Afya Limited (AFYA) 13 Nov 242024 Q3 Earnings call transcript

Thank you for joining us for Afya's Conference Call. I'm here today with Afya's CEO, Virgilio Gibbon; and our CFO, Luis Andre Blanco.

During today's 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 and its related benefits. available more Exchange in this Commission. The based the those the filings presentation include of on and as Securities forward-looking information risks fully hereof. our described with are the These date us to statements in

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

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

slide. now over Afya's Now, Virgilio let call the turn me the to next Gibbon, CEO, starting

everyone Thank us and thanks joining quarter third Renata, today results. conference our and call XXXX X-month to for for for you,

highlights. XXX quarter XXX growth grew our same BRL reaching million, with a income Adjusted followed by the net XX% allocation BRL of year, an followed XXX start Afya's Net adjusted last of X.XX. EBITDA BRL margin with last of and million year-over-year, year-over-year, reaching XX.X%. revenue Let's with XX% over higher reached an growth on discipline BRL efficient a and capital trend of structure. than XX% positive adjusted of capital quarter EPS great M&A million, XX% year-over-year reflecting

and In approved quarter, on reconsideration as the of XX with payments, acquisition medical seats we of of Unidom year net XXX the a for We in by of debt last from cash earn-out medical additional with a have even in period X-month considering Ended to X.XXX Luis be of cash maintain BRL will are million also UNIMA the UNIGRANRIO. XX% XXX.X%. X,XXX activities. seats level able our X record than with mentioned XX BRL approval in the reported the operating And Unidom, BRL seats reached further conversion this billion, higher flow acquisition stable Blanco. million, we

last the of revenue With reached continues XX% excluding which more than strong the Solution, students, XX,XXX year-over-year, number Practice reaching more quarter school year. in Solution a to ecosystem, representing Medical engaging million in the than our compared increased Unidom the securing highlight medical net BXB ticket, Our almost potential undergrad significant by Practice the medical students an of results clients period has XX Furthermore, growth in over attractiveness same acquisition, BRL and the to XX.X% driven revenue Education average XXXX. BRL ramp-up Once reported period. In reached results, continue XXX we net more XXX of again, net physicians the with X-month growth BXB period. presenting great in Medical the increase BXP great ended X-month in X% a year-over-year, Afya in million. These segment, engagements. on contracts XXX to results Continuing and the and also Afya's data clients in to grow, unique XX% see

Moving Slide now #X. to

Medicos the to XXXX. of seats, quarter UNIMA medical third process operation XXXX and November integration in maturation Thanks period. X-month X Afya the and of the costs medicine We throughout and segment, will our X.X% Starting such execution important tuition solid movements X Undergrad in units. about for the with increase medicine quarter, higher with as within business we the the Jaboatao completion the of in Mais its talk business that our our ramp-up started saw campuses tickets

XXX margin in XXXX. bps We months to glad to X see expansion a of comparison are gross

of in Salvador, Unidom, This strengthens one our the quarter, we Brazil's seats of acquisition areas. XXX also brings successfully footprint metropolitan largest medical additional completed and which

medical by Our boosting enrollment and our with of students and objectives. the our our dedicated recognition increase reinforcing brand substantial in base and Unidom, ecosystem the student a growth in efforts strong impact to alignment led XX% the at Salvador

in BXB by growth an by marked our was journey offerings. residency education Continued students restructuring, in boosted a operational resulted which

are in in units stand-alone cross and XXXX, we of X campus. to X an them units Additionally, being new see undergrad X of expansion pleased

Lastly, Blanco, BXB be contracts ramp-up to payers, driven in more This now provide engagements Afya's pharma financial with insight explained XX% in into Practice turning and our the to decision the grew by the new a reinforces Practice in the in contracts. And growth and result Solutions the and ramp-up operational continuous in that call quarter XX% clinical growth and active boosted opportunity Medical in Solutions XX% I'll Thank BXB ended with XX% net the revenues increase Medical in ahead clinical over segment, management. with by the over industry and Luis we metrics. you. CFO,

Virgilio, business unit. and key by everyone. programs. undergrad with #X metrics Slide you, good of Starting Starting operational evening, discussions Thank the with for

