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 12, 2024
Afya Limited
Unaudited interim condensed
consolidated financial statements
June 30, 2024
Afya Limited
Unaudited interim condensed consolidated statements of financial position
As of June 30, 2024 and December 31, 2023
(In thousands of Brazilian reais)
|
Notes |
June 30, 2024 |
|
December 31, 2023 |
|
|
(unaudited) |
|
|
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
4 |
723,408 |
|
553,030 |
Trade receivables |
5 |
595,134 |
|
546,438 |
Inventories |
|
344 |
|
1,382 |
Recoverable taxes |
|
59,097 |
|
43,751 |
Other assets |
7 |
56,512 |
|
58,905 |
Total current assets |
|
1,434,495 |
|
1,203,506 |
|
|
|
|
|
Non-current assets |
|
|
|
|
Trade receivables |
5 |
39,940 |
|
39,485 |
Other assets |
7 |
110,965 |
|
117,346 |
Investment in associate |
8 |
52,839 |
|
51,834 |
Property and equipment |
9 |
611,359 |
|
608,685 |
Right-of-use assets |
11.2.2 |
801,409 |
|
767,609 |
Intangible assets |
10 |
4,800,430 |
|
4,796,016 |
Total non-current assets |
|
6,416,942 |
|
6,380,975 |
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|
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Total assets |
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7,851,437 |
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7,584,481 |
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|
|
|
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Liabilities |
|
|
|
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Current liabilities |
|
|
|
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Trade payables |
|
119,677 |
|
108,222 |
Loans and financing |
11.2.1 |
163,501 |
|
179,252 |
Lease liabilities |
11.2.2 |
41,077 |
|
36,898 |
Accounts payable to selling shareholders |
11.2.3 |
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 |
|
|
|
|
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Non-current liabilities |
|
|
|
|
Loans and financing |
11.2.1 |
1,621,314 |
|
1,621,523 |
Lease liabilities |
11.2.2 |
880,624 |
|
837,671 |
Accounts payable to selling shareholders |
11.2.3 |
148,583 |
|
212,869 |
Taxes payable |
|
85,720 |
|
88,198 |
Provision for legal proceedings |
20 |
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 |
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Equity |
14 |
|
|
|
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 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
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 for earnings
per share information)
|
|
Three-month period ended |
|
Six-month period ended |
|
Notes |
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
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Revenue |
16 |
809,890 |
712,607 |
|
1,614,129 |
1,422,568 |
Cost of services |
17 |
(314,842) |
(284,295) |
|
(584,346) |
(531,902) |
Gross profit |
|
495,048 |
428,312 |
|
1,029,783 |
890,666 |
|
|
|
|
|
|
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Selling, general and administrative expenses |
17 |
(263,762) |
(249,586) |
|
(504,926) |
(482,806) |
Other expenses, net |
|
(472) |
(2,083) |
|
(4,685) |
(1,678) |
|
|
|
|
|
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Operating income |
|
230,814 |
176,643 |
|
520,172 |
406,182 |
|
|
|
|
|
|
|
Finance income |
18 |
23,733 |
23,892 |
|
49,263 |
51,579 |
Finance expenses |
18 |
(92,284) |
(114,118) |
|
(192,180) |
(238,357) |
Net finance result |
|
(68,551) |
(90,226) |
|
(142,917) |
(186,778) |
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|
|
|
|
|
|
Share of income of associate |
8 |
3,028 |
3,210 |
|
7,200 |
7,056 |
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|
|
|
|
|
|
Income before income taxes |
|
165,291 |
89,627 |
|
384,455 |
226,460 |
|
|
|
|
|
|
|
Income taxes expenses |
19 |
(3,091) |
(2,090) |
|
(13,956) |
(21,150) |
|
|
|
|
|
|
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Net income |
|
162,200 |
87,537 |
|
370,499 |
205,310 |
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Other comprehensive income |
|
- |
- |
|
- |
- |
Total comprehensive income |
|
162,200 |
87,537 |
|
370,499 |
205,310 |
|
|
|
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Income attributable to: |
