Group 1 - The core announcement is that Afya Limited, a leading medical education group in Brazil, has approved the first issuance of book-entry commercial notes through its subsidiary Afya Participações S.A. [1] - The commercial notes will be issued in two series for private placement [1] - The notes will be sold to Opea Securitizadora S.A., a Brazilian securitization corporation [1]

Group 1 - The results indicate no significant change in the trend for the year, which had already been addressed after the 1Q25 results [1] - Quipus Capital adopts a long-only investment strategy, focusing on operational aspects and long-term earnings potential rather than market-driven dynamics [1] - The majority of Quipus Capital's recommendations will be holds, reflecting a cautious approach in a bullish market [1] Group 2 - The article emphasizes the importance of understanding competitive dynamics within industries for making informed investment decisions [1] - A very small fraction of companies are deemed suitable for a buy recommendation at any given time, highlighting a selective investment strategy [1]

Financial Data and Key Metrics Changes - Company reported a revenue growth of 15% year-over-year, reaching $1,856 million for the first half of 2025 [4] - Adjusted EBITDA increased by 20% year-over-year, totaling $893 million, with a margin of 48.1%, up 220 basis points from the previous year [4][17] - Basic EPS rose to 4.69, representing a 17% increase compared to the previous year [4] Business Line Data and Key Metrics Changes - Undergraduate segment revenue grew over 16%, totaling R$1,642 million, with a 14% increase in the number of medical students [10] - Continuing education revenue increased by 8% year-over-year, reaching R$138 million, driven by a 12% growth in graduate journey students [11] - Medical practice solutions segment saw a revenue growth of over 9%, reaching R$84 million, with B2P revenues up nearly 12% [12][13] Market Data and Key Metrics Changes - The ecosystem reached 302,000 active users, indicating strong engagement among physicians and medical students across Brazil [14] - The number of approved medical seats increased to 3,653, reflecting a 14% growth year-over-year [10] Company Strategy and Development Direction - Company remains focused on operational excellence, aiming for robust growth, increased profitability, and solid cash generation as strategic pillars for long-term value creation [3] - A new share repurchase program was approved, allowing the company to buy back up to 4 million Class A shares by the end of 2026, reflecting a commitment to shareholder value [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting full-year 2025 guidance, supported by strong business fundamentals and disciplined execution [4] - The competitive landscape for medical education is expected to be more intense in the second half of the year, but the company is optimistic about maintaining occupancy rates [45] Other Important Information - The company is actively addressing the implications of new tax legislation aligned with OECD Pillar Two rules, with ongoing legal and administrative efforts to challenge the tax charge [52][53] Q&A Session Summary Question: What are the main levers for profitability expansion in the quarter? - Management highlighted improved efficiency in SG&A expenses and centralization of services as key factors contributing to margin expansion [22][24] Question: Can you provide insights on the EBITDA guidance for the second half? - Management prefers to remain conservative due to seasonality in continuing education, despite strong performance in the first half [35][36] Question: What is the competitive outlook for the second half intake? - Management noted increased competition due to new approvals of medical seats and a reduced candidate ratio, but expressed confidence in maintaining occupancy [44][45] Question: What are the implications of the new taxation? - Management is pursuing both legal and administrative avenues to challenge the new tax legislation, emphasizing its impact on the ProUni program [52][53] Question: How is the M&A environment perceived? - Management indicated that they are looking for the right opportunities at favorable prices, with a focus on good locations and reputations [58][61] Question: What is the strategy behind the share buyback program? - Management explained that the buyback program aims to enhance shareholder value while considering liquidity impacts [62][64]

Financial Performance - Revenue reached R$1,855.8 million, a 15.0% year-over-year increase[7] - Adjusted EBITDA was R$892.8 million, up 20.4% year-over-year, with an adjusted EBITDA margin of 48.1%, a 220 bps increase[7] - Net income increased by 17.0% year-over-year to R$433.6 million, with earnings per share at R$4.69, a 16.9% increase[7] - Cash flow from operating activities increased by 14.6% year-over-year to R$783.0 million[7] Operational Highlights - Medical school students increased by 14% to 25,733[9, 7] - Continuing education revenue increased by 7.9% year-over-year to R$137.5 million[7, 19] - Medical Practice Solutions revenue increased by 9.3% year-over-year to R$84.0 million[7, 22] - The number of users in Afya's ecosystem positively impacted reached 302,000[7, 25] Capital Allocation - Afya's board approved a new share repurchase program of up to 4 million Class A shares[12] Regulatory Impact - Brazil adopted OECD Pillar Two rules, potentially increasing the effective tax rate to a 15% global minimum, with an additional income tax expense of R$56.6 million for the six-month period ended in June 2025[42, 45]

