6-K
Afya Ltd (AFYA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORTOF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2022
CommissionFile Number: 001-38992
Afya Limited
(Exact name of registrant as specifiedin its charter)
Alameda Oscar Niemeyer, No. 119,Salas 502, 504, 1,501 and 1,503
Vila da Serra, Nova Lima, Minas Gerais
Brazil
+55 (31) 3515 7550
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | X | Form 40-F |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
| Yes | No | X |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
| Yes | No | X |
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TABLE OF CONTENTS
| EXHIBIT | |
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| 99.1 | Afya Limited Announces First-Quarter 2022 Financial Results |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Afya Limited | ||
|---|---|---|
| By: | /s/ Virgilio Deloy Capobianco Gibbon | |
| Name: | Virgilio Deloy Capobianco Gibbon | |
| Title: | Chief Executive Officer |
Date: May 23, 2022
****
Afya Limited Announces First-Quarter2022 Financial Results
High and Predictable GrowthFull Year 2022 Guidance Reaffirmed
Robust EPS Expansion
Nova Lima, Brazil, May 23, 2021 –Afya Limited (Nasdaq: AFYA) (“Afya” or the “Company”), the leading medical education group and digital health services provider in Brazil, reported today financial and operating results for the three-month period ended March 31, 2022 (first quarter 2022). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).
FirstQuarter 2022 Highlights
| § | 1Q22 Adjusted Net Revenue increased<br>41.0% YoY to R$567.7 million. Adjusted Net Revenue excluding acquisitions grew 10.6%, reaching R$445.3 million. | ||||
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| § | 1Q22 Adjusted EBITDA increased<br>30.4% YoY reaching R$270.8 million, with an Adjusted EBITDA Margin of 47.7%. Adjusted EBITDA excluding acquisitions grew 3.0%, reaching<br>R$213.9 million, with an Adjusted EBITDA Margin of 48.0%. | ||||
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| § | 1Q22 Net Income of R$134.9<br>million, 19.1% higher than 1Q21. | ||||
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| § | Cash conversion of 113.0%,<br>with a solid cash position of R$ 789.4 million. | ||||
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| § | ~260 thousand monthly active<br>physicians and medical students using Afya’s Digital Services. | ||||
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| Table 1: Financial Highlights | |||||
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| For the three months period ended March 31, | |||||
| (in thousand of R$) | 2022 | 2022 Ex Acquisitions* | 2021 | % Chg | % Chg Ex Acquisitions |
| (a) Net Revenue | 566,324 | 443,864 | 394,351 | 43.6% | 12.6% |
| (b) Adjusted Net Revenue (1) | 567,716 | 445,256 | 402,555 | 41.0% | 10.6% |
| (c) Adjusted EBITDA (2) | 270,801 | 213,893 | 207,652 | 30.4% | 3.0% |
| (d) = (c)/(b) Adjusted EBITDA Margin | 47.7% | 48.0% | 51.6% | -390 bps | -360 bps |
| *For the three months period ended March 31, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae, Medical Harbour, Cliquefarma, Shosp, UNIFIPMoc, FIPGuanambi, UNIGRANRIO, RX PRO, Garanhuns and Além da Medicina (all from January to March, 2022). | |||||
| (1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. | |||||
| (2) See more information on "Non-GAAP Financial Measures" (Item 09). | |||||
| 1. | Message from Management | ||||
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For us in Afya, these results indicate anothergreat start for the year ahead. We are proud to present, once again, strong results, reaffirming the success and the resilience of Afya,along with high and predictable growth, and a record cash generation. It is important to highlight that our operational leverage and capitalallocation discipline are resulting in a robust EPS expansion even considering the higher net debt and interest rate in the market.
We can finally see the pandemic losing its strength,pushing our students, employees, and partners to continue extracting the best from our campuses and digital health services.
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One good example of that is our Continuing Educationrecovery in this quarter. After challenging periods, our practical classes are boosting again, as we’ve invested in an expansionplan that allowed us to more than double our campuses, launch new courses, and strengthen our intake process.
As presented last month at our Investors and ESGDay, our digital services strategy is more thriving than ever. Throughout development and new acquisitions, our digital ecosystem is beingbuilt with multiple offerings, unlocking new interactions and revenue streams that go beyond the physicians, achieving pharma players,hospitals, labs and drugstores chains through our platforms, scratching the surface of a total addressable market of R$28.4 billion.
M&A remains a key growthstrategy for us and we will continue to evaluate opportunities to deploy capital into strategic acquisitions. In addition to Alémda Medicina and Cardiopapers, we are proud to announce today another business combination, our third of 2022: Glic, a free diabetes careand management app solution for physicians and patients, that uses technology to improve diabetes education and daily routine practices,connecting users, devices and health providers. This business combination represents Afya´s entering into the physician-patientrelationship pillar and further strengthens Afya's digital services strategy and ecosystem. Also, we are committed to continuing to expandour undergrad medical operation granting at least 200 medical seats per year through M&A deals, as we also have a pipeline of morethan 4,500 seats.
In the undergrad scenario,we’ve successfully consolidated our leadership in medical school seats in Brazil. The expansion of our offering in the undergradbusiness continues to grow strong, and, already in 2022, we have increased 200 operational seats with four new Mais Médicos authorizedunits by MEC, with operations to start in the second semester, along with 28 new seats from the UniSL Ji-Paraná campus. So far,Afya has reached 2,759 approved seats, representing almost 20 thousand students at maturity. Considering all acquisitions and seats approvedby MEC, we’ve added 1,307 seats since our IPO and we have become extremely efficient in operating medical schools and we continueto see opportunities in this area. All this effort means one thing: that our medical education business remains, and will continue tobe, the cornerstone of our business in the short and middle terms.
Regarding equity operationsin the quarter, one is very important to be mentioned, even though it has happened after the quarter: this month, Afya was notified ofthe closing of the transaction where Bertelsmann SE& Co. KGaA, or “Bertelsmann”, acquired 6,000,000 Class B common sharesof Afya at the purchase price of US$26.90 per share, from Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves and NRECapital Ventures Ltd. As a result of the closing of the transaction, Bertelsmann and the Esteves family will beneficially own ~57.5% and~33.1% voting interest, and ~31% and ~17.9% of the total shares, respectively, in Afya. As previously said, we are delighted that Bertelsmann,one of the world’s leading media companies with a significant footprint in the education sector, has evidenced its commitment toAfya’s long-term strategy through its evaluation of increasing its stake. We look forward to continuing to benefit from the visionand commitment of the Esteves family with their significant shareholding and active participation in our company.
