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Now let me turn the call over to Virgil Gibbon, Afya's CEO. Thank you, Zhuan, and welcome to our first conference call of 2025.
5m 12s
It is much satisfaction that Afya starts another year of great operational and financial performance. These quarterly results show 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 undergrad and continuing education segments, combined with solid cash generation and robust EPS growth. Showing our consistent business expansion. In this presentation, I will cover key strategic topics including our performance and highlights, success of business execution across our three segments, and finally, Luis Blanc will provide an in-depth look at our financial and operational performance. Now turning to page number three, Let's begin by highlighting our performance achievements. Initially, our net revenue increased by 16% reaching R936 million dollars a company by a growth in adjusted EBITDA of almost 24% year over year, reaching BRL492 million, for record margin of 52.5%. We also reported a strong cash flow from operating activities again, of R470 million dollars reflecting almost 10% increase compared to the previous year. Boosted by the solid operational results of the company with a cash conversion rate of 96.8%.
6m 47s
And solid cash position of almost BRL1.2 billion at the end of the first quarter. With consistent momentum, our net income reached BRL257 million, making over 23% growth year over year with an EPS of $2.79 a remarkable 23% increase compared to the previous year. This underscores our disciplined capital allocation and an efficient capital structure. Moving to our operation updates. We have 3,593 approved seats but with the closing of the Funiq acquisition, will contribute to additional 60 seats, our total number of approved medical seats will increase to three zero six thousand six hundred and fifty three seats. Additionally, our number of undergrad medical students has reached almost 26,000 students. Representing almost 50% growth compared to the first quarter of twenty twenty four. Furthermore, we increased the net average ticket of medical school by almost 4% year over year [indiscernible] In addition, we continue to observe improving performance in the continuing education and medical practice solutions segments. In continued education, net revenue increased almost 9% year over year pure organically. Reaching R71 million dollars In Medical Prep Solutions, we saw 14% growth in net revenue compared to the first quarter of twenty twenty four. Reaching almost R42 million dollars Lastly, our ecosystem has 317,000 active users exemplify substantial penetration among physician and medical students in Brazil.
8m 34s
Moving to Slide four, we will discuss our performance across our three business segments. Starting with the undergrad segment, we observed important movements throughout the quarter such as higher tickets in the medicine course, with almost 4% increase over a year. This growth was accompanied by gross margin expansion, driven by the consolidation of Wounded On acquired in July 24, and the continuous ramp up of our four Mice Magical campuses launched in the third quarter of twenty twenty two. It's also important to note that we concluded the Funiq acquisition which will enhance our operation of six additional medical seats for the next semester. The continued education segment was marked by an increase in graduate journey students, in addition to a gross margin expansion driven by our ongoing operational restructuring. Which continues to contribute to improve cost management cross selling, general and administrative expenses. In Medical Press Solutions segment, we growth is being driven by the ramp up of B2B contracts and the continued expansion of active payers as well as B2B engagements and the addition of new contracts with pharmaceuticals and industry partners. Before moving to the next slide, I'm proud to share that in April, we received two significant recognitions.
9m 58s
Moody's agents in Brazil upgraded our national scale credit rating from AA plus .br to AAA. Br. With a stable outlook reflecting our strong growth cash generation and financial discipline. I'm also pleased to highlight that we successfully achieved all the IFC defined targets for 02/2024. Including the number of free medical consultations provided and the percentage of medical costs rated with the highest quality scores. Meeting these targets will trigger a 15 bps step down in our lower interest rate over the next twelve months. Reinforcing both our social impact and financial discipline. Additionally, we received our first ESG rating for MSCI, debuting with a solid BBB score. MSCI's sector relative methodology underscore that we [indiscernible] significant portion of its peers.
11m 2s
Particularly in areas like the data privacy and security. Where our practices were stronger than many in the industry. This further solidifies our commitment to sustainability. On the next page, we would like to highlight that the latest NHG and CPC results released by INEP showcase outstanding academic performance across Afya's medical schools. These results reinforce our ongoing commitment to academic excellence, innovative teaching and the development of highly qualified professionals. Among the results, we are proud to celebrate our achievements and congratulate our institutions that performs above expectation, which continues to strengthen Afya's position as a leader. In medical education in Brazil. And now I will turn the call over to Luis Blanco, Afya's CFO to provide further insights into the financial operation metrics. Thank you. Thank you, Vigilio, and good evening everyone. Starting with Slide seven for discussions of key operational metrics by business unit. Starting with the under rep programs. Our number of medical students grew 15% over the first quarter twenty twenty four. Reaching almost 26,000 students and approved magical seats increased 12% yearly to 3,593. Our medical school net average ticket increased by 4%, reaching [indiscernible] In the first quarter of twenty twenty five. In addition, net revenues for the undergrad segments saw over 17% increase achieving 827,000,000. 86% of which are related to medicine and 94% from health related courses.
