Afya Limited Third Quarter and Nine Months 2024 Financial Results

About this update from Afya Limited

Impressive Adjusted EBITDA Margin Expansion Robust EPS Expansion Expressive Cash Generation NOVA LIMA , Brazil --(BUSINESS WIRE)-- Afya Limited (Nasdaq: AFYA ; B3: A2FY34) (“Afya” or the “Company”), the leading medical education group and medical practice solutions provider in Brazil , reported today financial and operating results for the three and nine-month periods ended September 30, 2024 (third quarter 2024). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS). Third Quarter 2024 Highlights 3Q24 Net Revenue increased 16.3% YoY to R$841.2 million . Net Revenue excluding acquisitions grew 11.8%, reaching R$808.8 million . 3Q24 Adjusted EBITDA increased 25.0% YoY reaching R$347.9 million , with an Adjusted EBITDA Margin of 41.4%. Adjusted EBITDA Margin increased 290 bps YoY. Adjusted EBITDA excluding acquisitions grew 18.2%, reaching R$328.9 million , with an Adjusted EBITDA Margin of 40.7%. 3Q24 Net Income increased 26.4% YoY, reaching R$124.1 million , and Adjusted Net Income increased 28.8% YoY, reaching R$165.4 million . Adjusted EPS growth was 29.9% in the same period. Nine Months 2024 Highlights 9M24 Net Revenue increased 14.4% YoY to R$2,455.3 million . Net Revenue excluding acquisitions grew 12.9%, reaching R$2,422.9 million . 9M24 Adjusted EBITDA increased 24.3% YoY reaching R$1,089.6 million , with an Adjusted EBITDA Margin of 44.4%. Adjusted EBITDA Margin increased 350 bps YoY. Adjusted EBITDA excluding acquisitions grew 22.1%, reaching R$1,070.6 million , with an Adjusted EBITDA Margin of 44.2%. 9M24 Net Income increased 63.0% YoY, reaching R$494.6 million , and Adjusted Net Income increased 46.9% YoY, reaching R$626.7 million . Adjusted EPS growth was 48.7% in the same period. Operating Cash Conversion ratio of 109.7%, with a solid cash position of R$836.9 million . ~326 thousand users in Afya’s ecosystem. Table 1: Financial Highlights Three months period ended September 30 , Nine months period ended September 30 , (in thousand of R$) 2024 2024 Ex Acquisitions* 2023 % Chg % Chg Ex Acquisitions 2024 2024 Ex Acquisitions* 2023 % Chg % Chg Ex Acquisitions (a) Net Revenue 841,185 808,763 723,479 16.3% 11.8% 2,455,314 2,422,892 2,146,047 14.4% 12.9% (b) Adjusted EBITDA 2 347,949 328,924 278,393 25.0% 18.2% 1,089,628 1,070,603 876,766 24.3% 22.1% (c) = (b)/(a) Adjusted EBITDA Margin 41.4% 40.7% 38.5% 290 bps 220 bps 44.4% 44.2% 40.9% 350 bps 330 bps Net income 124,142 - 98,220 26.4% - 494,641 - 303,530 63.0% - Adjusted Net income 165,372 - 128,393 28.8% - 626,683 - 426,675 46.9% - *For the three months period ended September 30, 2024 , "2024 Ex Acquisitions" excludes: UNIDOM (July to September, 2024; Closing of UNIDOM was in July 2024). *For the nine months period ended September 30, 2024 , "2024 Ex Acquisitions" excludes: UNIDOM (July to September, 2024; Closing of UNIDOM was in July 2024). (2) See more information on "Non-GAAP Financial Measures" (Item 08). Message from Management We are pleased to announce another quarter of solid results, marked by strong cash generation, consistent margin expansion, and progress in our strategic initiatives. This performance underscores the differentials of Afya’s business model centered on the entire physician career and the successful execution of our growth strategy, as we continue advancing our mission to integrate education and digital solutions for the medical journey, enhancing training, updating, assertiveness, productivity, and physicians' connections with the healthcare ecosystem. Our EBITDA margin expansion was largely supported by the integration of UNIMA and FCM Jaboatão delivered in 4Q23, the ramp-up of the four Mais Médicos campuses launched in 3Q22, restructuring efforts within the Continuing Education and Medical Practice Solutions, and improved cost management in Selling, General, and Administrative expenses. This quarter, we completed the acquisition of Unidom adding 300 medical seats, strengthening our presence in Salvador , one of Brazil’s largest cities. Through dedicated efforts, we achieved a robust medical students’ intake at Unidom with more than 300 students enrolled in the 2nd half just one month after the acquisition, reinforcing the impact of our ecosystem and brand recognition throughout the country. Additionally, we received authorization from Brazil’s Ministry of Education (“MEC”), to increase 80 medical seats at UNIMA and the reconsideration of 10 medical seats at Unigranrio in Rio de Janeiro , bringing our total approved seats across all campuses to 3,593. These expansions are aligned with our commitment to providing access to quality