Last, but not least,as also shown at our Investors and ESG Day, we’ve been making significant improvements in the environmental, social, and governanceagenda, sequentially. Subjects related to climate change, clean energy powering, environmental governance, social impact on vulnerableareas, diversity agenda and corporate culture, human rights, relationship with the community, transparency and compliance, internal auditand cyber security were widely disclosed. I would like to invite all of you that could not participate in Afya’s Investors and ESGDay to visit our Investor Relations website to check not only the video of the event but also our 2021 Sustainability Report, which weare proud to announce the availability simultaneously with this earnings release.
High and predictable growth,strong guidance for the year, and segments ramp-up: this proves how are we evolving and empowering our mission to become the referencein medical education and digital services, encouraging students and physicians to transform their ambitions into rewarding lifelong experiences.We are proud of our business and of what we have achieved so far, and also excited for what comes next during this year.
| 2. | Key Events in the Quarter: |
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| · | Afya announced, on January<br>2022, that Júlio de Angeli, Vice President of Innovation & Digital Services, left the company for personal reasons. "We<br>are grateful for the time Mr. de Angeli has spent with us developing our digital services<br>strategy and we wish him all the best” said Virgilio Gibbon, our CEO. Lélio de Souza, who has joined Afya effective as of<br>November 2021 and has 22 years of experience in tech companies, assumed the position of Vice President of Innovation & Digital Services. |
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| § | Third share repurchase program,<br>on January 2022 - after the completion of its second share repurchase program, which resulted in the purchase of 1,383,108 Class A common<br>shares, the Board of Directors has approved a new share repurchase program. Under this share repurchase program, Afya may repurchase up<br>to 1,874,457 of its outstanding Class A common shares, which represents 4% of its free float, in the open market, based on prevailing<br>market prices, beginning on January 27, 2022 until the earlier of the completion of the repurchase or December 31, 2022, depending upon<br>market conditions. During the three-month period ended March 31, 2022, the Company repurchased 1,204,424 shares. |
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| § | Reinforcing our ESG commitment,<br>Afya announced, on January 2022, that it is one of 418 companies across 45 countries and regions to join the 2022 Bloomberg Gender-Equality<br>Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency<br>in gender-data reporting. This reference index measures gender equality across five pillars: female leadership & talent pipeline,<br>equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and pro-women brand. Afya was included on this<br>year’s index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption<br>of best-in-class statistics and policies. |
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| § | Afya announced, on February<br>2022, that the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized<br>the operations of the medical schools in Abaetutuba, in the State of Pará, and Itacoatiara, in the State of Amazonas, both under<br>the Mais Médicos II program. With these authorizations, Afya reaches its third and fourth schools authorized to start operating<br>under the Mais Medicos II program. Each medical school will contribute with 50 seats and, with that, Afya will reach 2,581 operating seats<br>out of 2,731 approved seats. |
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| § | Afya announced, on March 2022,<br>the acquisition of 100% of the total share capital of Além da Medicina, a medical content online platform for physicians and medical<br>students that provides educational tools in addition to technical medical content that can assist them throughout their careers. Its robust<br>content includes mentoring for residency, soft skills, finance, accounting, and investment basics for physicians. Além da Medicina<br>had more than 4.000 subscribers in 2021, with a general NPS of 77 and almost 100.000 followers on Instagram. The company expects a R$12.7<br>million gross revenue for 2022. |
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| § | Afya announced, on March 2022,<br>that it was notified that an affiliate of Bertelsmann SE& Co. KGaA, or “Bertelsmann”<br>has agreed to buy 6,000,000 Class B common shares of Afya at the purchase price of US$26.90 per share, pursuant to a binding offer made<br>by Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves and NRE Capital Ventures Ltd (together with Nicolau Carvalho<br>Esteves and Rosângela de Oliveira Tavares Esteves, the “Esteves Family”). Bertelsmann’s acceptance of the<br>offer remains subject to due diligence and Bertelsmann board approval. If the transaction proceeds, following the transaction, Bertelsmann<br>and the Esteves family will beneficially own ~57.5% and ~33.1% voting interest, and ~31.0% and ~17.8% of the total shares respectively,<br>in Afya. Afya was notified that if Bertelsmann accepts the offer, the Esteves family and Bertelsmann have agreed to amend Afya’s<br>articles of association and the current shareholder’s agreement between Bertelsmann and the Esteves family in order to allow Bertelsmann<br>to consolidate its investment in Afya under International Financial Reporting Standards as a controlling shareholder. |
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| § | Afya announced, on March 2022,<br>that the Secretary of Regulation and Supervision of Higher Education of MEC authorized the operations of the medical schools in Bragança,<br>in the State of Pará, and Manacapuru, in the State of Amazonas, both under Mais Médicos II program. With these authorizations,<br>Afya reaches its fifth and sixth authorized schools to start operating under the Mais Medicos II program. Each medical school will contribute<br>with 50 seats and with that, Afya will reach 2,681 operating seats out of 2,731 approved seats. |
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| § | Afya announced, on March 2022,<br>that the Secretary of Regulation and Supervision of Higher Education of MEC authorized the increase of 28 seats of Centro Universitário<br>São Lucas, in Ji-Parana located in the state of Rondônia. With the authorization, Afya reaches 2,759 approved seats, which<br>will represent around 19,865 students at maturity, considering FIES and PROUNI. |
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| 3. | Subsequent Events in theQuarter |
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| § | CardioPapers acquisition in<br>April, 2022 – CardioPapers is the main medical content and education platform in the Cardiology field, offering courses and books<br>developed by physicians and for physicians, covering all phases of the medical career, aligned with Afya’s overall business strategy. |
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| § | Afya announced, on April 2022,<br>that Mr. Paulo Passoni, a board member since May 2021, has submitted his resignation letter as a member of the Board of Directors. Mrs.<br>Maria Tereza Azevedo was appointed as his replacement effective as of April 19^th^. |
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| § | Afya announced, on April 2022,<br>that the resolutions set out in its Notice of Annual General Meeting dated April 12, 2022 were duly passed at its Annual General Meeting<br>held today: (1) the approval and ratification of Afya’s financial statements as of and for the fiscal year ended December 31, 2021;<br>and (2) the approval of the Amended and Restated Memorandum and Articles of Association available at Afya’s website at https://ir.afya.com.br,<br>subject to and with effect from Closing of the transaction disclosed in the Form 13D/A on March 4, 2022, between Esteves Family and Bertelsmann<br>SE & Co. KGaA, accessible at the Company’s website at https://ir.afya.com.br. |
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| § | Afya announced, on May 2022,<br>that it was notified of the closing of the transactions where Bertelsmann acquired 6,000,000 Class B common shares of Afya at the purchase<br>price of US$26.90 per share, from Esteves Family. As a result of the closing of the transaction, Bertelsmann and the Esteves family will<br>beneficially own ~57.5% and ~33.1% voting interest, and ~31.0% and ~17.8% of the total shares respectively, in Afya. |
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| § | Glic acquisition in May, 2022<br>- Glic is a free diabetes care and management app solution for physicians and patients that uses technology to improve diabetes education<br>and daily routine practices, connecting users, devices and health providers. This business combination represents Afya´s entering<br>into the physician-patient relationship pillar. |
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| 4. | Full Year 2022 GuidanceReaffirmed |
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The Company is reaffirming its previously issued guidance for FY22 including the successfully concluded acceptances of new medical students for the first semester, ensuring 100% occupancy in all of its medical schools.
