Earnings call transcript: Afya Q4 2024 reports strong growth

Afya Ltd (market cap: $1.46 billion) reported a robust fourth quarter for 2024, showcasing significant growth across key financial metrics. The company achieved a net revenue increase of 14.9% to R$3.3 billion and an adjusted EBITDA rise of 25% to R$1.46 billion. The EPS climbed by 62.9% to R$0.071. Despite these positive results, Afya’s stock remained stable in aftermarket trading, closing at $16.22, up 0.43% from the previous close. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment.

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Key Takeaways

• Net revenue surged by 14.9%, driven by expanded medical education offerings.
• Adjusted EBITDA grew by 25%, reflecting improved operational efficiency.
• Medical seats and student numbers both increased by 13%.
• Stock price remained stable post-earnings, reflecting steady investor sentiment.

Company Performance

Afya demonstrated strong performance in Q4 2024, with substantial growth in revenue and profitability. The company expanded its medical education capacity, increasing the number of approved medical seats and medical students by 13% each. This growth aligns with Afya’s strategic focus on enhancing its educational ecosystem and expanding its market presence in Brazil’s competitive medical education sector.

Financial Highlights

• Revenue: R$3.3 billion, up 14.9% year-over-year
• Adjusted EBITDA: R$1.46 billion, a 25% increase
• EBITDA margin: 44.1%
• Cash flow from operations: R$1.45 billion, up 34%
• Net income: R$648.9 million, a 6% increase
• EPS: R$0.071, up 62.9%

Outlook & Guidance

For 2025, Afya projects net revenue between R$3.67 billion and R$3.77 billion, with adjusted EBITDA expected to range from R$1.62 billion to R$1.72 billion. The company also plans capital expenditures between R$250 million and R$290 million, anticipating continued margin expansion through operational leverage. InvestingPro data shows that analysts maintain a positive outlook, though 2 analysts have recently revised their earnings expectations downward for the upcoming period.

Executive Commentary

CEO Virgilio Gebon stated, "We have demonstrated the differentials of our business, the success implementation of our strategy, and the reliability of our business model." CFO Luis Blanc added, "Our commitment to advancing in a medical journey through an integrated educational system and medical practice solutions remain strong."

Risks and Challenges

• Regulatory changes in medical education pricing could impact revenue.
• Increased competition in the Brazilian medical education market may pressure margins.
• Economic volatility in Brazil could affect student enrollment and financial performance.

Afya’s Q4 2024 results underscore its strong market position and strategic growth initiatives. With a positive outlook for 2025, the company remains focused on expanding its educational offerings and maintaining robust financial performance. InvestingPro’s analysis awards Afya an overall financial health score of "GREAT," reflecting its solid operational performance and financial stability.

[Access the complete Pro Research Report for Afya, along with 1,400+ other top stocks, exclusively on InvestingPro.]

Full transcript - Afya Ltd (AFYA) Q4 2024:

Moderator/Introducer, Afia: I’m here today with our FFO, Virgil Gebon and our CFO, Luis Abnerre Blanc. During today’s presentation, our executives will make forward looking statements. Forward looking statements can be related to future events, future financial or operating performance, no and unknown risks, uncertainties and other factors that may cause AFIA’s actual results to differ materially from those contemplated by these forward looking statements. Forward looking statements in this presentation include, but are not limited to, statements related to the business and financial performance expectations and guidance for future periods or expectations regarding the company’s strategic product initiatives and its related benefits.

These risks include those more fully described in our filings with the Securities and Exchange Commission. The forward looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, as we disclaim any obligation to update any forward looking statements, except as required by law. In addition, management may reference non IFRS financial measures on this call. These measures are not intended to be considered in isolation or as substitute of the results prepared in accordance with IFRS.

This presentation has reconciled these known IFRS financial measures to the most directly comparable IFRS financial measures. Now, let me now turn the call over to Vigile Chibon, starting the next slide.