13m 3s
On the next page, I'll present our continuing educational metrics. We approach continuing educational through three main journeys. Starting with the residency journey, which encompass products focused on residence preparation. We saw a 70% decrease [indiscernible] 12,203 students by the end of the period. In the graduate journeys, focus on the specializations test preparations and graduate courses in medicine, Students grew by 16%, 8,542 students. Leslie, our other course and B2B offerings decreased by 3% over the same three month period of the prior year. Continuing education net revenue rose to BRL71 million. In the three months period of 2025, up from the BRL65 million in the three months period of 2024. Reflecting growth almost 9%. This includes an 8% increase in B2B revenue and 16% increase in B2B Moving to slide number nine, I'll discuss the medical solutions operator operational metrics. The first graph shows our total active payers which are the ones that generate revenues in the business to physicians, B2P, Following the STAT growth trends, the number of paying users increased to over a 98,000. A 4% increase over the same quarter last year. The second graph highlights our monthly active users, which accounts for 245,000. Dollars slightly lower than the 263,000 record last year.
15m
This reduction still reflects the transitional fall from the PEPMAN portal to the Afya portal. Lastly, in our final graph, represents the net revenue of our Medical Practice Solutions segments. Which has expanded by 14% compared to the same quarter of the last year. Reaching million. Of this total, BRL37 million was generated by B2B showing an increase of 14%. While B2B contributed to BRL4 million, a 16% increase over the same quarter last year. The next slide we present our Afya ecosystem. We are pleased to highlight Afya's substantial contributions to the Brazilian healthcare community. By the end of the first quarter of twenty twenty five, our ecosystem encompassed over three seventy thousand physicians and medical students using our service and products. Moving forward to Page 11, I want to our financial overview for the first quarter of twenty twenty five.
16m 15s
Starting with the next slide. With great satisfactions, I present another strong quarterly performance for Afya. Net revenue for the first quarter of twenty twenty five reached BRL936 million, representing a 16% increase compared to the same quarter last year. The yearly revenue increase was mainly due to higher ticket in medicine courses, the maturation of medical school seats, the consolidations of Unidol, and advancements of medical practice solutions and continuing educational segments. In the first quarter of twenty twenty five, adjusted EBITDA rose by 24%, reaching BRL492 million. With an adjusted EBITDA margins of 52.5%, a gain of 300 basis points compared to the first quarter twenty twenty four. The expansion in adjusted EBITDA margin is largely attributed to a strong performance of the undergrad segment. The gross margin expansions in the undergrad [indiscernible] of the four wise medical campuses that started operations in the February. The operational restrictions efforts [indiscernible] and medical practice solutions segments. The centralizations of academic process and expansions of service provided by our shared service center and also more efficiency in selling general and administrative expenses. Moving to the next slide, The first quarter cash flow from operating activities rose by almost 10%, reaching million.
18m 10s
Reflecting a strong operational performance. Operating cash flow conversion ratio was 96.8% Net income for the first quarter of twenty twenty five totally R257 million dollars representing a 23% increase from the same period in 2024. Adjusted net income was million dollars a 17% increase. This net income reflects not only our strong operational performance, but also the impact of the new tax legislations implementing the OECD Pillar two rules. Which introduced an additional social contributions to ensure a minimal effective tax rate for multinational groups. This result in an increase of BRL23 million in our income tax expenses. For the period ended in March 2025. Despite this effect, net income grew robustly underscoring the resilience and efficiency of our business model. Regarding EPS, we achieved BRL2.79 per share in the three months period, representing a 23% increase year over year. And now moving to my last two slides. I will discuss our cash and net debt positions. Also giving more color on our cost of debts, This slide presents a table detailing our gross debt compositions. And total cost of debt covering our primarily obligations. The SoftBank transactions, debentures, other financial liabilities, the IFC financials and accounts payables to selling shareholders.