medical education and meeting the demand for healthcare professionals. During our Afya Day event in October, we also announced a projected 5.1% increase in tuition fees for new students in 2025, above inflation expectations for 2024, which reflect the continued strength of our value proposition and the recognition of our brand. For the nine-month period, Net Revenue increased across all three segments. For Medical Practice Solutions we have seen a robust 15% increase in Net Revenue compared to the nine-month period of the prior year. Reaffirming the immense potential of our Solutions. For our Undergrad segment, Net Revenue grew by 14% when compared to the same period last year. Mainly supported by medical tickets increasing above inflation, the maturation of the medical seats, in addition to the acquisition of Unidom and increase of medical seats approved. Afya has concluded a very successful intake process in 2024 with more than 6 candidates per seat considering all 32 campuses reflecting the strengthening of Afya’s brand recognition and reputation among the medical community. In our Continuing Education segment, we are also proud to see another year of organic growth. Net Revenue increased over 10% in the nine-month period. Through a robust intake process, with the establishment of four new campuses in 2024 alone, we can see once more, our students, employees, and partners benefit from our constantly developing ecosystem. It is worth mentioning that our ecosystem has reached today 326 thousand active users, adopting at least one of Afya’s solutions. This achievement is complemented by a high level of satisfaction, reflecting the strong recognition and trust in Afya’s brand and its ecosystem Our commitment to high-quality education and comprehensive support for healthcare professionals remains at the core of our mission. Afya’s focus on operational excellence, strategic expansions, and sustainable growth positions us for continued success. We remain steadfast in our vision to transform health together with those who have medicine as a vocation, leveraging our ecosystem to create long-lasting value for all stakeholders. 1. Key Events in the Quarter: On July 1, 2024 , Afya Participações announced the closing of its acquisition of 100% of the total share capital of Unidom Participações S.A. (“Unidom”) which encompasses Unidompedro and Faculdade Dom Luiz, both located in the State of Bahia with operations in the cities of Salvador , Luis Eduardo Magalhães , Barreiras and Ribeira do Pombal. The acquisition contributes 300 operational medical school seats to Afya in Salvador , one of Brazil's largest cities. The authorization request for these 300 seats was made to MEC before the Mais Médicos´ Law was enacted and MEC concluded its analysis and issued Ordinance 630/2020 ("Ordinance") in 2020 to partially authorize the operation considering 125 medical seats. In 2021, as a result of a judicial order, MEC reviewed the Ordinance to authorize the 300 seats initially requested by Unidompedro. Said decision was confirmed by a judgment in 2023. Currently, Unidompedro has 300 seats authorized, of which 125 are final and 175 are subject to a final conclusion of the aforementioned court proceedings. The aggregate purchase price (enterprise value) was R$660.0 million , and the estimated Net Debt was deducted from the down payment. The price and payment conditions are: R$347.8 million , deducted from the estimated Net Debt, was paid in cash at closing. R$312.2 million will be paid in up to 10 annual installments of R$31.2 million , adjusted by the CDI (Interbank Certificate of Deposit) rate. Afya expects an EV/EBITDA of 4.2x at maturity and post-synergies (2027). On July 12, 2024 , the Secretary of Regulation and Supervision of Higher Education of MEC authorized the increase of 80 medical school seats of UNIMA , located in the city of Maceió, State of Alagoas , which will result in an additional payment of R$1.25 million per increased medical school seat, updated by IPCA since January 2, 2023 until the payment date to the selling shareholders of DelRey. With this authorization, Afya reaches 220 medical school seats on this campus. On August 30, 2024 , has received the total disbursement of R$500.0 million under the loan agreement with International Finance Corporation ("IFC") to finance its expansion program, through acquisitions. The financing is IFC’s first sustainability-linked loan based on social targets in the education sector. The pricing of IFC’s loan will be linked to Afya reaching performance target levels in selected social key performance indicators encompassing free medical consultations for the community and quality of