[Unaudited Interim Condensed Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Statements of Financial Position](index=2&type=section&id=Statements%20of%20Financial%20Position) Afya Limited's financial position as of June 30, 2025, reflects increased total assets and equity, with a notable rise in current liabilities Consolidated Statements of Financial Position (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | **Assets** | | | | | | Total current assets | 1,882,992 | 1,589,784 | 293,208 | 18.44% | | Cash and cash equivalents | 1,099,107 | 911,015 | 188,092 | 20.65% | | Trade receivables (current) | 678,950 | 595,898 | 83,052 | 13.94% | | Total non-current assets | 7,355,176 | 7,239,755 | 115,421 | 1.59% | | Intangible assets | 5,583,909 | 5,532,789 | 51,120 | 0.92% | | Property and equipment | 684,279 | 658,482 | 25,797 | 3.92% | | **Total assets** | **9,238,168** | **8,829,539** | **408,629** | **4.63%**| | **Liabilities** | | | | | | Total current liabilities | 2,011,213 | 1,140,195 | 871,018 | 76.39% | | Loans and financing (current) | 1,216,994 | 363,554 | 853,440 | 234.76% | | Total non-current liabilities | 2,590,167 | 3,378,761 | (788,594) | -23.34% | | Loans and financing (non-current) | 996,973 | 1,831,607 | (834,634) | -45.57% | | **Total liabilities** | **4,601,380** | **4,518,956** | **82,424** | **1.82%**| | **Equity** | | | | | | Total equity | 4,636,788 | 4,310,583 | 326,205 | 7.57% | - Total assets increased by **R$408,629 thousand (4.63%)** from December 31, 2024, to June 30, 2025, reaching **R$9,238,168 thousand**[2](index=2&type=chunk) - Current liabilities saw a substantial increase of **R$871,018 thousand (76.39%)**, primarily due to a significant rise in current loans and financing[2](index=2&type=chunk) [Statements of Income and Comprehensive Income](index=3&type=section&id=Statements%20of%20Income%20and%20Comprehensive%20Income) Afya Limited reported strong H1 2025 financial performance, with significant growth in revenue, operating income, and net income Consolidated Statements of Income (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Revenue | 1,855,760 | 1,614,129 | 241,631 | 14.97% | | Cost of services | (625,346) | (584,346) | (41,000) | 7.02% | | Gross profit | 1,230,414 | 1,029,783 | 200,631 | 19.48% | | Selling, general and administrative expenses | (574,371) | (504,926) | (69,445) | 13.75% | | Operating income | 657,755 | 520,172 | 137,583 | 26.45% | | Net finance result | (189,803) | (142,917) | (46,886) | 32.81% | | Income before income taxes | 475,828 | 384,455 | 91,373 | 23.77% | | Income taxes expenses | (42,250) | (13,956) | (28,294) | 202.73% | | Net income | 433,578 | 370,499 | 63,079 | 17.03% | | Basic earnings per common share (R$) | 4.69 | 4.02 | 0.67 | 16.67% | | Diluted earnings per common share (R$) | 4.64 | 3.98 | 0.66 | 16.58% | - Net income attributable to equity holders of the parent increased by **17.03%** to **R$433,578 thousand** for the six-month period ended June 30, 2025, compared to **R$370,499 thousand** in the prior year period[3](index=3&type=chunk) - Basic earnings per common share rose to **R$4.69** for the six-month period ended June 30, 2025, up from **R$4.02** in the same period of 2024[3](index=3&type=chunk) [Statements of Changes in Equity](index=4&type=section&id=Statements%20of%20Changes%20in%20Equity) The Company's total equity increased in H1 2025, primarily driven by net income, partially offset by declared dividends Key Changes in Equity (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------ | | Balances at January 1 | 4,310,583 | 3,643,012 | | Net income | 433,578 | 370,499 | | Share-based compensation | 12,520 | 20,428 | | Treasury shares transferred | 24,249 | 5,541 | | Restricted shares transferred | (4,885) | (8,299) | | Dividends declared | (139,257) | (9,399) | | Balances at June 30 | 4,636,788 | 4,021,782 | - Net income contributed **R$433,578 thousand** to equity in the first half of 2025, an increase from **R$370,499 thousand** in the same period of 2024[5](index=5&type=chunk) - Dividends declared significantly increased to **R$139,257 thousand** in H1 2025, compared to **R$9,399 thousand** in H1 2024[5](index=5&type=chunk) [Statements of Cash Flows](index=5&type=section&id=Statements%20of%20Cash%20Flows) Afya Limited generated higher operating cash flow in H1 2025, but cash used in financing activities significantly increased Consolidated Statements of Cash Flows (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Net cash flows from operating activities | 771,596 | 667,169 | 104,427 | 15.65% | | Net cash flows used in investing activities | (272,268) | (320,490) | 48,222 | -15.04% | | Net cash flows used in financing activities | (309,187) | (177,098) | (132,089) | 74.59% | | Net increase in cash and cash equivalents | 188,092 | 170,378 | 17,714 | 10.40% | | Cash and cash equivalents at end of period | 1,099,107 | 723,408 | 375,699 | 51.94% | - Net cash flows from operating activities increased by **15.65%** to **R$771,596 thousand** for the six-month period ended June 30, 