Afya Limited Announces First-Quarter 2025 Financial Results

Published: 2025-05-08 20:12:04 ET AFYA

Published on 05/08/2025 at 20:12

Impressive Adjusted EBITDA Margin Expansion and Cash Generation Full Year 2025 Guidance Reaffirmed

Afya Limited (Nasdaq: AFYA; B3: A2FY34) (“Afya” or the “Company”), the leading medical education group and medical practice solutions provider in Brazil, reported today its financial and operating results for the three-month period ended March 31, 2025 (first quarter 2025). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

First Quarter 2025 Highlights

2025

2025 Ex Acquisitions*

2024

% Chg

% Chg Ex Acquisitions

936,360

891,527

804,239

16.4%

10.9%

491,971

460,603

397,853

23.7%

15.8%

52.5%

51.7%

49.5%

257,036

208,299

23.4%

293,897

250,966

17.1%

Message from Management

It is with much satisfaction that Afya starts another year of great operational and financial performance. This quarterly result shows the high predictability of our business and successful execution of our strategy, that once again, combines strong growth, with higher profitability and cash generation – Afya’s three pillars business model. This quarter was marked by Gross margin expansion within our Undergraduate and Continuing Education segments, combined with solid cash generation, and robust EPS growth, showing our consistent business expansion.

Our Revenue Growth this quarter was supported by a successful intake process in all our medical school campuses, ensuring 100% occupancy in our integrated medical schools. Most notably, an example that highlights the effectiveness of our strategy was the acquisition of Unidom with a medical campus located in Salvador that had an occupancy rate below 60% prior to our acquisition. After only two intake processes the campus reached nearly 100% occupancy. This highlights the ongoing value of our ecosystem and the increasing recognition of our brand across the country.

We proudly present our highest Adjusted EBITDA Margin, ending the first quarter of 2025 with a record of 52.5%. This margin expansion reflects the strong performance of the Undergraduate segment, further enhanced by the continued ramp-up of the four Mais Médicos campuses launched in 3Q22, and most recently the Unidom acquisition. Our ongoing operational restructuring in the Continuing Education and Medical Practice Solutions segments contributed to improve cost management across selling, general, and administrative expenses in addition to enhancements to our shared services center, centralizing operations and increasing efficiency and operational synergies.

With the closing of the acquisition of Funic, we are excited to expand our undergraduate presence into the metropolitan area of Belo Horizonte, capital of Minas Gerais. This acquisition contributes 60 medical seats to Afya in Contagem, bringing our total approved medical seats to 3,653 in Brazil.

Furthermore, we are proud to highlight the excellent performance of our undergraduate medical schools in the most recent ENADE (Exame Nacional de Desempenho dos Estudantes – National Student Performance Exam), which reaffirms Afya’s commitment to academic excellence and the quality of medical education we provide across Brazil.

In April, we were proud to receive two significant recognitions. Moody’s Local Brazil upgraded our national scale credit rating from AA+.br to AAA.br with a stable outlook, reflecting our strong balance sheet, rewarded by cash generation, and financial discipline. They also highlighted our leadership in medical education and successful acquisition integration. We are also pleased to highlight that we successfully achieved all the IFC-defined targets for 2024, including the number of free medical consultations provided and the percentage of medical courses rated with the highest quality scores. This achievement will trigger a 15 bps step-down in our loan interest rate over the next 12 months, reinforcing and solidifying both our social impact and financial discipline. Additionally, we received our first ESG rating from MSCI, debuting with a solid BBB score. MSCI’s sector relative methodology underscores that Afya outperformed a significant portion of its peers, particularly in areas like data privacy and security, where our practices were stronger than many in the industry.

Looking ahead, Afya remains committed to its mission: to provide an integrated ecosystem of education and medical practice solutions throughout the entire medical journey. We continuously strive to support healthcare professionals' development, ongoing learning, and productivity. We are proud of our achievements and excited about what lies ahead.

1. Key Events in the Quarter

2. Subsequent Event

The acquisition contributes 60 medical school seats to Afya. FUNIC is pre-operational, with leased real estate prepared for a medical school operation, which is expected to start in the second semester of 2025.

The aggregate purchase price is R$ 100 million, net of the estimated Net Debt deducted from the down payment. The price and payment conditions were: (i) R$ 60 million, net of the estimated Net Debt, paid in cash on May 07, 2025; and (ii) R$ 40 million will be paid in three annual installments adjusted by CDI.

