AFYA - Earnings call transcript Q2 2022

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Ana Raquel Torres

Thank you for joining us for Afya’s Second Quarter 2022 Conference Call. Today I’m here with Afya’s CEO, Virgilio Gibbon and Luis André Blanco, our CFO.

During this presentation, our executives will make forward-looking statements.

Forward-looking statements can be related to future events, future financial or operating performance, known and unknown risks, uncertainties, and other factors that may cause Afya’s actual results to differ materially from those contemplated by these forward-looking statements.

Forward-looking statements in this presentation include, but are not limited to, statements related to the business and financial performance, expectations and guidance for future periods or expectations regarding the company’s strategic product initiatives, its related benefits, and our expectations regarding the market as well as the potential impact from COVID-19. more Exchange in Commission. those the filings include and Securities risks fully our described with These the The based available of on statements the hereof. forward-looking in information to this us presentation are date as

on You any required disclaim update by them should to not as of and obligation except future statements forward-looking predictions any law. we events, as rely

substitute prepared addition, may reference in call. accordance not are measures be IFRS. management has non-IFRS considered this This results the financial In reconciled financial intended or directly isolation of with the a these measures. as These IFRS comparable in measures financial measures the most to presentation on to non-IFRS

turn with Afya’s the now to over CEO, me Slide Virgilio starting X. Gibbon, Let number call

Virgilio Gibbon

us today. Thank Ana, you, joining and thanks for everyone

thank congratulate month. Renata birth our for I team prepare of daughter like IR her to work IR, this starting, for Couto, to second incredible would quarter and first the our to our Head of release the Before Maria

this in that Once again, For consistent present operational cash growth, business results. financial in model, marked our our and of proving growth are and flowing of combining results proud the resilience. execution successful, been Afya, profitability the we to by us all unique has lines our strategy quarter’s strong generation, high reinforce its

of this I units. demonstrating four highlights During the performance our operational all will main through business quarter, topics: run present our call, and Firstly, I financial will in strong

XXXX disclosed on our with reinforce results second round will I growth of Secondly, guidance expectations another half. of

our awards recognition. commitment being we show last but is important well everything pointing fourth the on of And, campuses our do reflected new and expansion, business Thirdly, least, will to acquisitions. public through how topic, I highlight and out I will our not opening

EBITDA margin XX.X%. Adjusted moving revenue adjusted XX% to with followed a XX% R$XXX.X increased reaching net highlights. with X, quarter of by number R$XXX.X an of year-over-year, start reaching growth more million million, So, year-over-year, let’s our than now page

six the growth, income of XXX% the relevant more major net income growth EPS. rate the This the One Afya’s year, on quarter capital and nowadays. last R$XXX.X allocation EPS a result level with interest year-over-year, Net great market than times of R$X.XX, buybacks higher even and than and the of level reached a operational a debt structure. is by reaffirms net efficient higher on followed results, than million, highlights an considering of jump discipline capital more M&A,

great with another We reported cash XX% the last million, higher also ending R$XXX than generation, semester year. flow

XX% seats and new into reached the result after pandemic XX% Moving almost than combines confirms acquire, year-over-year. that company’s the our quarter, can quarter, to Continuing now XX.X more of In of seats impacts Approved capacity expansion consolidate classes, students thousand, our integrate period. this practical same with same the than during also medical our XX% growth a last taking more strong we off the presenting revenue on see operation. gladly organic representing to Education to operational the by the undergrad grew strategy updates period a growth year. growth This compared

