Afya Limited

Thank you for joining us for ASIA's conference call. I'm here today with ASIA's CEO, Vigilio Gibon, and our CFO, Luiz André Blanca. 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, known and unknown risks, uncertainties, and other factors that may cause ASIA's actual results to differ maturely 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 initiative 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 the data results. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements, except as required by law. In addition, management may reference no IFRS financial measures on this call. These measures are not intended to be considered in isolation or as a substitute of the results prepared in accordance with IFRS. This presentation has reconciled these non-IFRS financial measures to the most directly comparable IFRS financial measures. Now, let me turn the call over to Vigilio Ribon, FSEO, who will begin with slide number three.

Thank you, Renata, and thanks to everyone for joining us today for our second quarter and first half conference call for 2024 results. Let's start with our performance highlights. First, net revenue increased almost 14%, reached 810 million reais, followed by an adjusted bidda growth of 28% year-over-year, reaching 344 million reais, with an adjusted bidda margin of 42.5%, an impressive 490 bps over last year. Adjusted net income reached 210 million reais, marking a 59% growth compared to the same period in 2023. Meanwhile, our adjusted EPS climbed to 2.29 reais, reflecting a 62% increase over the previous year. We delivered robust cash flow from operating activities, totaling 682 million reais, a 21% year-over-year increase, driven by the company's solid operational performance. Operating cash conversion reached 94%, with a robust cash position of R$723 million at the close of the quarter. Moving to our operational update for the quarter, medical seats reached 3,200 approved seats. Additionally, our number of medical students has reached 22,661, representing a 9% volume growth compared to the second quarter of the previous year. It's also important to mention that with our recent acquisition of Unidome and the addition of 80 seats authorized at Uniman in the third quarter of 2024, we have now reached a total of 3,583 approved seats as of today. We also observed impressive results in net revenue for our continuing education business, with the segment growing by over 12% year-over-year, resulting in a net revenue of R$127 million in the first six months of the period of 2024. Similarly, our medical practice solutions demonstrated significant progress, with a revenue increase of 13% compared to the first half of 2023. concluding the six-month period with a net revenue of 77 million reais. Moving now to slide number four, we can now observe our new business structure taking shape, comprised of three segments, undergrad programs, continual education, and medical prep solutions. I would like to reiterate that notable changes have occurred in continual education. Entities previously accounted for as a content and technology for medical education within medical practice solutions are now accounted for in the continuing education segment. Simultaneously, the segment formerly known as digital services was renamed to medical practice solutions. Beginning with the undergrad segment, we observed significant progress throughout the quarter, including an increase of over 5.4% in our net average tickets for medical courses, Organic growth in all segments and expansion in gross margin and the acquisition of UNIDO. Continued education was marked by an operational restructuring resulting in growth and an increase in B2B students boosted by both graduate and prep programs. This segment also benefited from a gross margin expansion due to operational restructuring efforts. Lastly, in our medical prep solution segment, we ended the quarter with a 13% increase in active payers, driven by 11% growth in clinical decision and a 19% growth in clinical management. We have also seen a recovery in our B2B net revenue for this segment, as some of the invoices that were postponed during the first quarter of 2024 are now being accounted for. Moving now to slide number five. We are pleased to announce an update to ASEA's guidance following the recent acquisition of Unidom, the addition of 80 medical seats at Uni Malagoas, the first half results that have exceeded our initial expectation, and also our robust intake process, which once again ensured 100% of occupancy. Our updates include a new net revenue range between 3,225,000,000 to 3,325,000,000 and An adjusted bidder range between R$1,375,000,000 and R$1,475,000,000. And a capex range between R$220,000,000 and R$260,000,000 for our capital expenditures. And now, I'll be turning the call over to Luis Blanco, AFIA's CFO, to provide more insight into the financial and operational metrics. Thank you.

