UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2024
Commission
File Number: 001-38992
Afya Limited
(Exact name of registrant as specified
in 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:
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):
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):
TABLE OF CONTENTS
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.
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Afya Limited |
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By: |
/s/ Virgilio Deloy Capobianco Gibbon |
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Name: |
Virgilio Deloy Capobianco Gibbon |
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Title: |
Chief Executive Officer |
Date: August 14, 2024
Afya Limited Announces Second-Quarter
and First-Half 2024 Financial Results
Solid Organic Growth
Impressive Adjusted EBITDA Margin Expansion
Robust EPS Expansion
Nova Lima, Brazil, August 14, 2024 –
Afya Limited (Nasdaq: AFYA; B3: A2FY34) (“Afya” or the “Company”), the leading medical education group and
medical practice solutions provider in Brazil, reported today financial and operating results for the three and six-month period, which
ended on June 30, 2024 (second quarter 2024). Financial results are expressed in Brazilian Reais and are presented in accordance with
International Financial Reporting Standards (IFRS).
Second
Quarter 2024 Highlights
| § | 2Q24 Net Revenue increased
13.7% YoY to R$809.9 million. |
| § | 2Q24 Adjusted EBITDA increased
28.2% YoY reaching R$343.8 million, with an Adjusted EBITDA Margin of 42.5%. Adjusted EBITDA Margin increased 490 bps YoY. |
| § | 2Q24 Net Income increased 85.3%
YoY, reaching R$162.2 million, and Adjusted Net Income increased 59.5% YoY, reaching R$210.3 million. Adjusted EPS growth was 61.8% in
the same period. |
First
Half 2024 Highlights
| § | 1H24 Net Revenue increased
13.5% YoY to R$1,614.1 million. |
| § | 1H24 Adjusted EBITDA increased
23.9% YoY reaching R$741.7 million, with an Adjusted EBITDA Margin of 45.9%. Adjusted EBITDA Margin increased 380 bps YoY. |
| § | 1H24 Net Income increased 80.5%
YoY, reaching R$370.5 million, and Adjusted Net Income increased 54.7% YoY, reaching R$461.3 million. Adjusted EPS growth was 56.9% in
the same period. |
| § | Operating Cash Conversion ratio
of 94.3%, with a solid cash position of R$ 723.4 million. |
| § | ~320 thousand users in Afya’s
ecosystem. |
| Table 1: Financial Highlights 1 |
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For the three months period ended June 30, |
|
For the six months period ended June 30, |
| (in thousand of R$) |
2024 |
2023 |
% Chg |
|
2024 |
2023 |
% Chg |
| (a) Net Revenue |
809,890 |
712,607 |
13.7% |
|
1,614,129 |
1,422,568 |
13.5% |
| (b) Adjusted EBITDA 2 |
343,827 |
268,174 |
28.2% |
|
741,679 |
598,373 |
23.9% |
| (c) = (b)/(a) Adjusted EBITDA Margin |
42.5% |
37.6% |
490 bps |
|
45.9% |
42.1% |
380 bps |
| Net income |
162,200 |
87,537 |
85.3% |
|
370,499 |
205,310 |
80.5% |
| Adjusted Net income |
210,346 |
131,903 |
59.5% |
|
461,311 |
298,282 |
54.7% |
| (1) No acquisitions were made during the period under review, therefore not affecting the comparable period. |
| (2) See more information on "Non-GAAP Financial Measures" (Item 08). |
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Message
from Management
With great satisfaction, I proudly present another
quarter of exceptional operational and financial performance for Afya. Once again, we have demonstrated the resilience of our business,
the successful execution of our strategy, the dedication of our team members, and the consistency of our business model. This quarter
was marked by a growth in gross margin, primarily led by the Undergrad segments, an increase in Adjusted EBITDA margin in our consolidated
figures, combined with solid cash generation, and robust EPS growth, reflecting our consistent business expansion.
A
significant part of our margin expansion resulted from the complete integration of UNIMA and FCM Jaboatão, the ramp-up of the four
Mais Médicos campuses that began operations in 3Q22, the operational restructuring efforts in the Continuing
Education and Medical Practice Solutions segments, and more efficiency in Selling, General and Administrative expenses
We
are pleased to announce the growth of our Undergrad offering with the authorization of an additional 80 seats at UNIMA Alagoas in the
city of Maceió, bringing our total approved seats to 3,583. Additionally, we closed the acquisition of Unidom in July, with 300
seats in Salvador-BA. These actions underscore our commitment to providing quality medical education and our role as Brazil's leading
medical education group.
We
also saw a recovery in B2B Net Revenue from our Medical Practice Solutions segment. In the first quarter of 2024, some of the invoices
were postponed, but now, we are glad to see a growth of 20% in comparison to the six-month period of the prior year in B2B Net Revenue
With
another round of solid and sustainable growth, we have exceeded our expectations for what we had planned for Organic Growth and Margin
Expansion in the first semester of 2024. In addition to the closing of Unidom and the seats expansion in UNIMA our guidance for 2024 was
revised incorporating our growth in revenue and margin beyond expected, as well our latest acquisition and authorized seat expansion.