Virgilio Gebon, CEO, Afia: Thank you, Renata, and welcome to our financial conference call of 2024. We’re excited to present another year of exceptional operational and financial performance for Afia. Once again, we have demonstrated the differentials of our business, the success implementation of our strategy, and the reliability of our business model. In this presentation, I will cover key strategic topics, including our performance highlights, the success on business execution across our three segments, the guidance for 2024, and the new goals for 2025. And finally, Luis Blanc will provide an in-depth look of our financial and operational performance.

Now turning to page number three. Let’s begin by highlighting our performance achievements. Initially, our net revenue increased by 14.9%, reaching 3,000,000,304,300,000.0 hats, accompanied by a growth in adjusted EBITDA of 25 year over year, which 1,000,000,455,600,000,000.0 hats with a margin of 44.1%. Furthermore, we are pleased to report a record on cash flow generation from operating activities, concluding the year with 1,000,000,453,200,000.0 hats, reflecting a 34% increase compared to the previous year, with a cash conversion rate of 102%. With consistent momentum throughout the year, our net income reached R648.9 million in 2024, marking over 6% growth year over year with an EPS of $0.071 a remarkable 62.9% increase compared to the previous year.

This underscore our disciplined capital allocation on buyback programs, M and A, and an efficient capital structure. Transition to our operational updates for the year, we have expanded to 3,593 approved seats, witnessing a year over year increase of over 13% facilitated by the acquisition of Unidom in July of twenty twenty four. In addition, our number of undergrad medical student has reached more than 24,000 students, representing 13% growth compared to 2023. Furthermore, we increased the net average ticket of medical school by 4.6%, reached 8849p. Additionally, in the continuing education segment, we continue to see

Unnamed Speaker, Afia: a significant growth, presenting a net revenue increase of 8% year over year peer organically, reaching 255,400,000.0 hands. Our Medco PET solution revenue marked another great result with a 15% increase compared to 2023, pure organically, reaching a net revenue of 161,800,000.0

Virgilio Gebon, CEO, Afia: hires. This outcome underscored the vast opportunity in medical pet solutions, driven by the ramp up in B2B engagements, securing new contracts with pharmaceutical industry companies, and the continuous expansion in B2B contracts. Lastly, our ecosystem has 313,000 active users and is amplifying substantial penetration among physician and medical students in Brazil. In the next slide, we will discuss our robust business performance across the three business segments. Beginning with our core business, the undergrad segment, we observed significant growth in the net average tickets of medicine, representing a growth of 4.6 year over year.

Gross margin expansion driven by the integration of Unima and that same in Jabuato completed in fourth quarter twenty twenty three. And the ramp up of the formalized medical campus’s launch in third quarter two thousand twenty two. Also, the closing of Unidom Pedro acquisition and the approval are 103 new medical seats, 80 of them additional at Unima, forty additional at Guana B, and the reconsideration of 10 seats in Onegrafia. Portinho education was marketed by gross margin expansion driven by an operational restructuring, which resulted in a growth in B2B students boosted by a residency journey offerings. Additionally, we are pleased to see an expansion of five new units in 2024, ’4 of them being cross units in the undergrad segment and one stand alone campus.

Lastly, in our Medical Pratt Solutions segment, we ended the quarter with over 6% increase in active payers, driven by 5% growth in clinical decision and almost 13% growth in clinical management. This result reinforced the opportunity ahead in medical practice solution. And it’s explained by the ramp up in B2B engagements that boosted net revenues and grew almost 30% with new contracts with the pharma industry and the continuous ramp up in business to physician contracts. Now transitioning to the slide number five. We take immense pride not only in our financial and operational achievements, but also in the significant social impact generated by Athens investments.