2025[7](index=7&type=chunk) - Net cash flows used in financing activities increased significantly by **74.59%** to **R$309,187 thousand**, largely due to higher dividend payments and payments of principal and interest on loans and leases[7](index=7&type=chunk) [Notes to the Unaudited Interim Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) [1. Corporate Information](index=6&type=section&id=1%20Corporate%20information) Afya Limited, a Nasdaq-listed holding company, expanded its medical school seat capacity in Brazil through recent acquisitions - Afya is the largest educational group by the number of medical school seats in Brazil, operating in **19 Brazilian States**[10](index=10&type=chunk) - On July 1, 2024, Afya acquired Unidom Participações S.A., adding **300 operational medical school seats**, with **175 seats** subject to final court proceedings[11](index=11&type=chunk)[12](index=12&type=chunk) - On May 7, 2025, Afya acquired Faculdade Masterclass Ltda. (FUNIC), contributing **60 pre-operational medical school seats** expected to start in H2 2025, with a contingent consideration for up to **60 additional seats**[14](index=14&type=chunk)[16](index=16&type=chunk)[18](index=18&type=chunk) - As of June 30, 2025, Afya had **3,603 operating medical school seats**[19](index=19&type=chunk) [2. Material Accounting Policies](index=7&type=section&id=2%20Material%20accounting%20policies) Interim financial statements adhere to IAS 34 on a historical cost basis, with Brazilian Real as currency, and reflect no significant new accounting standard impacts - The financial statements are prepared in accordance with **IAS 34 Interim Financial Reporting** and on a historical cost basis, with contingent consideration measured at fair value[20](index=20&type=chunk) - The **Brazilian Real** is the Company's functional and presentation currency[21](index=21&type=chunk)[22](index=22&type=chunk) - Unidom was merged with Afya Brazil on January 1, 2025, resulting in Afya Brazil directly controlling Unidom's subsidiaries IBES and SESSA[24](index=24&type=chunk) - No new standards, interpretations, or amendments adopted in 2025 had significant impacts on the interim financial statements[26](index=26&type=chunk) [3. Segment Information](index=9&type=section&id=3%20Segment%20information) Afya Limited operates three segments, with Undergraduate being the largest revenue contributor, and varying seasonality across revenue streams - The Company has three reportable segments: Undergraduate, Continuing education, and Medical practice solutions[27](index=27&type=chunk) Revenue by Segment (Six-month periods ended June 30, 2025 and 2024) | Segment (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------------------------- | :------------ | :------------ | :----- | :------- | | Undergraduate | 1,641,501 | 1,414,166 | 227,335 | 16.07% | | Continuing education | 137,520 | 127,506 | 10,014 | 7.85% | | Medical practice solutions | 84,004 | 76,854 | 7,150 | 9.30% | | Total Revenue | 1,855,760 | 1,614,129 | 241,631 | 14.97% | - Undergraduate tuition revenues are stable throughout each semester, while Continuing education revenues, particularly from Medcel's e-books, are concentrated in the first and last quarters[34](index=34&type=chunk)[35](index=35&type=chunk) [4. Cash and Cash Equivalents](index=12&type=section&id=4%20Cash%20and%20cash%20equivalents) Cash and cash equivalents significantly increased by 20.65% to R$1,099,107 thousand, primarily driven by highly liquid investment funds Cash and Cash Equivalents (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and bank deposits | 9,167 | 6,078 | 3,089 | 50.83% | | Cash equivalents | 1,089,940 | 904,937 | 185,003 | 20.44% | | Total | 1,099,107 | 911,015 | 188,092 | 20.65% | - Cash equivalents, primarily investment funds and Bank Certificates of Deposit (CDB), represent the majority of the balance and have an average interest rate of **101% of the Brazilian interbank interest rates (CDI)** as of June 30, 2025[38](index=38&type=chunk)[39](index=39&type=chunk) [5. Trade Receivables](index=12&type=section&id=5%20Trade%20receivables) Total trade receivables increased to R$710,312 thousand, driven by tuition and FIES, with a rise in credit loss allowance and past due amounts Trade Receivables Composition (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Tuition fees | 529,757 | 488,962 | 40,795 | 8.34% | | FIES | 127,618 | 79,712 | 47,906 | 60.10% | | Mobile app subscription | 17,235 | 24,223 | (6,988) | -28.85% | | Total trade receivables (gross) | 788,797 | 703,323 | 85,474 | 12.15% | | Allowance for expected credit losses | (78,485) | (71,477) | (7,008) | 9.80% | | Total trade receivables (net) | 710,312 | 631,846 | 78,466 | 12.42% | Aging of Trade Receivables (June 30, 2025 vs. December 31, 2024) | Aging Category (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------------------- | :------------ | :---------------- | :----- | :------- | | Neither past due nor impaired | 338,317 | 327,052 | 11,265 | 3.44% | | Past due: 1 to 30 days | 118,861 | 97,390 | 21,471 | 22.04% | | Past due: 31 to 90 days | 166,537 | 126,623 | 39,914 | 31.52% | | Past due: 91 to 180 days | 108,492 | 91,411 | 17,081 | 18.68% | | Past due: More than 180 days | 56,590 | 60,847 | (4,257) | -6.99% | - Additions to the allowance for expected credit losses increased to **R$33,053 thousand** for