|
|
|
|
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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 |
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Basic earnings per common share |
15 |
1.76 |
0.92 |
|
4.02 |
2.17 |
Diluted earnings per common share |
15 |
1.74 |
0.92 |
|
3.98 |
2.16 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of changes in equity
For the six-month periods ended June 30, 2024 and 2023
(In thousands of Brazilian reais)
|
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Equity attributable to equity holders of the parent |
|
|
Notes |
Share capital |
Additional paid-in capital |
Treasury shares |
Share-based compensation reserve |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
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Balances at January 1, 2023 |
|
17 |
2,375,344 |
(304,947) |
123,538 |
1,004,886 |
3,198,838 |
51,320 |
3,250,158 |
Net income |
|
- |
- |
- |
- |
194,916 |
194,916 |
10,394 |
205,310 |
Total comprehensive income |
|
- |
- |
- |
- |
194,916 |
194,916 |
10,394 |
205,310 |
Treasury shares |
|
- |
- |
(12,369) |
- |
- |
(12,369) |
- |
(12,369) |
Share-based compensation |
17 |
- |
- |
- |
13,398 |
- |
13,398 |
- |
13,398 |
Restricted shares transferred to executives |
|
- |
(2,571) |
2,571 |
- |
- |
- |
- |
- |
Dividends declared |
14.b |
- |
- |
- |
- |
- |
- |
(10,300) |
(10,300) |
Balances at June 30, 2023 (unaudited) |
|
17 |
2,372,773 |
(314,745) |
136,936 |
1,199,802 |
3,394,783 |
51,414 |
3,446,197 |
|
|
|
|
|
|
|
|
|
|
Balances at January 1, 2024 |
|
17 |
2,365,200 |
(299,150) |
155,073 |
1,380,365 |
3,601,505 |
41,507 |
3,643,012 |
Net income |
|
- |
- |
- |
- |
361,604 |
361,604 |
8,895 |
370,499 |
Total comprehensive income |
|
- |
- |
- |
- |
361,604 |
361,604 |
8,895 |
370,499 |
Share-based compensation |
17 |
- |
- |
- |
20,428 |
- |
20,428 |
- |
20,428 |
Treasury shares transferred to executives from exercise of stock options |
13.b.1 |
- |
(943) |
6,484 |
- |
- |
5,541 |
- |
5,541 |
Restricted shares transferred under the share-based compensation plan |
13.b.2 |
- |
(21,111) |
12,812 |
- |
- |
(8,299) |
- |
(8,299) |
Dividends declared |
14.b |
- |
- |
- |
- |
- |
- |
(9,399) |
(9,399) |
Balances at June 30, 2024 (unaudited) |
|
17 |
2,343,146 |
(279,854) |
175,501 |
1,741,969 |
3,980,779 |
41,003 |
4,021,782 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of cash flows
For the six-month periods ended June 30, 2024 and 2023
(In thousands of Brazilian reais)
|
Notes |
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 |
17 |
163,307 |
|
138,264 |
Write-off of property and equipment |
|
139 |
|
246 |
Write-off of intangible assets |
|
163 |
|
259 |
Allowance for expected credit losses |
5 |
30,018 |
|
39,086 |
Share-based compensation |
17 |
20,428 |
|
13,398 |
Net foreign exchange differences |
|
(797) |
|
539 |
Accrued interest |
18 |
102,278 |
|
152,404 |
Accrued interest on lease liabilities |
11.2.2, 11.5, 18 |
53,770 |
|
49,033 |
Share of income of associate |
8 |
(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 |
9 |
(45,989) |
|
(56,907) |
Acquisition of intangibles assets |
10 |
(91,119) |
|
(45,250) |
Dividends received |
8 |
6,195 |
|
5,101 |
Acquisition of subsidiaries, net of cash acquired |
11.2.3 |
(164,577) |
|
(626,594) |
Payments of interest from acquisition of subsidiaries and intangibles |
11.2.3 |
(25,000) |
|
(14,264) |
Net cash flows used in investing activities |
|
(320,490) |
|
(737,914) |
|
|
|
|
|
Financing activities |
|
|
|
|
Payments of principal of loans and financing |
11.5 |
(11,524) |
|
(1,116) |
Payments of interest of loans and financing |
11.5 |
(87,933) |
|
(66,189) |
Proceeds from loans and financing |
11.5 |
- |
|
5,288 |
Payments of principal of lease liabilities |
11.2.2, 11.5 |
(19,859) |
|
(14,026) |
Payments of interest of lease liabilities |
11.2.2, 11.5 |
(53,924) |
|
(52,213) |
Treasury shares |
|
- |
|
(12,369) |
Proceeds from exercise of stock options |
|
5,541 |
|
- |
Dividends paid to non-controlling shareholders |
14.b |
(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 |
4 |
553,030 |
|
1,093,082 |
Cash and cash equivalents at the end of the period |