Our number grew than students XX% of seats year-over-year, XX,XXX yearly. students more approved medical XX% increased and medical reaching almost

acquisitions, net for school X,XXX. medical ticket, months, Our the BRL X.X% by increased average the excluding Unidom reaching X

an up year, BRL from over We the million have BRL revenues, X,XXX prior net from X,XXX million also increase XX%. achieved in

was revenue the XX% from and Regarding health-related delivered medical school from students courses. XX% mix,

students, We On numbers student journey, educational educational by the our the X%, by present approached period. the graduate saw a XX,XXX we the XX% students grew metrics. driven graduations. page, metrics Starting I through residency journey, continuing next primarily reaching with X by of In the continuing end increase, X,XXX will the student reaching main journeys.

the revenue increase other decrease X-month in XXXX, million net a of educational X XXX months BXB in in This up BRL over the BXB million of increased XXX revenues to growth a XX% of by BXP. period same the XX% X-month a year. courses offerings reflecting includes XXXX, XX%. and our from XX% over Lastly, continued in the effort this BRL Overall, the and pushed period prior

#X, Solutions Moving operational to will metrics. the Practice I Medical discuss Slide

revenue The first our graph shows Business payers, to the representing active total generated Physicians segment. in

over trend, of quarter to over XX% number an Following the a same users paying growth increase year. the steady rose last XXX,XXX,

the record the Afya last than year. This PEBMED active XXX,XXX from The XXX,XXX, the our monthly to second due to slightly primarily graph highlights which change Portal for accounts portal. is the transition users, lower

generated total, the showing graph Lastly, XXX BRL in third growing our reaching grew an million, Medical next the XX% present Afya slide, In Of period. while increase also the X-month we XXX Practice revenues million which XX from Solutions, XX%, BXB of the shows BXP, by this the BRL million. contributed XX% was year-over-year, BRL net ecosystem.

our We physicians to the XXX,XXX in the XXXX, are and pleased highlight medical our end contributions quarter the ecosystem students substantial health community of care of products. to Afya By encompassed Brazil. using service and third

to tickets XXXX, quarter adjusted reaching for third X-month for reached quarter last XX.X%, with XXX the I XXX the XXXX. period, of by up the satisfaction, maturations Unidom seats, slide. Page margin the of quarterly million third BRL above XXX rose overview a year. to Practice the representing Continuing forward EBITDA #XX, XXXX compared of XX% Starting With the for medical an X,XXX another revenue totaled XX% the strong performance I increase performance with compared great inflation, the our year-over-year. Moving XX%, next quarter discuss BRL by a to want medical XXXX. third adjusted acquisitions revenue Education growth supported increasing quarter EBITDA segments. In of was financial third million, million Net to the Net Solutions of of basis BRL for points Afya. primarily same This and Medical and period present gain

X the an of in to Undergrad basis largely over Medicos XX% completions administrative Solutions EBITDA same EBITDA X-month period, efforts in XX.X%, ramp-up gross and Mais the operation more BRL in margin segment, in adjusted the adjusted attributed the with margin increase million, of general in campuses process representing expansion increase the UNIMA EBITDA started over Medical that expansions period. X,XXX an segments efficiency the Afya and adjusted Continuing selling, margin and year the quarter amounted the operational third The points prior of Jaboatao the integration For Educational XXXX, of XXX and in expenses. November is XXXX, Practice restructuring

income of third of the in cash conversion the to XXXX The flow operational million, flow net Adjusted BRL X,XXX for at operational of same period next increase XX% performance. marking from Moving BRL of reaching XXX.X% activities The by from was cash XXXX. an rose ratio XXXX. operating the quarter slide. months reflecting XXX X strong the XX%, million, came year's

period the totaled BRL performance our rate net XXX the than was X-month in to year income effective interest the million, year-over-year. last XX% enhancement This mainly adjusted lower due and For up September rates. XXXX, tax operational ending results, lower

our period, financing XX% to shareholders. are representing now X adjusted discuss April a a terms primary the IFC last In basis debt educational IFC debentures, X.XX X-month first terms, cost and debt installments the plus reductions positions, has increase. And table beginning X.X%, CDI the in more within the XX to BRL of a share sustainability-linked of the KPIs XXXX. be account the million repaid transactions, a SoftBank slides. total EPS, to based support in the BRL sector. also financial we growth disbursed will per IFC agreement covering semi-annual on the of compared with XX% quarter, my year sustainability financial is points if on cash interest equal slide presents Brazilian in Under a entered set you liabilities, the detailing to color the debt. social net I XXX our initiatives in our with potential cost The and other BRL agreement rate with rate gross Afya X give to represents payables moving acquisitions. our specific objectives compositions met. has IFC previous and through debt our achieved the X.XX, This expansion obligations, selling loan loan to This the