education according to Brazil’s Ministry of Education criteria (“Sustainability KPIs”). According to the financing terms, the loan shall be repaid in seven equal semi-annual installments starting in April 2027 . The interest rate is the Brazilian CDI rate plus 1.2%, and it may be reduced by 15 bps if the Sustainability KPIs are achieved. On September 6, 2024 , Afya Participações announced that following the conclusion of an administrative procedure, MEC has granted the request for reconsideration submitted by Unigranrio. Per the e-MEC portal, Unigranrio reestablished 10 medical seats in the city of Rio de Janeiro , reaching 318 medical seats across both Unigranrio campuses, contributing to Afya´s 3,593 total approved medical seats. 2. 2024 Guidance Afya reaffirms the Guidance FY2024, which was updated upward at the end of 2Q24 to encompass the acquisition of Unidom, the authorization of 80 seats in UNIMA , and the performance of the first semester. Guidance for 2024 Net Revenue 1 R$ 3,225 mn ≤ ∆ ≤ R$ 3,325 mn Adjusted EBITDA R$ 1,375 mn ≤ ∆ ≤ R$ 1,475 mn CAPEX 2 R$ 220 mn ≤ ∆ ≤ R$ 260 mn (1) Excludes any acquisition that may be concluded after the issuance of the guidance, notably, the Unidom acquisition was included in the guidance provided (2) The 2024 Capex guidance does not encompass the earn-out payment in the amount of R$49.6 million related to the 40-seat increase at Faculdades Integradas Padrão (FIP Guanambi), and also excludes the earn-out payment due to UNIMA Alagoas for the 80-seat increase in July 2024 . 3. 3Q24 Overview Segment Information The Company has three reportable segments as follows: Undergrad, which provides educational services through undergraduate courses related to medical school, undergraduate health science and other ex-health undergraduate programs; Continuing education, which provides medical education (including residency preparation programs, specialization test preparation and other medical capabilities), specialization and graduate courses in medicine, delivered through digital and in-person content; and Medical Practice solutions, which provides clinical decision, clinical management and doctor-patient relationships for physicians and provide access, demand and efficiency for the healthcare players. Key Revenue Drivers – Undergraduate Programs Table 2: Key Revenue Drivers Nine months period ended September 30 2024 2023 % Chg Undergrad Programs MEDICAL SCHOOL Approved Seats 3,593 3,163 13.6% Operating Seats 1 3,543 3,113 13.8% Total Students (end of period) 24,234 21,556 12.4% Average Total Students 23,168 21,056 10.0% Average Total Students (ex-Acquisitions)* 22,782 21,056 8.2% Net Revenue (Total - R$ '000) 1,852,742 1,607,217 15.3% Net Revenue (ex- Acquisitions* - R$ '000) 1,822,157 1,607,217 13.4% Medical School Net Avg . Ticket (ex- Acquisitions* - R$/month) 8,887 8,481 4.8% UNDERGRADUATE HEALTH SCIENCE Total Students (end of period) 25,950 21,564 20.3% Average Total Students 25,028 21,447 16.7% Average Total Students (ex-Acquisitions)* 24,810 21,447 15.7% Net Revenue (Total - R$ '000) 170,520 151,833 12.3% Net Revenue (ex- Acquisitions* - R$ '000) 169,733 151,833 11.8% OTHER EX- HEALTH UNDERGRADUATE Total Students (end of period) 27,855 24,286 14.7% Average Total Students 27,745 24,625 12.7% Average Total Students (ex-Acquisitions)* 27,302 24,625 10.9% Net Revenue (Total - R$ '000) 132,633 124,038 6.9% Net Revenue (ex- Acquisitions* - R$ '000) 131,583 124,038 6.1% Total Net Revenue Net Revenue (Total - R$ '000) 2,155,895 1,883,089 14.5% Net Revenue (ex- Acquisitions* - R$ '000) 2,123,473 1,883,089 12.8% *For the nine months period ended September 30, 2024 , "2024 Ex Acquisitions" excludes: UNIDOM (July to September, 2024; Closing of UNIDOM was in July 2024). (1) The difference between approved and operating seats is 'Cametá'. A campus for which we already have the license but haven't started operations. Key Revenue Drivers – Continuing Education Table 3: Key Revenue Drivers Nine months period ended September 30 2024 2023 % Chg Continuing Education 1 Total Studends (end of period) Residency Journey - Business to Physicians B2P 2 15,678 10,325 51.8% Graduate Journey - Business to Physicians B2P 7,293 7,063 3.3% Other Courses - B2P and Business to Business Offerings 29,780 24,385 22.1% Total Students (end of period) 52,751 41,773 26.3% Net Revenue (R$ '000) Business to Physicians - B2P 175,002 153,792 13.8% Business to Business - B2B 12,730 16,216 -21.5% Total Net Revenue 187,731 170,010 10.4% (1) The figure above does not contemplate intercompany transactions (2) 'Content & Technology for Medical Education' which had been reported in 'Digital Services' table, has been reclassified to 