XX result more XX opportunity contracts by ahead excluding of the explained of are We is which Digital BXP more This first with than revenue, engagements, Education and on ramp-up health quarter. and say the the Services great first the it than BXB further the Also, ahead. Continuing XX% Afya on with the reaching in industry ramp-up in companies, the pharmaceutical observed is will ended glance continuing that than in reverting the strong contracts. quarter great acquisitions digital services on we and happy explore an slides the the XX% results expansion reported increase year-over-year, more trend to almost

market. of active almost Our the represents XX% year-over-year. XX.X% medical around growth students’ of XXX,XXX This and a users, reached Brazilian ecosystem physicians

campuses, digital XXXX. long-term out campuses, Medical our digital and recent our Afya´s strategy point to the for high we X-pillar and slide has and cash School I to to closed half, the two Continuing of guidance Undergrad services updates along also fast successful of around with our important of through how capitals trend net capital growth on ensuring first and fulfillment of both In strategy our is added EBITDA continuing the Glic, X, of And awards combined to medical gladly our opening Médicos investments Besides enabled the reinforced After our combining our first to XXX% the everything strong education reflected on a to of Brazil, services show the of this we moving and organic new for relevant all do campus, discipline slide being after recognition. shows we number median on recovery acquisitions, how quarter, with will of allocation last new May. positive well significant to This presentation, expansion these conclusion skyrocket, this that second Unigranrio expansion year in IPEMED to of Ji-Paraná this opening with it’s several Cardiopapers in This half on next public entire will Mais enrollment added us accomplishments another them adjusted our Afya highlight of start students’ generation. is and deliver talk last important achievement: achieved quarter. seeds and the relevant operational it new the with the occupancy cycle strong boost new that can result XX% and another and great brand half of my commitment four the representing to now, revenue guidance about result reaffirm of inorganic for growth. business another slide, and the year in continues performance. moving our predictable of will profitability Moving Education,

award, programs, the in of evaluation including Team, we which market, our share proud an sector shown IR on the of As and our perception categories well-placed to Day, of to others. American among Investor actions operate, survey in Program, Best and Best market we Executive of are the are a that, the regarding Analyst were that Afya reflection independent Institutional Day and we Investor Best Relations recent Program, great evaluated results being Latin several very ESG in most

Another the engine now physician’s to Afya’s On XXth in considering proudful robust we of the announcement companies from year, journey. segment, is position. Afya’s and place on place great ecosystem results This in a Education entire Valor we Xth result this country, all central make innovation efforts integrates the the the are listed that Inovação to XXXX reflects Brasil: jumped Xnd

these at Codes of bottom information slides. find regarding awards on can the You QR the more the

Now, metrics. give I Luis Blanco, will you. the Afya’s on and turn operational CFO, the to color financial Thank call over to more

Luis André Blanco

Thank everyone. you evening good Virgilio, and

Afya. recovered tickets legal of on Medicine this the consolidation Continuing Company recovery, the number strong I Services to satisfaction for Moving seats, quarter tuition maturation that, to R$XXX results for million mandatory the proceedings important higher the discuss quarter It granted present was fees reflecting courses, slide Education discounts net of is Digital second it to the by in the mention highlights acquisitions. financial million, previously to that of X medical year-over-year R$XX.X to up quarter of another COVID-XX. the the related revenue with much is Adjusted the rebound quarter, XX% and

revenue, counted and As excluded amounts from adjusted these not these adjusted of is the XXXX. net net mandatory discounts for revenue recovery XXXX in XXXX in

while the million, was this an the the XX% of over R$XXX period million, basis increased to adjusted year. net Adjusted increase period, for adjusted margin For of XXX six-month revenue quarter XX% EBITDA decreased XX.X%. R$X.XXX to last same points EBITDA

R$XXX education was the to more the quarter due the Net in year. the period. is cash EBITDA the the XX% digital Softbank positively the increase of XXXX operational The resulting the R$XXX of in a Adjusted results EBITDA net the the level. over prior of period an income million, mainly new semester of adjusted mostly still shared adjusted the margin period, the higher segment, transaction the Adjusted over flow holding us residency than year, million, to of of expenses R$XXX increase XX% of an for totaling basis rate regarding cash decrease strong the were points the by XXX XX.X% market, maturing preparatory year-over-year, Medcel in of of an adjusted campuses, was EBITDA results six-month increase difference of XX%. same and same the affected which and was income and the FX the expenses, second same prior the generation the second XXXX. is For period the in in in conversion in services expansion segment, ratio in financial continuing affected that reduction performance quarter million, due increase reduction with margin for

