0001292814-23-002412.txt : 20230524 0001292814-23-002412.hdr.sgml : 20230524 20230524160620 ACCESSION NUMBER: 0001292814-23-002412 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230524 DATE AS OF CHANGE: 20230524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Afya Ltd CENTRAL INDEX KEY: 0001771007 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 000000000 STATE OF INCORPORATION: E9 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-38992 FILM NUMBER: 23954151 BUSINESS ADDRESS: STREET 1: ALAMEDA OSCAR NIEMEYER, NO 119 STREET 2: SALA 504 VILA DA SERRA CITY: NOVA LIMA, MINAS GERAIS STATE: D5 ZIP: 00000 BUSINESS PHONE: 55 (31) 3515 7500 MAIL ADDRESS: STREET 1: ALAMEDA OSCAR NIEMEYER, NO 119 STREET 2: SALA 504 VILA DA SERRA CITY: NOVA LIMA, MINAS GERAIS STATE: D5 ZIP: 00000 6-K 1 afyapr1q23_6k.htm 6-K

 

 

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May, 2023

 

 Commission File Number: 001-38992

 

Afya Limited

(Exact name of registrant as specified in its charter)

 

Alameda Oscar Niemeyer, No. 119, Salas 502, 504, 1,501 and 1,503

Vila da Serra, Nova Lima, Minas Gerais

Brazil

+55 (31) 3515 7550

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

   Form 40-F  

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes     No

X

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes     No

X

 

 

 

 

 

TABLE OF CONTENTS

 

EXHIBIT  
99.1 First-Quarter 2023 Financial Results

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Afya Limited
     
     
      By: /s/ Virgilio Deloy Capobianco Gibbon
        Name: Virgilio Deloy Capobianco Gibbon
        Title: Chief Executive Officer

Date: May 24, 2022

 

 

 EX-99.1 2 ex99-1.htm EX-99.1

 

 

Afya Limited Announces First-Quarter 2023 Financial Results

High and Predictable Growth
Full Year 2023 Guidance Reaffirmed

 

 

Nova Lima, Brazil, May 24, 2023 – Afya Limited (Nasdaq: AFYA) (“Afya” or the “Company”), the leading medical education group and digital health services provider in Brazil, reported today financial and operating results for the three-month period ended March 31, 2023 (first quarter 2023). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

First Quarter 2023 Highlights

§1Q23 Adjusted Net Revenue increased 25.0% YoY to R$709.4 million. Adjusted Net Revenue excluding acquisitions grew 13.5%, reaching R$644.3 million.
§1Q23 Adjusted EBITDA increased 21.9% YoY reaching R$330.2 million, with an Adjusted EBITDA Margin of 46.5%. Adjusted EBITDA excluding acquisitions grew 12.3%, reaching R$304.2 million, with an Adjusted EBITDA Margin of 47.2%.
§Cash conversion of 111.9%, with a solid cash position of R$ 722.7 million.
§~295 thousand monthly active physicians and medical students using Afya’s Digital Services.

 

Table 1: Financial Highlights            
  For the three months period ended March 31,  
(in thousand of R$) 2023 2023 Ex Acquisitions* 2022 % Chg % Chg Ex Acquisitions  
(a) Net Revenue 709,961 644,849 566,324 25.4% 13.9%  
(b) Adjusted Net Revenue (1) 709,383 644,271 567,716 25.0% 13.5%  
(c) Adjusted EBITDA (2) 330,211 304,231 270,801 21.9% 12.3%  
(d) = (c)/(b)  Adjusted EBITDA Margin 46.5% 47.2% 47.7% -120 bps -50 bps  
             
*For the three months period ended March 31, 2023, "2023 Ex Acquisitions" excludes: Alem da Medicina (January & February 2023; Closing of Alem da Medicina was in March, 2022), Glic, Cardiopapers and UNIT Alagoas and FITS Jaboatão dos Guararapes (all from January to March, 2023).  
 
(1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.    
(2) See more information on "Non-GAAP Financial Measures" (Item 07).  

 

Message from Management

For us in Afya, these results indicate another great start for the year ahead. We are proud to present, once again, strong results, reaffirming the success and resilience of Afya, along with high and predictable growth, and a solid cash generation. 

 

This quarter was marked by significant increases in net revenue within our three segments and we are delighted to see that the most significant growth came from our Continue Education segment with a robust intake process, six new campuses, and course maturation. 

 

Our second most significant growth came from our core business, as we saw higher tickets in Medicine courses, maturation of medical seats, the beginning of 4 Mais Médicos campuses, consolidation of UNIT Alagoas and FITS Jaboatão dos Guararapes acquisition, and the consolidation of 92 new medical seats, 28 in the UniSL Ji-Paraná

 
1 
 
 

campus, located in Rondônia, and 64 in Faculdade Santo Agostinho, in the city of Itabuna, situated in the state of Bahia. 

