Afya(US:AFYA)2023-08-29 00:36Financial Data and Key Metrics Changes - Adjusted net revenue increased by 24% year-over-year, reaching R$712 million [8][19] - Adjusted EBITDA grew by more than 22%, reaching R$268 million with a margin of 38% [8][20] - Record cash flow from operating activities was R$566 million, an increase of 26% year-over-year, with a cash conversion rate of 99% [8][21] - Adjusted net income was R$132 million, an 11% growth year-over-year, with an EPS of R$1.42, representing a growth of 12% [8][22] Business Line Data and Key Metrics Changes - Undergrad segment saw an 18% growth in the number of medical students, reaching almost 21,000 [9][23] - Continuing Education segment reported a strong net revenue growth of 50% year-over-year [9][24] - Digital Health Services segment ended the quarter with a revenue increase of 28% year-over-year [9][26] Market Data and Key Metrics Changes - The ecosystem reached almost 282,000 active users, a growth of 6% year-over-year, representing around 34% of the Brazilian physicians and medical students market [10][25] - The number of operating seats increased by over 25% year-over-year, reaching 3,113 [9][23] Company Strategy and Development Direction - The company aims to grow its Undergrad segment by maturing existing seats, organic growth, and acquisitions, targeting over 32,000 students by 2028 [16] - Continuing Education is expected to reach R$440 million in net revenue by 2028, 4x higher than 2022 [17] - Digital Services aims for a net revenue of $1.2 billion by 2028, focusing on B2B and B2P business acquisitions [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to deliver solid results with high predictability [12][14] - The company is focused on integrating new acquisitions and enhancing operational leverage across all segments [20][32] Other Important Information - The company received three significant awards in the second quarter, highlighting its performance in innovation and education [14] - The new brand strategy aims to consolidate the value under a single brand to enhance recognition and engagement [15] Q&A Session Summary Question: Impact of adjusted EBITDA margin due to revenue mix and integration of UNIT - Management confirmed that integration of UNIT is expected to occur in Q4, and noted that Medcel's performance is less relevant in Q2 and Q3 due to revenue concentration in other quarters [30][31] Question: Expectations for medical seat requests and FG-FIES impact - Management indicated that it is too early to assess the impact of new seat requests and confirmed that the expected impact of FG-FIES for the year is R$24 million, evenly distributed across the first and second halves [34][39] Question: Outlook for FG-FIES contribution in 2024 - Management stated that it is difficult to predict the impact for 2024 but expects a reduction in retention rates for medical programs due to lower delinquency rates [40][42] Question: Mitigation strategies for FG-FIES effects - Management highlighted that the delinquency rates for medical programs are much lower than for non-medical programs and discussed ongoing efforts to propose amendments to limit retention rates [44][46]