'Continuing Education' Key Revenue – Medical Practice Solutions Table 4: Key Revenue Drivers Nine months period ended September 30 2024 2023 % Chg Medical Practice Solutions 1 Active Payers (end of period) Clinical Decision 166,780 150,796 10.6% Clinical Management 33,503 29,281 14.4% Total Active Payers (end of period) 200,283 180,077 11.2% Monthly Active Users (MaU) Total Monthly Active Users (MaU) - Digital Services 2 248,775 259,259 -4.0% Net Revenue (R$ '000) Business to Physicians - B2P 99,707 88,485 12.7% Business to Business - B2B 17,583 13,803 27.4% Total Net Revenue 117,290 102,289 14.7% (1) The figure above does not contemplate intercompany transactions (2) 'Content & Technology for Medical Education' is now being reported in Continuing Education table Key Operational Drivers – Users Positively Impacted by Afya Users Positively Impacted by Afya represents the total number of medical students from the Undergrad segment, students from the Continuing Education and users from Medical Practice Solutions. For the third quarter of 2024, Afya’s ecosystem reached 325,760 users, in line with the same period of the prior year. Table 5: Key Revenue Drivers Nine months period ended September 30 2024 2023 % Chg Users Positively Impacted by Afya 1 Undergrad (Total Medical School Students - End of Period) 24,234 21,556 12.4% Continuing Education (Total Students - End of Period) 52,751 41,773 26.3% Medical Practice Solutions (Monthly Active Users) 248,775 259,259 -4.0% Ecosystem Outreach 325,760 322,588 1.0% (1) Ecosystem outreach does not contemplate intercompany figures. Note that there may be overlap in student numbers within the data. Seasonality of Operations Undergrad 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) Residence 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 significantly fluctuate regarding seasonality. Net Revenue Net Revenue for the third quarter of 2024 was R$841.2 million , an increase of 16.3% over the same period in the prior year. Excluding acquisitions, Net Revenue in the third quarter increased 11.8% YoY to R$808.8 million . For the nine-month period ending September 30, 2024 , Net Revenue was R$2,455.3 million , reflecting a 14.4% increase over the same period of last year. Excluding acquisitions, Net Revenue in the nine-month period increased 12.9% YoY to R$2,422.9 million . The revenue increase was mainly due to higher tickets in Medicine courses, the maturation of medical seats, the 40-seat expansion in the Guanambi campus, the Continuing Education intake performance, and the execution of Medical Practice Solutions. Specifically, in the third quarter, we also had the impact of 80 new seats at UNIMA and the reconsideration of 10 seats at Unigranrio ( Rio de Janeiro ). Additionally, on July 1, 2024 , Afya acquired Unidom. Table 6: Revenue & Revenue Mix (in thousands of R$) Three months period ended September 30 , Nine months period ended September 30 , 2024 2024 Ex Acquisitions* 2023 % Chg % Chg Ex Acquisitions 2024 2024 Ex Acquisitions* 2023 % Chg % Chg Ex Acquisitions Net Revenue Mix Undergrad 741,729 709,307 636,849 16.5% 11.4% 2,155,895 2,123,473 1,883,089 14.5% 12.8% Continuing Education 60,225 60,225 56,335 6.9% 6.9% 187,731 187,731 170,010 10.4% 10.4% Medical Practice Solutions 40,436 40,436 34,450 17.4% 17.4% 117,290 117,290 102,289 14.7% 14.7% Inter-segment transactions - 1,205 - 1,205 - 4,155 -71.0% -71.0% -5,602 -5,602 -9,341 -40.0% -40.0% Total Reported Net Revenue 841,185 808,763 723,479 16.3% 11.8% 2,455,314 2,422,892 2,146,047 14.4% 12.9% *For the three months period ended September 30, 2024 , "2024 Ex Acquisitions" excludes: UNIDOM (July to September, 2024; Closing of UNIDOM was in July 2024). *For the nine months period ended September 30, 2024 , "2024 Ex Acquisitions" excludes: UNIDOM (July to September, 2024; Closing of UNIDOM was in July 2024). Adjusted EBITDA Adjusted EBITDA for the three-month period ended September 30, 2024 , increased by 25.0% to R$347.9 million , up from R$278.4 million in the same period of the prior year, with the Adjusted EBITDA Margin rising by 290 basis points to 41.4. For the nine-month period ending September 30, 2024 , Adjusted EBITDA was R$1,089.6 million , an increase of 24.3% over the same period of the prior year, accompanied by an Adjusted EBITDA Margin increase of 350 basis points in the same period. The Adjusted EBITDA Margin expansion is primarily attributable to: (a) gross margin expansion in the Undergrad Segment; (b) completion of UNIMA and FCM Jaboatão integration process in November 2023 ; (c) the ramp-up of the four Mais Médicos campuses that started operation in 3Q22; (d) operational restructuring efforts in Continuing