The Adjusted EBITDA Margin expansion is primarily attributable to: (a) gross margin expansion in the Undergrad Segment; (b) completion of UNIMA and FCM Jaboatão integration process in November 2023; (c) the ramp-up of the four Mais Médicos campuses that started operation in 3Q22; (d) operational restructuring efforts in Continuing Education and Medical Practice Solutions segments; and (e) More efficiency in Selling, General and Administrative expenses.
Table 7: Reconciliation between Adjusted EBITDA and Net Income
(in thousands Three months period ended Nine months period ended
of R$) September 30, September 30,
---------------------------- --------------------------------
2024 2023 % Chg 2024 2023 % Chg
--------------- ------- -------- --------- --------- -------- -----------
Net income 124,142 98,220 26.4% 494,641 303,530 63.0%
--------------- ------- -------- --------- --------- -------- -----------
Net financial
result 99,844 80,535 24.0% 242,761 267,313 -9.2%
--------------- ------- -------- --------- --------- -------- -----------
Income taxes
expense 12,432 12,146 2.4% 26,388 33,296 -20.7%
--------------- ------- -------- --------- --------- -------- -----------
Depreciation
and
amortization 85,828 73,908 16.1% 249,135 212,172 17.4%
--------------- ------- -------- --------- --------- -------- -----------
Interest
received (1) 13,945 10,619 31.3% 34,979 25,760 35.8%
--------------- ------- -------- --------- --------- -------- -----------
Income share
associate (2,526) (615) 310.7% (9,726) (7,671) 26.8%
--------------- ------- -------- --------- --------- -------- -----------
Share-based
compensation 5,871 6,684 -12.2% 26,299 20,082 31.0%
--------------- ------- -------- --------- --------- -------- -----------
Non-recurring
expenses: 8,413 (3,104) n.a. 25,151 22,284 12.9%
--------------- ------- -------- --------- --------- -------- -----------
- Integration
of new
companies
(2) 6,444 7,769 -17.1% 17,722 19,951 -11.2%
--------------- ------- -------- --------- --------- -------- -----------
- M&A advisory
and due
diligence
(3) 1,220 703 73.5% 2,803 12,377 -77.4%
--------------- ------- -------- --------- --------- -------- -----------
- Expansion
projects (4) 198 2,007 -90.1% 2,568 2,536 1.3%
--------------- ------- -------- --------- --------- -------- -----------
-
Restructuring
expenses (5) 551 3,722 -85.2% 2,058 5,673 -63.7%
--------------- ------- -------- --------- --------- -------- -----------
- Mandatory
Discounts in
Tuition Fees
(6) - (493) n.a. - (1,441) n.a.
--------------- ------- -------- --------- --------- -------- -----------
- Gain on tax
amnesty (7) - (16,812) n.a. - (16,812) n.a.
--------------- ------- -------- --------- --------- -------- -----------
Adjusted EBITDA 347,949 278,393 25.0% 1,089,628 876,766 24.3%
Adjusted EBITDA
Margin 41.4% 38.5% 290 bps 44.4% 40.9% 350 bps
--------------- ------- -------- --------- --------- -------- -----------
(1) Represents the interest received on late payments of monthly tuition fees.
(2) Consists of expenses related to the integration of newly acquired
companies.
(3) Consists of expenses related to professional and consultant fees in
connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in
connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection
with the organizational restructuring of our acquired companies.
(6) Consists of mandatory discounts in tuition fees granted by state decrees,
individual/collective legal proceedings and public civil proceedings due to
COVID 19 on site classes restriction and excludes any recovery of these
discounts that were invoiced based on the Supreme Court decision.
(7) On August 10, 2023, Unigranrio entered into a tax amnesty program on
interest and penalties to settle a tax proceeding in respect to ISS (city tax
on services) with the municipality of Rio de Janeiro, which result in a
payment of R$14,819 to settle the claim. The selling shareholders of
Unigranrio agreed to pay R$5,438 regarding this matter. The Company had a
provision of R$53,302 and an indemnification asset from the selling
shareholders of R$20,000 (in light of the indemnification clauses as defined
at acquisition of Unigranrio), in respect to such tax proceeding. The
difference between the provision, indemnification asset and the actual paid
amount was recorded as Other income (expenses), net on the consolidated
statement of income and comprehensive income.