This commitment led us to calculate our social return on investment, s ROI, using robust, globally recognized methodologies. Our study applies the value of statistical life deeply adopted by institutions such as OECD and World Bank, which quantifies the financial impact of mortality reduction. In Brazil, this value is estimated to be at 4,200,000.0 reais, reflecting the value on preventing a single death. By leveraging these metrics, we quantify the social impact of prevented deaths in the study municipalities, reaching an extraordinary 14,500,000,000.0 reais. This demonstrates that AFA’s effort in medical education and the presence of students in these communities not only enhance health care access but also generate significant economic

Unnamed Speaker, Afia: and

Virgilio Gebon, CEO, Afia: social returns. According to our social return on investment, as Roy studied, every one how we invested resulted in 3.58 RIs in social benefits for the population and the municipalities analyzed. This reflects reduced mortality, increased life expectancy, and positive economic impacts such as wage growth and local financial activity. Based on these results, AFIS strongly reinforces commitment not only of creating value for its shareholder, while also maintaining a high social impact in the regions where we operate. Now moving to slide number six, we are thrilled to share some exciting news.

Thanks to Aker’s Rob’s Cash Generation Disciplined Financial Management, we are pleased to announce that we will distribute the first dividends to our shareholders and at the same time, staying fully committed to our ambitious growth plans. The board of directors has approved a cash dividend payout of 20% of 02/2024 net income. The dividend will be payable on 04/04/2025 to shareholders of record as of the close of business on March 26. This decision underscores our dedication to delivering long term value and sharing the results of our solid financial performance with our shareholders. Now on slide number seven, we will present our 2024 guidance achievement and introduce our new guidance for 2025.

AFIX ’20 ’20 ’4 net revenue was more than four times higher than in 2019, the year of our IPO, reaching 3,000,000,304,300,000.0 hats, surpassing our mid guidance for 2024 adjusted net revenue of 3,275,000,000 x. Furthermore, 02/2024 adjusted EBITDA was 1,000,000,455,600,000.0 x, followed by an adjusted EBITDA margin of 44.1%, also surpassing our EBITDA mid guidance of $1,425,000,000 These outstanding results reflect Afe’s consistent growth and operational excellence. This consistency, added to another strong intake site, paved the foundation for our 2025 guidance. Net revenue is expected to range between 3,670,000,000 reais and 3,770,000,000 reis, while adjusted EBITDA is anticipated to be between 1,620,000,000 reis and 1,720,000,000 reis, excluding any acquisition that may be concluded after the issuance of these guys. Once again, we are guiding another strong ground and improving ARFA’s resilience and ability to keep delivering solid results with a high predictability.

Furthermore, showing the chart, our CapEx for 2025 expects to be between two fifty million and two ninety million haps. In my last slide, I would like to welcome Doctor. Gustavo Merellis as the Chief Medical Officer of Affiant, reaffirming our mission of transforming healthcare through education and technology. One of his top priorities will be driving innovation, evolving our products and strengthening relationships within the health industry. Doctor.

Ameris has a proven track record in leadership, research and consultancy focusing on transformative change in health care. Welcome aboard. And now I will be turning the call over to Luis Blanco, our CFO, to provide more insights into the financial and operational metrics. Thank you.

Luis Blanc, CFO, Afia: Thank you, Virgilio, and good evening, everyone. Starting with slide number nine for discussions of key operational metrics by business unit. Starting with the undergrad programs. Our number of medical students grew 13% year over year, reaching more than 24,000 students. And approved medical seats increased 13% yearly.

Our medical school net average ticket, excluding the Unidom acquisitions increased by 4.6% for the twelve months reaching R849. We achieved R2,686 million dollars in net revenues, up from R2,511 million dollars from the prior year, an increase over 15%. Regarding the revenue mix, 86% was derived from medical school students and 94% from health related courses. On the next page, I will present our continuing education metrics. We approach continuing education through three main journeys.