inorganic With we’ve number XX.X average Undergrad from Combined year-over-year, Considering year-over-year, a for additional of starting XX prior number of X,XXX by approved grew maturity. medical our of almost up key reached students metrics XX% almost million seats students increasing with thousand R$XXX net achieve XX%. the students, slide of the increasing to and our more an year, million from with approved undergrad than expectations, more expect unit, seats. to medical operational XX% seats year-over-year at Moving increase than medical we XX,XXX discussion business organic Tuition X% to ticket Programs R$X,XXX reaching Fees,

courses. from XX% these medical health-related revenue and derived Regarding mix, XX% are of school students from

I On next will the our metrics. Continuing Education page, present

quarterly another better great IPEMED, effects recovery In reported campuses mainly interruption prior the our of almost segment, the the by a of of the period the pandemic. COVID-XX of process, year-over-year. net revenues Continuing X% saw we which when grew compared This students increasing the due same in before, said the strong quarter, number of of the recovery the As related Education performance intake and to is XX%, to to year. new ramp-up the

slide metrics. to Digital number I Services XX, the operational discuss will Moving

have which On so our BXP. a that revenue in this we graph, ones the continuous users. trend, paying are growth in see can With active the payers, reached first far, XXX,XXX quarter total generate you

in can in increased graph, you monthly combination And Whitebook reached our we finally, the year-over-year, which the medical the of said. growth and BXP, BXB graph, payers ecosystem XX% Services’ and users, Digital of can is in see of start around our than acquisitions. Brazil, Virgilio as XX% mainly physicians XXX,XXX students more in This our the engagements, expansion revenue, XX% the iClinic. all a and As active than previously the net representing see almost last more on active organic of second excluding and

net since started BXB segments. Service’s and our last break within BXP down we to addition, In Digital quarter, revenue

Cash since almost So, more came from the from strategy than million quarter, million equivalents due R$X.XXX R$XX at of were from same in the was R$X debts. still offset investments Digital in BXB activities, giving payments net debt and end and combinations the BXB, the R$XX of will cash came more quarter of position, Service’s second during mainly discuss The our totaled million and is the executed my revenue two year-over-year of the on net I XXXX. million, the generation. the business beginning. slides, cash compared also to last the million license and BXP, period acquisitions in and our to debt And now, shares our in related color increase last cash moving net to XX-month program period, a debt repurchase million. flow seven Net R$XXX R$XXX to partially by strong cost

debt financings, debts; see to sources payable a debt, table other next and of breakdown our of and of shareholders. with our On average can Softbank loans main selling cost gross transaction, you our the accounts the considering slide, and

a structure for our thank will and prepared position you. debt. capital cost remarks. with open ends leveraging Q&A now of This solid I conference low the a session, the Our remained conservative

Operator

Itau please. Instructions] BBA. question Vinicius, The go first Figueiredo ahead comes from from [Operator Vinicius

Vinicius Figueiredo

for Thanks everyone. taking evening Good question. my

has EBITDA Continuing performance of guys the affected mix, release expansion that in Education holding the You to Thanks. taken for could on the in And degree? that of an give and during quantify normalize factors Medcel, measures the you margins? mentioned earnings much update it possible each Continuing by sales the to in us us also growth in the and Medcel to be how the if but of to the the contributed the reduction also try Education increasing the company margin especially was of would expenses, contribution those

Virgilio Gibbon

take your Blanco can Vinicius, something add is I Virgilio. and can after. here question this

so impact. unit, each they I Education and the launched the Continuing seven XX% So started by campuses, impact think we was margin Medcel Education split to remember related Services business that of Continuing that just Digital maturation. On on had new

few So for students we campuses. each have

P&L important the from start So the on getting than expect semesters. to gross are points the forward, margins and operation we for moving lower we leveraging the this future. efficiency in Continuing of the next expect But Education