 

And, once again, Afya reported great results on the Digital Health Services revenue, which ended the quarter with an increase of 20% when compared to last year. This result reinforces the opportunity ahead in Digital Services, and it is explained by the ramp-up in B2B engagements, with new contracts with the pharmaceutical industry companies, and the continuous ramp-up in B2P contracts, as we will discuss further on. 

 

High and predictable growth, strong guidance for the year, and segments ramp-up: this proves how we are evolving and empowering our vision to transform health together with those who have medicine as a vocation. We are proud of our business and also excited for what comes next during this year. 

 

 

1.Key Events in the Quarter:
§Afya announced on January 2nd, 2023, the closing of its acquisition of 100% of the total share capital of Sociedade Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”), that encompasses the operations of Centro Universitário Tiradentes Alagoas (“UNIT Alagoas”) and Faculdade Tiradentes Jaboatão dos Guararapes (“FITS Jaboatão dos Guararapes”), on the terms previously disclosed.
§Afya announced on January 31st, 2023, that it is one of 484 companies across 45 countries and regions to join the 2023 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. This reference index measures gender equality across five pillars: leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and external brand. For the second time in a row, Afya was included on the index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption of best-in-class statistics and policies, being 1 of 16 Brazilian companies included in the index this year.
§Fourth share repurchase program, on March 2023 - the Board of Directors approved a new share repurchase program. Under this share repurchase program, Afya may repurchase up to 2,000,000 of its outstanding Class A common shares which represents approximately 5.8% of its free float in accordance with the conditions established by the Board of Directors on March 24, 2023. Accordingly, in connection with repurchases under the new program, Afya also announced that entered into a written trading plan with BofA Securities, Inc., as the independent broker-dealer, which is intended to comply with the requirements of Rule 10b5-1 and Rule 10b-18 each under the Securities and Exchange Act of 1934, as amended.

 

 

2.2023 Guidance

The Company is reaffirming its previously issued guidance for 2023 which considers the successfully concluded acceptances of new students, ensuring 100% occupancy in all of its medical schools.

 

Considering the above factors, the guidance for 2023 is defined in the following table:

 

 

 
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3.1Q23 Overview

Operational Review

Afya is the only Company offering educational and technological solutions to support physicians across every stage of their medical career, from undergraduate students in their medical school years through medical residency preparatory courses, medical specialization programs, and continuing medical education. The Company also offers solutions to empower physicians in their daily routine, including supporting clinic decisions through mobile app subscription, delivering practice management tools through a Software as a Service (SaaS) model, and assisting physicians in their relationship with their patients.

The Company reports results for three distinct business units - the first, Undergrad – medical schools, other healthcare programs, and ex-health degrees. Revenue is generated from the monthly tuition fees the Company charges students enrolled in the undergraduate programs - the second, Continuing Education – specialization programs and graduate courses for physicians. Revenue is also generated from the monthly tuition fees the Company charges students enrolled in the specialization and graduate courses. The third is Digital Services – digital services offered by the Company at every stage of the medical career. This business unit is divided into Business to Physician (which encompasses Content & Technology for Medical Education, Clinical Decision Software, Practice Management Tools & Electronic Medical Records, Physician-Patient Relationship, Telemedicine, and Digital Prescription) and Business to Business (which provides access and demand for the healthcare players). Revenue is generated from printed books and e-books and is recognized at the point in time when control is transferred to the customer, and subscription fees, which are recognized as the services, are transferred over time.

 