Starting with the residents journey, we saw a 35% increase reaching 16,381 students by the end of the period. In the graduate journey, students’ number grew 10%, reaching 8,527 students, primarily different by students’ graduations. Lastly, other courses and B2B offerings decreased by 6% over the same twelve month period of the prior year. Overall, this effort pushed continued educational net revenues to R255 million dollars in the twelve month period of 2024, up from R236 million dollars in the twelve months of 2023, reflecting a growth over 8%. This includes a 10% increase in B2B revenue and 11% decrease in B2B.

Moving to slide number 11, I will discuss the Medical Practice Solutions operational metrics. The first graph shows our total active payers representing revenues generated in the business to physicians, B2B. Following a steady growth trend, the number of paying users rose to over 195,000, a 6% increase over the same quarter last year. The second graph highlights our monthly active users, which accounts for 238,000, slightly lower than the 248,000 record last year. This change is primarily due to the transitions from the PABMET portal to the AFIA portal.

Lastly, the third graph shows the net revenues from our Medical Practice Solutions segment, which grew 15% year over year, reaching BRL162 million. Of this total, BRL135 million was generated by B2P, showing an increase of 13%, while B2B contributed in $26,000,000 growing almost 30% in the twelve month period. In the next slide, we also present AFIA Ecosystem. We are pleased to highlight AFIA’s substantial contributions to the Brazilian healthcare community. By the end of the fourth quarter of twenty twenty four, our Ecosystems ECOMPASS 313,000 physicians and medical students using our service and products.

Moving forward to page 14, I want to discuss our financial overview for the fourth quarter of twenty twenty four. With great satisfactions, I present another strong quarterly performance for Affian. Net revenue for the fourth quarter of twenty twenty four reached BRL $849,000,000, representing a 16% increase compared to the last year. Net revenue, totally 304,003,000 Bias for the twelve month period, up 15% year over year. The yearly revenue increase was mainly due to higher tickets in medicine courses, the maturations of medical school seats, the additions of 40 seats at Guanabie and 80 seats at Unima, the reconciliation of 10 seats in Unigran Rio Regional, the acquisitions of Unidom and the advancement of medical practice solutions and continuing educational segments.

In fourth quarter twenty twenty four, adjusted EBITDA rose by 27%, reaching BRL366 million with adjusted EBITDA margins of 43.1, again of three fifty basis points compared to the fourth quarter twenty twenty three. For the twelve month period, adjusted EBITDA amounted to R1,456 million dollars an increase of 25% year over year with an adjusted EBITDA margin of 44.1%, representing a three sixty basis points increase over the same period. Expansion in adjusted EBITDA margin is largely attributed to gross margin expansions in undergrad and continuing education segments. Completion of UNIMA and Afi Straubaton integration process in November 2023. The hump up of four MICE Medical Campus that started operations in third quarter twenty twenty two.

Operations restructuring efforts in continued education and medical practice solutions segments and more efficiency in selling general and administrative expenses. Moving to the next slide. The year’s cash flow from operating activities rose by 34%, reaching BRL1453 million, reflecting a strong operational performance. The operational cash conversions ratio was 102% in 2024. Net income for the fourth quarter of twenty twenty four came at BRL154 million, marking an increase of 51% from the same period in 2023.

And adjusted net income was BRL 194,000,000, an 18% increase. For the twelve month period ending December 2024, net income totaled BRL649 million, representing an increase of 60.1%, while adjusted net income amounted to BRL820 million, up 39% year over year. This performance is mainly due to enhancement of our operational results and lower effective tax rates compared to the last year. Regarding EPS, we’ve reached R1.66 in the fourth quarter, a 52% growth compared to the prior year with BRL7.0.01 per share in the twelve month period, representing a 63% increase. And now moving to my last two slides, I will discuss our cash and net debt positions, also giving more color on our cost of debts.