Education and Medical Practice Solutions segments; and (e) More efficiency in Selling, General and Administrative expenses. Table 7: Reconciliation between Adjusted EBITDA and Net Income (in thousands of R$) Three months period ended September 30 , Nine months period ended September 30 , 2024 2023 % Chg 2024 2023 % Chg Net income 124,142 98,220 26.4% 494,641 303,530 63.0% Net financial result 99,844 80,535 24.0% 242,761 267,313 -9.2% Income taxes expense 12,432 12,146 2.4% 26,388 33,296 -20.7% Depreciation and amortization 85,828 73,908 16.1% 249,135 212,172 17.4% Interest received 1 13,945 10,619 31.3% 34,979 25,760 35.8% Income share associate (2,526) (615) 310.7% (9,726) (7,671) 26.8% Share-based compensation 5,871 6,684 -12.2% 26,299 20,082 31.0% Non-recurring expenses: 8,413 (3,104) n.a. 25,151 22,284 12.9% - Integration of new companies 2 6,444 7,769 -17.1% 17,722 19,951 -11.2% - M&A advisory and due diligence 3 1,220 703 73.5% 2,803 12,377 -77.4% - Expansion projects 4 198 2,007 -90.1% 2,568 2,536 1.3% - Restructuring expenses 5 551 3,722 -85.2% 2,058 5,673 -63.7% - Mandatory Discounts in Tuition Fees 6 - (493) n.a. - (1,441) n.a. - Gain on tax amnesty 7 - (16,812) n.a. - (16,812) n.a. Adjusted EBITDA 347,949 278,393 25.0% 1,089,628 876,766 24.3% Adjusted EBITDA Margin 41.4% 38.5% 290 bps 44.4% 40.9% 350 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. (7) On August 10, 2023 , Unigranrio entered into a tax amnesty program on interest and penalties to settle a tax proceeding in respect to ISS (city tax on services) with the municipality of Rio de Janeiro , which result in a payment of R$14,819 to settle the claim. The selling shareholders of Unigranrio agreed to pay R$5,438 regarding this matter. The Company had a provision of R$53,302 and an indemnification asset from the selling shareholders of R$20,000 (in light of the indemnification clauses as defined at acquisition of Unigranrio), in respect to such tax proceeding. The difference between the provision, indemnification asset and the actual paid amount was recorded as Other income (expenses), net on the consolidated statement of income and comprehensive income. Adjusted Net Income Net Income for the three-month period ended September 30, 2024 was R$124.1 million , an increase of 26.4% over the same period of the prior year. Adjusted Net Income was R$165.4 million , which resulted in an increase of 28.8% over the same period from the previous year. For the nine-month period, Afya achieved a Net Income of R$494.6 million , 63.0% higher than the same period of 2023, and an Adjusted Net Income of R$626.7 million which was 46.9% higher than the previous period. This performance was mainly due to: (a) enhancement of operational results; (b) lower effective tax rates than last year; and (c) lower interest rates. Adjusted EPS reached R$6.81 per share for the nine-month period ended September 30, 2024 , an increase of 48.7% YoY, reflecting the increase in Net Income and capital allocation discipline. Table 8: Adjusted Net Income (in thousands of R$) Three months period ended September 30 , Nine months period ended September 30 , 2024 2023 % Chg 2024 2023 % Chg Net income 124,142 98,220 26.4% 494,641 303,530 63.0% Amortization of customer relationships and trademark 1 26,946 26,593 1.3% 80,592 80,779 -0.2% Share-based compensation 5,871 6,684 -12.2% 26,299 20,082 31.0% Non-recurring expenses: 8,413 (3,104 ) n.a. 25,151 22,284 12.9% - Integration of new companies 2 6,444 7,769 -17.1% 17,722 19,951 -11.2% - M&A advisory and due diligence 3 1,220 703 73.5% 2,803 12,377 -77.4% - Expansion projects 4 198 2,007 -90.1% 2,568 2,536 1.3% - Restructuring expenses 5 551 3,722 -85.2% 2,058 5,673 -63.7% - Mandatory Discounts in Tuition Fees 6 - (493 ) n.a. - (1,441 ) n.a. - Gain on tax amnesty 7 - (16,812 ) n.a. - (16,812 ) n.a. Adjusted Net Income 165,372 128,393 28.8% 626,683 426,675 46.9% Basic earnings per share - in R$ 8 1.33 1.04 27.9% 5.35 3.21 66.6% Adjusted earnings per share - in R$ 9 1.79 1.38 29.9% 6.81 4.58 48.7% (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) On August 10, 2023 , Unigranrio entered into a tax amnesty program on interest and penalties to settle a tax proceeding in respect to ISS (city tax on services) with the municipality of Rio de Janeiro , which result in a payment of R$14,819 to settle the claim. The selling shareholders of Unigranrio agreed to pay R$5,438 regarding this matter. The Company had a provision of R$53,302 and an indemnification asset from the selling shareholders of R$20,000 (in light of the indemnification clauses as defined at acquisition of Unigranrio), in respect to such tax proceeding. The difference between the