Medcel, to Medcel all have profit, to from On are start from combining and version also we results the the pillars launched new last of we products expect Digital Digital Services, the the September, are seeing we release, we after we half improving Services year products the all and have, gross new their following coming Medcel when better impact forward, for when that second gross the the new offers, but margin still the the launching that’s year. compared moving

quarters. still operation So But become even will to an fourth, second on of all I reached line have relevant the the coming more other Medcel. leverage we on Services margin we we start in on think on following half and impact pillars Digital bottom the the the now because terms and the of

be the moving September and also this launch will diluting So forward. in that new collection margins effect improving effect have

Luis André Blanco

and aligned our expectations give on add Virgilio we I may something if that’s with Yes, guidance. the in what Vinicius that it’s said,

the these we issued we’ve quarter the when So on guidance feels first that. during results, have

So aligned much are that we with give pretty for XXXX. we guidance the

Vinicius Figueiredo

thanks, Perfect, Thanks, very Blanco. Virgilio clear. and

Operator

Thank you, Vinicius.

comes from please. talk, next question Mauricio, you from may Mauricio Credit Our Suisse. Cepeda

Mauricio Cepeda

We Blanco. my impact first and the I previous quarters ask profitability. here about question a of the space were the Thank you integration the about hi bit Virgilio the to operations. for little in have talking Hi, new from questions. about

ago, ask impacting made, the they I profitability, two operations say were would you that I So say are are ones the one if to would years somehow, let’s still new if bit are certain in a role and also environments. new regulatory little related question my And digital playing margins still second the a profitability? business to if more impacting the is the

We the seen get I’m cetera. debates et as a courses, is around of to trying discuss so that to there courts are go have of lot the legally authorization trying to others medical mandates, to

the to distinct position eventually triggered? Mais regulatory or that you from of to may face more, this scenarios pathway another authorization How on, you. do market let’s one say keeps are current how situation? prepared both framework the from So now in kind yourselves you that the change Medicos something Thank

Virgilio Gibbon

Cepeda. Hi,

will help here So and I me. both can questions Blanco take

think the profitability, So in is UNIGRANRIO integration I we last year very three big expected. years UNIFIPMoc first two that better ago, related the all that years, what Claros City. acquisitions and expected. integration are Have mind concluded for aligned was in and to synergy the process two we than acquisitions the in processes the Montes All

see the also Digital can coming we to Education. combine that acquisition this You total higher Continuing is on Services assets our when these margin results, helping it’s improve because and than two margins from

the So for -- is relevant on the more we was of because two that undergrad on unit. that years of think margins digital related digital, we and value these concluded extract I the acquisition, in BUX acquisitions a On the it’s impact in last acquisitions to terms lot XX our side. last

can team, selling, people and reorganization, all extract team, optimizing the team, in we how commercial the So a the taking of stack of the tech of also value place there’s related. now right lot initiatives terms cross

now, also and are on tech So this at under expect the and us even right acquired that are discussion companies. dilute seeing than new and to same these G&A the we right start digital improving is now faster we helping from coming speed to the costs revenues

regulation On we to following on first So Mais profitability are Medicos here. the med your this to question. side the related is courses

medical of to we a a as a six these school, new we them, campuses country opening all new support we lot have regulation We need behind investments truly place physicians. the the where and seven launched of already that on new

in we undergrad the and really truth forward. that the a such of a would Medicos and under an have we all course that to that professional association this opportunity here Paulo, need São don’t moving are that rule physician side going to open the like that court have Horizonte and the also cities supporting but the school that don’t we to under Medicos we program discuss course, our Mais Mais support on an Belo I So is behind is

Mauricio Cepeda

Thank you, perfect, you. Thank clear. very that’s

Operator

Santos comes question you Next Marcelo Instructions] [Operator from JPMorgan. Cepeda. from please. may Marcelo, talk you, Thank

Marcelo Santos

my Hi, good evening. Luis you taking thank for questions. and Ana Virgilio,

And the What’s is in second maturity? The the -- students IPEMED to question Thank will half second you tickets. according and pass inflation? be this when up coming especially the about operation one going of are would ramp year the being it achieve that you. the the the for first regarding tickets to company, the for that plan able do of are outlook of think you