This slide is a table detailing our gross debt compositions and total cost of debt covering our primary obligations, the SoftBank transactions, debentries, other financial liabilities, the IFC financing and accounts payables to selling shareholders. AFIA’s net debt structure remains solid with a conservative leverage position and low cost of debt. AFIA’s net debt excluding the effect of IFRS 16 divided by the twenty twenty four adjusted EBITDA was 1.25 times. On the next page, we can look closely at our net debt variation. As of fourth quarter twenty twenty four, our net debt stood at R18,815 billion dollars stable when compared to the end of twenty twenty three.

Even accounting for the BRL157 million earn out payments regarding the additional seats for Gonna be in Onema and the BRL260 million regarding the acquisitions of Unidom, we were able to reduce our net debt to adjusted EBITDA thanks to our strong cash flow from operating activities in the twelve month period. This concludes our prepared remarks. We are proud of our accomplishments and robust performance across all areas. Our commitment to advancing in a medical journey through an integrated educational system and medical practice solutions remain strong, supporting healthcare professionals’ growth, continuous learning, accuracy and productivity. As we look ahead, we are enthusiastic about the opportunities that lies before us.

I will now open the conference for the Q and A section. Thank you.

Q&A Moderator, Afia: So if you want to ask a question, you may raise your hand. The first question comes from Andres Tarras from UBS. Andres, you may now go.

Luis Blanc, CFO, Afia: Hi. Good evening. Virgilio, Blanco, and Renata. I have two questions on my end here. The first one is regarding the vision of the company on capital allocation.

Can we expect the dividend levels to be sustainable ahead? Or you see, the the dividends that you disclosed as a more opportunistic, due to specific points in 2024? And my second question is regarding the top line guidance. What are the drivers that you think are important for us, to monitor in order for you to reach, the bottom part of the guidance? That’s it.

Thank you. Hi, Andres. Blanca speaking. Thank you for your questions. Regarding, dividends, we established these dividends, for these years.

We did not establish a formal policy for going ahead, but our capital occasional mind didn’t didn’t change. We want to keep our, capturing our organic and inorganic opportunity. In organic opportunities, of course, we see the management’s with three opportunities and inorganic step, we we we continue to see opportunities of growing, acquiring 200 seats per year. So, did not change these minds, capturing this growth according our long term view. And with this, executing this long term view, we saw these opportunities to establish our first payments of dividends equivalent of 20% of our consolidated net income of 2024.

Regarding the guidance for 2025, for the last years, we’ve been providing yearly guidance, and we’ll be, in the in all of these years, we’ve been achieving it. So that’s the same view. We provide the guidance for 02/2025. We are pretty pretty confident that we’re gonna gonna gonna deliver that during the year. Got it.

Thank you.

Q&A Moderator, Afia: Of course. The next question comes from Flavio Chede from Bank of America Merrill Lynch. Flavio, you may now go.

Flavio Chede, Analyst, Bank of America Merrill Lynch: Hi. Hi, Virgilio, Blanco, Renata. Congrats on the results. I have two questions on my side. The first one is on the M and A pipeline.

So given that you guys are now distributing dividends, how should we think about the M and A pipeline following these announcements? And if you could share some update on the pipeline, if you guys are seeing a high offering, given the injunctions already approved, what are your expectations for m and a’s for 2025, and also related to prices as well? And then, my second question is on tuition fees. We noticed that you guys increased tuitions by 5%. And if you guys are seeing any any trouble to to pass through a higher a higher level.

Because if I’m not wrong, historically, you guys managed to, pass through a higher level than inflation. So if you guys are are seeing some difficulties to increase prices to newcomers or to upper class men, if you could share some details, I would appreciate that. Thanks.

Virgilio Gebon, CEO, Afia: Hi, Flavio. And Brigidio. Thanks for your question. We see we saw, the opportunity here also to start being a company that will pay dividend for the at least a minimum rate for our shareholders in the long term and keeping our commitment to keep acquiring the company. Remember that we have a milestone this year in the first first semester of this year.