On look at the closely next variation. net page, debt we the can

from adjusted prepared and end thanks debt compared able accounting Guanambi the XXX of X,XXX our of million of our strong the X-month Even flow UNIMA the debt of acquisitions the BRL same to the in we Unidom, XXXX, quarter to BRL reduce net seats the in BRL XXX period. This third the earn-out regarding to to million net operating additional million, payments at and activities remarks. concludes cash almost regarding the stood XXXX. EBITDA, the were for our level As

our very across are and accomplished robust areas. of all performance proud We

to to productivity. practice and professionals commit learning, medical educational continuous journey Our system accuracy the and strong, medical integrated an advance growth, remains health supporting to care solutions

section. Thank we look open that about for ahead, lies you. before the conference the Q&A we As will us. I now enthusiastic the opportunities are

JPMorgan. first from Marcelo comes Santos The call from

I have a issued, unfold is seeing large second you comments competitive number think the do is increase And new were is And seats there which to if what M&A know now you could how more kind how what at the question How attributed are X. X.X% to will projected have changes, M&A very a environment. make could on? of regarding generally by number. you able having? tuition But about environment, if dealing speaking, you good cycles given noticed next of the that think, the for -- competition? are that you intake from of are previous more One any, with some versus for are you I negotiations kind I about students, you least that? be year, the

that I the we've all -- the and Marcelo, that better for number to them you would first thing new one, amplify, The all will thank come targets possible the these to they Court makes Supreme was some the take is compare a the that to more and approvals, we to about multiple market sellers' second be that they question. outcome these of will talk if in markets, Virgilio the these pipeline authorizations I us say, a to increase from one injunctions latest get -- take lower environment, our okay? going starting Unidom. these combinations our you deal next Regarding after because us. is business the of come this the process, your have to M&A

our lower all you that latest think if to to So, have go And multiple are remember that talking we the we seat the just in And deal that that profile. medicine. will per after keep the transactions. institutions highly have we compare concentrated next entities

get I environment the will competitive here. Marcelo, question

the for to price We did our cycle. at we to as our X, keep for the X next strategy years. tuition least inflation same price last the keeping are average We passing

in period in you is started notice, What we to the first we same are very last and much it's seeing candidates As the we much points more enrollments year, close leads our still candidates beginning. at much percentage saw compared may year better are XX already intake. last And coming. number higher, same month. It's of to we the of than XXXX above number semester the

all same the were So, a XX% already are seats still year, we of XX% around at already already enrolled. have time room. enrolled, last We

So, for keeping only us. And a good health that is trend not to medicine.

on We programs. health trend a are seeing also good other very

health all synergy covering growing because because on our see, you in fast on organically our have we and very our we brand we programs. are programs also campuses, may on labs As our are health the

So, period last also around the intake health programs, high year. same to on X X the when you coming digits it's digits, compare

So, UBS. our from Salles next question comes from Andre

have I on X my end.

that if expansion we follow-up might which better could the on you if to going restructuring strategy, see M&A Education EBITDA prioritize Solutions would on in regions Medical is we know deliver in helped how the a are road mentioned to states efforts far XXXX, I and that. or second further the could margin And forward? the the efforts, maybe one company comment restructuring these like company You Continuing down margins year-over-year. in Practice

here. I'll the X thank your speaking questions. take Andre, for questions. Blanco is This you

got expansions the organization that from operational the this that we the pillars segments. had with and Continuing by It's Regarding we regarding products, efficiency by restructuring. Education our at structure restructuring Digital divided from time. margin that We got the

give I'll example. you So, an

On the product for content had manager side, the a pillar. digital we

decision have the that product sites educational We than practice we to the digital content only have and we restructure, we from did the the -- sites. the structures management the did the We product. not for the When for tools. more pass all to deliver did continued the the structure that. We unified manager product support manager

we under have product So, Solutions. the we we one Education, in have all And same. that Continuing for just the the Practice Medical manager have offers

just have manager digital for product the and in-person offer. the one We

are So the XXXX through better gains we this structure. that the management regarding got for

costs that we operational in the of -- one reducing are the service. BUs. come these We providing ahead, and from expenses we the XXXX for are expansions come From leverage margin each that will getting

all growing, So, they the place. we have and in structures are

results segments. are for structure, of this one to with each we our able So increase the