The guidance for FY2022 is defined in the following table:
| Guidance for 2022 |
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| 2022 Adjusted Net Revenue is expected to be between R2,280.0 million – R2,360.0 million |
| 2022 Adjusted EBITDA is expected to be between R935.0 million - R1,015 million |
All values are in US Dollars.
| 5. | 1Q22 Overview |
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OperationalReview
Afya is the only company offering educational and technological solutions to support physicians across every stage of the medical career, from undergraduate students in their medical school years through medical residency preparatory courses, medical specialization programs and continuing medical education. The Company also offers solutions to empower the physicians in their daily routine including supporting clinic decisions through mobile app subscription and delivering practice management tools through a Software as a Service (SaaS model).
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The Company reports results for three distinct business units. The first, Undergrad – medical schools, other healthcare programs and ex-health degrees. Revenue is generated from the monthly tuition fees the Company charges students enrolled in the undergraduate programs. The second, Continuing Education – specialization programs and graduate courses for physicians. Revenue is also generated from the monthly tuition fees the Company charges students enrolled in the specialization and graduate courses. The third is Digital Services – digital services offered by the Company at every stage of the medical career. This business unit is divided into: Content & Technology for Medical Education, Clinical Decision Software, Practice Management Tools & Electronic Medical Records, Physician-Patient Relationship, Telemedicine and Digital Prescription for physicians and provides access and demand for the healthcare players. Revenue is generated from printed books and e-books, which is recognized at the point in time when control is transferred to the customer and subscription fees (SaaS model).
KeyRevenue Drivers – Undergraduate Courses
| Table 2: Key Revenue Drivers | Three months period ended March 31, | ||
|---|---|---|---|
| 2022 | 2021 | % Chg | |
| Undergrad Programs | |||
| MEDICAL SCHOOL | |||
| Approved Seats | 2,759 | 2,143 | 28.7% |
| Operating Seats | 2,481 | 1,893 | 31.1% |
| Total Students (end of period) | 17,523 | 12,852 | 36.3% |
| Average Total Students | 17,523 | 12,852 | 36.3% |
| Average Total Students (ex-Acquisitions)* | 14,023 | 12,852 | 9.1% |
| Tuition Fees (Total - R$MM) | 501,523 | 333,319 | 50.5% |
| Tuition Fees (ex- Acquisitions* - R$MM) | 393,709 | 333,319 | 18.1% |
| Medical School Gross Avg. Ticket (ex- Acquisitions* - R$/month) | 9,359 | 8,645 | 8.3% |
| Medical School Net Avg. Ticket (ex- Acquisitions* - R$/month) | 7,858 | 7,271 | 8.1% |
| UNDERGRADUATE HEALTH SCIENCE | |||
| Total Students (end of period) | 20,902 | 14,112 | 48.1% |
| Average Total Students | 20,902 | 14,112 | 48.1% |
| Average Total Students (ex-Acquisitions)* | 13,408 | 14,112 | -5.0% |
| Tuition Fees (Total - R$MM) | 78,310 | 41,664 | 88.0% |
| Tuition Fees (ex- Acquisitions* - R$MM) | 42,401 | 41,664 | 1.8% |
| OTHER UNDERGRADUATE | |||
| Total Students (end of period) | 24,209 | 13,167 | 83.9% |
| Average Total Students | 24,209 | 13,167 | 83.9% |
| Average Total Students (ex-Acquisitions)* | 11,715 | 13,167 | -11.0% |
| Tuition Fees (Total - R$MM) | 69,182 | 42,999 | 60.9% |
| Tuition Fees (ex- Acquisitions* - R$MM) | 37,948 | 42,999 | -11.7% |
| TOTAL TUITION FEES | |||
| Tuition Fees (Total - R$MM) | 649,015 | 417,982 | 55.3% |
| Tuition Fees (ex- Acquisitions* - R$MM) | 474,058 | 417,982 | 13.4% |
| *For the three months period ended March 31, 2022 - "2022 Ex Acquisitions" excludes: UNIFIPMoc and FIPGuanambi (January to March, 2022; Closing of UNIFIPMoc and FIPGuanambi was in June, 2021), UNIGRANRIO (January to March, 2022; Closing of UNIGRANRIO was in August, 2021) and Garanhuns (January to March, 2021; Closing of Garanhuns was in November, 2021). | |||
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KeyRevenue Drivers – Continuing Education and Digital Services
| Table 3: Key Revenue Drivers | Three months period ended March 31, | ||
|---|---|---|---|
| 2022 | 2021 | % Chg | |
| Continuing Education | |||
| Medical Specialization & Others | |||
| Total Students (end of period) | 3,479 | 3,698 | -5.9% |
| Average Total Students | 3,479 | 3,698 | -5.9% |
| Average Total Students (ex-Acquisitions) | 3,479 | 3,698 | -5.9% |
| Net Revenue from courses (Total - R$MM) | 23,851 | 19,288 | 23.7% |
| Net Revenue from courses (ex- Acquisitions¹) | 23,851 | 19,288 | 23.7% |
| Digital Services | |||
| Content & Technology for Medical Education | |||
| Medcel Active Payers | |||
| Prep Courses & CME - B2P | 11,673 | 13,862 | -15.8% |
| Prep Courses & CME - B2B | 4,574 | 1,842 | 148.3% |
| Além da Medicina Active Payers | 6,345 | - | n.a |
| Clinical Decision Software | |||
| Whitebook Active Payers | 131,193 | 110,659 | 18.6% |
| Clinical Management Tools² | |||
| iClinic Active Payers | 19,622 | 13,272 | 47.8% |
| Shosp Active Payers | 2,278 | - | n.a |
| Digital Services Total Active Payers (end of period) | 175,685 | 139,635 | 25.8% |
| Net Revenue from Services (Total - R$MM) | 47,477 | 53,538 | -11.3% |
| Net Revenue - B2P | 41,197 | 51,678 | -20.3% |
| Net Revenue - B2B | 6,280 | 1,860 | 237.6% |
| Net Revenue From Services (ex-Acquisitions¹) | 40,742 | 53,538 | -23.9% |
