Afya Limited

Thank you for joining us for AFES conference call. I'm here today with AFES CEO, Virgílio de Bom, and our CFO, Luisa André Blanco. 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 AFIA'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 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 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 now turn the call over to Virgílio Gibon, AFSCO, Starting the next slide.

Thank you, Renata, and thanks to everyone for joining us today for our third quarter and nine-month conference call for 2024 results. Let's start with our quarter highlights. Net revenue grew over 16% year-over-year, reaching 841 million reais, followed by an adjusted EBITDA growth of 25% year-over-year, reaching 348 million reais with a margin of 41.4%. Adjusted net income followed the same positive trend of last quarter and reached 165 million reais, a growth of 29% year over year with an adjusted EPS of 1.79 reais, 30% higher than last year, reflecting AFIA's great capital allocation discipline on M&A and efficient capital structure. We also reported a record cash flow from operating activities and the nine-month period with R$1,168,000,000, 25% higher than last year with a cash conversion of 109.7%. And we are able to maintain our net debt level stable, even considering the acquisition of Unidom for R$660,000,000, R$7,000,000 in earn-out payments, as will be mentioned further on by Luiz Blanco. In this quarter, we have reached 3,593 approved medical seats with the acquisition of Unidom. The approval of 80 seats in Unima and the reconsideration of additional 10 medical seats in Unigran Rio. Our number of undergrad medical students has reached more than 24,000 students, representing over 12% growth compared to the same period last year. Furthermore, our medical school net average ticket, excluding the UNI-DOM acquisition, increased almost 5% in the nine-month period. In the continued education segment, we continue to see great results, presenting a net revenue growth of 10.4% over the year, reaching R$ 188 million. Once again, AFIA also reported great results on the medical practice solution, which ended the quarter with an increase in net revenue of 15% year-over-year, reaching more than R$170 million in the nine-month period. These results highlight the significant potential in medical practice solutions driven by a strong ramp-up in B2B and B2P engagements. With more physicians and data in the ecosystem, IFAS' attractiveness to B2B clients continues to grow. engaging 47 unique clients and securing 109 contracts in 2024. Moving now to slide number four, we will talk about our solid business execution within our three business units. Starting with the undergrad segment, we saw important movements throughout the quarter, such as higher tickets and medicine courses, with 4.8 increase in medicine tuition for the nine month period. Thanks to the maturation of our medical seats, the completion of Unima and Áfia-Jaboatão integration process in November 2023, and the ramp-up of the four mais médicos campuses that started its operation in third quarter 2022, we are glad to see a gross margin expansion of 170 BIPs in comparison to nine months 2023. This quarter, we also successfully completed the acquisition of Unidom, which brings 300 additional medical seats and strengthens our footprint in Salvador, one of Brazil's largest metropolitan areas. Our dedicated efforts and the strong brand recognition in Salvador led to substantial increase in the medical students enrollment at UNI-DOM, boosting our student base by 37% and reinforcing the impact of our ecosystem in alignment with our growth objectives. Continued education was marked by an operational restructuring, which resulted in a growth in B2B students boosted by our residency journey offerings. Additionally, we are pleased to see an expansion of five new units in 2024, four of them being cross units in undergrad and one standalone campus. Lastly, In our medical practice solution segment, we ended the quarter with over 11% increase in active payers, driven by 11% growth in clinical decision and a 14% growth in clinical management. This result reinforces the opportunity I had in medical practice solution and explained by the ramp up in B2B engagements that boosted net revenues and grew 28% with new contracts with the pharma industry and the continuous ramp up in B2B And now I'll be turning the call over to Luis Blanco, AFIA CFO, to provide more insight into the financial and operational metrics. Thank you.