Additionally, the acquisition includes a contingent consideration for up to 60 additional medical school seats. If approved by MEC within 36 months from the closing date, it will result in an additional payment of R$1,000 per approved seat.

Afya expects an EV/EBITDA of 3.3x at full maturity and post synergies in 2030 with expected Net Revenues of R$ 52.4 million, of which 100% will come from Medicine.

3. 2025 Guidance

The Company is reaffirming its guidance for 2025, which considers the successful acceptance of new students for the first semester of 2025. The guidance for 2025 is defined in the following table:

4. 1Q25 Overview

Segment Information

The Company has three reportable segments as follows:

Undergraduate, which provides educational services through undergraduate courses related to medical school, undergraduate health science and other ex-health undergraduate programs;

Continuing education, which provides medical education (including residency preparation programs, specialization test preparation and other medical capabilities), specialization and graduate courses in medicine, delivered through digital and in-person content; and

Medical Practice Solutions, which provides clinical decision, clinical management and doctor-patient relationships for physicians and provide access, demand and efficiency for the healthcare players.

Key Revenue Drivers – Undergraduate Programs

2025

2024

3,593

3,203

12.2%

3,543

3,153

12.4%

25,879

22,609

14.5%

25,879

22,609

14.5%

24,263

22,609

7.3%

714,713

603,025

18.5%

672,589

603,025

11.5%

9,240

8,891

3.9%

26,134

24,881

5.0%

26,134

24,881

5.0%

25,348

24,881

1.9%

62,811

58,736

6.9%

61,730

58,736

5.1%

34,995

28,563

22.5%

34,995

28,563

22.5%

33,492

28,563

17.3%

49,848

42,758

16.6%

48,220

42,758

12.8%

827,372

704,519

17.4%

782,539

704,519

11.1%

Key Revenue Drivers – Continuing Education

2025

2024

12,203

14,693

-16.9%

8,542

7,366

16.0%

26,164

26,983

-3.0%

46,909

49,042

-4.3%

65,444

60,538

8.1%

5,660

4,877

16.0%

71,103

65,415

8.7%

Key Revenue – Medical Practice Solutions

2025

2024

% Chg

163,071

159,183

2.4%

34,934

31,806

9.8%

198,005

190,989

3.7%

244,518

262,717

-6.9%

37,231

32,730

13.7%

4,453

3,843

15.9%

41,684

36,573

14.0%

Key Operational Drivers – Users Positively Impacted by Afya

The Users Positively Impacted by Afya represents the total number of medical students from the Undergraduate segment, students from the Continuing Education and users from Medical Practice Solutions. For the first quarter of 2025, Afya’s ecosystem reached 317,306 users.

2025

2024

% Chg

25,879

22,609

14.5%

46,909

49,042

-4.3%

244,518

262,717

-6.9%

317,306

334,368

-5.1%

Seasonality of Operations

Undergraduate tuition revenues are related to the intake process, and monthly tuition fees charged to students and do not significantly fluctuate during each semester.

Continuing education revenues are mostly related to: (i) monthly intakes and tuition fees on medical education, which do not have a considerable concentration in any period; (ii) Residency journey product revenues, derived from e-books transferred at a point of time, which are concentrated at in the first and last quarter of the year due to the enrollments.

Medical Practice Solutions are comprised mainly of Afya Whitebook and Afya iClinic revenues, which do not have significant fluctuations regarding seasonality.

Net Revenue

Net Revenue for the first quarter of 2025 was R$936.4 million, an increase of 16.4% over the same period in the prior year. Excluding acquisitions, Net Revenue in the first quarter increased by 10.9% YoY to R$891.5 million.

The quarter revenue increase was mainly due to higher tickets in medicine courses, the maturation of medical school seats, the acquisition and the increase of occupancy in Unidom, and the advancement of Medical Practice Solutions and Continuing Education segments.

2025

2025 Ex Acquisitions*

2024

% Chg

% Chg Ex Acquisitions

827,372

782,539

704,519

17.4%

11.1%

71,103

65,415

8.7%

41,684

36,573

14.0%

(3,799)

(2,268)

67.5%

936,360

891,527

804,239

16.4%

10.9%

Adjusted EBITDA

Adjusted EBITDA for the first quarter of 2025 increased by 23.7% to R$492.0 million, up from R$397.9 million in the same period of the prior year, with the Adjusted EBITDA Margin rising by 300 basis points to 52.5%.

