Afya(AFYA) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 54% year-over-year, reaching R$274 million in Q2 2020, with a net revenue increase of 48.8% year-over-year [10][23] - Adjusted EBITDA rose 73% to R$180 million, with a margin expansion of 780 basis points [23][24] - Adjusted net income increased by 163%, with earnings per share rising 183% from R$0.23 to R$0.65 [24] Business Line Data and Key Metrics Changes - Medical school seats increased by 414 year-over-year, totaling 1,516 seats, a 38% increase [22] - The number of students rose by 64% year-over-year, reaching 9,097 [22] - In BU2, active paying students increased by 47%, with significant growth in both prep courses and continuing medical education [25] Market Data and Key Metrics Changes - The company maintained 100% occupancy for medical seats during the quarter, allowing for consistent pricing strategies [10] - Monthly active users for digital platforms increased by 27.6% compared to Q1 2020 [14] Company Strategy and Development Direction - The company aims to enhance its digital capabilities and integrate digital health services, exemplified by the acquisition of PEBMED [12][13] - Strategic M&A remains a key pillar of growth, with six acquisitions completed post-IPO and a strong pipeline for future opportunities [15][18] - The focus is on maintaining a healthy balance sheet while pursuing sustainable and predictable growth [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to exceed financial targets despite the challenges posed by COVID-19 [19][31] - The company anticipates strong demand for medical seats and expects to recognize deferred revenues from practical classes in the second half of 2020 [30] Other Important Information - The company has over R$1 billion in cash, with a cash flow generation rate of 83% EBITDA to cash [11] - The integration of acquired companies is ongoing, with significant synergies still to be captured [11][17] Q&A Session Summary Question: Plans for BU2 and monetization strategy - Management indicated that BU2 will focus on integrating digital platforms and enhancing user experience, with plans to launch an integrated app for students [34] Question: M&A competition and pricing - Management acknowledged increased competition in M&A but emphasized a disciplined approach to acquisitions, targeting mature institutions with favorable EBITDA multiples [36][37] Question: Margin evolution and acquisition integration - Management noted that there is still significant room for margin improvement from recent acquisitions, with expectations of capturing more synergies [44] Question: Partnerships and potential acquisitions - Management clarified that they have around 40 medical institutions using their platform, which could facilitate future acquisitions [50] Question: PEBMED's cross-selling potential - Management confirmed that while PEBMED primarily targets medical students, there are opportunities to expand into other healthcare careers [52]