4 |
723,408 |
|
741,196 |
The accompanying notes are an integral part of the unaudited interim condensed consolidated
financial statements.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Afya Limited (“Afya”), collectively
with its subsidiaries referred to as the “Company”, is a holding company incorporated under the laws of the Cayman Islands
on March 22, 2019. Afya completed its initial public offering (IPO) on July 19, 2019, and its shares are listed on the Nasdaq under the
symbol “AFYA”. The Company’s ultimate parent company is Bertelsmann SE& Co. KGaA (“Bertelsmann”), as
a result of Bertelsmann’s acquisition of control on May 5, 2022.
The Company is formed by a network of higher education and post-graduate institutions
focused on medical schools located in 19 Brazilian States forming the largest educational group by the number of medical school seats
in the country. In non-regulated education, the Company provides services that comprise the development and sale of electronically distributed
educational courses on medicine science and soft skills educational content. The Company also offers solutions to empower the physicians
in their daily routine including supporting clinic decisions through mobile app subscription, delivering practice management tools through
a SaaS (Software as a Service) model and supporting the patient-physician relationship.
On January 24, 2024, the Ministry of Education (“MEC”) authorized the increase
of 40 medical school seats of Faculdades Integradas Padrão (FIP Guanambi) located in the city of Guanambi, State of Bahia, which
resulted in an additional payment of R$49,600. With the authorization, the Company reaches 100 medical school seats on this campus, and
3,203 total approved seats. The operation of these medical school seats started in the first quarter of 2024.
Acquisition in 2023
On January 2, 2023, Afya Participações
S.A. (“Afya Brazil”), a wholly-owned subsidiary of Afya, acquired Sociedade
Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”). DelRey is a post-secondary education
institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and health, as
well as other courses, and encompasses the operations of Centro Universitário Tiradentes Alagoas (“UNIMA”) and
Faculdade Tiradentes Jaboatão dos Guararapes (“FCM Jaboatão”).
The aggregate purchase price of R$816,236 is comprised
by: i) R$809,000 of which R$575,000 was paid in cash on the transaction closing date (of which R$567,196 represents the cash paid net
of cash acquired (included in cash flows from investing activities)), and R$234,000 is payable in cash in three annual installments, respectively,
of R$134,000 in January 2024, R$50,000 in January 2025 and R$50,000 in January 2026, adjusted by the SELIC rate; and ii) offer of Afya’s
digital solutions free of charge until December 31, 2030, for students of medicine of universities owned by the sellers which are not
part of the transaction. The fair value of this service was estimated at R$7,236 at the acquisition date. There are 84 additional medical
school seats still pending approval which, if approved by MEC, will result in a potential additional payment of up to R$105,000. Given
the future event that will trigger the potential payout is not under the Company’s control, the probability of such payout cannot
be reliably estimated and accordingly the contingent consideration was not measured at the acquisition date. Should the additional medical
school seats be approved, it will result in additional licenses, which will be measured accordingly if and when approved.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
| 2 | Material accounting policies |
2.1 Basis for preparation of the unaudited interim condensed consolidated
financial statements
The Company’s unaudited interim condensed
consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and the basis it will continue
to operate as a going concern for the foreseeable future.
The unaudited interim condensed consolidated financial statements have been prepared
on a historical cost basis, except for contingent consideration (earn-outs) that have been measured at fair value.