the six-month period ended June 30, 2025, from **R$30,018 thousand** in the prior year period[43](index=43&type=chunk) [6. Related Parties](index=13&type=section&id=6%20Related%20parties) Afya Limited maintains balances and transactions with related parties, and key management personnel compensation increased in H1 2025 Related Party Balances (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Trade receivables (assets) | 506 | 507 | (1) | -0.20% | | Lease liabilities | 243,913 | 242,703 | 1,210 | 0.50% | Key Management Personnel Compensation (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Short-term employee benefits | 18,125 | 10,106 | 8,019 | 79.35% | | Share-based compensation plans | 9,056 | 12,412 | (3,356) | -27.04% | | Total compensation | 27,181 | 22,518 | 4,663 | 20.71% | - Lease payments to related parties increased to **R$18,253 thousand** for the six-month period ended June 30, 2025, from **R$16,962 thousand** in the prior year period[44](index=44&type=chunk) [7. Other Assets](index=14&type=section&id=7%20Other%20assets) Total other assets increased slightly to R$180,256 thousand, comprising indemnification assets, advances, judicial deposits, and prepaid expenses Other Assets Composition (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Indemnification assets | 77,106 | 78,701 | (1,595) | -2.03% | | Advances | 22,023 | 35,140 | (13,117) | -37.33% | | Judicial deposits | 17,754 | 16,938 | 816 | 4.82% | | Prepaid expenses | 31,777 | 19,761 | 12,016 | 60.81% | | Other assets | 13,183 | 3,146 | 10,037 | 318.99% | | Total | 180,256 | 173,020 | 7,236 | 4.18% | - Prepaid expenses increased significantly by **60.81%** to **R$31,777 thousand** as of June 30, 2025[48](index=48&type=chunk) [8. Investment in Associate](index=14&type=section&id=8%20Investment%20in%20associate) Afya's 30% equity-method investment in UEPC slightly decreased, despite increased share of income and dividends received - Afya holds a **30% interest in UEPC**, a medical school, accounted for using the equity method[49](index=49&type=chunk) Investment in UEPC Movements (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Opening balance | 54,442 | 51,834 | 2,608 | 5.03% | | Share of income | 7,876 | 7,200 | 676 | 9.39% | | Dividends received | (8,803) | (6,195) | (2,608) | 42.10% | | Closing balance | 53,515 | 52,839 | 676 | 1.28% | - No impairment was recognized for the investment in UEPC as of June 30, 2025[50](index=50&type=chunk) [9. Property and Equipment](index=15&type=section&id=9%20Property%20and%20equipment) The net book value of property and equipment increased to R$684,279 thousand due to significant additions, with no impairment identified Property and Equipment Movements (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Additions | 81,617 | 45,989 | 35,628 | 77.47% | | Write-off (cost) | (2,072) | (1,040) | (1,032) | 99.23% | | Depreciation | (55,284) | (43,176) | (12,108) | 28.05% | | Net book value at period end | 684,279 | 802,477 | (118,198) | -14.73% | - Additions to property and equipment increased by **77.47%** to **R$81,617 thousand** in the first half of 2025 compared to the same period in 2024[54](index=54&type=chunk) - No impairment indicators were present for property and equipment as of June 30, 2025[51](index=51&type=chunk) [10. Intangible Assets](index=17&type=section&id=10%20Intangible%20assets) The net book value of intangible assets increased to R$5,583,909 thousand due to significant additions, with no impairment identified Intangible Assets Movements (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Additions | 143,455 | 91,119 | 52,336 | 57.44% | | Amortization | (92,254) | (86,542) | (5,712) | 6.60% | | Net book value at period end | 5,583,909 | 5,333,934 | 249,975 | 4.69% | - Additions to intangible assets for the six-month period ended June 30, 2025, included **R$99,629 thousand** for licenses with indefinite useful lives, specifically for an increase of **40 medical school seats**[56](index=56&type=chunk) - No impairment indicators were present for goodwill or intangible assets with indefinite or finite useful lives as of June 30, 2025[58](index=58&type=chunk)[60](index=60&type=chunk) [11. Financial Assets and Liabilities](index=18&type=section&id=11%20Financial%20assets%20and%20liabilities) Afya's financial assets and liabilities increased, driven by current loans, while the company actively manages market, credit, and liquidity risks Financial Assets and Liabilities (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Financial assets (amortized cost) | 1,818,710 | 1,553,471 | 265,239 | 17.07% | | Financial liabilities (amortized cost) | 3,563,969 | 3,517,396 | 46,573 | 1.32% | | Financial liabilities (fair value) | 302,301 | 314,953 | (12,652) | -4.02% | - Current loans and financing increased by **R$853,440 thousand (234.76%)** to **R$1,216,994 thousand** as of June 30, 2025, compared to December 31, 2024[62](index=62&type=chunk) - The Company's net exposure to interest rate risk indicates that a **75 basis point increase** in interest rates would negatively impact profit before tax by **R$5,947 thousand**[75](index=75&type=chunk) [11.2.1 Loans and Financing](index=18&type=section&id=11.2.1%20Loans%20and%20financing) Total loans and financing slightly increased to R$2,213,967 thousand, with a significant shift towards