This is the MICE magical three that depending on the result, we will have additional CapEx here. So this is a variable that will demand more capital this year, but we will continue to deliver the inorganic growth as expect on our guidance, for the long term guidance. So regarding tuition, so we keep also our commitment here to pass at least inflation in a consistent way. We are seeing a very healthy intake process for this first semester. Here, we have more than seven candidates around Brazil, around all of our offerings here in Brazil.

So what we are seeing here, it’s a good opportunity. We saw that our brand, our differential is getting even higher in most of the regions. So we are seeing a sustainable way to pass at least inflation as we are doing since, since the IPO. So about the opportunities also on the pipeline on m and a, yes. So, the pipeline, it’s hot.

We are seeing many institution that because of the injections, they also don’t have good condition to start its operation. But we have been very selective in terms of assets, the quality, and also region, where we are going to apply and allocate our capital to acquire at least 200 seats per

Flavio Chede, Analyst, Bank of America Merrill Lynch: year. If you make

Q&A Moderator, Afia: any point, Flavio, when you said that we used to pass more price in the past than what we are correcting right now, We all you guys always need to remember that when we pass prices really above inflation is when we do acquisitions and the assets are deprepriced. So in the past, the deal acquisitions, they were more representative in our results, and now they’re not that representative anymore. And some of the times, those those assets are already well priced. So that’s the difference. I wouldn’t say that the difference here is because of the market dynamics.

Luis Blanc, CFO, Afia: And and Flavio, just to to add additional color on on on the M and A pipeline, with these new assets that come to the to to to the markets, as we do, we’ve been very selective, in in in the locations that we, we see opportunities to to to to to to operate. And with these new, new new assets that are in place, what we see then is we have good opportunities on on on doing good negotiations regarding the price proceeds. So we can see the next years be more likely that the, like with the one that we we we signed in December that was in Compassion, that was unique, that we are right now between signing and closing. These these assets should be with a lower size, more similar with, with 60 seats.

Flavio Chede, Analyst, Bank of America Merrill Lynch: Alright. Great. Thanks, guys.

Q&A Moderator, Afia: Of course. Next question comes from Jessica from JPMorgan. Jessica, you may now go.

Jessica, Analyst, JPMorgan: Hi. Good evening, Virgilio Blanco Renata. Thank you for taking my question. I want to know about the continued education. Should we continue to see this segment expanding in 2025?

What is the outlook for this segment? Thank you.

Virgilio Gebon, CEO, Afia: Yes, Jessica. Yes. We can expect, we have a large cohort of students graduating this second semester, but the intake level that started that kicked off on October, November was quite high. So expecting a little bit, even higher, than what we are seeing, for 02/2024. In 02/2025 and continue meds verification.

Okay?

Jessica, Analyst, JPMorgan: Thank you.

Q&A Moderator, Afia: And next question comes from Gustavo Miele from Goldman Sachs.

Gustavo Miele, Analyst, Goldman Sachs: Good evening, Virgilio Blanca Renata. Thanks for the presentation. I have two question. The first one, I just want to bounce back here to the guidance discussion more on the profitability front. So if we consider the mid of the range for both revenues and, EBITDA we have, and adjusted EBITDA margin expanding 80 bps versus twenty twenty four.

So I just want to reconcile, the main drivers for such expansion or if this is related to purely DNA dilution or if there’s any other line in cost here that you would highlight as one of the main, drivers for for such movement. This is the first one. And on a second note here, I would like to ask you to provide a bit more of content and details on how do you guys saw the MaSMEDicals three, preliminary result, announced a couple of weeks ago. How did you view competition, and what are the expectations for the final outcome, to be announced at all? Thank you.

Luis Blanc, CFO, Afia: Gustavo Blanca speaking. Thank you for your questions. I’ll take the first one, and Giulio will take the questions about March Madness three. Regarding the expansions, and, you just make the calculations between the midpoint of the that with the midpoint of the revenues compared to 2024. The expectations come in increasing level of, efficiency that we got from from the grants.