The unaudited interim condensed consolidated financial statements
do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with
the Company’s annual consolidated financial statements as of December 31, 2023.
Afya is a holding company, as such the primary source of revenue derives from its interest
on the operational companies in Brazil. As result, the Brazilian Real has been determined as the Company’s functional currency.
The unaudited interim condensed consolidated financial statements are presented in Brazilian
reais (“R$”), which is the Company’s functional and presentation currency. All amounts are rounded to the nearest thousand.
The Company segregated the payments of principal and interest of loans and financing,
lease liabilities and accounts payables to selling shareholders in the unaudited interim condensed consolidated statements of cash flows
for the six-month period ended June 30, 2024, in accordance with the provisions set forth in IAS 7 – Statement of Cash Flows. As
a result, Management revised, retrospectively, the prior period unaudited interim condensed consolidated statements of cash flows for
the six-month period ended June 30, 2023, for comparative purposes. The Company assessed the materiality of this matter and, based on
an analysis of quantitative and qualitative considerations, determined that the segregation of payments of principal and interest on prior
period over such transactions is not material to its unaudited interim condensed consolidated financial statements. However, even if it
is not material, the segregation of payments of principal and interest regarding such transactions for the six-month period ended June
30, 2023 are appropriate for the users of the unaudited interim condensed consolidated financial statements, considering the comparability
of such information over the periods presented. The payments of interest of loans and financing, lease liabilities, notes payable and
accounts payables to selling shareholders are classified within the unaudited interim condensed consolidated statements of cash flows
under the same activities of which the payments of principal are classified. As a result, no change occurred in the net cash flows used
in investing activities and net cash flows generated (used) in financing activities in the unaudited interim condensed consolidated statements
of cash flows for the six-month period ended June 30, 2023.
These unaudited interim condensed consolidated financial statements were approved by
the Board of Directors for issuance on August 14, 2024.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
2.2 Changes in accounting policies and disclosures
New standards, interpretations and amendments issued and adopted
by the Company
The accounting policies adopted in the preparation of the unaudited interim condensed
consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial
statements for the year ended December 31, 2023. Certain amendments apply for the first time in 2024, but do not have significant impacts
on the Company’s interim condensed consolidated financial statements.
The Company has not early adopted any standard, interpretation
or amendment that has been issued but is not yet effective.
2.3 Basis consolidation
The table below presents a list of the Company’s subsidiaries and associate:
|
|
|
|
Direct and indirect interest |
Name |
Main activities |
Location |
Investment type |
June 30, 2024
(unaudited) |
December 31, 2023 |
Afya Participações S.A. (“Afya Brazil”) |
Holding |
Nova Lima - MG |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos Porto S.A. - (“ITPAC Porto”) |
Undergraduate degree programs |
Porto Nacional - TO |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos S.A. - (“ITPAC Araguaína”) |
Undergraduate degree programs |
Araguaína - TO |
Subsidiary |
100% |
100% |
União Educacional do Vale do Aço S.A. - (“UNIVAÇO”) |
Medicine undergraduate degree program |
Ipatinga - MG |
Subsidiary |
100% |
100% |
IPTAN - Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A. (“IPTAN”) |
Undergraduate degree programs |
São João Del Rei - MG |
Subsidiary |
100% |
100% |
