Afya Limited Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Revenue for the nine-month period grew over 13% year-over-year to BRL 2.784 billion. Adjusted EBITDA grew almost 19% year-over-year to BRL 1.292 billion, with an adjusted EBITDA margin of 46.4%. Cash flow from operating activities was BRL 1.292 billion, 11% higher than the prior year, and net income was BRL 593 million, a 20% year-over-year growth.
• Operational Metrics: Maintained 100% occupancy in medical programs in Brazil. Number of undergraduate medical students over 25,000 (6% growth y/y). Approved medical seats at 3,753. Continued education revenue up 11%, medical practice solutions revenue up 9%.
• ESG Initiatives: Delivered 700,000 free healthcare consultations. Created Instituto Afya focusing on sustainability and social impact. Recognized by Valor Econômico as top-performing education sector in Brazil for the fourth time.
• Ecosystem: Ecosystem reached 300,000 active users, with 104,000 physicians and medical students using services and products by end of 2025.

Segment Performance

• Undergraduate Segment: Revenue for the nine-month period was BRL 2.459 billion, up over 14% year-over-year. Number of undergraduate medical students reached over 25,000, a 6% growth compared to the same period last year. Approved medical seats totaled 3,753, with net average ticket excluding acquisition increasing over 3% in the nine-month period.
• Continued Education Segment: Revenue grew 11% year-over-year to BRL 208 million. B2B revenues saw a 65% increase, and B2P revenues had a 7% increase.
• Medical Practice Solutions Segment: Revenue reached BRL 128 million in the nine-month period, a 9% year-over-year growth. B2P revenues increased 11%, while B2B revenues decreased 2.5% in the nine-month period.

Guidance

• Revenue for the nine-month period 20xx was BRL 2.784 billion, up 13% year-over-year.
• Adjusted EBITDA for the nine-month period was BRL 1.292 billion, up 19% year-over-year, with an adjusted EBITDA margin of 46.4% (200 basis points higher than prior year).
• Net income for 20xx was BRL 593 million, a 20% year-over-year growth. Cash flow from operating activities was BRL 1.292 billion, 11% higher than prior year.

Risks

• Risks detailed in SEC filings, including those related to future events, financial performance, and unknown uncertainties.
• Tax provisions related to OECD Pillar Two global minimum tax effects impacting net income.
• Effects of market changes on shareholder remuneration strategies.

Question and Answer

• Q: Regarding the effective tax rate and capital allocation strategy A: Effective tax rate for the nine-month period was 9.7% due to Pillar Two taxation provisions. Capital allocation strategy includes evaluating M&A opportunities, share buybacks, and dividends, with flexibility to optimize based on market conditions.
• Q: On capital allocation strategies and 2026 intake cycle A: Evaluating M&A on medical assets, aiming for ~200 seats per year in capital allocation. Tuition for 2026 expected to be 5%-5.2% higher than 2025. Intake for 2026 candidates still early, with candidate numbers similar to prior year at same time.
• Q: Gross margins on medical practice solutions and clinical decision software trends A: Gross margins in medical practice solutions increased due to cost management. Clinical decision software user reduction was due to price changes, with efforts to review feature combinations to resume growth in penetration.