Our
mission remains steadfast: to provide an ecosystem that integrates education and medical practice solutions for the entire medical journey,
enhancing the development, updating, accuracy, and productivity of health professionals. We are very proud of our business and our achievements
so far, and we are excited about our future plans.
| 1. | Key Events in the Quarter: |
| § | On May 2, 2024, Afya Participações
announced that it has entered into a share purchase agreement for the acquisition of 100% of the total share capital of Unidom Participações
S.A. (“Unidom”) which encompasses Unidompedro and Faculdade Dom Luiz, both located in the State of Bahia with operations in
the cities of Salvador, Luis Eduardo Magalhães, Barreiras and Ribeira do Pombal. The acquisition contributes 300 operational medical
school seats to Afya in Salvador, one of Brazil's largest cities. The aggregate purchase price (enterprise value) was R$ 660.0 million,
and the estimated Net Debt was deducted from the down payment. |
The price and payment conditions are:
·
R$ 347.8 million, deducted from the estimated Net Debt,
was paid in cash at closing.
·
R$ 312.2 million will be paid in up to 10 annual installments
of R$31.2 million, adjusted by the CDI (Interbank Certificate of Deposit) rate.
Afya expects an EV/EBITDA of 4.2x at
maturity and post-synergies (2027). With the acquisition, Afya achieved 3,503 total approved seats at the time of the transaction.
| § | Afya announced on July 1, 2024,
the closing of its acquisition of Unidom on the previously disclosed terms. |
| § | On July 12, 2024, the Secretary
of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the increase of 80 medical
school seats of UNIMA, located in the city of Maceió, State of Alagoas, which will result in an additional payment of R$ 1.25 million
per increased medical school seat, updated by IPCA since January 2, 2023 until the payment date to the selling shareholders of DelRey.
With this authorization, Afya reaches 220 medical school seats on this campus, and 3,583 total approved medical school seats. |
| § | On August 7, 2024, Afya Participações
announced that entered into a loan agreement with International Finance Corporation ("IFC") to finance its expansion program,
through acquisitions. The financing is IFC’s first sustainability-linked loan based on social targets in the education sector. The
pricing of IFC’s loan will be linked to Afya reaching performance target levels in selected social key performance indicators encompassing
free medical consultations for the community and quality of education according to Brazil’s Ministry of Education criteria (“Sustainability
KPIs”). According to the financing terms, IFC will loan up to R$500.0 million, which shall be repaid in seven equal semi-annual
installments starting in April 2027. The interest rate is the Brazilian CDI rate plus 1.2%, and it may be reduced by 15 bps if the Sustainability
KPIs are achieved. The disbursement is subject to customary closing conditions. |
Following the acquisition of Unidom, the authorization
of 80 seats in UNIMA Alagoas and the performance of the first semester, the company is adjusting its guidance upward for FY2024.
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Updated Guidance for 2024 |
| Net Revenue 1 |
|
R$ 3,225 mn ≤ ∆ ≤ R$ 3,325 mn |
| Adjusted EBITDA |
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R$ 1,375 mn ≤ ∆ ≤ R$ 1,475 mn |
| CAPEX 2 |
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R$ 220 mn ≤ ∆ ≤ R$ 260 mn |
| (1) Excludes any acquisition that may be concluded after the issuance of the guidance, notably, the Unidom acquisition was included in the guidance provided |
| (2) The 2024 Capex guidance does not encompass the earn-out payment in the amount of R$49.6 million related to the 40-seat increase at Faculdades Integradas Padrão (FIP Guanambi), and also excludes the earn-out payment due to UNIMA Alagoas for the 80-seat increase in July 2024. |
Segment
Information
The
Company has three reportable segments as follows:
Undergrad,
which provides educational services through undergraduate courses related to medical school, undergraduate health science and other ex-health
undergraduate programs;
Continuing
education, which provides medical education (including residency preparation programs, specialization test preparation and other medical
capabilities), specialization and graduate courses in medicine, delivered through digital and in-person content; and
Medical
Practice solutions, which provides clinical decision, clinical management and doctor-patient relationships for physicians and provide
access, demand and efficiency for the healthcare players.
Key
Revenue Drivers – Undergraduate Programs
| Table 2: Key Revenue Drivers |
Six months period ended June 30 |
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2024 |
2023 |
% Chg |
| Undergrad Programs |
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| MEDICAL SCHOOL |
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| Approved Seats |
3,203 |
3,163 |
1.3% |
| Operating Seats 1 |
3,153 |
3,113 |
1.3% |
| Total Students (end of period) |
22,661 |
20,790 |
9.0% |
| Average Total Students |
22,635 |
20,806 |
8.8% |
| Net Revenue (Total - R$ '000) |
1,211,764 |
1,056,382 |
14.7% |
| Medical School Net Avg. Ticket (R$/month) |
8,922 |
8,462 |
5.4% |
| UNDERGRADUATE HEALTH SCIENCE |
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| Total Students (end of period) |
24,252 |
21,117 |
14.8% |
| Average Total Students |
24,567 |
21,389 |
14.9% |
| Net Revenue (Total - R$ '000) |
113,767 |
106,838 |
6.5% |
| OTHER EX- HEALTH UNDERGRADUATE |
|
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|
| Total Students (end of period) |
26,816 |
24,545 |
9.3% |
| Average Total Students |
27,690 |
24,794 |
11.7% |
| Net Revenue (Total - R$ '000) |
88,634 |
83,022 |
6.8% |
| Total Net Revenue |
|
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|
| Net Revenue (Total - R$ '000) |