Thank you, Virgílio, and good evening, everyone. Starting with slide number six for discussions of key operational metrics by business unit. Starting with the undergrad programs. Our number of medical students grew 12% year-over-year, reaching more than 24,000 students, and approved medical seats increased almost 14% yearly. Our medical school net average ticket, excluding the Unidom acquisitions, increased by 4.8% for the nine months, reaching R$ 8,887. We have also achieved R$ 2,156 million in net revenues, up from R$ 1,883 million from the prior year, an increase over 14%. 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 educational metrics. We approach the continuing educational metrics through three main journeys. Starting with the residency journey, we saw a 52% increase, reaching 15,678 students by the end of the period. In the graduate journey, students' numbers grew by 3%, reaching 7 300 students primarily driven by student graduations lastly our other courses and b2b offerings increased by 22 percent over the same nine month period of the prior year overall this effort pushed the continual educational net revenues to 188 million reais in the nine month period of 2024 up from R$170 million in the nine months of 2023, reflecting a growth over 10%. These include a 14% increase in B2B revenue and a 22% decrease in B2B. Moving to slide number eight, I will discuss the medical practice solutions operational metrics. The first graph shows our total active payers. representing revenue generated in the business to physicians segment. Following a steady growth trend, the number of paying users rose to over 200,000, an 11% increase over the same quarter last year. The second graph highlights our monthly active users, which accounts for 249,000, slightly lower than the 259,000 record last year. This change is primarily due to the transitions from the PEPMAP portal to the AFIA portal. Lastly, the third graph shows the net revenues from our medical practice solutions, which grew 15% year over year, reaching R$117 million. Of this total, R$100 million was generated by the B2P, showing an increase of 13%. while B2B contributed in R$17 million, growing 28% in the nine-month period. In the next slide, we also present AFIA ecosystem. We are pleased to highlight AFIA's substantial contributions to the healthcare community in Brazil. By the end of the third quarter of 2024, our ecosystem encompassed 326,000 physicians and medical students, using our service and products. Moving forward to page number 11, I want to discuss our financial overview for the third quarter of 2024, starting with the next slide. With great satisfaction, I present another strong quarterly performance for AFIA. Net revenue for the third quarter of 2024 reached R$ 841 million. representing a 16% increase compared to the same period last year. Net revenue totally, R$2,455 million for the nine-month period, up 14% year over year. This growth was primarily supported by medical tickets increasing above inflation. the maturations of medical seats, unidome acquisitions, and the performance of the continuing education and medical prep solution segments. In third quarter 2024, adjusted EBITDA rose by 25%, reaching R$348 million, with an adjusted EBITDA margin of 41.4%, a gain of 290 base points compared to the third quarter 2023. For the nine-month period, adjusted EBITDA amounted R$1,019 million, an increase of 24% over the prior year, with an adjusted EBITDA margin of 44.4%, representing a 350 base points increase over the same period. The expansion in the adjusted EBITDA margin is largely attributed to Gross margin expansions in the undergrad segments. The completion of the UNIMA and Afro-Jabotão integration process in November 2023. The ramp up of four mais médicos campuses that started operation in the third quarter 2022. Operation restricting efforts in continual educational and medical practice solution 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 25%, reaching R$1,167 million, reflecting strong operational performance. The operational cash flow conversions ratio was 109.7%, in the nine months of 2024. Adjusted net income for the third quarter of 2024 came at R$165 million, marking an increase of 29% from the same period of 2023. For the nine-month period ending September 2024, adjusted net income, totally R$627 million, up 47% year over year. This performance was mainly due to the enhancement in our operational results, lower effective tax rates than the last year, and lower interest rates. In terms of adjusted EPS, the quarter we achieved R$1.79, a 30% growth compared to the previous year, with R$6.81 per share, in the nine-month period, representing a 49% increase. And now, moving to my two last slides, I will discuss our cash and net debt positions, also giving more color on our cost of debt. This slide presents a table detailing our gross debt compositions and the total cost of debt, covering our primary obligations. the SoftBank transactions, the debentures, the other financial liabilities, the IFC financing, and account payables to selling shareholders. AFIA has entered into a financial agreement with IFC to support our expansion initiatives through acquisitions. These agreements represent the first IFC sustainability-linked loan based on social objectives within the educational sector. Under the loan terms, IFC has disbursed 500 million reais to be repaid in seven equal semiannual installments beginning in April, 2027. The interest rate is set in the Brazilian CDI rate plus 1.2%, with a potential 15 base points reductions if specific sustainability KPIs are met. On the next page, we can look closely at the net debt variation. As of the third quarter of 2024, our net debt stood at R$ 1,894 million. almost the same level compared to the end of 2023. Even accounting for the 157 million earn-out payments regarding the additional seats in Guanabe and Unima, and the 660 million reais regarding the acquisitions of Unidom, we were able to reduce our net debt to adjusted EBITDA, thanks to the strong cash flow from operating activities in the nine-month period. This concludes our prepared remarks. We are very proud of our accomplished and robust performance across all areas. Our commit to advance to the medical journey to 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&A section. Thank you.