current maturities Loans and Financing (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Total Loans and financing | 2,213,967 | 2,195,161 | 18,806 | 0.86% | | Current | 1,216,994 | 363,554 | 853,440 | 234.76% | | Non-current | 996,973 | 1,831,607 | (834,634) | -45.57% | - The current portion of loans and financing increased by **R$853,440 thousand**, indicating a significant amount of debt maturing within one year[62](index=62&type=chunk) [11.2.2 Leases](index=19&type=section&id=11.2.2%20Leases) Right-of-use assets and lease liabilities increased in H1 2025 due to new additions and remeasurements, alongside recognized expenses and payments Lease Balances and Movements (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Right-of-use assets (closing balance) | 859,356 | 801,409 | 57,947 | 7.23% | | Lease liabilities (closing balance) | 1,011,091 | 921,701 | 89,390 | 9.70% | | Additions (ROU assets/liabilities) | 33,730 | 27,783 | 5,947 | 21.40% | | Depreciation expense (ROU assets) | (38,915) | (33,589) | (5,326) | 15.86% | | Interest expense (lease liabilities) | 59,727 | 53,770 | 5,957 | 11.08% | - Lease contracts generally have maturities between **five and 30 years**[63](index=63&type=chunk) [11.2.3 Accounts Payable to Selling Shareholders](index=20&type=section&id=11.2.3%20Accounts%20payable%20to%20selling%20shareholders) Accounts payable to selling shareholders decreased to R$506,113 thousand, with Unidom's contingent consideration probable to be paid Accounts Payable to Selling Shareholders (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------- | :------------ | :---------------- | :----- | :------- | | Accounts payable at amortized cost | 198,970 | 185,318 | 13,652 | 7.37% | | Accounts payable at fair value | 307,143 | 345,454 | (38,311) | -11.10% | | Total | 506,113 | 530,772 | (24,659) | -4.65% | - The contingent consideration for Unidom (**R$298,584 thousand**) is measured at fair value and is considered probable to be paid, based on the current stage of court proceedings regarding the authorization of **175 medical school seats**[66](index=66&type=chunk)[67](index=67&type=chunk) [11.3 Fair Values](index=20&type=section&id=11.3%20Fair%20values) Fair values for loans and financing are determined by discounted cash flow, while other instruments use carrying amounts, with no change in hierarchy Loans and Financing: Carrying Amount vs. Fair Value (June 30, 2025 vs. December 31, 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 Carrying amount | June 30, 2025 Fair value | December 31, 2024 Carrying amount | December 31, 2024 Fair value | | :------------------------------------- | :------------------------------ | :----------------------- | :-------------------------------- | :----------------------- | | Loans and financing | 2,213,967 | 2,159,243 | 2,195,161 | 2,196,152 | - The fair value of interest-bearing loans and financing is determined using the discounted cash flow method[70](index=70&type=chunk) [11.4 Financial Instruments Risk Management Objectives and Policies](index=21&type=section&id=11.4%20Financial%20instruments%20risk%20management%20objectives%20and%20policies) Afya manages market, credit, and liquidity risks under Board oversight, prohibiting speculative derivatives and performing sensitivity analyses - The Company monitors market, credit, and liquidity risks with the support and oversight of the Board of Directors[72](index=72&type=chunk) - The Company's policy is that no trading of derivatives for speculative purposes may be undertaken[72](index=72&type=chunk) - The Company's exposure to market risk is related to interest rate and foreign currency risk[73](index=73&type=chunk) [11.5 Changes in Liabilities Arising from Financing Activities](index=23&type=section&id=11.5%20Changes%20in%20liabilities%20arising%20from%20financing%20activities) Liabilities from financing activities in H1 2025 saw significant movements in loans, leases, and dividends, with substantial principal and interest payments Changes in Liabilities from Financing Activities (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------ | | Loans and financing (Jan 1 balance) | 2,195,161 | 1,800,775 | | Loans and financing (June 30 balance) | 2,213,967 | 1,784,815 | | Lease liabilities (Jan 1 balance) | 978,336 | 874,569 | | Lease liabilities (June 30 balance) | 1,011,091 | 921,701 | | Dividends payable (Jan 1 balance) | - | - | | Dividends payable (June 30 balance) | 778 | - | | Total liabilities (Jan 1 balance) | 3,173,497 | 2,675,344 | | Total liabilities (June 30 balance) | 3,225,836 | 2,706,516 | - Payments of principal for loans and financing were **R$1,543 thousand**, and for lease liabilities were **R$24,222 thousand** in H1 2025[85](index=85&type=chunk) - Payments of interest for loans and financing totaled **R$110,399 thousand**, and for lease liabilities **R$58,793 thousand** in H1 2025[85](index=85&type=chunk) [12. Capital Management](index=24&type=section&id=12%20Capital%20management) Afya's capital management aims to maximize shareholder value and ensure compliance with all financial and non-financial covenants, with no breaches reported - The primary objective of the Company's capital management is to maximize shareholder value[86](index=86&type=chunk) - The Company ensures it meets financial and non-financial covenants under its debentures and other