1,414,166 |
1,246,240 |
13.5% |
| (1) The difference between approved and operating seats is 'Cametá'. A campus for which we already have the license but haven't started operations. |
Key
Revenue Drivers – Continuing Education
| Table 3: Key Revenue Drivers |
Six months period ended June 30 |
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2024 |
2023 |
% Chg |
| Continuing Education 1 |
|
|
|
| Total Studends (end of period) |
|
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|
| Residency Journey - Business to Physicians B2P 2 |
13,058 |
9,829 |
32.9% |
| Graduate Journey - Business to Physicians B2P |
8,100 |
6,632 |
22.1% |
| Other Courses - B2P and Business to Business Offerings |
22,921 |
21,193 |
8.2% |
| Total Students (end of period) |
44,079 |
37,654 |
17.1% |
| Net Revenue (R$ '000) |
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| Business to Physicians - B2P |
118,940 |
103,797 |
14.6% |
| Business to Business - B2B |
8,566 |
9,878 |
-13.3% |
| Total Net Revenue |
127,506 |
113,675 |
12.2% |
| (1) The figure above does not contemplate intercompany transactions |
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| (2) 'Content & Technology for Medical Education' which had been reported in 'Digital Services' table, has been reclassified to 'Continuing Education' |
Key
Revenue – Medical Practice Solutions
| Table 4: Key Revenue Drivers |
Six months period ended June 30 |
| |
2024 |
2023 |
% Chg |
| Medical Practice Solutions 1 |
|
|
|
| Active Payers (end of period) |
|
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|
| Clinical Decision |
162,313 |
145,744 |
11.4% |
| Clinical Management |
33,398 |
27,958 |
19.5% |
| Total Active Payers (end of period) |
195,711 |
173,702 |
12.7% |
| Monthly Active Users (MaU) |
|
|
|
| Total Monthly Active Users (MaU) - Digital Services 2 |
253,497 |
257,000 |
-1.4% |
| Net Revenue (R$ '000) |
|
|
|
| Business to Physicians - B2P |
65,113 |
58,070 |
12.1% |
| Business to Business - B2B |
11,743 |
9,768 |
20.2% |
| Total Net Revenue |
76,854 |
67,839 |
13.3% |
| (1) The figure above does not contemplate intercompany transactions |
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| (2) 'Content & Technology for Medical Education' is now being reported in Continuing Education table |
|
Key
Operational Drivers – Users Positively Impacted by Afya
Users
Positively Impacted by Afya represents the total number of medical students from the Undergrad Segment, students from the Continuing Education
and users from Medical Practice Solutions. For the second quarter of 2024, Afya’s ecosystem reached 320,237 users, in line with
the same period of the prior year.
| Table 5: Key Revenue Drivers |
Six months period ended June 30 |
| |
2024 |
2023 |
% Chg |
| Users Positively Impacted by Afya 1 |
|
|
|
| Undergrad (Total Medical School Students - End of Period) |
22,661 |
20,790 |
9.0% |
| Continuing Education (Total Students - End of Period) |
44,079 |
37,654 |
17.1% |
| Medical Practice Solutions (Monthly Active Users) |
253,497 |
257,000 |
-1.4% |
| Ecosystem Outreach |
320,237 |
315,444 |
1.5% |
| (1) Ecosystem outreach does not contemplate intercompany figures. Note that there may be overlap in student numbers within the data. |
Seasonality
of Operations
Undergrad tuition revenues are related to the intake
process, and monthly tuition fees charged to students and do not significantly fluctuate during each semester.
Continuing education revenues are mostly related
to: (i) monthly intakes and tuition fees on medical education, which do not have a considerable concentration in any period; (ii) Medcel’s
revenue, derived from e-books transferred at a point of time, which are concentrated at in the first and last quarter of the year due
to the enrollments; and (iii) Além da Medicina and Afya Papers revenues, which are sold in the last and first quarter of the year
due to the timeline of exams and recognized mainly over time.
Medical
Practice Solutions are comprised mainly of Afya Whitebook and Afya iClinic revenues, which do not have significant fluctuations regarding
seasonality.
Net
Revenue
Net Revenue for the first quarter of 2024 was R$809.9
million, an increase of 13.7% over the same period in the prior year. For the six-month period ended June 30, 2024, Net Revenue was R$1,614.1
million, reflecting a 13.5% increase over the same period of last year. The revenue increase was mainly due to higher tickets in Medicine
courses by 5.4%, maturation of medical seats, the 40 seats expansion in Guanambi campus, the Continuing Education intake performance and
Medical Practice Solutions execution.
| Table 6: Revenue & Revenue Mix |
|
|
|
|
|
|
|
| (in thousands of R$) |
|
For the three months period ended June 30, |
|
For the six months period ended June 30, |
| |
|
2024 |
2023 |
% Chg |
|
2024 |
2023 |
% Chg |
| Net Revenue Mix |
|
|
|
|
|
|
|
|
| Undergrad |
|
709,647 |
625,264 |
13.5% |
|
1,414,166 |
1,246,240 |
13.5% |
| Continuing Education |
|
62,091 |
55,463 |
12.0% |
|
127,506 |
113,675 |
12.2% |
| Medical Practice Solutions |
|
40,281 |
34,299 |
17.4% |
|
76,854 |
67,839 |
13.3% |
| Inter-segment transactions |
|
- 2,129 |
- 2,419 |
-12.0% |
|
-4,397 |
- 5,186 |
-15.2% |
| Total Reported Net Revenue |
|
809,890 |
712,607 |
13.7% |
|
1,614,129 |
1,422,568 |
13.5% |
| (1) No acquisitions were made during the period under review, therefore not affecting the comparable period. |
| (1) See more information on "Non-GAAP Financial Measures" (Item 08). |
Adjusted EBITDA
Adjusted EBITDA for the three-month period ended
June 30, 2024, increased by 28.2% to R$343.8 million, up from R$268.2 million in the same period of the prior year, with the Adjusted
EBITDA Margin rising by 490 basis points to 42.5%. For the six-month period ended June 30, 2024, Adjusted EBITDA was R$741.7 million,
an increase of 23.9% over the same period of the prior year, accompanied by an Adjusted EBITDA Margin increase of 380 basis points in
the same period.