So, this is question. the for first

need here, One results to that our in thing I Andre. to guys you If careful may add model mix. about a just order point be is

when mix, than margin So careful and we But talk Digital we foresee we Undergrad yes, increase bit a the grows BUs. because lower be Continuing services. all in need Education to about

can margin that impact the So overall.

are And M&A possible we regarding Brazil, in on focused Renata. you, Thank Yes. specific that within any are targets regions. each regions not

medicine and talking with was acquisitions, been has And of based become been more to cities. more focused it be players a that of we The each institutions. combination that to business in X one last and are large was we've remember highly in We concentrated are in on in one, the target previous of in And the Salvador us. institutions closed we've the Jaboatao -- to Maceio. latest course, the city

targets So, trying deals. specific any good we a and We seek concentrated And medicine. of that don't in each these are IRR seek specific get to one on highly regions.

Next question comes America. Bank from of Mirela from

side. my X I questions on have

accelerating from this have The first the services one the users second regarding the This quarter, active X% solutions. digital monthly declined on quarter.

acquisition. some this color that second normalize And PEBMED expect platform been to on the us the on you be And comment terms Could main since are you margins on little margins lines are of bit What the the what challenges? margin in do guys there? what gains main a give transferred? ramp-up you would has of now when the do could decrease? you normalized question already there? expect So, the the Unidom more supporting And the

past, since changed with then, that That your in really affects had launch is active our new users. Portal So, it Afya. the had results in part guys have and Portal we Afya. monthly portal. monthly I but question, regarding we It's PEBMED changed. new we launched know we of one this the recall, totally And to have you seeing first It's And normal if we users. are our number of April. March, decrease the we But since we don't strategy. brand in a that, from of great Portal have effect the active

Yes.

Just adding a point here.

the each from we for user. On were here, Mirela, side data asking more other

number us helped payers. increase that to the So of

we much procedure monthly is our the the data access to to than just new is have have active when some changed get because signing we how the monthly portal. more users to So, user user paying that fee the

Okay?

will regarding Mirela, the one take it's Unidom. Blanco speaking. second I

students We deal. got finalized And than second in medical We of And performing expected have the months put occupations XX% increase us. closing the X,XXX been students X-K we and than Xst the It's just had glad under to July, more are Unidom announced XXX able them itself. to better with initially with very around XX% combination And months. We in medical remember with been remember the the there. we there. got for intake X in of deal, there. over that institutions occupations business over that that information only semester around that we've we we around over the X

these So, this is brings margins semester. what in this

expect, we what gains And a XXXX. we systems, XXX% integrate room integration that, occupancy legacy we to because to have more we're their there. to can systems that our had of all with to to regarding ahead, over can Going service Unidom occur going go going shared we expect their during that items we're the

capacity that from the in we So, this expand process the deal. the unifications margins got plus Unidom will of these fulfillment more existing even

from Marquezini comes question Itau. Next Lucca from

couple of questions A from side. our

reason the the segment how regarding provide The please first would growth which you behind should color net leverage. regarding deceleration? be expect Education also, we this revenue growth saw we Can And then financial quarter. one the in the one a segment throughout XXXX? Continuing second will be And more for this deceleration on for

So, we leverage. saw in another financial decrease quarter of

dividend or should comment also And for higher please? the ratio please in if financial XXXX, level leverage payout you expect on a can target should So, forward? comfortable we what in this going a sense, be

the question first rate on Continuing growth on the Education. about Luca,

expected, Pillar seasonality As quarter, a like intake that on have it's low the used second what the the and called X that be we the third a on is to quarter.