20m 7s
Afya, capital structure remains solid with a conservative leverage positions. And the low cost of debt. Afya net stats excluding IFRS 16, divided by the midpoint of the 2025 adjusted EBITDA was 0.9 times On the next page, we can look at it closely. At our net debt variation. As of the first quarter twenty twenty five, our net debt had reduced to R1,524 million dollars when compared to the end of twenty twenty four. A reduction of million. Reflecting our strong operational performance and capital allocation discipline. This concludes our prepared remarks. We are proud of our accomplishments and robust performance across all areas. Our commitment to advancing the medical journey through an integrated educational systems and medical practice solutions remains strong. Supporting students in becoming physicians, promoting continuous medical earnings, and enhancing physicians' accuracy and productivity. As we look ahead, we are enthusiastic about opportunities that lies before us.
21m 32s
I will now open the conference for the Q and A session. Thank you.
21m 42s
If you wanna ask a question, please raise your hand. We're gonna start the q and a session with Flavio Ashita, from Bank of America. Flavio, you may go ahead, please.
21m 54s
Hi. Good evening, everyone.
21m 58s
So I I have, two questions on my side. The the first one is on the EBITDA margin. So we noticed a very strong print on the quarter. So I I would like you to share some details on what drove this performance Was it related to the ramp up of new units to greater efficiency? Or maybe contribution for other businesses? And also given the strong premium on the quarter, if you see room for an upward revision on the guidance for this year. And then my second question is on the intake process.
22m 39s
So are you guys seeing a a greater challenge on the intake process given the seats offering expansion from of medical courses over the past year. Are you guys feeling that it's getting hard to fill all the seats? If you could comment on the the intake process, we would like a lot. Thank you.
23m 7s
Hi, Flavio. Thank you for your question. It Blanco speaking. I will take the first one, and Dijiro, we'll get the the second one, regarding the intake. So regarding the margin expansions that we had, compared to the same period of the the prior year, The main drivers was the higher gross margins that we we got from and the margin expansion that we got from the undergrad and the continued education segments. The continuing ramp up of the four MICE match campuses that we've launched in the February They continually an issue that we got with higher efficiency coming from the continued education segments and medical practice solutions Remember that we've made a huge transformations in the first quarter of of two thousand thirty four, moving some functionalities between the segments and restructuring the segments internally, and we got a lot of efficiencies on on the movements. So it's like the the full year of these these changes. And the improved cost and efficiency in s g and a. It's that we got from the the applications of the zero budget project that we've started in 02/2023. And on top of that, we came with Unidom Pedro where we got almost a % occupancy with that.
24m 52s
And with a very, very smooth acquisitions that will make that on this month of May, we're gonna put we need on Piedra in our shared service. So we are very happy with these these these results that we achieved in the first quarter. Regarding the the the the the the year, we we have a view that we have a very strong start of the year, but we keep our guidance that we provide provided in March for for the year. We are ahead in terms of margins, but right now, we we we keep the guidance that we provide both in terms of revenues and EBITDA. For the year if we had second semester intake, we might might review it. But right now, we we keep our our view for the year.
26m
Okay?
26m 1s
Thank you, Blanco. So just to add in on that, a very strong start for 02/2025, Flavio. And just remembering, we just closed yesterday, six additional seats in Contagion City close to to Belo Horizonte where we are right now. And any update that we may have or not, on our, guidance for 02/2025. That would only happen on the after the second semester intake. So also depending on on all the process to be completed. And regarding the intake, that we had on the first semester, it was a very healthy intake process. Around seven to eight candidates for every seat that we have in Brazil. We saw a very strong recognition of our brand, the the brand project that was kicked off in thousand twenty three. I think it's paying out, and I think this is a a good news for all campuses that's using now Afya's brand around the country. So not only on the medical intake was a health process. But if you may see on the table two we have a very strong intake and renewal for also health and nonhealth programs that also happen to grow organically all the student base in 02/2025. This is ahead of our expectation here.
27m 31s
We have a very strong intake, and a better renewal rate that was result of a very good renewal process that we started back in November. Last year. Made a very strong, student, base, for 02/2025. So that's it. Alright.
27m 54s
Thank you. Thank you, Flavio. Thank you, Flavio. The next question comes from Luca Makizini from Itau.