The Adjusted EBITDA Margin expansion is primarily
attributable to: (a) gross margin expansion lead by Undergrad business; (b) completion of UNIMA and
Afya Jaboatão integration process in November 2023; (c) the ramp up of the four Mais Médicos campuses that started operation
in 3Q22; (d) operational restructuring efforts in Continuing Education and Medical Practice Solutions segments; and (e) More efficiency
in Selling, General and Administrative expenses.
| Table 7: Reconciliation between Adjusted EBITDA and Net Income |
|
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|
|
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|
|
|
|
|
|
|
| (in thousands of R$) |
For the three months period ended June 30, |
|
For the six months period ended June 30, |
| |
2024 |
2023 |
% Chg |
|
2024 |
2023 |
% Chg |
| Net income |
162,200 |
87,537 |
85.3% |
|
370,499 |
205,310 |
80.5% |
| Net financial result |
68,551 |
90,226 |
-24.0% |
|
142,917 |
186,778 |
-23.5% |
| Income taxes expense |
3,091 |
2,090 |
47.9% |
|
13,956 |
21,150 |
-34.0% |
| Depreciation and amortization |
84,038 |
72,306 |
16.2% |
|
163,307 |
138,264 |
18.1% |
| Interest received 1 |
8,619 |
4,842 |
78.0% |
|
21,034 |
15,141 |
38.9% |
| Income share associate |
(3,028) |
(3,210) |
-5.7% |
|
(7,200) |
(7,056) |
2.0% |
| Share-based compensation |
11,799 |
6,902 |
71.0% |
|
20,428 |
13,398 |
52.5% |
| Non-recurring expenses: |
8,557 |
7,481 |
14.4% |
|
16,738 |
25,388 |
-34.1% |
| - Integration of new companies 2 |
5,408 |
6,282 |
-13.9% |
|
11,278 |
12,182 |
-7.4% |
| - M&A advisory and due diligence 3 |
1,336 |
635 |
110.4% |
|
1,583 |
11,674 |
-86.4% |
| - Expansion projects 4 |
1,765 |
378 |
366.9% |
|
2,370 |
529 |
347.9% |
| - Restructuring expenses 5 |
48 |
556 |
-91.4% |
|
1,507 |
1,951 |
-22.8% |
| - Mandatory Discounts in Tuition Fees 6 |
- |
(370) |
n.a. |
|
- |
(948) |
n.a. |
| Adjusted EBITDA |
343,827 |
268,174 |
28.2% |
|
741,679 |
598,373 |
23.9% |
| Adjusted EBITDA Margin |
42.5% |
37.6% |
490 bps |
|
45.9% |
42.1% |
380 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. |
Adjusted
Net Income
Net Income for the three-month period of the second
quarter of 2024 was R$162.2 million, an increase of 85.3% over the same period of the prior year. Adjusted Net Income was R$210.3 million,
which resulted in an increase of 59.5% over the same period from the previous year. For the six-month period, Afya achieved a Net Income
of R$370.5 million, 80.5% higher than the same period of 2023, and an Adjusted Net Income of R$ 461.3 million which was 54.7% higher than
the previous period. This performance was mainly due to: (a) enhancement of operational results (details above); (b) reduction in finance
expenses due to a decrease in Net Debt (excluding IFRS 16) in R$ 544.8 million and lower interest rates; and (c) lower effective tax rates
than last year.
Adjusted EPS reached R$2.29 per share for the second
quarter of 2024, an increase of 61.8% YoY, reflecting the increase in Net Income and capital allocation discipline.
| Table 8: Adjusted Net Income |
|
|
|
|
|
|
|
| (in thousands of R$) |
For the three months period ended June 30, |
|
For the six months period ended June 30, |
| |
2024 |
2023 |
% Chg |
|
2024 |
2023 |
% Chg |
| Net income |
162,200 |
87,537 |
85.3% |
|
370,499 |
205,310 |
80.5% |
| Amortization of customer relationships and trademark 1 |
27,790 |
29,983 |
-7.3% |
|
53,646 |
54,186 |
-1.0% |
| Share-based compensation |
11,799 |
6,902 |
71.0% |
|
20,428 |
13,398 |
52.5% |
| Non-recurring expenses: |
8,557 |
7,481 |
14.4% |
|
16,738 |
25,388 |
-34.1% |
| - Integration of new companies 2 |
5,408 |
6,282 |
-13.9% |
|
11,278 |
12,182 |
-7.4% |
| - M&A advisory and due diligence 3 |
1,336 |
635 |
110.4% |
|
1,583 |
11,674 |
-86.4% |
| - Expansion projects 4 |
1,765 |
378 |
366.9% |
|
2,370 |
529 |
347.9% |
| - Restructuring expenses 5 |
48 |
556 |
-91.4% |
|
1,507 |
1,951 |
-22.8% |
| - Mandatory Discounts in Tuition Fees 6 |
- |
(370) |
n.a. |
|
- |
(948) |
n.a. |
| Adjusted Net Income |
210,346 |
131,903 |
59.5% |
|
461,311 |
298,282 |
54.7% |
| Basic earnings per share - in R$ 7 |
1.76 |
0.92 |
90.5% |
|
4.02 |
2.17 |
85.2% |
| Adjusted earnings per share - in R$ 8 |
2.29 |
1.42 |
61.8% |
|
5.03 |
3.20 |
56.9% |
| (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) Basic earnings per share: Net Income/Weighted average number of outstanding shares. |
|
|
|
|
|
| (8) Adjusted earnings per share: Adjusted Net Income attributable to equity holders of the Parent/Weighted average number of outstanding shares. |
Cash
and Debt Position
On June 30, 2024, Cash and Cash Equivalents were
R$723.4 million, an increase of 30.8% over December 31, 2023. The Net Debt, excluding the effect of IFRS 16, totaled R$1,458.8 million
compared to December 31, 2023, Afya reduced its Net Debt by R$355.8 million due to solid Operating Cashflow generation.