We expected to to do the integrations of, Unidom Pedro in the first semester. So, we’re gonna have a positive impact on that and keep getting some efficient opportunities that we have in the undergrad segment. In digital and in medical practice solutions and continued educationals, What we’re seeing is that operational leverage as we’re expanding the the the the the the the these segments with a higher growth. What we see then, we can capture the operational level increasing the margins that we have in these segments. And on top of that, we are always capturing opportunities on holding and shared service opportunities.

We implemented two or three years ago our zero budget methodology that’s helped us a lot during 02/2024 to increase margins, and we see some opportunities to capture this in 02/2025. We’re pretty confident that we’ll have this opportunity for 02/2025 and capturing once again this guidance that we’re providing to the market.

Virgilio Gebon, CEO, Afia: Hi, Gustavo. Just just adding here in the first question. Yeah. So it’s basically operational leveraging. On the undergrad, it’s major part of the business.

We still have maturation, on our Maize Medical’s campuses, the Maize Medical’s two campuses. And also, we still have more students to come on. It’s a very large operation and with a huge impact on the overall operational margin. And both the other segments, continuing education and also digital medical practice, they are leveraging their growing its operation. We launched many new campuses also on continued med education.

So we have opportunity here to dilute fixed costs. And, so that is the source where the the margin improvements will come in 02/2025. Regarding MICEmatch was three, well, we like it, the results. So it’s just the first phase where we had been recognized and able to participate in all 23 cities that we send our our proposal. So the likelihood here is quite positive.

We have in some areas, we have more competition. In others, It’s a low competition. We are quite excited here with the opportunity, but still early in the process. I wouldn’t like to to give any back here what is the with the number that we’re expecting. But, we are very short in the process here, but maybe some weeks, we’ll have the final results about that.

So it’s 23 new opportunities. Remember that in MaSMAD two, we bid for nine, we won seven. Now we are bidding for 23. The competition is much higher. We are also much better prepared.

So let’s wait. I think it’s better.

Gustavo Miele, Analyst, Goldman Sachs: That’s clear. Thank you.

Virgilio Gebon, CEO, Afia: Welcome.

Q&A Moderator, Afia: Of course. Next question comes from Lucas Nagano from Morgan Stanley.

Lucas Nagano, Analyst, Morgan Stanley: Hey. Good evening, Julio, Luis, Renata. Thanks for the space here. We have two questions. The first question is related to the intake.

You you mentioned the intake process was successful, but more competitive. And it would be interesting to hear from you how this expansion of seats is manifesting. Maybe if you have examples of regions that are more competitive or commercial offers you’re observing and what steps you took to offset this pressure. And the second question is related to regulation. So what are your thoughts on the recent comments from Camille Santana about monitoring prices in medical schools, as he suggested, they might be too high and also, share your thoughts on the proposal in the Senate about a proficiency exam for physicians similar as the OB for for lawyers.

Thanks.

Virgilio Gebon, CEO, Afia: Hey, Lucas, can you ask, can you repeat your last part of the second question?

Lucas Nagano, Analyst, Morgan Stanley: Yes. Yeah. Yes. It was about the there’s a proposal in the Senate about a proficiency exam for physicians who are graduating, which is similar to the OB exams for lawyers. How this would impact the the the sector?

Virgilio Gebon, CEO, Afia: Okay. Lucas, same thing for a question. So about intake, I think it’s a very good message here. We have a very successful intake, in 02/2025 first semester when compared to 02/2024. That was even better in terms of, candidates ratio that we have.

So and that was spreaded. That was must dependent on on the the local competition. Let me give give an example. I just came from a two and north region in Brazil. I visited four campuses.