Key Revenue Drivers – Undergraduate Courses

Table 2: Key Revenue Drivers Three months period ended March 31,
  2023 2022 % Chg
Undergrad Programs      
MEDICAL SCHOOL      
Approved Seats 3,163 2,759 14.6%
Operating Seats 3,113 2,481 25.5%
Total Students (end of period)  20,822  17,523 18.8%
Average Total Students  20,822  17,523 18.8%
Average Total Students (ex-Acquisitions)*  18,819  17,523 7.4%
Tuition Fees (Total - R$ '000)  630,960  501,523 25.8%
Tuition Fees (ex- Acquisitions* - R$ '000)  573,747  501,523 14.4%
Medical School Gross Avg. Ticket (ex- Acquisitions* - R$/month)  10,163 9,540 6.5%
Medical School Net Avg. Ticket (ex- Acquisitions* - R$/month) 8,517 7,861 8.3%
UNDERGRADUATE HEALTH SCIENCE      
Total Students (end of period)  21,660  20,902 3.6%
Average Total Students  21,660  20,902 3.6%
Average Total Students (ex-Acquisitions)*  19,788  20,902 -5.3%
Tuition Fees (Total - R$ '000)  97,968  78,310 25.1%
Tuition Fees (ex- Acquisitions* - R$ '000)  90,296  78,310 15.3%
OTHER UNDERGRADUATE      
Total Students (end of period)  25,043  24,209 3.4%
Average Total Students  25,043  24,209 3.4%
Average Total Students (ex-Acquisitions)*  21,882  24,209 -9.6%
Tuition Fees (Total - R$ '000)  77,174  69,182 11.6%
Tuition Fees (ex- Acquisitions* - R$ '000)  66,889  69,182 -3.3%
TOTAL TUITION FEES      
Tuition Fees (Total - R$ '000)  806,101  649,015 24.2%
Tuition Fees (ex- Acquisitions* - R$ '000)  730,932  649,015 12.6%
*For the three months period ended March 31, 2023, "2023 Ex Acquisitions" excludes: Alem da Medicina (January & February 2023; Closing of Alem da Medicina was in March, 2022), Glic, Cardiopapers and UNIT Alagoas and FITS Jaboatão dos Guararapes (all from January to March, 2023).

 

 
3 
 
 

Key Revenue Drivers – Continuing Education and Digital Services

Table 3: Key Revenue Drivers Three months period ended March 31,
  2023 2022 % Chg
Continuing Education      
Medical Specialization & Others      
Total Students (end of period) 4,774 3,479 37.2%
Average Total Students 4,774 3,479 37.2%
Average Total Students (ex-Acquisitions) 4,774 3,479 37.2%
Net Revenue from courses (Total - R$ '000)  34,960  23,851 46.6%
Net Revenue from courses (ex- Acquisitions¹)  34,960  23,851 46.6%
Digital Services      
Content & Technology for Medical Education      
Medcel Active Payers      
Prep Courses & CME - B2P 6,147  11,673 -47.3%
Prep Courses & CME - B2B 5,988 4,574 30.9%
Além da Medicina Active Payers 6,222 6,345 -1.9%
Cardiopapers Active Payers 7,083  -  -
Medical Harbour Active Payers  21,686  -  -
Clinical Decision Software      
Whitebook Active Payers  143,832  131,193 9.6%
Clinical Management Tools²      
iClinic Active Payers  23,740  19,622 21.0%
Shosp Active Payers 2,881 2,278 26.5%
       
Digital Services Total Active Payers (end of period)  217,579  175,685 23.8%
Net Revenue from Services (Total - R$ '000)  56,792  47,477 19.6%
Net Revenue - B2P  46,603  41,197 13.1%
Net Revenue - B2B  10,187 6,280 62.2%
Net Revenue From Services (ex-Acquisitions¹)  49,834  47,477 5.0%
*For the three months period ended March 31, 2023, "2023 Ex Acquisitions" excludes: Alem da Medicina (January & February 2023; Closing of Alem da Medicina was in March, 2022), Glic, Cardiopapers and UNIT Alagoas and FITS Jaboatão dos Guararapes (all from January to March, 2023).
(2) Clinical management tools includes Telemedicine and Digital Prescription features.

 

 

Key Operational Drivers – Digital Services

 

Monthly Active Users (MaU) represents the number of unique individuals that consumed Digital Services content in each one of our products in the last 30 days of a specific period. Total monthly active users reached almost 295 thousand, 13.6% higher than the same period of last year.

Monthly Unique Active Users (MuaU) represents the number of unique individuals, without overlap of users among products, in the last 30 days of a specific period.

 
4 
 
 
Table 4: Key Operational Drivers for Digital Services - Monthly Active Users (MaU)    
  1Q23 1Q22 % Chg YoY 4Q22
Content & Technology for Medical Education 31,549 21,464 47.0%  16,539
Clinical Decision Software 237,003 218,313 8.6% 221,762
Clinical Management Tools¹ 24,568 19,762 24.3%  20,936
Physician-Patiet Relationship  1,773 -    1,473
Total Monthly Active Users (MaU) - Digital Services 294,893 259,539 13.6% 260,710
1) Clinical management tools includes Telemedicine and Digital Prescription features    
Includes Shosp, Medicinae and Além da Medicina starting in 1Q22 and Cardiopapers and Glic starting in 2Q22

 

 

Table 5: Key Operational Drivers for Digital Services - Monthly Unique Active Users (MuaU)      
  1Q23 1Q22 % Chg QoQ 4Q22  
           
Total Monthly Unique Active Users (MuaU) - Digital Services 262,137 242,374 8.2% 241,949  
           
1) Total Monthly Unique Active Users excludes non-integrated companies: Medical Harbour, Medicinae, Shosp, Além da Medicina, Cardiopapers and Glic  
 

 

 

Seasonality

Undergrad’s tuition revenues are related to the intake process and monthly tuition fees charged to students over the period; thus does not have significant fluctuations during the semester. Continuing Education revenues are related to monthly intakes and tuition fees and do not have a considerable concentration in any period. Digital Services is comprised mainly of Medcel, Pebmed, and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality, Medcel’s revenue is concentrated in the first and last quarter of the year due to the enrollments of Medcel’s clients period. In addition, the majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results of operations in the first and last quarters of the year than in the second and third quarters.