For the six-month period ended June 30, 2024, Afya
reported Cash Flow from Operating Activities of R$683.4 million, up from R$566.5 million in the same period of the previous year, an increase
of 20.6% YoY, boosted by the solid operational results. Operating Cash Conversion Ratio achieved 94.3%.
| Table 9: Operating Cash Conversion Ratio Reconciliation |
For the six months period ended June 30, |
| (in thousands of R$) |
Considering the adoption of IFRS 16 |
| |
2024 |
2023 |
% Chg |
| (a) Net cash flows from operating activities |
667,169 |
537,492 |
24.1% |
| (b) Income taxes paid |
16,208 |
28,988 |
-44.1% |
| (c) = (a) + (b) Cash flow from operating activities |
683,377 |
566,480 |
20.6% |
| |
|
|
|
| (d) Adjusted EBITDA |
741,679 |
598,373 |
23.9% |
| (e) Non-recurring expenses: |
16,738 |
25,388 |
-34.1% |
| - Integration of new companies 1 |
11,278 |
12,182 |
-7.4% |
| - M&A advisory and due diligence 2 |
1,583 |
11,674 |
-86.4% |
| - Expansion projects 3 |
2,370 |
529 |
347.9% |
| - Restructuring Expenses 4 |
1,507 |
1,951 |
-22.8% |
| - Mandatory Discounts in Tuition Fees 5 |
- |
(948) |
n.a. |
| (f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses |
724,941 |
572,985 |
26.5% |
| (g) = (c) / (f) Operating cash conversion ratio |
94.3% |
98.9% |
-460 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, 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. |
The following table shows more information regarding
the cost of debt for in the first half of 2024, considering loans and financing, capital market and accounts payable to selling shareholders.
Afya’s capital structure remains solid with a conservative leveraging position and a low cost of debt. Considering Unidom’s
acquisition and the updated mid guidance Afya’s Net Debt (excluding the effect of IFRS16) divided by the Adjusted EBITDA would be
1.49x.
| Table 10: Gross Debt and Average Cost of Debt |
|
|
| (in millions of R$) |
For the closing of the six months period ended in June 30, |
| |
|
|
|
|
Cost of Debt |
| |
Gross Debt |
Duration (Years) |
Per year |
%CDI² |
| |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
| Loans and financing: Softbank |
827 |
825 |
1.9 |
2.9 |
6.5% |
6.5% |
58% |
48% |
| Loans and financing: Debentures |
526 |
537 |
3.1 |
4.1 |
12.6% |
15.5% |
117% |
114% |
| Loans and financing: Others |
432 |
563 |
1.0 |
1.6 |
12.6% |
15.5% |
117% |
114% |
| Accounts payable to selling shareholders |
398 |
820 |
0.7 |
1.0 |
10.7% |
13.0% |
100% |
97% |
| Total¹| Average |
2,183 |
2,745 |
1.8 |
2.3 |
9.7% |
11.9% |
91% |
89% |
| (1) Total ammount refers only to the "Gross Debt" columns |
| (2) Based on the annualized Interbank Certificates of Deposit ("CDI") rate for the period as a reference: 1H24: ~10.40% p.y. and for 1H23: ~13.65% p.y. |
| Table 11: Cash and Debt Position |
|
|
|
|
|
| (in thousands of R$) |
|
|
|
|
|
| |
2Q24 |
FY2023 |
% Chg |
2Q23 |
% Chg |
| (+) Cash and Cash Equivalents |
723,408 |
553,030 |
30.8% |
741,196 |
-2.4% |
| Cash and Bank Deposits |
8,922 |
11,746 |
-24.0% |
17,057 |
-47.7% |
| Cash Equivalents |
714,486 |
541,284 |
32.0% |
724,139 |
-1.3% |
| (-) Loans and Financing |
1,784,815 |
1,800,775 |
-0.9% |
1,925,154 |
-7.3% |
| Current |
163,501 |
179,252 |
-8.8% |
193,660 |
-15.6% |
| Non-Current |
1,621,314 |
1,621,523 |
0.0% |
1,731,494 |
-6.4% |
| (-) Accounts Payable to Selling Shareholders |
397,432 |
566,867 |
-29.9% |
764,595 |
-48.0% |
| Current |
248,849 |
353,998 |
-29.7% |
401,766 |
-38.1% |
| Non-Current |
148,583 |
212,869 |
-30.2% |
362,829 |
-59.0% |
| (-) Other Short and Long Term Obligations |
|
- |
n.a. |
55,045 |
-100.0% |
| (=) Net Debt (Cash) excluding IFRS 16 |
1,458,839 |
1,814,612 |
-19.6% |
2,003,598 |
-27.2% |
| (-) Lease Liabilities |
921,701 |
874,569 |
5.4% |
851,845 |
8.2% |
| Current |
41,077 |
36,898 |
11.3% |
35,292 |
16.4% |
| Non-Current |
880,624 |
837,671 |
5.1% |
816,553 |
7.8% |
| Net Debt (Cash) with IFRS 16 |
2,380,540 |
2,689,181 |
-11.5% |
2,855,443 |
-16.6% |
CAPEX
Capital expenditures consist of the purchase of property
and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of Afya’s campuses and
headquarters, leasehold improvements, and the development of new solutions in the Medical Practice Solutions segment, among others.