Instituto de Educação Superior do Vale do Parnaíba S.A. (“IESVAP”) |
Undergraduate degree programs |
Parnaíba - PI |
Subsidiary |
80% |
80% |
Centro de Ciências em Saúde de Itajubá S.A. (“CCSI”) |
Medicine undergraduate degree program |
Itajubá - MG |
Subsidiary |
75% |
75% |
Instituto de Ensino Superior do Piauí S.A. (“IESP”) |
Undergraduate and graduate degree programs |
Teresina - PI |
Subsidiary |
100% |
100% |
FADEP - Faculdade Educacional de Pato Branco Ltda. (“FADEP”) |
Undergraduate degree programs |
Pato Branco - PR |
Subsidiary |
100% |
100% |
Medcel Editora e Eventos S.A. (“Medcel”) |
Medical education content |
São Paulo - SP |
Subsidiary |
100% |
100% |
Instituto Educacional Santo Agostinho S.A. (“FASA”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda. (“IPEMED”) |
Graduate |
Belo Horizonte - MG |
Subsidiary |
100% |
100% |
Instituto Paraense de Educação e Cultura Ltda. (“IPEC”) |
Medicine degree programs |
Marabá - PA |
Subsidiary |
100% |
100% |
Sociedade Universitária Redentor S.A. (“UniRedentor”) |
Undergraduate and graduate degree programs |
Itaperuna - RJ |
Subsidiary |
100% |
100% |
Centro de Ensino São Lucas Ltda. (“UniSL”) |
Undergraduate degree programs |
Porto Velho - RO |
Subsidiary |
100% |
100% |
Peb Med Instituição de Pesquisa Médica e Serviços Ltda. (“PebMed”) (i) |
Content and clinical tools and online platform |
Rio de Janeiro - RJ |
Subsidiary |
- |
100% |
Sociedade de Educação, Cultura e Tecnologia da Amazônia S.A. - (“FESAR”) |
Undergraduate degree programs |
Redenção - PA |
Subsidiary |
100% |
100% |
Centro Superior de Ciências da Saúde S/S Ltda. (“FCMPB”) |
Medicine degree programs |
João Pessoa - PB |
Subsidiary |
100% |
100% |
iClinic Desenvolvimento de Software Ltda. (“iClinic”) |
Electronic Medical Record, Clinical Management System |
Ribeirão Preto - SP |
Subsidiary |
100% |
100% |
Medicinae Solutions S.A. (“Medicinae”) |
Healthcare payments and financial services |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Medical Harbour Aparelhos Médico Hospitalares e Serviços em Tecnologia Ltda. (“Medical Harbour”) |
Educational health and medical imaging |
Florianópolis - SC |
Subsidiary |
100% |
100% |
Cliquefarma Drogarias Online Ltda. (“Cliquefarma”) |
Online platform |
São Paulo - SP |
Subsidiary |
100% |
100% |
Shosp Tecnologia da Informação Ltda. (“Shosp”) |
Electronic Medical Record, Clinical Management System |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Sociedade Padrão de Educação Superior Ltda. (“UnifipMoc”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Companhia Nilza Cordeiro Herdy de Educação e Cultura (“Unigranrio”) |
Undergraduate and graduate degree programs |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
Policlínica e Centro de Estética Duque de Caxias Ltda. (“Policlínica”) |
Outpatient care |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
RX PRO Soluções de Tecnologia Ltda. (“RX PRO”) |
Marketing for pharmaceutical industry |
São Paulo - SP |
Subsidiary |
100% |
100% |
RX PRO LOG Transporte e Logística Ltda. (“RX PRO LOG”) (ii) |
Marketing for pharmaceutical industry |
São Paulo - SP |
Subsidiary |
- |
100% |
BMV Atividades Médicas Ltda. (“Além da Medicina”) |
Medical education content |
São Paulo - SP |
Subsidiary |
100% |
100% |
Cardiopapers Soluções Digitais Ltda. (“CardioPapers”) |
Medical education content |
Recife - PE |
Subsidiary |
100% |
100% |
Quasar Telemedicina Desenvolvimento de Sistemas Computacionais Ltda. (“Glic”) |
Patient physician relationship |
Barueri - SP |
Subsidiary |
100% |
100% |
Sociedade Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”) |
Undergraduate degree programs |
Maceió - AL |
Subsidiary |
100% |
100% |
União Educacional do Planalto Central S.A. (“UEPC”) |
Undergraduate degree programs |
Brasília - DF |
Associate |
30% |
30% |
(i) PebMed was merged with Afya Brazil in April 2024.
(ii) RX PRO LOG had its operations closed down in January
2024.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The financial information of the
subsidiaries acquired is included in the Company’s unaudited interim condensed consolidated financial statements beginning on the
respective acquisition dates.
