Afya(AFYA) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net revenue increased by 16%, reaching R936 million, with adjusted EBITDA growing almost 24% year over year to R492 million, achieving a record margin of 52.5% [5][17] - Cash flow from operating activities rose by almost 10% to R470 million, with a cash conversion rate of 96.8% and a solid cash position of nearly R1.2 billion at the end of Q1 [5][18] - Net income reached R257 million, reflecting a 23% growth year over year, with EPS of R2.79, also a 23% increase compared to the previous year [5][19] Business Line Data and Key Metrics Changes - The undergraduate segment saw net revenues increase by over 17%, achieving R827 million, with a 4% rise in net average ticket to R9,240 [12][16] - Continuing education net revenue rose to R71 million, reflecting a growth of almost 9% year over year, driven by an 8% increase in B2B revenue [7][14] - Medical practice solutions segment expanded by 14% in net revenue, reaching R42 million, with B2P contributing R37 million and B2B R4 million [15][16] Market Data and Key Metrics Changes - The ecosystem now includes over 370,000 active users, demonstrating substantial penetration among physicians and medical students in Brazil [16] - The number of approved medical seats increased to 3,653 following the Funiq acquisition, with undergraduate medical students reaching almost 26,000, a 50% growth compared to Q1 2024 [6][12] Company Strategy and Development Direction - The company emphasizes a three-pillar business model focusing on strong growth, higher profitability, and cash generation, with ongoing operational restructuring to improve cost management [4][6] - Recent acquisitions and expansions, such as the Funiq acquisition and the ramp-up of new campuses, are expected to enhance operational capabilities and market presence [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong start to 2025, maintaining guidance for the year despite the robust performance in Q1 [27][28] - The company is optimistic about future opportunities, particularly in expanding its educational systems and medical practice solutions [21][22] Other Important Information - Moody's upgraded the company's national scale credit rating from AAplus.br to AAA.br, reflecting strong growth and financial discipline [9] - The company received its first ESG rating from MSCI, debuting with a solid BBB score, indicating strong performance in data privacy and security [10] Q&A Session Summary Question: What drove the strong EBITDA margin performance? - Management indicated that higher gross margins from the undergraduate and continuing education segments, along with operational efficiencies from restructuring, contributed to the margin expansion [25][26] Question: Are there challenges in the intake process due to increased medical course offerings? - Management reported a healthy intake process with strong brand recognition, noting around seven to eight candidates per seat, indicating no significant challenges in filling seats [29][30] Question: Any significant changes in the competitive landscape affecting price hikes? - Management acknowledged that while the average ticket grew in line with inflation, there were impacts from retention policies affecting pricing strategies [36][37] Question: What is the expectation for the medical practice solutions segment given the decrease in monthly active users? - Management explained that the decrease was due to the transition from the PepMed portal to the Afya portal, but they expect improvements as the changes stabilize [39][41] Question: Clarification on the OECD Pillar Two tax implications? - Management detailed that the new tax law introduces minimal taxation for multinational groups, and they are currently provisioning for potential impacts while seeking legal clarification [48][50] Question: How is the company preparing for the SoftBank convertible debt? - Management stated they are prepared with cash flow generation to meet obligations if the debt is not converted into equity, with provisions already in place for potential early redemption [51][53]