 

Revenue

Adjusted Net Revenue for the first quarter of 2023 was R$709.4 million, an increase of 25.0% over the same period of the prior year, mainly due to higher tickets in Medicine courses in 8.3%, maturation of medical seats, the beginning of 4 Mais Médicos campuses, consolidation of UNIT Alagoas and FITS Jaboatão dos Guararapes acquisition, the Continuing Education high performance and Digital Services execution.

 

The Digital Services segment increased 19.6% year over year, a combination of (a) B2B engagements, and (b) expansion of the active payers in the B2P, mainly in Whitebook, iClinic, and Shosp, partially offset by the lower performance of Medcel, due to a higher competition scenario in the Residency Preparatory market; and (c) consolidation of Alem da Medicina, Glic, and Cardiopapers.

 
5 
 
 
Table 6: Revenue & Revenue Mix               
(in thousands of R$)   For the three months period ended March 31,  
    2023 2023 Ex Acquisitions* 2022 % Chg % Chg Ex Acquisitions  
Net Revenue Mix              
Undergrad   620,976 562,822 495,395 25.3% 13.6%  
Adjusted Undergrad¹   620,398 562,244 496,787 24.9% 13.2%  
Continuing Education   34,960 34,960 23,851 46.6% 46.6%  
Digital Services   56,792 49,834 47,477 19.6% 5.0%  
Inter-segment transactions   -2,767 -2,767 - 399 n.a 593.5%  
Total Reported Net Revenue   709,961 644,849 566,324 25.4% 13.9%  
Total Adjusted Net Revenue ¹   709,383 644,271 567,716 25.0% 13.5%  
*For the three months period ended March 31, 2023, "2023 Ex Acquisitions" excludes: Alem da Medicina (January & February 2023; Closing of Alem da Medicina was in March, 2022), Glic, Cardiopapers and UNIT Alagoas and FITS Jaboatão dos Guararapes (all from January to March, 2023).  
 
(1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.  
(2) See more information on "Non-GAAP Financial Measures" (Item 07).  

 

 

Adjusted EBITDA

 

 

Adjusted EBITDA for the three-month period ended March 31, 2023, increased 21.9% to R$330.2 million, up from R$270.8 million in the same period of the prior year, and the Adjusted EBITDA Margin decreased 120 basis points to 46.5%. The Adjusted EBITDA Margin reduction is mainly due to the following: (a) Digital segment, primarily due to Medcel’s performance; and (b) consolidation of 4 new Mais Médicos campuses (operation started on 3Q22) and UNIT Alagoas and FITS Jaboatão dos Guararapes which are performing better than expected but still present lower margins when compared to the integrated companies.

 

Table 7: Adjusted EBITDA            
(in thousands of R$) For the three months period ended March 31,  
  2023 2023 Ex Acquisitions* 2022 % Chg % Chg Ex Acquisitions  
Adjusted EBITDA 330,211 304,231 270,801 21.9% 12.3%  
% Margin 46.5% 47.2% 47.7% -120 bps -50 bps  
*For the three months period ended March 31, 2023, "2023 Ex Acquisitions" excludes: Alem da Medicina (January & February 2023; Closing of Alem da Medicina was in March, 2022), Glic, Cardiopapers and UNIT Alagoas and FITS Jaboatão dos Guararapes (all from January to March, 2023).  
 

 

 

Adjusted Net Income

Net Income for the first quarter of 2023 was R$117.8 million, a decrease of 12.7% over the same period of the prior year. Adjusted Net Income for the first quarter of 2023 was R$166.4 million, in line with the same period from the previous year, mainly due to better operational performance, which was offset by higher financial expenses, mainly related to the increase in leverage due to UNIT Alagoas and FITS Jaboatao business combination and higher interest rates, when compared to the same period of the prior year.

