Afya(AFYA) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net revenue for Q3 2020 increased by 52% year over year to BRL 313 million, primarily due to the maturation of medical school seats and consolidation of acquired companies [9][19] - Adjusted EBITDA increased by 63% to BRL 149 million, with a margin expansion of 340 basis points [20] - Net income rose by 47% to BRL 101 million, with earnings per share increasing by 48% from BRL 0.54 to BRL 0.80 [10][21] - Cash and cash equivalents at the end of the quarter were approximately BRL 1.1 billion, reflecting strong cash flow generation [10][27] Business Line Data and Key Metrics Changes - The number of medical seats increased by 294 year over year, totaling 1,516 seats [18] - The total number of students reached 9,567, a 50% increase compared to the same period last year [19] - Average monthly medical tuition fees increased by 17% to BRL 8,053, contributing to a 41% rise in net tuition fees year over year [21][22] Market Data and Key Metrics Changes - 78% of combined tuition fees were derived from medical schools, up from 69% in the same period of the prior year [22] - Active paying users reached 130,000 at the quarter end, including 95,000 from PEBMED, with a 40% increase in active paying students excluding PEBMED [22] Company Strategy and Development Direction - The company aims to maintain long-term relationships with physicians from their entry into medical school through their entire career, focusing on digital health products and medical programs [16] - The company is committed to disciplined acquisitions to further grow its digital assets and enhance its service offerings [17][56] - Recent acquisitions in digital health services, including PEBMED, iClinic, and MedPhone, are expected to strengthen the company's position in the health tech segment [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong cash flow and healthy balance sheet to navigate through the challenges posed by COVID-19 [10][17] - The company anticipates maintaining a 100% occupancy rate for medical seats in 2021, with no surprises expected in the intake [34] - Management acknowledged the impact of COVID-19 on traditional on-campus programs but remains focused on sustainable operations [45] Other Important Information - The company won awards in the education sector, recognizing its leadership in financials, corporate governance, and sustainability [12] - The company reaffirmed its second-half 2020 guidance, expecting net revenue between BRL 600 million and BRL 640 million [30] Q&A Session Summary Question: Update on the intake for the medical unit in 2021 - Management indicated a positive trend for 2021 intake, expecting 100% occupancy of all seats [34] Question: PEBMED integration and cross-sell initiatives - Integration activities are ongoing, with commercial activities promoting both PEBMED and Medcel products [35] Question: Plans for MedPhone and WhiteBook - Both applications will be maintained, with a focus on converting MedPhone users to WhiteBook subscribers [39] Question: Discounts recognized in the quarter - All mandatory discounts for Q3 have been recognized, with expectations of 1% to 2% of net revenues in Q4 [44] Question: Non-medical programs and their future - The company is closing non-sustainable programs, focusing on maintaining high margins and operational efficiency [45][46] Question: Receivables and cash flow insights - Receivables increased due to lower student advances and financial support during the pandemic, but are expected to decrease moving forward [49] Question: Dropouts and M&A perspective - Management noted no significant increase in dropouts and remains disciplined in pursuing M&A opportunities [53][56]