The increase in Adjusted EBITDA Margin was mainly driven by: (a) higher gross margin in the Undergraduate and Continuing Education segments; (b) the continued ramp-up of the four Mais Médicos campuses launched in 3Q22; (c) restructuring initiatives within Continuing Education and Medical Practice Solutions; and (d) improved cost efficiency in Selling, General, and Administrative expenses.

2025

2024

257,036

208,299

23.4%

94,994

74,366

27.7%

24,782

10,865

128.1%

91,755

79,269

15.8%

14,532

12,415

17.1%

(4,285)

(4,172)

2.7%

6,963

8,629

-19.3%

6,194

8,181

-24.3%

5,970

5,870

1.7%

248

-64.5%

124

605

-79.5%

1,458

-99.2%

491,971

397,853

23.7%

52.5%

49.5%

Adjusted Net Income

Net Income for the first quarter of 2025, totaled R$257.0 million, reflecting a 23.4% increase YoY. Adjusted Net Income reached R$293.9 million, up 17.1% from the same period in the prior year. This growth was primarily driven by improved operational performance that was partially offset by a higher tax rate compared to the previous year due to the provision of additional CSLL towards OECD’s Pillar Two global minimum tax effects.

Adjusted EPS reached R$3.20 per share for the first quarter ended March 31, 2025, an increase of 17.0% YoY, supported by higher Net Income and a disciplined capital allocation strategy.

2025

2024

% Chg

257,036

208,299

23.4%

23,704

25,856

-8.3%

6,963

8,630

-19.3%

6,194

8,181

-24.3%

5,970

5,870

1.7%

248

-64.5%

124

605

-79.5%

1,458

-99.2%

293,897

250,966

17.1%

2.79

2.26

23.3%

3.20

2.73

17.0%

Cash and Debt Position

As of March 31, 2025, Cash and Cash Equivalents totaled R$1,154.9 million, an increase of 26.8% over December 31, 2024. Net Debt, excluding the effect of IFRS 16, reached R$1,524.1 million, compared to December 31, 2024, Afya reduced its Net Debt by R$290.8 million due to solid Cash Flow from Operating Activities.

For the three-month period ended March 31, 2025, Afya generated R$470.2 million in Cash Flow from Operating Activities, up from R$429.1 million in the same period of the previous year, an increase of 9.6% YoY, boosted by operational results. The Operating Cash Conversion Ratio reached 96.8%.

2025

2024

% Chg

463,850

417,860

11.0%

6,386

11,194

-43.0%

470,236

429,054

9.6%

491,971

397,853

23.7%

6,194

8,181

-24.3%

5,970

5,870

1.7%

248

-64.5%

124

605

-79.5%

1,458

-99.2%

485,777

389,672

24.7%

96.8%

110.1%

The following table provides additional details on the cost of debt for the first quarter of 2025, considering loans and financing and accounts payable to selling shareholders. Afya’s capital structure remains solid, with a conservative leveraging position and a low cost of debt. Afya’s Net Debt (excluding the effect of IFRS16) divided by Adjusted EBITDA mid guidance for 2025 would be 0.9x.

2025

2024

2025

2024

2025

2024

2025

2024

850

826

1.1

2.1

8.6%

6.5%

69%

57%

513

510

2.3

3.3

14.6%

12.7%

115%

117%

328

446

0.5

1.3

14.7%

12.7%

115%

116%

522

3.6

14.0%

110%

466

405

3.6

0.9

12.7%

10.8%

100%

2,679

2,189

2.2

2.1

12.2%

9.8%

97%

91%

1Q25

FY2024

% Chg

1Q24

% Chg

1,154,888

911,015

26.8%

611,077

89.0%

3,508

6,078

-42.3%

5,573

-37.1%

1,151,380

904,937

27.2%

605,504

90.2%

2,212,674

2,195,161

0.8%

1,783,094

24.1%

373,275

363,554

2.7%

161,675

130.9%

1,839,399

1,831,607

0.4%

1,621,419

13.4%

466,341

530,772

-12.1%

405,410

15.0%

191,698

185,318

3.4%

244,865

-21.7%

274,643

345,454

-20.5%

160,545

71.1%

n.a.

1,524,127

1,814,918

-16.0%

1,577,427

-3.4%

989,184

978,336

1.1%

902,542

9.6%

47,762

45,580

4.8%

40,030

19.3%

941,422

932,756

0.9%

862,512

9.1%

2,513,311

2,793,254

-10.0%

2,479,969

1.3%

CAPEX

Capital expenditures consist of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of Afya’s campuses and headquarters, leasehold improvements, and the development of new solutions in the Medical Practice Solutions and content in the Continuing Education.