provision, indemnification asset and the actual paid amount was recorded as Other income (expenses), net on the consolidated statement of income and comprehensive income. (8) Basic earnings per share: Net Income/Weighted average number of outstanding shares. (9) Adjusted earnings per share: Adjusted Net Income attributable to equity holders of the Parent/Weighted average number of outstanding shares. Cash and Debt Position As of September 30, 2024 , Afya's Cash and Cash Equivalents stood at R$836.9 million , marking a 51.3% increase compared to December 31, 2023 . Net Debt, excluding IFRS 16 impacts, reached R$1,894.4 million—an increase of R$106.6 million over the same period of the previous year. Despite the R$660.0 million acquisition of Unidom and the R$157.2 million earn-out payment regarding the additional seats in Guanambi and UNIMA , Afya’s Net Debt (excluding IFRS 16) increased by only 4.4%, thanks to strong Cash Flow from operating activities. For the nine-month period ended September 30, 2024 , Afya reported Cash Flow from Operating Activities of R$1,167.5 million , up from R$933.8 million in the same period of the previous year, an increase of 25.0% YoY, boosted by solid operational results. Operating Cash Conversion Ratio achieved 109.7%. Table 9: Operating Cash Conversion Ratio Reconciliation Nine months period ended September 30 , (in thousands of R$) Considering the adoption of IFRS 16 2024 2023 % Chg (a) Net cash flows from operating activities 1,148,175 896,202 28.1% (b) Income taxes paid 19,290 37,599 -48.7% (c) = (a) + (b) Cash flow from operating activities 1,167,465 933,801 25.0% (d) Adjusted EBITDA 1,089,628 876,766 24.3% (e) Non-recurring expenses: 25,151 22,284 12.9% - Integration of new companies 1 17,722 19,951 -11.2% - M&A advisory and due diligence 2 2,803 12,377 -77.4% - Expansion projects 3 2,568 2,536 1.3% - Restructuring Expenses 4 2,058 5,673 -63.7% - Mandatory Discounts in Tuition Fees 5 0 -1,441 n.a. - Gain on tax amnesty 6 - -16,812 n.a. (f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses 1,064,477 854,482 24.6% (g) = (c) / (f) Operating cash conversion ratio 109.7% 109.3% 40 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. (6) On August 10, 2023 , Unigranrio entered into a tax amnesty program on interest and penalties to settle a tax proceeding in respect to ISS (city tax on services) with the municipality of Rio de Janeiro , which result in a payment of R$14,819 to settle the claim. The selling shareholders of Unigranrio agreed to pay R$5,438 regarding this matter. The Company had a provision of R$53,302 and an indemnification asset from the selling shareholders of R$20,000 (in light of the indemnification clauses as defined at acquisition of Unigranrio), in respect to such tax proceeding. The difference between the provision, indemnification asset and the actual paid amount was recorded as Other income (expenses), net on the consolidated statement of income and comprehensive income. The following table shows more information regarding the cost of debt for 9M24, considering loans and financing and accounts payable to selling shareholders. Afya’s capital structure remains solid, with a conservative leveraging position and a low cost of debt. Considering the updated mid guidance, Afya’s Net Debt (excluding the effect of IFRS16) divided by the Adjusted EBITDA is 1.33x. Table 10: Gross Debt and Average Cost of Debt (in millions of R$) For the closing of the nine months period ended in September 30 , Cost of Debt Gross Debt Duration (Years) Per year %CDI² 2024 2023 2024 2023 2024 2023 2024 2023 Loans and financing: Softbank 828 826 1.6 2.6 6.5% 6.5% 51% 50% Loans and financing: Debentures 511 512 2.8 3.9 12.1% 15.5% 112% 114% Loans and financing: Others 309 570 1.0 1.4 12.8% 15.4% 119% 114% Loans and financing: IFC 497 - 4.1 - 11.8% - 110% - Accounts payable to selling shareholders 586 702 3.3 0.9 10.7% 12.8% 100% 96% Total¹| Average 2,731 2,610 2.6 2.2 9.4% 11.8% 88% 88% (1) Total ammount refers only to the "Gross Debt" columns (2) Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference: 9M24: ~10.65% p.y. and for 9M23: ~12.65% p.y. Table 11: Cash and Debt Position (in thousands of R$) 3Q24 FY2023 % Chg 3Q23 % Chg (+) Cash and Cash Equivalents 836,876 553,030 51.3% 822,008 1.8% Cash and Bank Deposits 5,594 11,746 -52.4% 11,107 -49.6% Cash Equivalents 831,282 541,284 53.6% 810,901 2.5% (-) Loans and Financing 2,145,270 1,800,775 19.1% 1,908,299 12.4% Current 30,051 179,252 -83.2% 186,903 -83.9% Non-Current 2,115,219 1,621,523 30.4% 1,721,396 22.9% (-) Accounts Payable to Selling Shareholders 586,042 566,867 3.4% 651,068 -10.0% Current 247,192 353,998 -30.2% 382,500 -35.4% Non-Current 338,850 212,869 59.2% 268,568 26.2% (-) Other Short and Long Term Obligations n.a. 50,469 -100.0% (=) Net Debt (Cash) excluding IFRS 16 1,894,436 1,814,612 4.4% 1,787,828 6.0% (-) Lease Liabilities 974,780 874,569 11.5% 869,729 12.1% Current 45,133 36,898 22.3% 36,705 23.0% Non-Current 929,647 837,671 11.0% 833,024 11.6% Net Debt (Cash) with IFRS 16 2,869,216 2,689,181 6.7% 2,657,557 8.0% 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 segment. For the nine-month period ending September 30, 2024 , CAPEX was R$316.8 million . Excluding the one-off effect in the first quarter of R$49.6 million regarding the earn-out of Guanambi, due to the expansion of 40 seats as disclosed to the market in January 2024 , and the earn-out of UNIMA in the amount of R$107.6 million , due to the expansion of 80 seats as disclosed to the market in July 2024 the CAPEX/Net Revenue ratio would be 6.5%. Table 12: CAPEX (in thousands of R$) For the nine months period ended September 30 , 2024 2023 % Chg CAPEX 316,766 155,127 104.2% Property and equipment 93,367 88,014 6.1% Intanglibe assets 223,399 67,113 232.9% - Licenses 157,227 0 n.a. - Others 66,172 67,113 -1.4% 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/ Table 13: ESG Metrics 1, 2 & 3 3Q24 3Q23 2023 # GRI Governance and Employee Management 1 405-1 Number of employees 10,155 9,868 9,680 2 405-1 Percentage of female employees 59% 58% 58% 3 405-1 Percentage of female employees in the board of directors 30% 36% 36% 4 102-24 Percentage of independent member in the board of directors 40% 36% 36% Environmental 5 Total renewable energy generated by own photovoltaic plants (MWh) 1,471,476 1,151,649 4,510,637 6 302-1 Total energy consumed (MWh) 5,644,403 6,078,952 24,036,608 7 302-1 % of renewable energy consumed from own generation 22.5% 16.4% 16.0% 8 302-1 % of energy consumed from the power grid 37.6% 56.7% 60.3% 9 302-1 % of energy consumed from the free market 39.9% 26.9% 23.7% Social 10 413-1 Number of free clinical consultations offered by Afya 221,230 146,294 586,611 11 Number of physicians graduated in Afya's campuses 21,266 18,965 20,197 12 201-4 Number of students with financing and scholarship programs (FIES and PROUNI) 11,636 10,628 10,584 13 % students with scholarships over total undergraduate students 14.9% 15.8% 16.0% 14 413-1 Hospital, clinics and city halls partnerships 567 664 649 (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) 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. (3) The number of students with financing and scholarship programs (FIES and PROUNI) in 2023 excludes students from the Unima and FCM Jaboatão acquisition, and for 3Q24, also excludes those from the UNIDOM acquisition. 4. Conference Call and Webcast Information When: November 13, 2024 at 5:00 p.m. EST . 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/94887462478 OR Dial-in: Brazil : +55 11 4680 6788 or +55 11 4700 9668 or +55 21 3958 7888 or +55 11 4632 2236 or +55 11 4632 2237 United States : +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 or +1 253 205 0468 or +1 253 215 8782 Webinar ID: 948 8746 2478 Other Numbers: https://afya.zoom.us/u/aAPTjXWSq 5. 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 . 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 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 prospectus 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. 8. Investor Relations Contact E-mail: [email protected] 9. Financial Tables Unaudited interim condensed consolidated statements of income and comprehensive income For the three and nine-month periods ended September 30, 2024 and 2023 (In thousands of Brazilian reais, except earnings per share information) Three-month period ended Nine-month period ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 (unaudited) (unaudited) (unaudited) (unaudited) Revenue 841,185 723,479 2,455,314 2,146,047 Cost of services (324,083) (288,234) (908,429) (820,136) Gross profit 517,102 435,245 1,546,885 1,325,911 Selling, general and administrative expenses (280,027) (257,002) (784,953) (739,808) Other income (expenses), net (3,183) 12,043 (7,868) 10,365 Operating income 233,892 190,286 754,064 596,468 Finance income 30,396 34,771 79,659 86,259 Finance expenses (130,240) (115,306) (322,420) (353,572) Net finance result (99,844) (80,535) (242,761) (267,313) Share of income of associate 2,526 615 9,726 7,671 Income before income taxes 136,574 110,366 521,029 336,826 Income taxes expenses (12,432) (12,146) (26,388) (33,296) Net income 124,142 98,220 494,641 303,530 Other comprehensive income - - - - Total comprehensive income 124,142 98,220 494,641 303,530 Income attributable to: Equity holders of the