loans and financing[87](index=87&type=chunk) - There have been no breaches of financial and non-financial covenants in the current period[87](index=87&type=chunk) [13. Labor and Social Obligations](index=24&type=section&id=13%20Labor%20and%20social%20obligations) Labor and social obligations, including variable and share-based compensation, saw increased bonuses and new grants in H1 2025, despite decreased overall expense Variable Compensation (Bonuses) (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Bonuses recognized | 27,197 | 8,047 | 19,150 | 238.00% | - **60,000 stock options** were granted in April 2025 with a weighted average fair value of **R$45.95**[91](index=91&type=chunk) - **35,000 Restricted Stock Units (RSUs)** were granted in April 2025 with a weighted average fair value of **R$107.33**[95](index=95&type=chunk) Share-based Compensation Expense (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Stock options plan expense | 5,410 | 11,387 | (5,977) | -52.49% | | RSU program expense | 7,110 | 9,041 | (1,931) | -21.36% | | Total share-based compensation expense | 12,520 | 20,428 | (7,908) | -38.71% | [14. Equity](index=26&type=section&id=14%20Equity) Afya's share capital remained constant, while the Company approved its first dividend distribution and treasury shares decreased due to compensation plans - The Company's share capital remained at **R$17 thousand**, represented by **93,722,831 shares**[98](index=98&type=chunk) - On March 12, 2025, the Board of Directors approved the first dividend distribution of **R$129,784 thousand**, representing **20%** of the consolidated net income for 2024[100](index=100&type=chunk) Treasury Shares Movements (Six-month periods ended June 30, 2025 and 2024) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------- | :------------ | :------------ | | Outstanding at January 1 | 3,455,538 | 3,773,478 | | Delivered under share-based compensation plans | (543,722) | (243,534) | | Outstanding at June 30 | 2,911,816 | 3,529,944 | [15. Earnings Per Share ("EPS")](index=27&type=section&id=15%20Earnings%20per%20share%20(%22EPS%22)) Afya reported increased basic and diluted earnings per share for H1 2025, with dilutive effects from stock options and RSUs, and antidilutive Softbank shares Basic and Diluted EPS (Six-month periods ended June 30, 2025 and 2024) | Metric (in Brazilian Reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------------- | :------------ | :------------ | :----- | :------- | | Basic earnings per share | 4.69 | 4.02 | 0.67 | 16.67% | | Diluted earnings per share | 4.64 | 3.98 | 0.66 | 16.58% | - Net income attributable to equity holders of the parent, adjusted for dilution, increased to **R$424,331 thousand** for H1 2025 from **R$387,060 thousand** for H1 2024[106](index=106&type=chunk) - Softbank's series A perpetual convertible preferred shares were antidilutive for the six-month period ended June 30, 2025, and thus not included in diluted EPS[105](index=105&type=chunk) [16. Revenue](index=28&type=section&id=16%20Revenue) Afya's total revenue increased by 14.97% in H1 2025, primarily from tuition fees and recognized over time, with increased deductions Revenue Composition (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Tuition fees | 2,332,390 | 1,967,573 | 364,817 | 18.54% | | Other revenue | 161,895 | 145,773 | 16,122 | 11.06% | | Deductions (total) | (638,725) | (549,287) | (89,440) | 16.28% | | Total Revenue | 1,855,760 | 1,614,129 | 241,631 | 14.97% | - Revenue from contracts with customers is entirely generated in Brazil[107](index=107&type=chunk) - The majority of revenue (**R$1,813,323 thousand** in H1 2025) is recognized over time, primarily from tuition, digital content, and app subscription fees[107](index=107&type=chunk)[109](index=109&type=chunk) [17. Costs and Expenses by Nature](index=29&type=section&id=17%20Costs%20and%20expenses%20by%20nature) Total costs and expenses increased by 10.14% in H1 2025, driven by payroll, depreciation, and sales/marketing, while some other expenses decreased Costs and Expenses by Nature (Six-month periods ended June 30, 2025 and 2024) | Expense Category (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :----------------------------------------------- | :------------ | :------------ | :----- | :------- | | Payroll | (668,039) | (595,769) | (72,270) | 12.13% | | Hospital and medical agreements | (36,569) | (48,754) | 12,185 | -24.99% | | Depreciation and amortization | (186,453) | (163,307) | (23,146) | 14.17% | | Sales and marketing | (48,126) | (34,656) | (13,470) | 38.87% | | Allowance for expected credit losses | (33,053) | (30,018) | (3,035) | 10.11% | | Consulting fees | (14,702) | (23,718) | 9,016 | -38.01% | | Total Costs and Expenses | (1,199,717) | (1,089,272) | (110,445) | 10.14% | - Payroll expenses, including costs for pedagogical services, increased by **12.13%** to **R$668,039 thousand** in H1 2025[110](index=110&type=chunk) - Sales and marketing expenses saw a significant increase of **38.87%** to **R$48,126 thousand**[110](index=110&type=chunk) [18. Finance Result](index=29&type=section&id=18%20Finance%20result) Afya's net finance result worsened to negative R$189,803 thousand in H1 2025, primarily due to increased finance expenses, despite higher finance income Finance Result (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Finance