For the three-months period ending March 31, 2025, CAPEX was R$56.2 million, representing 6.0% of Afya’s Net Revenue.

2025

2024

% Chg

56,212

92,901

-39.5%

38,477

22,955

67.6%

17,735

69,946

-74.6%

49,600

17,735

20,346

-12.8%

ESG Metrics

ESG commitment is an important part of 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 in three key metrics, Governance and Employee Management, Environmental and Social.

The 2023 Sustainability Report can be found at: https://ir.afya.com.br/annual-report/

1Q25

1Q24

2024

2023

405-1

9,810

9,914

9,717

9,680

405-1

59%

58%

59%

58%

405-1

30%

36%

30%

36%

102-24

40%

36%

40%

36%

1,447.552

1,794.215

6,329.796

4,510.637

302-1

6,330.837

5,831.206

24,260.662

24,036.608

302-1

19.5%

26.8%

23.2%

16.0%

302-1

37.6%

30.8%

34.8%

60.3%

302-1

42.9%

42.3%

42.0%

23.7%

413-1

212,549

147,757

846,264

586,611

23,032

20,220

22,867

20,197

201-4

12,825

10,815

12,342

10,584

14.7%

14.2%

16.0%

413-1

524

518

614

649

5. Conference Call and Webcast Information

When:

May 8, 2025 at 5:00 p.m. EDT.

Who:

Mr. Virgilio Gibbon, Chief Executive Officer

Mr. Luis André Blanco, Chief Financial Officer

Webcast:

https://afya.zoom.us/j/99527431135

Dial-in:

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

United States: +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 or +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

Webinar ID: 995 2743 1135

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

6. About Afya Limited (Nasdaq: AFYA; B3: A2FY34)

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 medical practice solutions to help doctors enhance their healthcare services through their whole career. For more information, please visit www.afya.com.br.

7. 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, including risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our capacity to increase tuition prices; our ability to anticipate and meet the evolving needs of students and teachers; our capacity to source and successfully integrate acquisitions; as well as general market, political, economic, and business conditions. Additionally, these statements include 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. These statements are not guarantees of future performance and undue reliance should not be placed on them.

The Company assumes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances occurring after its publication, nor to incorporate 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 of these risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from those 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 they are made. Further information on these and other factors that could affect the Company’s financial results is included in 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 annual report on Form 20-F. These documents are available in the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

8. Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with IFRS accounting standards as issued by the International Accounting Standards Board—IASB, Afya presents Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted EPS, 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 income share associate, plus/minus non-recurring expenses/income. Operating Cash Conversion Ratio is calculated as the Cash flow from Operating Activities plus income taxes paid, minus/plus non-recurring expenses/income divided by Adjusted EBITDA. The calculation of Adjusted Net Income is the Net Income plus amortization of customer relationships and trademark, plus share-based compensation, plus/minus non-recurring expenses/income. The calculation of Adjusted EPS is the Adjusted Net Income minus the non-controlling interests divided by the Weighted average number of outstanding shares.

The non-GAAP supplemental financial measures are provided with the intend to help investors in assessing the overall performance of Afya’s business regarding its core operations, cash generation and profitability. The non-GAAP financial measures described in this release are not substitutes for the IFRS measures. In addition, the calculations of Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted EPS are not standardized financial measures and may differ 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.

9. Investor Relations Contact

E-mail: [email protected]

10. Financial Tables

Unaudited interim condensed consolidated statements of financial position

As of March 31, 2025 and December 31, 2024

(In thousands of Brazilian reais)

March 31, 2025

December 31, 2024

Assets

(unaudited)