| (1) For the three months period ended March 31, 2022 - "2022 Ex Acquisitions" excludes: iClinic (January, 2022; Closing of iClinic was in January, 2021), Medicinae (January to March, 2022; Closing of Medicinae was in March, 2021), Medical Harbour (January to March, 2022; Closing of Medical Harbour was in April, 2021), Cliquefarma (January to March, 2022; Closing of Cliquefarma was in April, 2021), Shosp (January to March, 2022; Closing of Shosp was in May, 2021), RX PRO (January to March, 2022; Closing of RX PRO was in October, 2021) and Além da Medicina (January to March, 2022; Closing of Além da Medicina was in March, 2022). | |||
| (2) Clinical management tools includes Telemedicine and Digital Prescription features. |
KeyOperational Drivers – Digital Services
Monthly Active Users (MaU) represents the number of unique individuals that consumed Digital Services content in each one of our products in the last 30 days of a specific period.
Monthly Active Unique Users (MUAU) represents the number of unique individuals, without overlap of users among products, in the last 30 days of a specific period. Since this concept is being implemented for the first time starting this quarter, historical metrics of MUAU could not be disclosed.
Total monthly active users reached approximately 260 thousand, 17.1% higher over the same period in the last year.
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| Table 4: Key Operational Drivers for Digital Services - Monthly Active Users (MaU) | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 1Q22 | 1Q21 | % Chg YoY | 4Q21 | 3Q21 | 2Q21 | |
| Content & Technology for Medical Education | 21,464 | 19,857 | 8.1% | 16,205 | 20,015 | 18,968 |
| Clinical Decision Software | 218,313 | 173,959 | 25.5% | 194,308 | 194,082 | 181,138 |
| Clinical Management Tools¹ | 19,762 | 27,799 | -28.9% | 37,030 | 32,909 | 32,968 |
| Total Monthly Active Users (MaU) - Digital Services | 259,539 | 221,615 | 17.1% | 247,543 | 247,006 | 233,074 |
| 1) Clinical management tools includes Telemedicine and Digital Prescription features | ||||||
| 2) Clinical management tools MAU excludes other users other than payors, starting in 1Q22 | ||||||
| Table 5: Key Operational Drivers for Digital Services - Monthly Unique Active Users (MuaU) | ||||||
| --- | --- | |||||
| 1Q22 | ||||||
| Total Monthly Unique Active Users (MuaU) - Digital Services | 242,374 | |||||
| 1) Total Monthly Unique Active Users excludes non-integrated companies: Medicinae, Shosp and Além da Medicina |
Seasonality
Undergrad’s and Continuing Education tuition revenues are related to the intake process and monthly tuition fees charged to students over the period thus the Company does not have significant fluctuations during the semester. Digital Services is comprised mostly by Medcel, Pebmed and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality, Medcel’s revenue is concentrated in the first and last quarter of the year, as a result of the enrollments of Medcel’s clients period. The majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results of operations in the first and last quarters of the year compared to the second and third quarters of the year.
Revenue
Adjusted Net Revenue for the first quarter of 2022 was R$567.7 million, an increase of 41.0% over the same period of the prior year, mainly due to the maturation of medical seats, an increase in the average ticket of Medical programs and consolidation of acquisitions of medical schools and digital services. Adjusted Net Revenue also includes an impact of R$ 1.4 million due to the remaining net temporary discounts in tuition fees granted by individual and collective legal proceedings and public civil proceedings related to COVID-19, that are expected to end during the second quarter.
Excluding acquisitions, Adjusted Net Revenue in the first quarter increased 10.6% YoY to R$445.3 million, mainly due to the expansion of Undergrad and the Continuing Education recovery, which ended the first quarter with a 23.7% increase in net revenue, mainly due to the interruption of the effects of the COVID-19 pandemic. The growth in Adjusted Net Revenue was partially offset by Digital Services revenue, which decreased 23.9%, due to a lower performance of Medcel in the 1Q22, which was caused by higher competition in the Residency Preparatory market.
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| Table 6: Revenue & Revenue Mix | |||||
| --- | --- | --- | --- | --- | --- |
| (in thousands of R$) | For the three months period ended March 31, | ||||
| 2022 | 2022 Ex Acquisitions* | 2021 | % Chg | % Chg Ex Acquisitions | |
| Net Revenue Mix | |||||
| Undergrad | 495,395 | 379,670 | 321,852 | 53.9% | 18.0% |
| Adjusted Undergrad¹ | 496,787 | 381,062 | 330,056 | 50.5% | 15.5% |
| Continuing Education | 23,851 | 23,851 | 19,288 | 23.7% | 23.7% |
| Digital Services | 47,477 | 40,742 | 53,538 | -11.3% | -23.9% |
| Inter-segment transactions | - 399 | - 399 | - 327 | n.a | n.a |
| Total Reported Net Revenue | 566,324 | 443,864 | 394,351 | 43.6% | 12.6% |
| Total Adjusted Net Revenue ¹ | 567,716 | 445,256 | 402,555 | 41.0% | 10.6% |
| *For the three months period ended March 31, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae, Medical Harbour, Cliquefarma, Shosp, UNIFIPMoc, FIPGuanambi, UNIGRANRIO, RX PRO, Garanhuns and Além da Medicina (all from January to March, 2022). | |||||
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| (1) Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. | |||||
| (2) See more information on "Non-GAAP Financial Measures" (Item 09). |
AdjustedEBITDA
Adjusted EBITDA for the three-month period ended March 31, 2022 increased 30.4% to R$ 270.8 million, up from R$ 207.7 million in the same period of the prior year, while the Adjusted EBITDA Margin decreased 390 basis points to 47.7%, mainly due to consolidations of acquisitions with lower EBITDA Margins and a decrease in Medcel Net Revenue, mainly due to higher competition in the Residency Preparatory market.