 

 
6 
 
 
Table 8: Adjusted Net Income      
(in thousands of R$) For the three months period ended March 31,
  2023 2022 % Chg
Net income  117,772  134,942 -12.7%
Amortization of customer relationships and trademark (1)  24,203  18,283 32.4%
Share-based compensation 6,495 2,929 121.7%
Non-recurring expenses: 17,907 11,027 62.4%
 - Integration of new companies (2) 5,900 4,171 41.5%
 - M&A advisory and due diligence (3)  11,039 1,212 810.8%
 - Expansion projects (4)  151  602 -74.9%
 - Restructuring expenses (5) 1,395 3,650 -61.8%
 - Mandatory Discounts in Tuition Fees(6) -578 1,392 n.a.
Adjusted Net Income 166,377 167,181 -0.5%
Basic earnings per share - in R$ (7) 1.25 1.42 -12.0%
Adjusted earnings per share - in R$ (8) 1.77 1.77 0.0%
(1) Consists of amortization of customer relationships and trademark recorded under business combinations.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.
(7) Basic earnings per share: Net Income/Weighted average number of outstanding shares.
(8) Adjusted earnings per share: Adjusted Net Income attributable to equity holders of the Parent/Weighted average number of outstanding shares.

 

 

Cash and Debt Position

 

On March 31, 2023, Cash and Cash Equivalents were R$722.7 million, a decrease of 33.9% over December 31, 2022, due to UNIT Alagoas and FITS Jaboatão dos Guararapes business combination.

 

For the three-month period ended March 31, 2023, Afya reported Adjusted Cash Flow from Operations of R$349.4 million, up from R$293.6 million in the same period of the previous year, an increase of 19.0% YoY, boosted by the solid operational results. Operating Cash Conversion Ratio was 111.9% for the three-month period that ended on March 31, 2023.

 

On March 31, 2023, Net Debt, excluding the effect of IFRS 16, totaled R$2,029 million. When compared to December 31, 2022 Net Debt added to R$825 million related to UNIT Alagoas and FITS Jaboatão dos Guararapes business combination closed on January 2, 2023, the Net Debt reduced R$ 177 million due to the strong cash flow generation in the quarter.

 

The following table shows more information regarding the cost of debt of 1Q23, considering loans and financing, capital market, and accounts payable to selling shareholders. Afya’s capital structure remains solid with a conservative leveraging position and a low cost of debt.

 

 
7 
 
 
Table 9: Operating Cash Conversion Ratio Reconciliation For the three months period ended March 31,
(in thousands of R$) Considering the adoption of IFRS 16
  2023 2022 % Chg
(a) Cash flow from operations 331,554 278,715 19.0%
(b) Income taxes paid 17,819 14,850 20.0%
(c) = (a) + (b) Adjusted cash flow from operations 349,373 293,565 19.0%
       
(d) Adjusted EBITDA 330,211 270,801 21.9%
(e) Non-recurring expenses: 17,907 11,027 62.4%
 - Integration of new companies (1) 5,900 4,171 41.5%
 - M&A advisory and due diligence(2) 11,039 1,212 810.8%
 - Expansion projects (3) 151 602 -74.9%
 - Restructuring Expenses (4) 1,395 3,650 -61.8%
 - Mandatory Discounts in Tuition Fees(5) -578 1,392 n.a.
(f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses 312,304 259,774 20.2%
(g) = (c) / (f) Operating cash conversion ratio 111.9% 113.0% -110 bps
(1) Consists of expenses related to the integration of newly acquired companies.
(2) Consists of expenses related to professional and consultant fees in connection with due diligence services for M&A transactions.
(3) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(4) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of acquired companies.
(5) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.

 

 

Table 10: Gross Debt and Average Cost of Debt  
(in millions of R$) For the three months period ended March 31,
      Cost of Debt
  Gross Debt Duration (Years) per year %CDI*
Loans and financing: Softbank 825 3.1 6.5% 48%
Capital Market 519 4.4 15.7% 114%
Loans and financing: Others 580 1.9 15.7% 114%
Accounts payable to selling shareholders 828 1.2 13.3% 97%
Average 2,751 2.6 12.1% 89%
**Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference:
1Q23: ~13.65% p.y.