For the six-months period ending June 30, 2024, CAPEX
was R$137.1 million an increase of 34.2% over the same period of the prior year, representing 8.5% of Afya’s Net Revenue. However,
there was a one-off effect in the first quarter of R$ 49.6 million regarding the Earnout of FIP Guanambi, due to the expansion of 40 seats
as disclosed to the market in January 2024. By disregarding this impact, the CAPEX/Net Revenue ratio would be 5.4%.
| Table 12: CAPEX |
| (in thousands of R$) |
For the six months period ended June 30, |
| |
2024 |
2023 |
% Chg |
| CAPEX |
137,108 |
102,157 |
34.2% |
| Property and equipment |
45,989 |
56,907 |
-19.2% |
| Intanglibe assets |
91,119 |
45,250 |
101.4% |
| - Licenses |
49,600 |
0 |
n.a. |
| - Others |
41,519 |
45,250 |
-8.2% |
ESG
Metrics
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 three key metrics, Governance and
Employee Management, Environmental and Social.
The 2023 Sustainability Report can be found at: https://ir.afya.com.br/annual-report/
| Table 13: ESG Metrics 1, 2 & 3 |
2Q24 |
2Q23 |
2023 |
| # |
GRI |
Governance and Employee Management |
|
|
|
| 1 |
405-1 |
Number of employees |
10,181 |
9,795 |
9,680 |
| 2 |
405-1 |
Percentage of female employees |
59% |
57% |
58% |
| 3 |
405-1 |
Percentage of female employees in the board of directors |
30% |
36% |
36% |
| 4 |
102-24 |
Percentage of independent member in the board of directors |
40% |
36% |
36% |
| |
|
Environmental |
|
|
|
| 5 |
|
Total renewable energy generated by own photovoltaic plants (MWh) |
1,322,982 |
851,000 |
4,510,637 |
| 6 |
302-1 |
Total energy consumed (MWh) |
6,201,555 |
5,643,324 |
24,036,608 |
| 7 |
302-1 |
% of renewable energy consumed from own generation |
21.2% |
14.5% |
16.0% |
| 8 |
302-1 |
% of energy consumed from the power grid |
37.0% |
58.3% |
60.3% |
| 9 |
302-1 |
% of energy consumed from the free market |
41.8% |
27.1% |
23.7% |
| |
|
Social |
|
|
|
| 10 |
413-1 |
Number of free clinical consultations offered by Afya |
228,968 |
168,362 |
586,611 |
| 11 |
|
Number of physicians graduated in Afya's campuses |
20,960 |
18,865 |
20,197 |
| 12 |
201-4 |
Number of students with financing and scholarship programs (FIES and PROUNI) |
11,694 |
10,045 |
10,584 |
| 13 |
|
% students with scholarships over total undergraduate students |
15.9% |
15.1% |
16.0% |
| 14 |
413-1 |
Hospital, clinics and city halls partnerships |
560 |
714 |
649 |
| (1) Some factors can influence in the adequate proportionality analysis of data over the years, such as: climate changes, COVID-19 pandemic effects, seasonalities, number of employees, number of students, number of active units, among others. |
| (2) Starting in 2Q22, previously disclosed social data were updated to consider: (a) the number of graduated physicians considering all units after its closing, and (b) partnerships related only to medical schools. |
| (3) The number of students with financing and scholarship programs (FIES and PROUNI) in 2023 does not include any student from Unima and FCM Jaboatão Acquisition |
5.
Conference Call and Webcast Information
| When: |
|
August 14, 2024 at 5:00 p.m. EST. |
| |
|
|
| Who: |
|
Mr. Virgilio Gibbon, Chief Executive Officer
Mr. Luis André Blanco, Chief Financial Officer
Ms. Renata Costa Couto, IR Director
|
Webcast: https://afya.zoom.us/j/99265369988
OR
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: +1 929 205 6099 or +1 253 205 0468
or +1 253 215 8782 or +1 301 715 8592 or +1 305 224 1968 or
+1 309 205 3325 or +1 312 626 6799 or +1 346 248
7799 or +1 360 209 5623 or +1 386 347 5053 or +1 507 473 4847 or +1 564 217 2000 or +1 646 931 3860 or +1 669 444 9171 or +1 669 900 6833
or +1 689 278 1000 or +1 719 359 4580
Webinar ID: 992 6536 9988
Other Numbers: https://afya.zoom.us/u/acUEtLR3J9
6.