Two of them was from ICE Medicals, and the other two, it was a traditional medical school. And all of four campuses, they had, more than six and seven candidates per, ratio. One of them, almost 20, and it was, from a very small city, on North Of Barai State. So depending on what the competition, the local competition was, too far, so we have very successful intake on that. So we are seeing that brand of Afia, it’s, I think it’s, helping us a lot to be recognized.

The awareness that we have, from physician on our ecosystem is also much higher than we have last year and last two years that Aafia was not known in the segment. So this is helping us on the commercial cycle overall. About regulation, maybe that’s the second part here, the proficiency exam here. This is, I think everything that put the bar higher here in terms of quality in the market, we are, supportive. So I think it had to be another differential here.

Remember that we are helping physician here to get prepared for residency. That’s a very high competition here. So it’s a quite, good opportunity also to help students to get prepared for this type of bar exam here. And above the the the the recent communication, I think it’s too soon in the process to set about any regulation. So higher education is something very stable in terms of pricing, based on a federal law since, 1999.

The law is three three eight seven zero, if I’m not wrong here. So this is that we have for all, cohorts of all new students that we have to enroll. We have no pricing control. We just have to follow our internal inflation, internal cost inflation, to follow the contract until the student graduates on our on our campuses. So, I think it’s too soon to understand what is come from this, speech, the recent speech.

K?

Lucas Nagano, Analyst, Morgan Stanley: Super helpful, Virgilio. Thanks.

Q&A Moderator, Afia: Welcome. Just a reminder, if you wanna ask a question, please raise your hand. Next question comes from Luca Machesini from Itavo.

Virgilio Gebon, CEO, Afia0: Hey. Good evening, everyone, and thank you for taking our question. Just one question considering the capital allocation strategy of the company and looking at the medical practice solutions segment. Should we expect the company to engage in M and A activities in this vertical? And if so, is there a specific solution that the company should be focused on or going forward we should only expect organic growth on this segment?

That will be helpful. Thank you.

Luis Blanc, CFO, Afia: Thank you, Luca, and thank you for our questions. Regarding M and A opportunities, we are always, chase opportunities in the three segments. Okay? And we are very strict regarding, capital locations and the returns that we can get per each one of the business combinations independently if it comes from undergrads, medical practice solutions, or the continuing education. So we are always looking for opportunities.

We don’t change any specific functionality, on it, but we are always looking forward for great entrepreneurs and great solutions that we can add to to our ecosystem major is in in the magical practical practical product solution. So, just to make clear, totally clear, the guidance for 02/2025 do not include any kind of business combination only. So if it come, we’re pretty sure that we’ll be very accretive and very positive for the ecosystem as we are very strict in our capital allocation.

Virgilio Gebon, CEO, Afia0: Very clear. Thank you.

Q&A Moderator, Afia: Of course. The next question comes from Hernan Prata from SIT. Hernan, you may now go.

Unnamed Speaker, Afia: Ivan, thank you for taking the question and and for the space. Just a very quick question here just to clarify. So regarding the 2025 guidance, looking at the CapEx, I mean, do you have any anticipated, like, expenditure relating to the MICE magical trees embedded on the guidance? Or, I mean, it should more it should be more backloaded to 2026?

Luis Blanc, CFO, Afia: Hi, Hannah. Luckily speaking, we don’t put that in the maize the CapEx guidance for 02/2025, the management’s because we don’t know yet how many cities that we’re gonna we’re gonna one among the 23 that we are participating on the bids. So when we we put that, when we receive that, you can use as a proxy 25,000,000 per per each one of the locations that we are competing to. So, management’s cost rate is not included in the CapEx guidance.

Unnamed Speaker, Afia: Okay. That’s very helpful. Thank you very much.

Q&A Moderator, Afia: Of course. So, we don’t have any other questions. I just wanna make sure that you guys know that if you wanna ask anything else, you can reach us in our investor relation department. We are going to be really happy to help you guys. Thank you, and have a good night.

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