 

 
8 
 
 
Table 11: Cash and Debt Position          
(in thousands of R$)          
  1Q23 FY2022 % Chg 1Q22 % Chg
(+) Cash and Cash Equivalents 722,691 1,093,082 -33.9% 789,435 -8.5%
Cash and Bank Deposits  28,375  57,509 -50.7% 42,648 -33.5%
Cash Equivalents 694,316  1,035,573 -33.0% 746,787 -7.0%
(-) Loans and Financing 1,923,737 1,882,901 2.2% 1,388,841 38.5%
Current 193,214 145,202 33.1% 142,654 35.4%
Non-Current  1,730,523  1,737,699 -0.4% 1,246,187 38.9%
(-) Accounts Payable to Selling Shareholders 769,274 528,678 45.5% 698,413 10.1%
Current 417,398 261,711 59.5% 264,520 57.8%
Non-Current 351,876 266,967 31.8% 433,893 -18.9%
(-) Other Short and Long Term Obligations 58,702 62,176 -5.6% 70,880 -17.2%
(=) Net Debt (Cash) excluding IFRS 16 2,029,022 1,380,673 47.0% 1,368,699 48.2%
(-) Lease Liabilities 864,983 769,525 12.4% 733,420 17.9%
Current  38,026  32,459 17.2% 27,750 37.0%
Non-Current 826,957 737,066 12.2% 705,670 17.2%
Net Debt (Cash) with IFRS 16 2,894,005 2,150,198 34.6% 2,102,119 37.7%

 

 

CAPEX

Capital expenditures consist of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of our campuses and headquarters, leasehold improvements, and the development of new solutions in the digital segment, among others.

 

For the three-months period ending March 31, 2023, CAPEX was R$46.4 million, representing 6.5% of Afya’s Net Revenue.

 

Table 12: CAPEX
(in thousands of R$) For the three months period ended March 31,
  2023 2022 % Chg
CAPEX 46,429 76,759 -39.5%
Property and equipment 27,299 30,670 -11.0%
Intanglibe assets 19,130 46,088 -58.5%
 - Licenses 0 24,408 n.a.
 - Others 19,130 21,680 -11.8%

 

 

 

ESG Metrics

ESG commitment is essential to Afya’s strategy and permeates the Company’s core values. Afya has been advancing year after year on its core pillars, and since 2021, ESG metrics have been disclosed in the Company’s quarterly financial results.

 

On January 2023, Afya announced it is one of 484 companies across 45 countries and regions to join the 2023 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. This reference index measures gender equality across five pillars: leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and external brand. In addition, for the second time in a row, Afya was included on the index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption of best-in-class statistics and policies, being 1 of 16 Brazilian companies included in the index this year.

 
9 
 
 

 

Furthermore, the 2021 Sustainability Report can be found at: https://ir.afya.com.br/ >> Corporate Governance >> Sustainability.

Table 13: ESG Metrics 1Q23 1Q22 2022 2021 2020 2019
# GRI Governance and Employee Management            
1 405-1 Number of employees 9,567 8,528  8,708  8,079  6,100  3,369
2 405-1 Percentage of female employees 57% 56% 57% 55% 55% 57%
3 405-1 Percentage of female employees in the board of directors 40% 18% 40% 18% 18% 22%
4 102-24 Percentage of independent member in the board of directors 30% 36% 30% 36% 36% 22%
    Environmental            
4 302-1 Total energy consumption (kWh) 5,468,733 3,678,812  17,011,842  12,176,966  8,035,845  5,928,450
4.1 302-1 Consumption per campus 118,855.5 96,811 412,747 385,573 321,434 395,230
5 302-1 % supplied by distribution companies 79.0% 75.0% 72.4% 91.3% 83.4% 96.2%
6 302-1 % supplied by other sources 21.0% 25.0% 27.6% 8.7% 16.6% 3.8%
    Social            
8 413-1 Number of free clinical consultations offered by Afya 116,979 80,751  494,635  341,286  427,184  270,000
9   Number of physicians graduated in Afya's campuses 18,126 16,824 18,104 16,772 12,691 8,306
10 201-4 Number of students with financing and scholarship programs (FIES and PROUNI)  9,619  8,223 10,965 7,881 4,999 2,808
11   % students with scholarships over total undergraduate students 14.2% 13.1% 18.8% 12.9% 13.7% 11.7%
12 413-1 Hospital, clinics and city halls partnerships 718 447 662 447 432 60
(1) Some factors can influence in the adequate proportionality analysis of data over the years, such as: climate changes, COVID-19 pandemic effects, seasonalities, number of employees, number of students, number of active units, among others.
(2) "Other sources" refers to: (a) Derived from renewable sources, such as solar panels installed in the units; and (b) Derived from the search for alternative energy options in the market.
(3) Starting in 2Q22, previously disclosed environmental data were updated to consider: (a) GHG Protocol guidelines improvements, and (b) additional data-collection criteria refinements.
(4) Starting in 2Q22, previously disclosed social data were updated to consider: (a) the number of graduated physicians considering all units after its closing, and (b) partnerships related only to medical schools.

 

 

4. Conference Call and Webcast Information

When: March 24, 2023 at 5:00 p.m. ET.