The Company consolidates the financial information for all entities it controls. Control
is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary
and it ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company
ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries in
order to bring their accounting policies in line with the Company’s accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a change of control, is
accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets (including
goodwill), liabilities, non-controlling interest and other components of equity, while any resulting gain or loss is recognized in the
statement of income.
Non-controlling interests in the results and equity of subsidiaries are shown separately
in the consolidated statements of financial position, consolidated statements of income and comprehensive income and consolidated statements
of changes in equity.
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.
Segment information is presented consistently with the internal reports provided to
the Company's Chief Executive Officer (CEO), which is the Chief Operating Decision Maker (CODM) and is responsible for allocating resources,
assessing the performance of the Company's operating segments, and making the Company's strategic decisions.
No operating segments have been aggregated to form the reportable operating segments.
There is only one geographic region, and the results are monitored and evaluated as a single business.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Business units restructuring
In connection with a restructuring project occurred
across the Continuing education and Medical practice solutions segments, the Pilar 1 entities (Medcel, Além da Medicina, CardioPapers
and Medical Harbour), which offer residency preparation programs, specialization test preparation and other medical capabilities, were
moved into the Continuing education segment. This strategic project aims to integrate all continuing education capabilities into one single
structure that will be responsible for offerings that address physicians education and continuous update needs from the graduation and
throughout their careers, while exploring the potential synergies among those operations.
This restructuring project took place since the
first quarter of 2024 and represents how the segments are monitored internally. Due to changes in operating segments, the segment information
as of December 31, 2023 and for the six-month period ended June 30, 2023 have been retroactively adjusted for comparison purposes.
The tables below present assets and liabilities information for the Company’s
operating segments as of June 30, 2024 and December 31, 2023, respectively:
As of June 30, 2024
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Adjustments and eliminations |
Total |
|
|
|
|
|
|
|
Total assets |
7,363,717 |
347,989 |
144,128 |
7,855,834 |
(4,397) |
7,851,437 |
Current assets |
1,224,701 |
163,118 |
51,073 |
1,438,892 |
(4,397) |
1,434,495 |
Non-current assets |
6,139,016 |
184,871 |
93,055 |
6,416,942 |
- |
6,416,942 |
|
|
|
|
|
|
|
Total liabilities and equity |
7,363,717 |
347,989 |
144,128 |
7,855,834 |
(4,397) |
7,851,437 |
Current liabilities |
697,103 |
231,757 |
49,896 |
978,756 |
(4,397) |
974,359 |
Non-current liabilities |
2,758,821 |
73,948 |
22,527 |
2,855,296 |
- |
2,855,296 |
Equity |
3,907,793 |
42,284 |
71,705 |
4,021,782 |
- |
4,021,782 |
|
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (i) |
52,839 |
- |
- |
52,839 |
- |
52,839 |
Capital expenditures (ii) |
109,760 |
18,538 |
8,810 |
137,108 |
- |
137,108 |
(i) Investment in UEPC is included in non-current assets in the statement of financial
position.
(ii) Capital expenditures consider the acquisitions of property and equipment and intangible
assets.
As of December 31, 2023 |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Adjustments and eliminations |
Total |
|
|
|
|
|
|
|
Total assets |
7,104,154 |
336,908 |
154,636 |
7,595,698 |
(11,217) |
7,584,481 |
Current assets |
1,001,156 |
155,511 |
58,056 |
1,214,723 |
(11,217) |
1,203,506 |
Non-current assets |
6,102,998 |
181,397 |
96,580 |
6,380,975 |
- |
6,380,975 |
|
|
|
|
|
|
|
Total liabilities and equity |
7,104,154 |
336,908 |
154,636 |
7,595,698 |
(11,217) |
7,584,481 |
Current liabilities |
787,658 |
221,002 |
61,124 |
1,069,784 |
(11,217) |
1,058,567 |
Non-current liabilities |
2,783,855 |
73,960 |
25,087 |
2,882,902 |
- |
2,882,902 |
Equity |
3,532,641 |
41,946 |
68,425 |
3,643,012 |
- |
3,643,012 |
|
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (i) |
51,834 |
- |
- |
51,834 |
- |
51,834 |
Capital expenditures (ii) |
64,655 |
17,819 |
19,683 |
102,157 |
- |
102,157 |
(i) Investment in UEPC is included in non-current assets in the statement of financial
position.