28m 4s
Hi. Good evening, everyone, and taking for taking our questions. A couple of questions from our side. The first one would be regarding the undergrad medical school average ticket. It grew 4%, year over year, which is pretty much in line with inflation. So question would be whether the company has seen any significant change in the competitive landscape that maybe brought some challenges in, implementing price hikes. So that's the first question. And then the second question will be regarding the medical practice solution segment. We saw a decrease in the number of monthly active users. We were just wondering if there was a a change also in the in the competitive landscape and what is expectation for the rest of the the year for this segment? Thank you.
28m 49s
Luca, thank you. So the undergrad ticket it's around 4%. We expect a little bit than that.
28m 58s
But they have a an impact on the increase of FIA's percentage that keep the that that start impacting our campuses. Last year. So last year, we had around 10 campuses that was impacted by the 27.5% retention on the Fiesta, that is impact a little bit the increase that we had on our tuition on our average tuition. So moving ahead, the price that we passed, it was a little bit above than that. So as soon as we have same compare same stores comparison that with the institutions that have this impact, I think that it can be even a little bit further than that for the for the next spot, but close to four to 5%.
29m 47s
We are not we are not expecting any div difficult here to change close to inflation or to our campuses. So it's just, more than the same what we are doing, every semester, every year. When we start the the intake process for the following year.
30m 5s
Based on the active users, Blank will will add something here. Hi, Luca.
30m 10s
Thank you for your questions.
30m 11s
Regarding the the the most active users on the medical practice solutions. We still see a a kind of a a a pushback in the in the the movements that we change the PubMed portal to the the Afya portal. And as you you you you you remember, when we we make this these changes, we put it a lot of this content stands related to the content of the portal regarding with a a a information. So these kind of movements, we had some pushbacks on the on the on the the monthly active users using our our website. But as these keep going, we see these this [indiscernible] be smaller. So the changes, if I'm not wrong, happening in April. So the most part of these changes has already happened. There is no changes on the the the kind of profile of assets that's are seeing right now. And, Luca, just to add a point here, just the the rationale behind it.
31m 30s
We changed the portal back in April 2024. The reason of that that we that we decide to be more strict to have, the user sign, our our our portal here, so it's more difficult to have the active user. We are getting more information. The reason of that is that, well, we more information. We have more behavior, and all we can leverage the relationship with the industry, with the b two b contracts, having more details, more data about, these users that is logging into our On the other side, the payers keep improving in a healthy way. That was a decision that we took to be more restrictive, but it's, it's running as expected.
32m 16s
Okay?
32m 18s
Thank you, Virgilio Blanco. That was very clear.
32m 21s
Thank you, Luca.
32m 22s
The next question comes from Mauricio Sepeida from Morgan Stanley.
32m 31s
Hi, Virgilio Blanco. Thank you you for the opportunity here. I have to two questions. One, if you you could clarify all the kind of minimum tax according to the pillar two of, OCD, [indiscernible] a little bit on why were you classified as a multinational company? What are your perspectives, in terms of let's say, this this kind of text behaving I understand that you were provisioning not necessarily paying I understood correctly, from the tax. What are your expectations here? And, and the second about, the SoftBank convertible debt. Right? Do we have this We are getting closer to to to the to the to the, deadline and how are you preparing in terms of cash if if this debt is not converted into equity? Thank you.
33m 33s
Hi, Sepeda. It's Vlad speaking now. Take the the the two questions here. Regarding the pillar two, that's it was a lot. That was enacted in December 27. And being effective in January 2025. This law aligns the Brazilian tax less list legislations with the OCDA globe rules and introduce a minimal tax So it's a it's a complex calculations, very, very different from the Brazilian calculations of Lukroel that we are usage to have here. So this was approved in the last minute of thousand twenty four and effective in in in in for for this quarter. This applies to multinational groups. That have a a entities in in the country.
34m 42s
With that's the multinational group has more than €750,000,000 in the last in the last years in the the last fiscal year. So in our understanding, we are we are we are under perimeter of this law. So what we did we we make this provisioning. The payment of it is is due. To July 2026. That's the the the the the the when we we should pay it. And right now, we started that the the March, We started to questioning to to do our injections.
35m 28s
Going to justice to to get question [indiscernible] and some some points about about this because how it is implemented has some some some it's reducing the impacts of the the the problem. It's a it's a complex case. We we have a conservative approach of provisioning that until we are discussing that in the. Okay? So it's a provision. It's not a disbursement right now. Regarding the the the SoftBank transactions, the we had these early redemption, the the right of early redemption from SoftBank in May 2026.