Adjusted Net Income
Net Income for the three-month period ended September 30, 2024 was R$124.1 million, an increase of 26.4% over the same period of the prior year. Adjusted Net Income was R$165.4 million, which resulted in an increase of 28.8% over the same period from the previous year. For the nine-month period, Afya achieved a Net Income of R$494.6 million, 63.0% higher than the same period of 2023, and an Adjusted Net Income of R$626.7 million which was 46.9% higher than the previous period. This performance was mainly due to: (a) enhancement of operational results; (b) lower effective tax rates than last year; and (c) lower interest rates.
Adjusted EPS reached R$6.81 per share for the nine-month period ended September 30, 2024, an increase of 48.7% YoY, reflecting the increase in Net Income and capital allocation discipline.
Table 8: Adjusted Net Income
--------------------------------------------------------------------------
(in thousands Three months period ended Nine months period ended
of R$) September 30, September 30,
---------------------------- ---------------------------
2024 2023 % Chg 2024 2023 % Chg
--------------- ------- ------- --------- ------- ------- --------
Net income 124,142 98,220 26.4% 494,641 303,530 63.0%
--------------- ------- ------- --------- ------- ------- --------
Amortization of
customer
relationships
and trademark
(1) 26,946 26,593 1.3% 80,592 80,779 -0.2%
--------------- ------- ------- --------- ------- ------- --------
Share-based
compensation 5,871 6,684 -12.2% 26,299 20,082 31.0%
--------------- ------- ------- --------- ------- ------- --------
Non-recurring
expenses: 8,413 (3,104) n.a. 25,151 22,284 12.9%
--------------- ------- ------- --------- ------- ------- --------
- Integration
of new
companies
(2) 6,444 7,769 -17.1% 17,722 19,951 -11.2%
--------------- ------- ------- --------- ------- ------- --------
- M&A advisory
and due
diligence
(3) 1,220 703 73.5% 2,803 12,377 -77.4%
--------------- ------- ------- --------- ------- ------- --------
- Expansion
projects (4) 198 2,007 -90.1% 2,568 2,536 1.3%
--------------- ------- ------- --------- ------- ------- --------
-
Restructuring
expenses (5) 551 3,722 -85.2% 2,058 5,673 -63.7%
--------------- ------- ------- --------- ------- ------- --------
- Mandatory
Discounts in
Tuition Fees
(6) - (493) n.a. - (1,441) n.a.
--------------- ------- ------- --------- ------- ------- --------
- Gain on tax
amnesty (7) - (16,812) n.a. - (16,812) n.a.
--------------- ------- ------- --------- ------- ------- --------
Adjusted Net
Income 165,372 128,393 28.8% 626,683 426,675 46.9%
--------------- ------- ------- --------- ------- ------- --------
Basic earnings
per share - in
R$ (8) 1.33 1.04 27.9% 5.35 3.21 66.6%
--------------- ------- ------- --------- ------- ------- --------
Adjusted
earnings per
share - in R$
(9) 1.79 1.38 29.9% 6.81 4.58 48.7%
--------------- ------- ------- --------- ------- ------- --------
(1) Consists of amortization of customer relationships and trademark
recorded under business combinations.
(2) Consists of expenses related to the integration of newly acquired
companies.
(3) Consists of expenses related to professional and consultant fees in
connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in
connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in
connection with the organizational restructuring of our acquired
companies.
(6) Consists of mandatory discounts in tuition fees granted by state
decrees, individual/collective legal proceedings and public civil
proceedings due to COVID 19 on site classes restriction and excludes any
recovery of these discounts that were invoiced based on the Supreme Court
decision.
(7) On August 10, 2023, Unigranrio entered into a tax amnesty program on
interest and penalties to settle a tax proceeding in respect to ISS (city
(MORE TO FOLLOW) Dow Jones Newswires
November 13, 2024 17:46 ET (22:46 GMT)