(ii) Balances for the six-month period ended June 30, 2023 (unaudited). Capital expenditures
consider the acquisitions of property and equipment and intangible assets.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The tables below present the statements of income for the Company’s operating
segments for the six-month periods ended June 30, 2024 and 2023:
June 30, 2024
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,414,166 |
126,090 |
73,873 |
1,614,129 |
- |
1,614,129 |
Inter-segment |
- |
1,416 |
2,981 |
4,397 |
(4,397) |
- |
Revenue |
1,414,166 |
127,506 |
76,854 |
1,618,526 |
(4,397) |
1,614,129 |
Cost of services |
(517,741) |
(50,261) |
(20,741) |
(588,743) |
4,397 |
(584,346) |
Gross profit |
896,425 |
77,245 |
56,113 |
1,029,783 |
- |
1,029,783 |
Selling, general and administrative expenses |
|
|
|
|
|
(504,926) |
Other expenses, net |
|
|
|
|
|
(4,685) |
Operating income |
|
|
|
|
|
520,172 |
Finance income |
|
|
|
|
|
49,263 |
Finance expenses |
|
|
|
|
|
(192,180) |
Share of income of associate |
|
|
|
|
|
7,200 |
Income before income taxes |
|
|
|
|
|
384,455 |
Income taxes expenses |
|
|
|
|
|
(13,956) |
Net income |
|
|
|
|
|
370,499 |
June 30, 2023
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,246,240 |
109,633 |
66,695 |
1,422,568 |
- |
1,422,568 |
Inter-segment |
- |
4,042 |
1,144 |
5,186 |
(5,186) |
- |
Revenue |
1,246,240 |
113,675 |
67,839 |
1,427,754 |
(5,186) |
1,422,568 |
Cost of services |
(474,165) |
(44,901) |
(18,022) |
(537,088) |
5,186 |
(531,902) |
Gross profit |
772,075 |
68,774 |
49,817 |
890,666 |
- |
890,666 |
Selling, general and administrative expenses |
|
|
|
|
|
(482,806) |
Other expenses, net |
|
|
|
|
|
(1,678) |
Operating income |
|
|
|
|
|
406,182 |
Finance income |
|
|
|
|
|
51,579 |
Finance expenses |
|
|
|
|
|
(238,357) |
Share of income of associate |
|
|
|
|
|
7,056 |
Income before income taxes |
|
|
|
|
|
226,460 |
Income taxes expenses |
|
|
|
|
|
(21,150) |
Net income |
|
|
|
|
|
205,310 |
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 Cardiopapers 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.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
| 4 | Cash and cash equivalents |
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Cash and bank deposits |
8,922 |
11,746 |
Cash equivalents |
714,486 |
541,284 |
|
723,408 |
553,030 |
Cash equivalents correspond mainly to financial investments in Bank Certificates of
Deposit (“CDB”) with highly rated financial institutions and investment funds managed by highly rated financial institutions.
As of June 30, 2024, the average interest on these investments is equivalent to 97%
of the CDI rate (December 31, 2023: 100.8%). These funds are available for immediate use and have an insignificant risk of changes in
value. Cash equivalents denominated in U.S. dollars totaled R$6,935 as of June 30, 2024 (December 31, 2023: R$23,173).
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Tuition fees |
515,519 |
461,066 |
Educational content (i) |
50,113 |
49,135 |
FIES |
73,963 |
62,971 |
Educational credits (ii) |
25,140 |
29,391 |
Mobile app subscription (iii) |
18,521 |
29,091 |
Other |
18,653 |
15,667 |
|
701,909 |
647,321 |
(-) Allowance for expected credit losses |
(66,835) |
(61,398) |
|
635,074 |
585,923 |
Current |
595,134 |
546,438 |
Non-current |
39,940 |
39,485 |
(i) Related to trade receivables from sales of e-books and medical courses through digital
platform from Medcel, Além da Medicina and Cardiopapers.