Excluding acquisitions, Adjusted EBITDA for the three months period ended March 31, 2022 increased 3.0% YoY to R$ 213.9 million from R$ 207.7 million, while the Adjusted EBITDA Margin decreased 360 basis points to 48.0%, mainly due to Medcel lower results.
| Table 7: Adjusted EBITDA | |||||
|---|---|---|---|---|---|
| (in thousands of R$) | For the three months period ended March 31, | ||||
| 2022 | 2022 Ex Acquisitions* | 2021 | % Chg | % Chg Ex Acquisitions | |
| Adjusted EBITDA | 270,801 | 213,893 | 207,652 | 30.4% | 3.0% |
| % Margin | 47.7% | 48.0% | 51.6% | -390 bps | -360 bps |
| *For the three months period ended March 31, 2022, "2022 Ex Acquisitions" excludes: iClinic (only January, 2022; Closing of iClinic was in January, 2021), Medicinae, Medical Harbour, Cliquefarma, Shosp, UNIFIPMoc, FIPGuanambi, UNIGRANRIO, RX PRO, Garanhuns and Além da Medicina (all from January to March, 2022). |
AdjustedNet Income
Net Income for the first quarter of 2022 was R$134.9 million, an increase of 19.1% over the same period of the prior year. Net Income results were mainly affected by an increase of 141.4% in finance expenses, especially due to a higher debt position related to 9 business combinations and license acquisitions executed in the last 12 months, and a higher interest rate over the same period last year.
Our EPS reached R$1.42 per share, an increase of 22.4% year over year, reflecting the increase in our Net Income, and capital allocation discipline executing our three buyback programs.
Adjusted Net Income for the first quarter of 2022 was R$ 167.2 million, an increase of 4.5% over the same period of the prior year. The difference between Net Income and Adjusted Net Income in this quarter was reduced mainly related to decreases of 39.8% and 79.1% in non-recurring expenses and in share-based compensation, respectively.
| 8 | |||
|---|---|---|---|
| Table 8: Adjusted Net Income | |||
| --- | --- | --- | --- |
| (in thousands of R$) | For the three months period ended March 31, | ||
| 2022 | 2021 | % Chg | |
| Net income | 134,942 | 113,348 | 19.1% |
| Amortization of customer relationships and trademark (1) | 18,283 | 14,317 | 27.7% |
| Share-based compensation | 2,929 | 14,009 | -79.1% |
| Non-recurring expenses: | 11,027 | 18,315 | -39.8% |
| - Integration of new companies (2) | 4,171 | 3,023 | 38.0% |
| - M&A advisory and due diligence (3) | 1,212 | 1,811 | -33.1% |
| - Expansion projects (4) | 602 | 1,227 | -50.9% |
| - Restructuring expenses (5) | 3,650 | 4,050 | -9.9% |
| - Mandatory Discounts in Tuition Fees (6) | 1,392 | 8,204 | -83.0% |
| Adjusted Net Income | 167,181 | 159,989 | 4.5% |
| Basic earnings per share - R$ (7) | 1.42 | 1.16 | 22.4% |
| (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 recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. | |||
| (7) Basic earnings per share: Net Income/Average number of shares in the period (ex-treasury). |
Cashand Debt Position
For the three-month period ended March 31, 2022, Afya reported Adjusted Cash Flow from Operations of R$293.6 million, up from R$194.1 million in the same period of the previous year, an increase of 51.3% YoY, boosted by the solid operational result.
Operating Cash Conversion Ratio for the three-month period ended March 31, 2022, was 113.0%, compared with 102.5% in the same period of the previous year. This increase was mainly due to a decrease in the growth of the trade receivables comparing 1Q22 over FY2021, mainly affected by the end of the grace period of tuition renegotiation that occurred in 2020 and highly affected the 1Q21 and the enrollment renewals.
Cash and cash equivalents on March 31, 2022 were R$ 789.4 million, a decrease of 18.2% over the same period in 2021.
On March 31, 2022, net debt, excluding the effect of IFRS 16, totaled R$1,368.7 million, compared with net debt of R$230.0 million in the same period in 2021, mainly due to payments related to (a) 9 business combinations and license acquisitions executed in the last 12 months, totaling R$1,184.5 million; (b) shares repurchase program of R$237.7 million, executed in the last 12 months and (c) investments activities in properties, equipment and intangibles (excluding license acquisitions) totaling R$213.4 million in the last 12 months, that were partially offset by the R$730.3 million cash generation from March 31, 2021 through March 31, 2022. The following table shows more information regarding the cost of debt for the first quarter, considering loans and financing and accounts payable to selling shareholders.