Who:  

Mr. Virgilio Gibbon, Chief Executive Officer

Mr. Luis André Blanco, Chief Financial Officer

Ms. Renata Costa Couto, IR Director

 

Webcast: https://afya.zoom.us/j/96259212642

 

 

OR

 

Dial-in:  

Brazil: +55 11 4700 9668 or +55 21 3958 7888 or +55 11 4632 2236 or +55 11 4632 2237 or +55 11 4680 6788

 

United States: +1 253 205 0468 or +1 253 215 8782 or +1 301 715 8592 or +1 305 224 1968 or +1 309 205 3325 or +1 312 626 6799 or +1 346 248 7799 or +1 360 209 5623 or +1 386 347 5053 or +1 507 473 4847 or +1 564 217 2000 or +1 646 931 3860 or +1 669 444 9171 or +1 669 900 6833 or +1 689 278 1000 or +1 719 359 4580 or +1 929 205 6099

 

Webinar ID: 962 5921 2642

 

Other Numbers: https://afya.zoom.us/u/aXW4bIxA

 

 

5. About Afya Limited (Nasdaq: AFYA)

Afya is a leading medical education group in Brazil based on the number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students and physicians to transform their ambitions into rewarding lifelong experiences from the moment they join us as medical students through their medical residency preparation, graduation program, continuing medical education activities and offering digital products to help doctors enhance their healthcare services through their whole career. For more information, please visit www.afya.com.br.

 

 

 

 
10 
 
 

 

6. Forward – Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, and include risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of students and professors; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and the Brazilian economy.

 

The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company’s financial results are included in the filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled “Risk Factors” in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

 

7. Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board—IASB, Afya uses Adjusted EBITDA and Operating Cash Conversion Ratio information, which are non-GAAP financial measures, for the convenience of investors. A non-GAAP financial measure is generally defined as one that intends to measure financial performance but excludes or includes amounts that would not be equally adjusted in the most comparable GAAP measure.

 

Afya calculates Adjusted EBITDA as net income plus/minus net financial result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, plus share-based compensation plus/minus share of income of associate plus/minus non-recurring expenses. The calculation of Adjusted Net Income is net income plus amortization of customer relationships and trademark, plus share-based compensation. We calculate Operating Cash Conversion Ratio as the cash flow from operations, adjusted with income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.

 

Management presents Adjusted EBITDA, because it believes these measures provide investors with a supplemental measure of financial performance of the core operations that facilitates period-to-period comparisons on a consistent basis. Afya also presents Operating Cash Conversion Ratio because it believes this measure provides investors with a measure of how efficiently the Company converts EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, calculations of Adjusted EBITDA and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya’s measures may not be comparable to those of other companies.

 

8. Investor Relations Contact

E-mail: ir@afya.com.br

 
11 
 
 

 

9. Financial Tables

Consolidated statements of financial position
(In thousands of Brazilian reais)

  March 31, 2023   December 31, 2022
Assets (unaudited)    
Current assets      
Cash and cash equivalents 722,691   1,093,082
Trade receivables 475,712   452,831
Inventories 9,925   12,190
Recoverable taxes 36,858   27,809
Other assets 50,123   51,745
Total current assets 1,295,309   1,637,657
       
Non-current assets      
Trade receivables 45,966   42,568
Other assets 195,936   191,756
Investment in associate 54,152   53,907
Property and equipment 577,692   542,087
Right-of-use assets 777,086   690,073
Intangible assets 4,852,656   4,041,491
Total non-current assets 6,503,488   5,561,882
       
Total assets 7,798,797   7,199,539
       
Liabilities      
Current liabilities      
Trade payables 72,228   71,482
Loans and financing 193,214   145,202
Lease liabilities 38,026   32,459
Accounts payable to selling shareholders 417,398   261,711
Notes payable 58,702   62,176
Advances from customers 165,694   133,050
Labor and social obligations 188,928   154,518
Taxes payable 29,045   26,221
Income taxes payable 26,229   16,151
Other liabilities 4,932   2,719
Total current liabilities 1,194,396   905,689
       
Non-current liabilities      
Loans and financing 1,730,523   1,737,699
Lease liabilities  826,957   737,066
Accounts payable to selling shareholders 351,876   266,967
Taxes payable 91,989   92,888
Provision for legal proceedings 199,160   195,854
Other liabilities 35,601   13,218
Total non-current liabilities 3,236,106   3,043,692
Total liabilities 4,430,502   3,949,381
       
Equity      
Share capital 17   17
Additional paid-in capital 2,375,344   2,375,344
Share-based compensation reserve 130,033   123,538
Treasury stock (304,947)   (304,947)
Retained earnings 1,117,010   1,004,886
Equity attributable to equity holders of the parent 3,317,457   3,198,838
Non-controlling interests 50,838   51,320
Total equity 3,368,295   3,250,158
       