Thank you, Virgílio, and good evening, everyone. Starting with slide number seven for discussions of key operational metrics by business units. Our number of medical students increased by 9% over the first half of 2023 to 22.6 thousand students. We have reached 3,203 approved medical seats due to the 40-seat increase in Guanabí authorized in January 2024. The net average ticket for our medical school grew by 5.4%, reaching R$ 8,922 in the first half of 2024. Furthermore, undergrad program net revenue saw an increase of more than 13%, reaching over R$ 1,414 million, 86% of which is related to medicine and 94% from health-related courses. All these efforts highlight one key point. Our medical educational business remains and will continue to be the foundations of our business in the short and middle term, driving consistent growth alongside strong profitability and cash generation. On the next page, I will present our continuing educational metrics. Strategically, we look into our continuing education considering three journeys, starting from the left to the right. With the residency journey, we observed a 33% increase in active payers, reaching 13,058 students by the end of the period. Moving through the graduate journey, we achieved a 22% growth, totaling 8,100 students. Finally, in our other courses and B2B offerings, we saw an increase of 8.2% over the six-month period of the prior year. In summary, our efforts enable the Continual Education Net Revenue to reach R$128 million in the first half of 2024 compared to R$114 million in the first half of 2023, reflecting a growth of over 12%. This growth includes a 15% increase from B2P and a 13% decrease from the B2B offerings. Moving to slide number nine, I will discuss the Magical Practice Solutions operational metrics. On the first graph, you can see our total active payers, those generating revenues in the business to physician segment. With a continuous growth trend, we reached 196,000 paying users, reflecting a 13% growth compared to last year's quarter. As shown in the second graph, our monthly active users counting, and over 57,000 in the first half of last year, mainly due to the discontinuations of PadMed portal and the launch of the AFIA portal. Finally, our last graph displays the net revenue from our medical practice solutions, which grew by 13% compared to last year, reaching 77 million reais. Within this revenue, 65 million reais come from the B2B and 12 million reais was from B2B, reverting the decrease in net revenue in the first quarter as previously postponed B2B invoices were now accounted for. In the next slide, we also present Asia ecosystem. We are proud to present the significant impact that AFIA has made on the healthcare community in Brazil. At the end of the second quarter of 2024, our ecosystem includes over 320,000 users who are actively engaged with our service and products. Moving forward to page 11, I want to discuss our financial overview for the second quarter of 2024, starting with the next slide. With great satisfaction, I'm pleased to present another robust quarterly result for ASEAN. Net revenue for the second quarter of 2024 reached 810 million reais, reflecting a 13.7% increase over the same quarter of the prior year. And for the six-month period, net revenue was 1,614 million riyals, an increase of 13.5% over the same period of last year. This growth is mainly driven by 5.4% increase in net average tickets for medical courses, maturations of medical seats, the addition of 40 seats at the Guanabe campus, strong performance in continuing educational intake, and effective execution in medical practice solutions. In the second quarter of 2024, adjusted EBITDA increased over 28% to R$344 million, with an adjusted EBITDA margin of 42.5%, marking an increase of 490 base points compared to the second quarter of 2023. For the six-month period, adjusted EBITDA was R$742 million, an increase of 24% over the same period of the prior year, with an adjusted EBITDA margin of 45.9%, an increase of 380 base points in the same period. The adjusted dividend margin expansion is mainly due to gross margin expansions within undergrad and continuing education, completion of UNIMA and FCM, Jaboatão integration process in November, 2023. The ramp-up of the Four Mais Médicos campus that started operations in third quarter of 2022. operation restructuring efforts in our continual educational and medical practice solution segments, and more efficient in selling general and administrative expenses. Moving to the next slide, the year cash flows from operating activities grew 21%, totaling 683 million reais, driving by our robust operational performance. The operating cash conversions ratio was 94% in the first half of 2024. Adjusted net income for the second quarter of 2024 amounted to 210 million reais, an increase of almost 60% over the same period of 2023. For the six-month period that ended June 2024, we also saw an increase in adjusted net income reaching R$ 461 million, presenting an increase of nearly 55% year-over-year, mainly due to the enhancement of operational results, the reduction in financial expenses due to the decrease in net debt and lower interest rates, and lower effective tax rates. and increasing distribution from subsidiaries. Regarding adjusted EPS, we achieved R$ 2.29 for the quarter, a remarkable 62% increase compared to the prior year, and R$ 5.03 per share in the first six-month period, a growth of 57%. On the next slide, we can see a table with the breakdown of our gross debt and our total cost of debt, considering our main debts, the SoftBank transactions, debentures, accounts payable to selling shareholders, and other financial obligations. We are proud to announce that AFIA entered into a loan agreement with international finance corporations to finance our exponential program through acquisitions. The financing is IFC's first sustainability-linked loan based on social targets in the educational sector. According to the financial terms, IFC will loan up to R$ 500 million, which shall be repaid in seven equal semi-annual installments starting in April 2027. The interest rate is the Brazilian CDI rate plus 1.2%, and may be reduced by 15 pips if sustainability KPIs are cheap. And now, moving to my last two slides, I'll discuss our cash and net debt position, also giving more insights into our cost of debt. In second quarter 2024, our net debt reached 1,459 million reais when compared to December 2023, after reducing its net debt by 356 million reais. Even considering the PIP wannabe earn-out of 49 million reais, we were able to reduce our net debt per EBITDA from 1.6 times in 2023 to 1.5 times in the second quarter of 2024, including Unidom-Pedro business combination. As shown, we also reduced our net debt over R$150 million more compared to the same period of the prior year. This concludes our prepared remarks. We are very proud of our achievements and strong performance across our areas. Our commitment to enhancing the medical journey through a unified educational system and digital solutions remains steadfast. This approach supports the growth, continuous learning, accuracy and productivity of healthcare professionals. Looking ahead, we are excited about the promising opportunities that await for us. I will now open the conference for Q&A sessions. Thank you.