About Afya Limited (Nasdaq: AFYA; B3: A2FY34)
Afya is a leading
medical education group in Brazil based on the number of medical school seats, delivering an end-to-end physician-centric ecosystem that
serves and empowers students and physicians to transform their ambitions into rewarding lifelong experiences from the moment they join
us as medical students through their medical residency preparation, graduation program, continuing medical education activities and offering
medical practice solutions to help doctors enhance their healthcare services through their whole career. For more information, please
visit www.afya.com.br.
7.
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/.
8.
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 presents Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted
EPS, 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 income share associate, plus/minus non-recurring expenses/income. Operating Cash
Conversion Ratio is calculated as the Cash flow from Operating Activities plus income taxes paid, minus/plus non-recurring expenses/income
divided by Adjusted EBITDA. The calculation of Adjusted Net Income is the Net Income plus amortization of customer relationships and trademark,
plus share-based compensation, plus/minus non-recurring expenses/income. The calculation of Adjusted EPS is the Adjusted Net Income minus
the non-controlling interests divided by the Weighted average number of outstanding shares.
The non-GAAP supplemental
financial measures are provided with the intend to help investors in assessing the overall performance of Afya’s business regarding
its core operations, cash generation and profitability. The non-GAAP financial measures described in this prospectus are not substitutes
for the IFRS measures. In addition, the calculations of Adjusted EBITDA, Operating Cash Conversion Ratio, Adjusted Net Income and Adjusted
EPS are not standardized financial measures and may differ 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.
9.
Investor Relations Contact
E-mail: ir@afya.com.br
10.
Financial Tables
Unaudited interim
condensed consolidated statements of income and comprehensive income
For the three and six-month periods ended June 30, 2024 and 2023
(In thousands of Brazilian reais, except earnings per share information)
| |
Three-month period ended |
|
Six-month period ended |
| |
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
| |
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
| |
|
|
|
|
|
| Revenue |
809,890 |
712,607 |
|
1,614,129 |
1,422,568 |
| Cost of services |
(314,842) |
(284,295) |
|
(584,346) |
(531,902) |
| Gross profit |
495,048 |
428,312 |
|
1,029,783 |
890,666 |
| |
|
|
|
|
|
| Selling, general and administrative expenses |
(263,762) |
(249,586) |
|
(504,926) |
(482,806) |
| Other expenses, net |
(472) |
(2,083) |
|
(4,685) |
(1,678) |
| |
|
|
|
|
|
| Operating income |
230,814 |
176,643 |
|
520,172 |
406,182 |
| |
|
|
|
|
|
| Finance income |
23,733 |
23,892 |
|
49,263 |
51,579 |
| Finance expenses |
(92,284) |
(114,118) |
|
(192,180) |
(238,357) |
| Net finance result |
(68,551) |
(90,226) |
|
(142,917) |
(186,778) |
| |
|
|
|
|
|
| Share of income of associate |
3,028 |
3,210 |
|
7,200 |
7,056 |
| |
|
|
|
|
|
| Income before income taxes |
165,291 |
89,627 |
|
384,455 |
226,460 |
| |
|
|
|
|
|
| Income taxes expenses |
(3,091) |
(2,090) |
|
(13,956) |
(21,150) |
| |
|
|
|
|
|
| Net income |
162,200 |
87,537 |
|
370,499 |
205,310 |
| |
|
|
|
|
|
| Other comprehensive income |
- |
- |
|
- |
- |
| Total comprehensive income |
162,200 |
87,537 |
|
370,499 |
205,310 |
| |
|
|
|
|
|
| Income attributable to: |
|
|
|
|
|
| Equity holders of the parent |
158,211 |
82,789 |
|
361,604 |
194,916 |
| Non-controlling interests |
3,989 |
4,748 |
|
8,895 |
10,394 |
| |
162,200 |
87,537 |
|
370,499 |
205,310 |
| |
|
|
|
|
|
| Basic earnings per common share |
1.76 |
0.92 |
|
4.02 |
2.17 |
| Diluted earnings per common share |
1.74 |
0.92 |
|
3.98 |
2.16 |
Unaudited interim condensed consolidated
statements of financial position
As of June 30, 2024, and December 31, 2023
(In thousands of Brazilian reais)
| |
June
30, 2024 |
|
December
31, 2023 |
| |
(unaudited) |
|
|
| Assets |
|
|
|
| Current
assets |
|
|
|
| Cash
and cash equivalents |
723,408 |
|
553,030 |
| Trade
receivables |
595,134 |
|
546,438 |
| Inventories |
344 |
|
1,382 |
| Recoverable
taxes |
59,097 |
|
43,751 |
| Other
assets |
56,512 |
|
58,905 |
| Total
current assets |
1,434,495 |
|
1,203,506 |
| |
|
|
|
| Non-current
assets |
|
|
|
| Trade
receivables |
39,940 |
|
39,485 |
| Other
assets |
110,965 |
|
117,346 |
| Investment
in associate |
52,839 |
|
51,834 |
| Property
and equipment |
611,359 |
|
608,685 |