Total liabilities and equity 7,798,797   7,199,539

 

 
12 
 
 

 

Consolidated statements of income and comprehensive income
(In thousands of Brazilian reais, except for earnings per share information)

 

  March 31, 2023 March 31,, 2022
  (unaudited)  (unaudited) 
Net revenue 709,961 566,324
Cost of services (247,607) (186,730)
Gross profit 462,354 379,594
     
General and administrative expenses (233,220) (178,514)
Other (expenses) income, net 405 (309)
     
Operating income 229,539 200,771
     
  Finance income 27,688 24,569
  Finance expenses (124,240) (81,291)
Finance result (96,552) (56,722)
     
Share of income of associate 3,845 4,240
     
Income before income taxes 136,832 148,289
     
Income taxes expenses (19,060) (13,347)
     
Net income 117,772 134,942
     
Other comprehensive income - -
Total comprehensive income 117,772 134,942
     
Income attributable to    
  Equity holders of the parent 112,124 129,610
  Non-controlling interests 5,648 5,332
  117,772 134,942
Basic earnings per share    
Per common share 1.25 1.42

Diluted earnings per share

Per common share

 1.24 1.42

 

 
13 
 
 

Consolidated statements of cash flows
(In thousands of Brazilian reais)

  March 31, 2023 March 31, 2022
Operating activities (unaudited) (unaudited) 
  Income before income taxes 136,832 148,289
    Adjustments to reconcile income before income taxes    
      Depreciation and amortization 65,971 48,387
      Write-off of property and equipment 88 319
      Write-off of intangible assets 246 2,894
      Allowance for doubtful accounts 17,694 14,983
      Share-based compensation expense 6,495 2,929
      Net foreign exchange differences 161 126
      Accrued interest 77,530 46,106
      Accrued lease interest 25,524 20,641
      Share of income of associate (3,845) (4,240)
      Provision for legal proceedings 3,154 3,819
Changes in assets and liabilities    
  Trade receivables (10,232) (576)
  Inventories 2,404 (2,037)
  Recoverable taxes (8,460) (5,965)
  Other assets 6,005 9,263
  Trade payables (11,507) (2,736)
  Taxes payables 8,480 1,043
  Advances from customers 147 (9,229)
  Labor and social obligations 28,158 22,388
  Other liabilities 4,528 (2,839)
    349,373 293,565
  Income taxes paid (17,819) (14,850)
       
  Net cash flows from operating activities 331,554 278,715
       
Investing activities    
  Acquisition of property and equipment (27,299) (30,670)
  Acquisition of intangibles assets (19,130) (21,680)
  Dividends received 3,600 1,554
  Acquisition of subsidiaries, net of cash acquired (608,146) (51,518)
  Net cash flows used in investing activities (650,975) (102,314)
     
Financing activities    
  Payments of loans and financing (15,745) (14,494)
  Issuance of loans and financing 3,663 -
  Payments of lease liabilities (32,597) (27,476)
  Treasury shares - (88,763)
  Dividends paid to non-controlling interests (6,130) (4,669)
  Net cash flows from (used in) financing activities (50,809) (135,402)
  Net foreign exchange differences (161) (126)
  Net increase (decrease) in cash and cash equivalents (370,391) 40,873
  Cash and cash equivalents at the beginning of the period 1,093,082 748,562
  Cash and cash equivalents at the end of the period 722,691 789,435
 
14 
 
 

 

Reconciliation between Net Income and Adjusted EBITDA

 

(in thousands of R$) For the three months period ended March 31,
  2023 2022 % Chg
Net income 117,772 134,942 -12.7%
Net financial result 96,552 56,722 70.2%
Income taxes expense 19,060 13,347 42.8%
Depreciation and amortization 65,971 48,387 36.3%
Interest received (1) 10,299 7,687 34.0%
Income share associate (3,845) (4,240) -9.3%
Share-based compensation 6,495 2,929 121.7%
Non-recurring expenses: 17,907 11,027 62.4%
 - Integration of new companies (2) 5,900 4,171 41.5%
 - M&A advisory and due diligence (3) 11,039 1,212 810.8%
 - Expansion projects (4) 151 602 -74.9%
 - Restructuring expenses (5) 1,395 3,650 -61.8%
 - Mandatory Discounts in Tuition Fees  (6) (578) 1,392 n.a.
Adjusted EBITDA 330,211 270,801 21.9%
Adjusted EBITDA Margin 46.5% 47.7% -120 bps
(1) Represents the interest received on late payments of monthly tuition fees.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees, individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes any recovery of these discounts that were invoiced based on the Supreme Court decision.  

 

 
15 

 

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