income | 84,478 | 49,263 | 35,215 | 71.49% | | Financial income from cash equivalents | 56,815 | 25,468 | 31,347 | 123.00% | | Finance expenses | (274,281) | (192,180) | (82,101) | 42.72% | | Interest expense | (158,613) | (102,278) | (56,335) | 55.08% | | Interest expense on lease liabilities | (59,727) | (53,770) | (5,957) | 11.08% | | Net finance result | (189,803) | (142,917) | (46,886) | 32.81% | - Finance income from cash equivalents more than doubled, increasing by **123%** to **R$56,815 thousand** in H1 2025[111](index=111&type=chunk) - Interest expense, excluding lease liabilities, increased by **55.08%** to **R$158,613 thousand** in H1 2025[111](index=111&type=chunk) [19. Income Taxes](index=30&type=section&id=19%20Income%20taxes) Income tax expense significantly increased in H1 2025 due to Brazil's Pillar Two global minimum tax, raising the effective tax rate to 8.9% Income Taxes Expense (Six-month periods ended June 30, 2025 and 2024) | Metric (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | Change | % Change | | :------------------------------------- | :------------ | :------------ | :----- | :------- | | Income before income taxes | 475,828 | 384,455 | 91,373 | 23.77% | | Income taxes at statutory rate (34%) | (161,782) | (130,715) | (31,067) | 23.77% | | PROUNI - Fiscal incentive | 243,479 | 193,615 | 49,864 | 25.75% | | Pillar Two - Additional social contribution | (56,649) | - | (56,649) | N/A | | Income taxes expense | (42,250) | (13,956) | (28,294) | 202.73% | | Effective rate | 8.9% | 3.6% | 5.3% | 147.22% | - Law 15,079/2024, implementing the OECD's Pillar Two global minimum tax in Brazil, became effective January 1, 2025, introducing an additional Social Contribution on Net Profit (CSLL) to ensure a minimum effective taxation of **15%**[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The Company provisioned **R$56,649 thousand** for the additional CSLL in H1 2025, despite challenging its enforceability in Federal Court[116](index=116&type=chunk)[117](index=117&type=chunk) [20. Legal Proceedings and Contingencies](index=31&type=section&id=20%20Legal%20proceedings%20and%20contingencies) Provisions for probable legal proceedings increased to R$117,772 thousand, while other possible risk proceedings exist, and indemnification assets are held Provisions for Legal Proceedings (June 30, 2025 vs. January 1, 2025) | Category (in thousands of Brazilian reais) | June 30, 2025 | January 1, 2025 | Change | % Change | | :--------------------------------------- | :------------ | :-------------- | :----- | :------- | | Labor | 34,932 | 31,455 | 3,477 | 11.05% | | Civil | 25,990 | 25,140 | 850 | 3.38% | | Taxes | 56,850 | 56,926 | (76) | -0.13% | | Total | 117,772 | 113,521 | 4,251 | 3.74% | Possible Risk of Loss Proceedings (June 30, 2025 vs. December 31, 2024) | Category (in thousands of Brazilian reais) | June 30, 2025 | December 31, 2024 | Change | % Change | | :--------------------------------------- | :------------ | :---------------- | :----- | :------- | | Labor | 38,082 | 38,097 | (15) | -0.04% | | Civil | 57,371 | 50,667 | 6,704 | 13.23% | | Taxes | 25,968 | 17,498 | 8,470 | 48.41% | | Total | 121,421 | 106,262 | 15,159 | 14.27% | - The Company holds indemnification assets of **R$77,106 thousand** for legal proceedings arising from events prior to acquisition closing dates, for which selling shareholders are exclusively responsible[127](index=127&type=chunk)[128](index=128&type=chunk) [21. Non-Cash Transactions](index=33&type=section&id=21%20Non-cash%20transactions) Afya engaged in various non-cash transactions in H1 2025, including lease adjustments, legal provisions, acquisition payables, and dividends payable Non-Cash Transactions (Six-month periods ended June 30, 2025 and 2024) | Transaction (in thousands of Brazilian reais) | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Additions and remeasurements of right-of-use assets and lease liabilities | 57,052 | 69,313 | | Additions (reversals) of provision for legal proceedings with corresponding indemnification asset, net | (1,595) | (8,145) | | Accounts payable to selling shareholders from FUNIC's acquisition | 40,000 | - | | Dividends payable | 778 | - | - The acquisition of FUNIC in 2025 resulted in **R$40,000 thousand** in accounts payable to selling shareholders as a non-cash transaction[130](index=130&type=chunk) [22. Subsequent Event](index=33&type=section&id=22%20Subsequent%20event) Afya's board approved a new share repurchase program on August 13, 2025, for up to 4,000,000 Class A common shares, running until December 31, 2026 - A new share repurchase program was approved on August 13, 2025, allowing Afya to repurchase up to **4,000,000 Class A common shares**[131](index=131&type=chunk) - The repurchase program will commence on August 15, 2025, and conclude by December 31, 2026[131](index=131&type=chunk) - The repurchased shares are intended for use in the stock option program, as consideration in future business combinations, and for general corporate purposes[132](index=132&type=chunk)