| Right-of-use
assets |
801,409 |
|
767,609 |
| Intangible
assets |
4,800,430 |
|
4,796,016 |
| Total
non-current assets |
6,416,942 |
|
6,380,975 |
| |
|
|
|
| Total
assets |
7,851,437 |
|
7,584,481 |
| |
|
|
|
| Liabilities |
|
|
|
| Current
liabilities |
|
|
|
| Trade
payables |
119,677 |
|
108,222 |
| Loans
and financing |
163,501 |
|
179,252 |
| Lease
liabilities |
41,077 |
|
36,898 |
| Accounts
payable to selling shareholders |
248,849 |
|
353,998 |
| Advances
from customers |
120,248 |
|
153,485 |
| Labor
and social obligations |
237,264 |
|
192,294 |
| Taxes
payable |
29,741 |
|
27,765 |
| Income
taxes payable |
10,748 |
|
3,880 |
| Other
liabilities |
3,254 |
|
2,773 |
| Total
current liabilities |
974,359 |
|
1,058,567 |
| |
|
|
|
| Non-current
liabilities |
|
|
|
| Loans
and financing |
1,621,314 |
|
1,621,523 |
| Lease
liabilities |
880,624 |
|
837,671 |
| Accounts
payable to selling shareholders |
148,583 |
|
212,869 |
| Taxes
payable |
85,720 |
|
88,198 |
| Provision
for legal proceedings |
99,256 |
|
104,361 |
| Other
liabilities |
19,799 |
|
18,280 |
| Total
non-current liabilities |
2,855,296 |
|
2,882,902 |
| Total
liabilities |
3,829,655 |
|
3,941,469 |
| |
|
|
|
| Equity |
|
|
|
| Share
capital |
17 |
|
17 |
| Additional
paid-in capital |
2,343,146 |
|
2,365,200 |
| Treasury
shares |
(279,854) |
|
(299,150) |
| Share-based
compensation reserve |
175,501 |
|
155,073 |
| Retained
earnings |
1,741,969 |
|
1,380,365 |
| Equity
attributable to equity holders of the parent |
3,980,779 |
|
3,601,505 |
| Non-controlling
interests |
41,003 |
|
41,507 |
| Total
equity |
4,021,782 |
|
3,643,012 |
| |
|
|
|
| Total
liabilities and equity |
7,851,437 |
|
7,584,481 |
Unaudited interim condensed consolidated
statements of cash flow
For the six-month periods ended June 30, 2024 and 2023
(In thousands of Brazilian reais)
| |
June
30, 2024 |
|
June
30, 2023 |
| |
(unaudited) |
|
(unaudited) |
| Operating activities |
|
|
|
| Income
before income taxes |
384,455 |
|
226,460 |
| Adjustments
to reconcile income before income taxes |
|
|
|
| Depreciation
and amortization |
163,307 |
|
138,264 |
| Write-off
of property and equipment |
139 |
|
246 |
| Write-off
of intangible assets |
163 |
|
259 |
| Allowance
for expected credit losses |
30,018 |
|
39,086 |
| Share-based
compensation |
20,428 |
|
13,398 |
| Net foreign
exchange differences |
(797) |
|
539 |
| Accrued
interest |
102,278 |
|
152,404 |
| Accrued
interest on lease liabilities |
53,770 |
|
49,033 |
| Share
of income of associate |
(7,200) |
|
(7,056) |
| Provision
(reversal) for legal proceedings |
3,040 |
|
6,934 |
| |
|
|
|
| Changes in assets and liabilities |
|
|
|
| Trade receivables |
(79,169) |
|
(62,359) |
| Inventories |
1,038 |
|
4,241 |
| Recoverable
taxes |
(15,346) |
|
(23,107) |
| Other assets |
629 |
|
(9,121) |
| Trade payables |
11,455 |
|
(1,103) |
| Taxes payable |
319 |
|
18,502 |
| Advances
from customers |
(33,237) |
|
(43,709) |
| Labor and
social obligations |
44,970 |
|
59,249 |
| Other liabilities |
3,117 |
|
4,320 |
| |
683,377 |
|
566,480 |
| Income
taxes paid |
(16,208) |
|
(28,988) |
| Net cash flows from operating
activities |
667,169 |
|
537,492 |
| |
|
|
|
| Investing activities |
|
|
|
| Acquisition
of property and equipment |
(45,989) |
|
(56,907) |
| Acquisition
of intangibles assets |
(91,119) |
|
(45,250) |
| Dividends
received |
6,195 |
|
5,101 |
| Acquisition
of subsidiaries, net of cash acquired |
(164,577) |
|
(626,594) |
| Payments
of interest from acquisition of subsidiaries and intangibles |
(25,000) |
|
(14,264) |
| Net cash flows used in investing
activities |
(320,490) |
|
(737,914) |
| |
|
|
|
| Financing activities |
|
|
|
| Payments
of principal of loans and financing |
(11,524) |
|
(1,116) |
| Payments
of interest of loans and financing |
(87,933) |
|
(66,189) |
| Proceeds
from loans and financing |
- |
|
5,288 |
| Payments
of principal of lease liabilities |
(19,859) |
|
(14,026) |
| Payments
of interest of lease liabilities |
(53,924) |
|
(52,213) |
| Treasury
shares |
- |
|
(12,369) |
| Proceeds
from exercise of stock options |
5,541 |
|
- |
| Dividends
paid to non-controlling shareholders |
(9,399) |
|
(10,300) |
| Net cash flows generated
(used) in financing activities |
(177,098) |
|
(150,925) |
| Net foreign
exchange differences |
797 |
|
(539) |
| Net increase (decrease)
in cash and cash equivalents |
170,378 |
|
(351,886) |
| Cash and
cash equivalents at the beginning of the period |
553,030 |
|
1,093,082 |
| Cash and
cash equivalents at the end of the period |
723,408 |
|
741,196 |
Afya (NASDAQ:AFYA)
Gráfica de Acción Histórica
De Jul 2024 a Ago 2024
Afya (NASDAQ:AFYA)
Gráfica de Acción Histórica
De Ago 2023 a Ago 2024