parent 119,979 93,347 481,583 288,263 Non-controlling interests 4,163 4,873 13,058 15,267 124,142 98,220 494,641 303,530 Basic earnings per common share 1.33 1.04 5.35 3.21 Diluted earnings per common share 1.31 1.03 5.28 3.18 Unaudited interim condensed consolidated statements of financial position As of September 30, 2024 and December 31, 2023 (In thousands of Brazilian reais) September 30, 2024 December 31, 2023 (unaudited) Assets Current assets Cash and cash equivalents 836,876 553,030 Trade receivables 552,381 546,438 Inventories 235 1,382 Recoverable taxes 41,424 43,751 Other assets 45,304 58,905 Total current assets 1,476,220 1,203,506 Non-current assets Trade receivables 36,940 39,485 Other assets 117,789 117,346 Investment in associate 55,365 51,834 Property and equipment 639,187 608,685 Right-of-use assets 846,333 767,609 Intangible assets 5,541,793 4,796,016 Total non-current assets 7,237,407 6,380,975 Total assets 8,713,627 7,584,481 Liabilities Current liabilities Trade payables 129,920 108,222 Loans and financing 30,051 179,252 Lease liabilities 45,133 36,898 Accounts payable to selling shareholders 247,192 353,998 Advances from customers 154,759 153,485 Labor and social obligations 269,381 192,294 Taxes payable 32,470 27,765 Income taxes payable 12,066 3,880 Other liabilities 4,213 2,773 Total current liabilities 925,185 1,058,567 Non-current liabilities Loans and financing 2,115,219 1,621,523 Lease liabilities 929,647 837,671 Accounts payable to selling shareholders 338,850 212,869 Taxes payable 86,016 88,198 Provision for legal proceedings 115,042 104,361 Other liabilities 52,025 18,280 Total non-current liabilities 3,636,799 2,882,902 Total liabilities 4,561,984 3,941,469 Equity Share capital 17 17 Additional paid-in capital 2,344,053 2,365,200 Treasury shares (276,944) (299,150) Share-based compensation reserve 181,372 155,073 Retained earnings 1,861,948 1,380,365 Equity attributable to equity holders of the parent 4,110,446 3,601,505 Non-controlling interests 41,197 41,507 Total equity 4,151,643 3,643,012 Total liabilities and equity 8,713,627 7,584,481 Unaudited interim condensed consolidated statements of cash flows For the nine-month periods ended September 30, 2024 and 2023 (In thousands of Brazilian reais) September 30, 2024 September 30, 2023 (unaudited) (unaudited) Operating activities Income before income taxes 521,029 336,826 Adjustments to reconcile income before income taxes Depreciation and amortization 249,135 212,172 Write-off of property and equipment 2,108 1,209 Write-off of intangible assets 243 288 Allowance for expected credit losses 41,589 57,160 Share-based compensation 26,299 20,082 Net foreign exchange differences 7,462 448 Accrued interest 166,343 224,349 Accrued interest on lease liabilities 82,803 74,867 Share of income of associate (9,726) (7,671) Provision (reversal) for legal proceedings 4,619 (27,119) Changes in assets and liabilities Trade receivables (35,619) (52,169) Inventories 1,147 7,828 Recoverable taxes 2,409 (34,921) Other assets 20,107 35,960 Trade payables 19,966 1,920 Taxes payable (6,625) 25,321 Advances from customers 40 (27,883) Labor and social obligations 69,719 94,465 Other liabilities 4,417 (9,331) 1,167,465 933,801 Income taxes paid (19,290) (37,599) Net cash flows from operating activities 1,148,175 896,202 Investing activities Acquisition of property and equipment (93,367) (88,014) Acquisition of intangibles assets (223,399) (67,113) Dividends received 6,195 8,294 Acquisition of subsidiaries, net of cash acquired (579,074) (726,530) Payments of interest from acquisition of subsidiaries and intangibles (55,898) (36,674) Net cash flows used in investing activities (945,543) (910,037) Financing activities Payments of principal of loans and financing (126,666) (12,216) Payments of interest of loans and financing (156,897) (124,468) Proceeds from loans and financing 492,351 5,288 Payments of principal of lease liabilities (30,218) (22,657) Payments of interest of lease liabilities (82,567) (78,001) Treasury shares - (12,369) Proceeds from exercise of stock options 6,041 3,546 Dividends paid to non-controlling shareholders (13,368) (15,914) Net cash flows generated (used) in financing activities 88,676 (256,791) Net foreign exchange differences (7,462) (448) Net increase (decrease) in cash and cash equivalents 283,846 (271,074) Cash and cash equivalents at the beginning of the period 553,030 1,093,082 Cash and cash equivalents at the end of the period 836,876 822,008 View source version on businesswire.com : https://www.businesswire.com/news/home/20241113502172/en/ [email protected] Source: Afya Limited

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