Group 1: Primoris Services (PRIM) - Primoris Services operates as one of the largest specialty contractors and infrastructure companies in the United States [1] - The company carries a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for its current year earnings has increased by 0.9% over the last 60 days [1] - Primoris has a PEG ratio of 1.57 compared to 3.83 for the industry [2] - The company possesses a Growth Score of A [2] Group 2: Afya (AFYA) - Afya is a medical education group primarily in Brazil [2] - The company carries a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings has increased by 4.6% over the last 60 days [2] - Afya has a PEG ratio of 0.47 compared to 0.82 for the industry [2] - The company possesses a Growth Score of B [2] Group 3: Jabil (JBL) - Jabil is one of the largest global suppliers of electronic manufacturing services [3] - The company carries a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 5.2% over the last 60 days [3] - Jabil has a PEG ratio of 1.41 compared to 1.95 for the industry [3] - The company possesses a Growth Score of B [3]

Core Insights - Investors in the Schools sector may consider Afya (AFYA) and Grand Canyon Education (LOPE) as potential investment opportunities [1] - The Zacks Rank system, which emphasizes positive earnings estimate revisions, is a key tool for identifying value opportunities [2] Valuation Metrics - Afya has a Zacks Rank of 1 (Strong Buy), while Grand Canyon Education has a Zacks Rank of 3 (Hold), indicating a stronger earnings outlook for AFYA [3] - AFYA's forward P/E ratio is 10.16, significantly lower than LOPE's forward P/E of 20.16, suggesting AFYA may be undervalued [5] - The PEG ratio for AFYA is 0.55, compared to LOPE's PEG ratio of 1.34, indicating better expected earnings growth relative to its price [5] - AFYA's P/B ratio is 2.02, while LOPE's P/B ratio is 6.42, further highlighting AFYA's relative valuation advantage [6] - Based on these metrics, AFYA holds a Value grade of A, while LOPE has a Value grade of C, making AFYA the more attractive option for value investors [6]

Core Insights - Afya (AFYA) currently holds a Zacks Rank of 1 (Strong Buy), indicating a more favorable earnings estimate revision trend compared to K12 (LRN), which has a Zacks Rank of 2 (Buy) [3] - Value investors typically assess various fundamental metrics to identify undervalued stocks, beyond just earnings estimates [3][4] Valuation Metrics - AFYA has a forward P/E ratio of 10.86, significantly lower than LRN's forward P/E of 20.74, suggesting AFYA may be undervalued [5] - The PEG ratio for AFYA is 0.58, while LRN's PEG ratio is 1.04, indicating AFYA's expected earnings growth is more favorable relative to its price [5] - AFYA's P/B ratio stands at 2.16, compared to LRN's P/B of 4.52, further supporting the notion that AFYA is a better value option [6] - Overall, AFYA's Value grade is A, while LRN's Value grade is C, highlighting AFYA's superior valuation metrics and earnings outlook [6]

Company Performance - Afya (AFYA) has returned 8.5% year-to-date, outperforming the average gain of 5.3% in the Consumer Discretionary sector [4] - The Zacks Consensus Estimate for Afya's full-year earnings has increased by 8.2% over the past three months, indicating improved analyst sentiment and a stronger earnings outlook [4] Industry Context - Afya is part of the Schools industry, which consists of 17 companies and currently ranks 19 in the Zacks Industry Rank [6] - The Schools industry has gained an average of 2.8% so far this year, showing that Afya is performing better than its industry peers [6] Sector Ranking - The Consumer Discretionary group is ranked 10 within the Zacks Sector Rank, which evaluates 16 different sector groups [2] - Afya holds a Zacks Rank of 1 (Strong Buy), indicating a favorable outlook compared to other stocks in the sector [3]

Core Viewpoint - The article emphasizes the importance of value investing and highlights specific companies, Afya (AFYA) and American Public Education (APEI), as strong value stock opportunities based on their financial metrics and rankings [2][4][7]. Company Analysis: Afya (AFYA) - Afya (AFYA) holds a Zacks Rank of 1 (Strong Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The stock has a P/E ratio of 11.03, significantly lower than the industry average of 15.82, suggesting it may be undervalued [4]. - AFYA's Forward P/E has fluctuated between 7.81 and 12.39 over the past year, with a median of 9.41 [4]. - The PEG ratio for AFYA is 0.59, compared to the industry average of 0.72, indicating favorable growth expectations relative to its price [5]. - AFYA's P/B ratio stands at 2.27, lower than the industry average of 3.38, further supporting its valuation as attractive [6]. Company Analysis: American Public Education (APEI) - American Public Education (APEI) has a Zacks Rank of 2 (Buy) and a Value score of A, making it another appealing option for value investors [7]. - APEI's Forward P/E ratio is 17.26, which is higher than the industry average of 15.82, suggesting a different valuation perspective [7]. - The PEG ratio for APEI is 1.15, indicating it may be priced higher relative to its growth expectations compared to the industry average of 0.72 [7]. - APEI's P/B ratio is 1.95, also lower than the industry average of 3.38, indicating it may be undervalued [8]. Summary of Valuation Metrics - Both AFYA and APEI exhibit strong value metrics, suggesting they are likely undervalued in the current market [9]. - The analysis of earnings outlook and valuation ratios positions AFYA and APEI as impressive value stocks at this time [9].