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|---|---|---|---|---|
| Table 9: Gross Debt and Average Cost of Debt | ||||
| --- | --- | --- | --- | --- |
| (in thousands of R$) | For the three months period ended March 31, | |||
| Cost of Debt | ||||
| Gross Debt | Duration (Years) | per year | %CDI* | |
| Loans and financing: Softbank | 823 | 4.2 | 6.5% | 65% |
| Loans and financing: Others | 566 | 1.3 | 11.9% | 116% |
| Accounts payable to selling shareholders | 769 | 1.5 | 10.2% | 100% |
| Average | 2.5 | 9.2% | 90% | |
| *Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference:<br><br>1Q22: ~10.06% p.y. | ||||
| Table 10: Operating Cash Conversion Ratio Reconciliation | For the three months period ended March 31, | |||
| --- | --- | --- | --- | |
| (in thousands of R$) | Considering the adoption of IFRS 16 | |||
| 2022 | 2021 | % Chg | ||
| (a) Cash flow from operations | 278,715 | 179,279 | 55.5% | |
| (b) Income taxes paid | 14,850 | 14,801 | 0.3% | |
| (c) = (a) + (b) Adjusted cash flow from operations | 293,565 | 194,080 | 51.3% | |
| (d) Adjusted EBITDA | 270,801 | 207,652 | 30.4% | |
| (e) Non-recurring expenses: | 11,027 | 18,315 | -39.8% | |
| - Integration of new companies (1) | 4,171 | 3,023 | 38.0% | |
| - M&A advisory and due diligence (2) | 1,212 | 1,811 | -33.1% | |
| - Expansion projects (3) | 602 | 1,227 | -50.9% | |
| - Restructuring Expenses (4) | 3,650 | 4,050 | -9.9% | |
| - Mandatory Discounts in Tuition Fees (5) | 1,392 | 8,204 | -83.0% | |
| (f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses | 259,774 | 189,337 | 37.2% | |
| (g) = (a) / (f) Operating cash conversion ratio | 113.0% | 102.5% | 1050 bps | |
| (1) Consists of expenses related to the integration of newly acquired companies. | ||||
| (2) Consists of expenses related to professional and consultant fees in connection with due diligence services for M&A transactions. | ||||
| (3) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses. | ||||
| (4) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of acquired companies. | ||||
| (5) Consists of mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. | ||||
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| --- | ||||
| Table 11: Cash and Debt Position | ||||
| --- | --- | --- | --- | --- |
| (in thousands of R) | ||||
| FY2021 | % Chg | 1Q21 | % Chg | |
| (+) Cash and Cash Equivalents | 748,562 | 5.5% | 965,546 | -18.2% |
| Cash and Bank Deposits | 88,487 | -51.8% | 41,191 | 3.5% |
| Cash Equivalents | 660,075 | 13.1% | 924,355 | -19.2% |
| (-) Loans and Financing | 1,374,876 | 1.0% | 620,928 | 123.7% |
| Current | 128,720 | 10.8% | 115,089 | 24.0% |
| Non-Current | 1,246,156 | 0.0% | 505,839 | 146.4% |
| (-) Accounts Payable to Selling Shareholders | 679,826 | 2.7% | 499,309 | 39.9% |
| Current | 239,849 | 10.3% | 193,692 | 36.6% |
| Non-Current | 439,977 | -1.4% | 305,617 | 42.0% |
| (-) Other Short and Long Term Obligations | 72,726 | -2.5% | 75,329 | -5.9% |
| (=) Net Debt (Cash) excluding IFRS 16 | 1,378,866 | -0.7% | 230,020 | 495.0% |
| (-) Lease Liabilities | 714,085 | 2.7% | 466,204 | 57.3% |
| Current | 24,955 | 11.2% | 65,999 | -58.0% |
| Non-Current | 689,130 | 2.4% | 400,205 | 76.3% |
| Net Debt (Cash) with IFRS 16 | 2,092,951 | 0.4% | 696,224 | 201.9% |
All values are in US Dollars.
CAPEX
Capital expenditures is consisting of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of our campuses and headquarters including leasehold improvements, and the development of new solutions in the digital segment, among others.
For the first quarter of 2022, CAPEX went from R$32.9 million to R$76.8 million, an increase of 133.2% over the same period of the prior year, due to higher expenditures related to intangible assets, mainly explained by the R$24.4 million earn-out related to the 28 additional seats of Centro Universitário São Lucas, in Ji-Parana, that was approved in March, 2022.
| Table 12: CAPEX | |||
|---|---|---|---|
| (in thousands of R$) | For the three months period ended March 31, | ||
| 2022 | 2021 | % Chg | |
| CAPEX | 76,759 | 32,922 | 133.2% |
| Property and equipment | 30,670 | 23,056 | 33.0% |
| Intanglibe assets | 46,088 | 9,866 | 367.1% |
| - Licenses | 24,408 | - | n.a. |
| - Others | 21,680 | 9,866 | 119.7% |
ESGMetrics
ESG commitment is an important part of Afya’s strategy and permeates the Company’s core values. Afya has been advancing year after year on its core pillars and, since 2021, ESG metrics have been disclosed in the Company’s quarterly financial results.
In August 2021, Afya assumed a voluntary commitment to have at least 50% women in its management positions by 2030. In addition, Afya announced that it was certificated by Women on Board, an independent initiative whose purpose is to acknowledge, value and promote corporate environments in which women are part of the board of directors. The company voluntarily committed to continuing to have at least two women as board members.
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On January 2022, Afya announced that it is one of 418 companies across 45 countries and regions to join the 2022 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. This reference index measures gender equality across five pillars: female leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and pro-women brand. Afya was included on this year’s index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption of best-in-class statistics and policies.
Simultaneously with the quarterly results, we are also proud to announce Afya’s 2021 Sustainability Report.
We have consolidated our leadership position in Medical Education, and continued our inroads into the Digital Medical Services segment, which is consistent with our proposal to be the physician's partner in all stages of their academic training and professional journey. This strategy, which guides our business, as well as its unfolding, is detailed in the report, along with the results achieved from our operations. In it, we have also gathered information on our Management structure and ESG practices, in addition to the socio-environmental impacts we produce through our operations.
This material, as it has been since our 1st edition, was prepared based on the guidelines laid down by the Global Reporting Initiative (GRI), which is the international benchmark for the preparation of sustainability reports. To depict the impacts of our operations on society and the environment, we have complemented the information with elements from the approach determined by the International Integrated Reporting Council (IIRC), the institution that sets the parameters for Integrated Reports.
For the purpose of providing more information to those who wish to assess our performance as regards ESG practices, we have incorporated some indicators from the Sustainability Accounting Standards Board (SASB), an international organization that establishes parameters for a better analysis of these topics. We have also indicated, throughout the report, how our initiatives contribute to achieving the goals established by global movements led by the United Nations Organization (UNO): the Global Compact, to which we have been a signatory since 2020, and by the 2030 Agenda, which unfolds in the Sustainable Development Goals (SDGs).