Virgilio Gibbon

get I’m sorry, I didn’t second question. Marcelo. your

Marcelo Santos

wanted when seven in the right? and as education, continued you. campus maturity the just you to should if launched Thank that units, you plan? you, reach operations IPEMED progressing, understand the regarding business I It’s when it’s this have expected

Luis André Blanco

Normally half. Marcelo, in I don’t first the, increase pricing start have in the an the tickets. will one regarding with second we the

have that have is we the half. increase year. price in the don’t but we beginning in increase that second have We done of All one or two price spread, this generally the units back the

the can’t second increase beginning in you of half. expect pricing adding not the So in Okay? much the same trends,

Virgilio Gibbon

add just second the we effect last the Yes, the ticket. cohorts a of on year are higher new effect to ticket as half Marcel, students for as that what graduating enrolling also a and is maturation we have

program it’s X beginning Remember of years. of graduate is starting X.X them operation, just duration the this your So them, was effect it half, about positive the maturation second between quite of question maturation new for campuses launched April, actually, in most is our between half, first second the we to year. is Then in IPEMED second the the so is and specialization half. some first these the

is what linear be said of maturation launching, this years And this process what only the some two are But full that, we seen our, that expect the process a our launching for and more offers, even not half. awareness IPEMED a being campuses. these new well, for having would XX right considered we brands over to have, of have that cities So is in operating intake seeing much that a very but intake cities aligned of plan, business we we also programs, higher and acceptance IPEMED of our we the now. positive

Marcelo Santos

very you Perfect. Thank much.

Virgilio Gibbon

Thank you, Marcelo.

Operator

Thank Marcelo. you,

from from ahead Yan, comes please. question go Yan Next BTG Pactual. Cesquim

Yan Cesquim

Luis Virgilio, everyone Ana, evening, good Good evening. and

your fees adjustments in a technical a that granted I pandemic, the that That’s know discounts these the adjustment mandatory results your if you. the during is about results, year-over-year, revenues what would if to question just related here this the XXXX and revenues in helped mandatory tuition or quarter? during reversion of be it the Just Thank net guys. show XXXX discounts this in passed to if in to maybe just wanted had we these still is discounts

Luis André Blanco

our just Blanco students process. this regarding We as invoice received of million XX itself. Yan, adjustment discounts. Hi, It’s it’s speaking. accounted this not judge we’ve clearance the from for the for the We reverse these these

As adjusted consider during of adjustments adjusted adjusted net reverse them we discounts, and our we this the these invoice we revenues all we to we exclude these net our amount discount revenues. this this had during the, and for, are invoicing, did of XXXX, And from discounts. mandatory XXXX of give where this amount proposal, as these

that not, not quarter. consider in this additional accounted we So we second consider the invoices

in in quarter So during revenues. adjusted additional this are XXXX aligned very, made being during excluding we’ve the we very that the and we invoicing second XXXX what did net

to you’re net net revenues, accounted if accounted revenues. see see adjusted revenue net you our that above So of is going the

Yan Cesquim

quarters all of And see all adjustments these looking the are adjustments, in more or backward does following the clear. going these very the -- that’s we to Yes, do adjustments?

Luis André Blanco

we have invoice the that these major the revoice the to states that the but that this do part -- these clearance got discounts. -- same we going the one major are previous one Yes, justice discounts, comes can as major procedure of from we is we granted

our this clearance, these again. mandatory invoice discounts we and as granted So, we will students charge

Yan Cesquim

very you Luis. much, All right, thank

Operator

for no will I Yan. his questions, And remarks. Virgilio Q&A closing you if have more again you, for turn Thank the

Virgilio Gibbon

Thank you.

accomplishment of for and I and today was Thank investors Thank a a think you you, more new you Ana. is all you to earnings good all promise half our meeting proud more ahead. I hope I no couldn’t of joining and be the semester optimistic next following release. great have and Thank there another question. see of us night. Bye-bye. during on It

Afya Limited (AFYA) 23 Aug 222022 Q2 Earnings call transcript