Current assets

Cash and cash equivalents

1,154,888

911,015

Trade receivables

636,906

595,898

Recoverable taxes

32,118

25,726

Other assets

57,304

57,145

Total current assets

1,881,216

1,589,784

Non-current assets

Trade receivables

34,014

35,948

Deferred tax assets

7,146

Other assets

116,371

115,875

Investment in associate

53,129

54,442

Property and equipment

670,162

658,482

Right-of-use assets

845,698

842,219

Intangible assets

5,504,138

5,532,789

Total non-current assets

7,230,658

7,239,755

Total assets

9,111,874

8,829,539

Liabilities

Current liabilities

Trade payables

129,973

128,080

Loans and financing

373,275

363,554

Lease liabilities

47,762

45,580

Accounts payable to selling shareholders

191,698

185,318

Advances from customers

161,262

161,048

Dividends payable

130,798

Labor and social obligations

237,850

208,076

Taxes payable

35,695

33,456

Income taxes payable

9,517

4,247

Other liabilities

5,137

10,836

Total current liabilities

1,322,967

1,140,195

Non-current liabilities

Loans and financing

1,839,399

1,831,607

Lease liabilities

941,422

932,756

Accounts payable to selling shareholders

274,643

345,454

Taxes payable

134,355

112,681

Provision for legal proceedings

115,599

113,521

Other liabilities

42,074

42,742

Total non-current liabilities

3,347,492

3,378,761

Total liabilities

4,670,459

4,518,956

Equity

Share capital

Additional paid-in capital

2,343,939

2,344,521

Treasury shares

(271,751)

(273,955)

Share-based compensation reserve

194,460

187,497

Retained earnings

2,134,090

2,011,875

Equity attributable to equity holders of the parent

4,400,755

4,269,955

Non-controlling interests

40,660

40,628

Total equity

4,441,415

4,310,583

Total liabilities and equity

9,111,874

8,829,539

Unaudited interim condensed consolidated statements of income and comprehensive income

For the three-month periods ended March 31, 2025 and 2024

(In thousands of Brazilian reais, except for earnings per share information)

March 31, 2025

March 31, 2024

(unaudited)

Revenue

936,360

804,239

Cost of services

(282,639)

(269,504)

Gross profit

653,721

534,735

Selling, general and administrative expenses

(281,500)

(241,164)

Other income (expenses), net

306

(4,213)

Operating income

372,527

289,358

Finance income

43,481

25,530

Finance expenses

(138,475)

(99,896)

Net finance result

(94,994)

(74,366)

Share of income of associate

4,285

4,172

Income before income taxes

281,818

219,164

Income taxes expenses

(24,782)

(10,865)

Net income

257,036

208,299

Other comprehensive income

Total comprehensive income

257,036

208,299

Income attributable to:

Equity holders of the parent

251,999

203,393

Non-controlling interests

5,037

4,906

257,036

208,299

Basic earnings per common share

2.79

2.26

Diluted earnings per common share

2.76

2.22

Unaudited interim condensed consolidated statements of cash flows

For the three-month periods ended March 31, 2025 and 2024

(In thousands of Brazilian reais)

March 31, 2025

March 31, 2024

(unaudited)

Operating activities

Income before income taxes

281,818

219,164

Adjustments to reconcile income before income taxes

Depreciation and amortization expenses

91,755

79,269

Write-off of property and equipment

305

Allowance for expected credit losses

16,558

15,264

Share-based compensation expense

6,963

8,630

Net foreign exchange differences

476

(190)

Accrued interest

76,939

51,745

Accrued interest on lease liabilities

29,563

26,744

Share of income of associate

(4,285)

(4,172)

Provision (reversal) for legal proceedings

408

(1,851)

Changes in assets and liabilities

Trade receivables

(55,632)

(6,434)

Recoverable taxes

(6,392)

(6,914)

Other assets

(6,131)

1,458

Trade payables

1,893

14,472

Taxes payable

10,787

5,439

Advances from customers

214

3,095

Labor and social obligations

29,774

23,528

Other liabilities

(4,777)

(212)

470,236

429,054

Income taxes paid

(6,386)

(11,194)

Net cash flows from operating activities

463,850

417,860

Investing activities

Acquisition of property and equipment

(38,477)

(22,955)

Acquisition of intangibles assets

(17,735)

(69,946)

Dividends received

5,598

3,900

Acquisition of subsidiaries, net of cash acquired

(65,162)

(147,262)

Payments of interest from acquisition of subsidiaries and intangibles

(14,536)

(24,735)

Net cash flows used in investing activities

(130,312)

(260,998)

Financing activities

Payments of principal of loans and financing

(769)

(10,762)

Payments of interest of loans and financing

(44,980)

(48,806)

Payments of principal of lease liabilities

(11,904)

(9,648)

Payments of interest of lease liabilities

(29,167)

(26,903)

Proceeds from exercise of stock options

1,622

826

Dividends paid to non-controlling shareholders

(3,991)

(3,712)

Net cash flows used in financing activities

(89,189)

(99,005)

Net foreign exchange differences

(476)

190

Net increase in cash and cash equivalents

243,873

58,047

Cash and cash equivalents at the beginning of the period

911,015

553,030

Cash and cash equivalents at the end of the period

1,154,888

611,077

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