The 2021 Sustainability Report can be found at: https://ir.afya.com.br/ >> Corporate Governance >> Sustainability.
| Table 12: ESG Metrics | 1Q22 | 1Q21 | 2020 | 2019 | ||
|---|---|---|---|---|---|---|
| # | GRI | Governance and Employee Management | ||||
| 1 | 405-1 | Number of employees | 8,528 | 6,012 | 6,100 | 3,369 |
| 2 | 405-1 | Percentage of female employees | 56% | 55% | 55% | 57% |
| 3 | 405-1 | Percentage of female employees in the board of directors | 18% | 18% | 18% | 22% |
| 4 | 102-24 | Percentage of independent member in the board of directors | 36% | 36% | 36% | 22% |
| Environmental | ||||||
| 4 | 302-1 | Total energy consumption (kWh) | 2,757,942 | 1,877,353 | 6,428,382 | 5,928,450 |
| 4.1 | 302-1 | Consumption per campus | 72,577 | 69,532 | 257,135 | 395,230 |
| 5 | 302-1 | % supplied by distribution companies | 78.5% | 90.0% | 87.4% | 96.2% |
| 6 | 302-1 | % supplied by other sources | 21.5% | 10.0% | 12.6% | 3.8% |
| Social | ||||||
| 8 | 413-1 | Number of free clinical consultations offered by Afya | 80,751 | 62,096 | 427,184 | 270,000 |
| 9 | Number of physicians graduated in Afya's campuses | 16,597 | n.a | 12,691 | 8,306 | |
| 10 | 201-4 | Number of students with financing and scholarship programs (FIES and PROUNI) | 8,223 | 5,789 | 4,999 | 2,808 |
| 11 | % students with scholarships over total undergraduate students | 13.1% | 15.9% | 13.7% | 11.7% | |
| 12 | 413-1 | Hospital, clinics and city halls partnerships | 1,816 | 432 | 432 | 60 |
*Considering deliberations approved on April 29, 2022, the number of female employees represents 27% of the board of directors.
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**6.**Conference Call and Webcast Information
| When: | May<br>23, 2021 at 5:00 p.m. ET. |
|---|---|
| Who: | Mr. Virgilio Gibbon, Chief Executive Officer<br><br> <br>Mr. Luis André Blanco, Chief Financial Officer<br><br> <br>Ms. Renata Costa Couto, Head of Investor Relations |
Dial-in: Brazil: +55 11 4680 6788 or +55 11 4700 9668 or +55 21 3958 7888 or +55 11 4632 2236 or +55 11 4632 2237
United States: +1 312 626 6799 or +1 929 205 6099 or +1 301 715 8592 or +1 346 248 7799 or +1 669 900 6833 or +1 253 215 8782
Webinar ID: 916 1547 5303
Other Numbers: https://afya.zoom.us/u/aenU85FCu
OR
Webcast: https://afya.zoom.us/j/91615475303
Webinar ID: 916 1547 5303
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**7.**About Afya Limited (Nasdaq: AFYA)
Afya is the leading medical education group in Brazil based on number of medical school seats. It delivers an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners, from the moment they enroll as medical students, through their medical residency preparation, graduate program, and continuing medical education activities. Afya also offers content and clinical decision applications for healthcare professionals through its products WhiteBook, Nursebook and Portal PEBMED. For more information, please visit www.afya.com.br.
**8.**Forward – Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, and include risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of students and professors; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and the Brazilian economy.
The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company’s financial results are included in the filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled “Risk Factors” in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.
**9.**Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board—IASB, Afya uses Adjusted EBITDA and Operating Cash Conversion Ratio information, which are non-GAAP financial measures, for the convenience of investors. A non-GAAP financial measure is generally defined as one that intends to measure financial performance but excludes or includes amounts that would not be equally adjusted in the most comparable GAAP measure.
Afya calculates Adjusted EBITDA as net income plus/minus net financial result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, plus share-based compensation plus/minus share of income of associate plus/minus non-recurring expenses. The calculation of Adjusted Net Income is net income plus amortization of customer relationships and trademark, plus share-based compensation. We calculate Operating Cash Conversion Ratio as the cash flow from operations, adjusted with income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.
Management presents Adjusted EBITDA, because it believes these measures provide investors with a supplemental measure of financial performance of the core operations that facilitates period-to-period comparisons on a consistent basis. Afya also presents Operating Cash Conversion Ratio because it believes this measure provides investors with a measure of how efficiently the Company converts EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, calculations of Adjusted EBITDA and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya’s measures may not be comparable to those of other companies.
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**10.**Investor Relations Contact
Renata Couto, Head of Investor Relations
Phone: +55 31 3515.7564 | +55 31 98463.3341
E-mail: renata.couto@afya.com.br
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**11.**Financial Tables
Consolidated statements of income
For the three monthsperiod ended March 31, 2022 and 2021
(In thousands ofBrazilian Reais, except earnings per share)
| March 31, 2022<br><br> <br>(unaudited) | March 31, 2021<br><br> <br>(unaudited) | |
|---|---|---|
| Net revenue | 566,324 | 394,351 |
| Cost of services | (186,730) | (126,492) |
| Gross profit | 379,594 | 267,859 |
| General and administrative expenses | (178,514) | (130,404) |
| Other (expenses) income, net | (309) | 1,185 |
| Operating income | 200,771 | 138,640 |
| Finance income | 24,569 | 13,815 |
| Finance expenses | (81,291) | (33,672) |
| Finance result | (56,722) | (19,857) |
| Share of income of associate | 4,240 | 3,239 |
| Income before income taxes | 148,289 | 122,022 |
| Income taxes expenses | (13,347) | (8,674) |
| Net income | 134,942 | 113,348 |
| Other comprehensive income | - | - |
| Total comprehensive income | 134,942 | 113,348 |
| Income attributable to | ||
| Equity holders of the parent | 129,610 | 108,090 |
| Non-controlling interests | 5,332 | 5,258 |
| 134,942 | 113,348 | |
| Basic earnings per share | ||
| Per common share | 1.42 | 1.16 |