We are intake also stronger graduate in of middle programs. the the on

We have a this a graduating semester. cohort large high last very cohort,

right this the we reason was kind flat main are good quarter now. why seeing that of intake. So on we are trends But

check X now. is we can new campuses. ramping this new that semester These You right up launched campuses

The So, January -- it's will we starting new intake process. in October, goes but February. that the have good December into November, early still seasonality of this figures and

flat some in the and So, on fourth we XXXX. getting something the in Continuing Education, path quarter expect may on better same

that speaking it's if from And you net of got the debt inorganic movements, now inorganic EBITDA midpoint about that the movements leverage. and financial net from XXXX right like I end the guidance year. debt the had X got we when here the we really debt and for the we paid adjusted that for X.Xx Unidom additional X important X.X to presented. UNIMA to that slide PROUNI. this and reduced talking amazing we've was just to was FIES consider Luca, compared Blanco and done performance reduced net the in our months, earn-outs we've the I acquisitions reconciliation Even of really that at the it seats

that very Our I to Moving the and ahead, return us minimal doing company on talking combinations, capital. investments again about that? our on concentrated are want and returns give point we address this what's business combinations, is that we're view our IRR and leverage in the medicine that view business

on on that. that on very are allocations strict we capital So,

started we business extract So, combinations, leverage these the to from to next we of ratios the cash to combination. until then synergies having to company are do the keep high conversion leverage business cash, prepared And keep we combination. generating the discipline decrease business a do

figures. are in this all -- acquisitions we financial we As less bigger strategy, the that are marginal our with have impact made becoming

any growing we this scenario discussions. internally our keep year on ongoing this XXX we So to are distribute with changes with dividends. possibility -- is with We if policy. that that, M&A kind seats to of per a did start this it's if But not target, discussing have we have

So ratio. that's net the my regarding leverage to view the debt

that Luca, year, also reminder, a Just Medicos. Mais have next we

of pace Medicos the units have and investments we Lucas So, to of seats win. [Operator we our Mais comes question to start from Instructions] are will going per that the that keep XXX year Nagano. the Next acquisitions also we

We have X.

to if a very higher increase saw basically saw seat. those sense The candidates regarding into first type can versus there tuition you're in like of institutions we still school that between We'd segmented particular lower that your increase a is to understand portfolio the or candidates in the seeing like metrics different per get buckets, tuition another whether see not, variance of is trends. of homogenous your

allocation debt about But you of capital or the pay question. this, account is for the question to we and how capital a M&A. more on case So, taking SoftBank to it redeemed. debt time But assuming up is into redeemed, the the question. is does plenty and still second -- allocation Would be refinance your the M&A inclined this change if first the debt, your down be keep Sorry priorities? assume until can is we And have follow-up it long base debt? the the how

Lucas, the one and ratio. tuition the I'll here first candidates the about get

So, campuses pricing North, we XX West South, we more differently. are from than of programs medical East, offering and Brazil, have

around are average X.X%, is the for So, all the passing to average that XXXX we institutions.

quality we we good have that some that. have students cohort, that a very for course, applying Of institutions

of a bit are on lower. tuition the moving ahead And priced X.X%. forward, moving institutions are We level, the independently other little we

the process. we higher I intake to that question are that mentioned, same at but course, passing demand we are terms is you first synergy move point from same we average that all -- commitment when another in candidates much the at campus least we Of one campuses keep our ratio, have we as here operate here, a can integrated, inflation have. The campus, for compare as seeing of the to on the we candidates

beginning that them. of until still also of goes enrollment. January, in the are we And most in So, very terms

Afya XX% in last campuses almost So Brazil. have already Unidom, acquisition that's we our all That includes today, all in here. of seats for also fulfilled

we in that still beginning. ratio last better, say the better same much you here candidates period year the are the actually what we very the than is compare when can intakes. But So,

Okay?

deal, if here. before, It's mentioned not any get has SoftBank has. Talking the of clear to Blanco It's they to that kind for operating -- were of SoftBank almost the -- XXX cash us or these to discussions. redemption Having going the on to billion. BRL early as optionality get X with finance XXXX, source that could didn't the repay do months, BRL that. of early do amount, another Nagano, of for It's you million anticipation our this these generated SoftBank the convertible. repay we of X.X speaking deal we about even easily optionality from that, redemptions said flow. May And just we

we very it's but early finance think to for could managed discussions, have get -- substitute I this to instrument. easily to another So, these

have questions, Investor a open need. to See Relations follow-up do you we keep more you any Since if the quarter. we guys not team next