Afya(AFYA) - 2023 Q1 - Quarterly Report

Financial Performance - Net revenue for Q1 2023 reached BRL 709,961 thousand, a 25.3% increase from BRL 566,324 thousand in Q1 2022[4] - Gross profit for Q1 2023 was BRL 462,354 thousand, up 21.8% from BRL 379,594 thousand in Q1 2022[4] - Operating income increased to BRL 229,539 thousand in Q1 2023, compared to BRL 200,771 thousand in Q1 2022, reflecting a growth of 14.3%[4] - Net income for Q1 2023 was BRL 117,772 thousand, a decrease of 12.7% from BRL 134,942 thousand in Q1 2022[4] - Basic earnings per share for Q1 2023 was BRL 1.25, down from BRL 1.42 in Q1 2022[4] - The company reported a net cash flow from operating activities of BRL 331,554 thousand for Q1 2023, compared to BRL 278,715 thousand in Q1 2022[8] - Total expenses for the three-month period were R$480,827, representing a 31.6% increase from R$365,244 in the same period last year[139] - Finance income for Q1 2023 was R$27,688, an increase of 12.2% from R$24,569 in Q1 2022[140] - Interest expense rose significantly to R$77,530 in Q1 2023, compared to R$46,106 in Q1 2022, marking a 67.9% increase[140] - Income before income taxes for Q1 2023 was R$136,832, a decrease from R$148,289 in Q1 2022[142] Assets and Liabilities - Total assets as of March 31, 2023, amounted to BRL 7,798,797 thousand, an increase from BRL 7,199,539 thousand at the end of 2022[2] - Total liabilities increased to BRL 4,430,502 thousand as of March 31, 2023, compared to BRL 3,949,381 thousand at the end of 2022[2] - Cash and cash equivalents decreased to BRL 722,691 thousand from BRL 1,093,082 thousand at the end of 2022, representing a decline of 33.9%[2] - Current liabilities increased to R$1,194,396 as of March 31, 2023, from R$905,689 as of December 31, 2022, representing an increase of approximately 31.9%[41] - Total financial liabilities increased to R$3,854,618 as of March 31, 2023, compared to R$3,447,812 at the end of 2022, driven by higher loans and financing[79] - Afya Limited's loans and financing reached R$1,923,737 as of March 31, 2023, up from R$1,882,901 at the end of 2022, reflecting ongoing investment in growth initiatives[80] Acquisitions and Investments - The company completed the acquisition of Sociedade Educacional e Cultural Sergipe DelRey Ltda. on January 2, 2023, expanding its educational offerings[11] - The acquisition of DelRey on January 2, 2023, involved a total purchase price of R$825,000, with R$575,000 paid in cash at closing and R$250,000 payable in installments[49] - DelRey contributed R$58,157 in net revenue and R$18,895 in income before income taxes to the Company in 2023[56] - The company maintains a 100% ownership interest in most of its subsidiaries, ensuring full control over its educational and operational entities[31] - The company’s investment in UEPC had a carrying amount of R$54,152 thousand as of March 31, 2023, compared to R$53,907 thousand at the end of 2022, reflecting a slight increase of 0.5%[70] Operational Segments - The company operates through three reportable segments: Undergrad, Continuing Education, and Digital Services, focusing on various educational and technological offerings in the healthcare sector[38] - The company’s digital services segment includes electronic medical records and telemedicine solutions, enhancing efficiency for healthcare providers[38] Tax and Legal Matters - The effective income tax rate for Q1 2023 was 13.9%, up from 9.0% in Q1 2022[142] - The company reported accumulated unrecognized deferred income tax assets of R$895,158 as of March 31, 2023, compared to R$778,080 at the end of 2022[145] - Total provisions for legal proceedings as of March 31, 2023, amounted to R$199,160, an increase from R$195,854 at the beginning of the year[147] - The company has judicial deposits related to various proceedings totaling R$13,729 as of March 31, 2023, up from R$12,693 at the end of 2022[147] Shareholder Information - The Company approved interim dividends of R$19,269 for the three-month period ended March 31, 2023, with R$13,135 distributed to Afya and R$6,130 to non-controlling shareholders[125] - As of March 31, 2023, the Company's share capital remained at R$17, represented by 93,722,831 shares[124] Compensation and Employee Costs - Key management personnel compensation increased significantly to R$9,434 thousand for the three months ended March 31, 2023, compared to R$5,235 thousand in the same period of 2022, reflecting an increase of 80.5%[66] - The company recorded variable compensation bonuses of R$9,036 for the three-month period ended March 31, 2023, compared to R$6,519 for the same period in 2022[112] Cash Flow and Financial Management - The company recognized lease liabilities of R$864,983 as of March 31, 2023, compared to R$769,525 at the end of 2022, indicating an increase in leased properties[83] - The company’s maximum exposure to credit risk as of March 31, 2023, is represented by the carrying amounts of its financial assets[102] - The company’s exposure to foreign currency risk included cash equivalents of R$6,651 denominated in U.S. dollars as of March 31, 2023[96] - A 10% change in the U.S. dollar exchange rate would affect the company's income before income taxes by R$665[98] - The company’s interest rate risk sensitivity analysis indicated a potential effect on profit before tax of R$8,988 with a 75 basis points increase in interest rates[95]