| Diluted earnings per share<br><br> <br>Per common share | 1.42 | 1.15 |
| 16 | ||
| --- |
Consolidated balancesheets - For the three months period ended March 31, 2022 and December 31, 2021
(In thousands of Brazilian Reais)
| March 31, 2022<br><br> <br>(unaudited) | December 31, 2021 | |
|---|---|---|
| Assets | ||
| Current assets | ||
| Cash and cash equivalents | 789,435 | 748,562 |
| Trade receivables | 364,701 | 378,351 |
| Inventories | 13,864 | 11,827 |
| Recoverable taxes | 31,544 | 25,579 |
| Other assets | 30,678 | 42,533 |
| Total current assets | 1,230,222 | 1,206,852 |
| Non-current assets | ||
| Trade receivables | 28,390 | 27,442 |
| Other assets | 182,946 | 180,306 |
| Investment in associate | 51,163 | 48,477 |
| Property and equipment | 440,193 | 419,808 |
| Right-of-use assets | 676,402 | 663,686 |
| Intangible assets | 3,952,453 | 3,900,835 |
| Total non-current assets | 5,331,547 | 5,240,554 |
| Total assets | 6,561,769 | 6,447,406 |
| Liabilities | ||
| Current liabilities | ||
| Trade payables | 57,066 | 59,098 |
| Loans and financing | 142,654 | 128,720 |
| Lease liabilities | 27,750 | 24,955 |
| Accounts payable to selling shareholders | 264,520 | 239,849 |
| Notes payable | 15,306 | 14,478 |
| Advances from customers | 111,541 | 114,585 |
| Labor and social obligations | 152,438 | 131,294 |
| Taxes payable | 30,059 | 26,715 |
| Income taxes payable | 11,608 | 11,649 |
| Other liabilities | 13,205 | 15,163 |
| Total current liabilities | 826,147 | 766,506 |
| Non-current liabilities | ||
| Loans and financing | 1,246,187 | 1,246,156 |
| Lease liabilities | 705,670 | 689,130 |
| Accounts payable to selling shareholders | 433,893 | 439,977 |
| Notes payable | 55,574 | 58,248 |
| Taxes payable | 95,341 | 96,598 |
| Provision for legal proceedings | 152,106 | 148,287 |
| Other liabilities | 2,394 | 2,486 |
| Total non-current liabilities | 2,691,165 | 2,680,882 |
| Total liabilities | 3,517,312 | 3,447,388 |
| Equity | ||
| Share capital | 17 | 17 |
| Additional paid-in capital | 2,375,344 | 2,375,344 |
| Share-based compensation reserve | 97,030 | 94,101 |
| Treasury stock | (241,393) | (152,630) |
| Retained earnings | 760,927 | 631,317 |
| Equity attributable to equity holders of the parent | 2,991,925 | 2,948,149 |
| Non-controlling interests | 52,532 | 51,869 |
| Total equity | 3,044,457 | 3,000,018 |
| Total liabilities and equity | 6,561,769 | 6,447,406 |
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Consolidated statementsof cash flow - For the three months period ended March 31, 2022 and 2021
(In thousands ofBrazilian Reais)
| March 31, 2022<br><br> <br>(unaudited) | March 31, 2021<br><br> <br>(unaudited) | ||||
|---|---|---|---|---|---|
| Operating activities | |||||
| Income before income taxes | 148,289 | 122,022 | |||
| Adjustments to reconcile income before income taxes | |||||
| Depreciation and amortization | 48,387 | 31,651 | |||
| Disposals of property and equipment | 319 | 26 | |||
| Disposals of intangible | 2,894 | - | |||
| Allowance for doubtful accounts | 14,983 | 11,065 | |||
| Share-based compensation expense | 2,929 | 14,009 | |||
| Net foreign exchange differences | 126 | (3,988) | |||
| Accrued interest | 46,106 | 12,285 | |||
| Accrued lease interest | 20,641 | 13,120 | |||
| Share of income of associate | (4,240) | (3,239) | |||
| Provision for legal proceedings | 3,819 | 2,002 | |||
| Changes in assets and liabilities | |||||
| Trade receivables | (576) | (33,229) | |||
| Inventories | (2,037) | (2,077) | |||
| Recoverable taxes | (5,965) | 779 | |||
| Other assets | 9,263 | 1,550 | |||
| Trade payables | (2,736) | 7,088 | |||
| Taxes payables | 2,357 | 729 | |||
| Advances from customers | (9,229) | 13,582 | |||
| Labor and social obligations | 21,074 | 9,046 | |||
| Other liabilities | (2,839) | (2,341) | |||
| 293,565 | 194,080 | ||||
| Income taxes paid | (14,850) | (14,801) | |||
| Net cash flows from operating activities | 278,715 | 179,279 | |||
| Investing activities | |||||
| Acquisition of property and equipment | (30,670) | (23,056) | |||
| Dividends received | 1,554 | 5,770 | |||
| Acquisition of intangibles assets | (21,680) | (9,866) | |||
| Payments of notes payable | (3,614) | (2,628) | |||
| Acquisition of subsidiaries, net of cash acquired | (47,904) | (150,483) | |||
| Net cash flows used in investing activities | (102,314) | (180,263) | |||
| Financing activities | |||||
| Payments of loans and financing | (14,494) | (2,010) | |||
| Payments of lease liabilities | (27,476) | (17,509) | |||
| Treasury shares | (88,763) | (64,752) | |||
| Dividends paid to non-controlling interests | (4,669) | (4,275) | |||
| Net cash flows from (used in) financing activities | (135,402) | (88,546) | |||
| Net foreign exchange differences | (126) | 3,984 | |||
| Net increase in cash and cash equivalents | 40,873 | (85,546) | |||
| Cash and cash equivalents at the beginning of the year | 748,562 | 1,045,042 | |||
| Cash and cash equivalents at the end of the year | 789,435 | 959,496 | |||
| 18 | |||||
| --- |
Reconciliationbetween Net Income and Adjusted EBITDA
| Reconciliation between Adjusted EBITDA and Net Income | |||
|---|---|---|---|
| (in thousands of R$) | For the three months period ended March 31, | ||
| 2022 | 2021 | % Chg | |
| Net income | 134,942 | 113,348 | 19.1% |
| Net financial result | 56,722 | 19,857 | 185.7% |
| Income taxes expense | 13,347 | 8,674 | 53.9% |
| Depreciation and amortization | 48,387 | 31,651 | 52.9% |
| Interest received (1) | 7,687 | 5,037 | 52.6% |
| Income share associate | (4,240) | (3,239) | 30.9% |
| Share-based compensation | 2,929 | 14,009 | -79.1% |
| Non-recurring expenses: | 11,027 | 18,315 | -39.8% |
| - Integration of new companies (2) | 4,171 | 3,023 | 38.0% |
| - M&A advisory and due diligence (3) | 1,212 | 1,811 | -33.1% |
| - Expansion projects (4) | 602 | 1,227 | -50.9% |
| - Restructuring expenses (5) | 3,650 | 4,050 | -9.9% |
| - Mandatory Discounts in Tuition Fees (6) | 1,392 | 8,204 | -83.0% |
| Adjusted EBITDA | 270,801 | 207,652 | 30.4% |
| Adjusted EBITDA Margin | 47.7% | 51.6% | -390 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 and individual/collective legal proceedings due COVID 19 on site classes restriction and excludes recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. |
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