• Net Revenue: BRL841 million for Q3 2024, a 16% increase year over year.
• Adjusted EBITDA: BRL348 million for Q3 2024, a 25% increase year over year, with a margin of 41.4%.
• Adjusted Net Income: BRL165 million for Q3 2024, a 29% increase year over year.
• Adjusted EPS: BRL1.79 for Q3 2024, a 30% increase year over year.
• Cash Flow from Operating Activities: BRL1.168 billion for the nine-month period, a 25% increase year over year.
• Medical Students: Over 24,000, a 12% increase year over year.
• Medical Practice Solutions Revenue: BRL117 million for the nine-month period, a 15% increase year over year.
• Continuing Education Revenue: BRL188 million for the nine-month period, a 10.4% increase year over year.
• Net Debt: BRL1,894 million as of Q3 2024, stable compared to the end of 2023.

• Warning! GuruFocus has detected 4 Warning Sign with AFYA.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Afya Ltd (NASDAQ:AFYA) reported a net revenue growth of over 16% year over year, reaching BRL841 million.
• Adjusted EBITDA grew by 25% year over year, with a margin of 41.4%.
• The company achieved a record cash flow from operating activities, ending the nine-month period with BRL1.168 billion, a 25% increase from the previous year.
• Afya Ltd (NASDAQ:AFYA) successfully completed the acquisition of Unidom, adding 300 medical seats and strengthening its presence in Salvador.
• The medical practice solutions segment saw a 15% increase in net revenue year over year, driven by strong B2B and B2P engagements.

Negative Points

• The number of monthly active users in the digital services segment declined by 4% this quarter.
• There was a deceleration in net revenue growth for the continuing education segment this quarter.
• The competitive environment remains challenging, with increased competition potentially impacting future tuition increases.
• The transition from the PEBMED Portal to the Afya portal led to a decrease in monthly active users.
• Financial leverage remains a concern, although it has decreased, the company continues to focus on managing its debt levels.

Q & A Highlights

Q: Can you comment on the M&A environment and how you see it unfolding, especially with the increase in approved medical seats? A: Luis Andre Blanco, CFO: The increase in approved medical seats has expanded our pipeline of potential targets. This creates a more favorable market for us, potentially leading to lower multiples in future deals compared to our recent acquisition of Unidom. We focus on institutions highly concentrated in medicine.

Q: How are you handling the competitive environment, especially with the tuition increase for new students? A: Virgilio Gibbon, CEO: We maintain our strategy of passing at least inflation to our tuition prices. The number of candidates is higher than last year, with a 10% increase in enrollments. This trend is strong across both medicine and other health programs.

Q: How far along are you in restructuring efforts in continuing education and medical practice solutions, and can we expect further margin expansion? A: Luis Andre Blanco, CFO: The restructuring has improved operational efficiency, reducing costs. Future margin expansion will come from operational leverage as our business units grow. We have unified product management structures to enhance efficiency.

Q: Can you explain the decline in monthly active users on digital services and the expected normalization timeline? A: Renata Couto, Investor Relations: The decline is due to the transition from the PEBMED Portal to the Afya Portal. This change is part of our new brand strategy, and we are seeing positive results since the launch.

Q: What are the main factors supporting the margin gains at Unidom since its acquisition, and what challenges do you foresee? A: Luis Andre Blanco, CFO: Unidom has performed better than expected, with increased student occupancy from 60% to 80% in two months. We anticipate further margin expansion as we integrate systems and fully utilize existing capacity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.