36m 19s
Right now, we don't have any official positions on that. But as we are getting closer, what we did in in 02/2024 we started to provision the the premium from this this this loan that is due this premium, if they exercise this early, early, early, early redemption. That, we started to talk with SoftBank regarding their views on that. We don't have any put official positions regarding regarding the the the extension or not of this this operations. But what we did, we started to to get in 02/2004 the provision of this this premium of 5%. But we are prepared with our cash flow generations to to to pay to pay these instruments. If it's required, if SoftBank exercise the the early redemption. On May 2026.
37m 32s
That's clear. Thank you, Blanco.
37m 35s
Thank you, Seppera.
37m 37s
As a reminder, if you wanna ask a question, please raise your hand. Our next question comes from Marcelo Santos from JPMorgan.
37m 48s
Hello. Good evening.
37m 50s
Thanks for taking the questions. I have two as well. The first, I wanna touch on continued education. So we saw the revenue trends starting to improve, but still single digits. What could what's could you provide an update on what's going on, on the segment and what's the expectation for this year? And the second question is about the b2b business within medical practice solutions. I remember last year that there was kind of let's say, the revenue that was supposed to take place in the first quarter happened in the second. Looks like this year, something like is this a seasonality How how is the B2B business going on the medical practice solutions? Thank you very much.
38m 34s
Hey, Marcelo. I'll get the first one, and Blanco help me with the second one here. So on continuing education, we had a very good intake process and also the end of year process coming from graduates. All the specialization, that long term and higher ticket.
38m 53s
Brazil facing some competition on the residency and small programs of the lower ticket. So that was the combination. We accelerate our growth when you compare to the speed that we were on the third and the fourth last year, a little bit higher, expecting to be even a little bit better. For the following quarters. But, yes, we are growing on graduates. The speed that we would like is to grow, but still facing strong competition on residency, prep programs. So that's the main reason why we are [indiscernible] on continuing education this first quarter and also think it would be something close to that for the rest of the year. Regarding the b two b contrast, Blanco, like to Yeah.
39m 43s
Thank you, Marcelo, for for your questions. As you remember that we had some some postponement of recognition of revenues in 02/1934. Moving from the the first to to the second semester. That made at that time, if compared 02/2024 with thousand and twenty three, we have even a a decrease on that. What happened and you you clearly see that in the b to b, that we've had some some kind of seasonality on how the pharmaceutical industry make the contracts with with the the the adversement products that we have. The fourth quarter, it's always more active in terms of contracts if you compare it to the the the first the first quarter. So you you can see in the b two b sides that the the first quarter always will be a little bit below what we had to find in in the fourth quarter. Just just to to to to see if we got the the growth of thousand and and and 24 as as a whole of the year, the b to b contracts grew last year almost 30% in terms of revenues. Right now, we we we started with with [indiscernible] compared to minus 6.2 in the same period of last year.
41m 17s
So it's kind of a little bit of seasonality in the pharmaceutical industry. But we are very conf confident regarding the the b to b business, mostly supported by the pharmaceutical player. The the pharmaceutical players.
41m 32s
Perfect. Thank you very much for the answers.
41m 34s
Thank you, Marcella. Since we don't have any further questions, I would like to thank your participation here today. We inform the investor relations teams are available if you have any follow-up questions.
41m 46s
See you again in our next conference call. Thank you.
Key Insights
Afya reported strong Q1 2025 results, with net revenue up 16% year-over-year to BRL936 million, adjusted EBITDA up 24% to BRL492 million (margin of 52.5%), and net income up 23% to BRL257 million; EPS grew 23% to BRL2.79.
Operational highlights include a 15% increase in medical students (to nearly 26,000), a 12% rise in approved medical seats (to 3,593, with more from acquisitions), and a 4% increase in average medical school ticket prices.
Continuing education segment saw net revenue grow 9% year-over-year to BRL71 million, with graduate journey students up 16%, though residency journey students decreased; Medical Practice Solutions revenue rose 14% to BRL42 million, with B2B revenue up 14%.
The company maintained a strong cash position (BRL1.2 billion), high cash conversion (96.8%), and reduced net debt to BRL1,524 million; leverage remains conservative at 0.9x adjusted EBITDA.
Management reaffirmed full-year revenue and EBITDA guidance despite the strong start, citing margin expansion from operational efficiencies and acquisitions; intake process remains healthy with strong demand for seats, and no significant competitive or pricing challenges are expected for the remainder of the year.