(ii) Related to the financing programs offered by the Company’s subsidiaries to
its students that existed prior to the acquisitions. The Company closed such programs to new enrolments and maintained only the agreements
that were outstanding as of the acquisition date.
(iii) Related to trade receivables from mobile applications subscriptions for digital
medical content.
As of June 30, 2024 and December 31, 2023, the aging of trade receivables was as follows:
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Neither past due nor impaired |
333,890 |
323,614 |
Past due: |
|
|
1 to 30 days |
85,070 |
73,563 |
31 to 90 days |
130,786 |
109,908 |
91 to 180 days |
96,768 |
85,193 |
More than 180 days |
55,395 |
55,043 |
|
701,909 |
647,321 |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The changes in the allowance for expected credit losses for the six-month periods ended
June 30, 2024 and 2023, was as follows:
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Opening balance |
(61,398) |
(44,046) |
Additions |
(30,018) |
(39,086) |
Write-offs |
24,581 |
24,000 |
Closing balance |
(66,835) |
(59,132) |
The tables below summarize the balances and transactions with related parties:
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Assets |
|
|
Trade receivables (i) |
466 |
693 |
Other assets (ii) |
1,050 |
285 |
|
1,516 |
978 |
Current |
466 |
792 |
Non-current |
1,050 |
186 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Other income (expenses) |
|
|
UEPC (i) |
179 |
304 |
EMIVE Patrulha 24 Horas Ltda. (iii) |
4 |
- |
|
183 |
304 |
|
|
|
Leases (iv) |
|
|
RVL Esteves Gestão Imobiliária S.A. |
12,569 |
11,294 |
UNIVAÇO Patrimonial Ltda. |
1,798 |
1,786 |
IESVAP Patrimonial Ltda. |
2,595 |
2,577 |
|
16,962 |
15,657 |
(i) Refers to sales of educational content from Medcel to UEPC.
(ii) Refers to expenses to be reimbursed by Bertelsmann SE& Co. KGaA.
(iii) Refers to amounts of expenses related to security services provided by a company
of which one of Afya’s main shareholders has significant influence.
(iv) The carrying amounts of lease liabilities with related parties as of June 30, 2024
totaled R$234,289 (December 31, 2023: R$223,496).
Lease agreement with RVL Esteves Gestão Imobiliária
S.A.
On June 14, 2024, RVL Esteves Gestão Imobiliária S.A. (“RVL”)
entered into a lease agreement with DelRey, pursuant to which RVL agreed to lease to DelRey a property for the campus in the city of Jaboatão
dos Guararapes, State of Pernambuco. The lease agreement is for a monthly amount payable equal to R$114, with a grace period of 12 months.
The monthly amount payable should be adjusted by the inflation rate (IPCA) after 12 months. The lease agreement is for a term of 20 years.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Key management personnel compensation
Key management personnel compensation included in the Company’s unaudited interim
condensed consolidated statement of income comprised the following:
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Short-term employee benefits |
10,106 |
7,131 |
Share-based compensation plans |
12,412 |
9,905 |
|
22,518 |
17,036 |
Compensation of the Company’s key management includes short-term employee benefits
comprised by salaries, labor and social obligations, and other ordinary short-term employee benefits. The amounts disclosed in the table
above are the amounts recognized as an expense in selling, general and administrative expenses during the reporting period related to
key management personnel. See further details on the share-based compensation plans in Note 13.
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Indemnification assets |
73,710 |
81,855 |
Advances |
29,562 |
39,890 |
Judicial deposits |
14,653 |
14,187 |
Prepaid expenses |
24,611 |
15,820 |
Other FIES credits |
7,908 |
8,674 |
Dividends |
1,668 |
1,668 |
Deferred tax assets |
2,181 |
3,233 |
Other assets |
13,184 |
10,924 |
|
167,477 |
176,251 |
Current |
56,512 |
58,905 |
Non-current |
110,965 |
117,346 |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The Company holds a 30% interest in UEPC, a medical school located in the Federal District
that offers higher education and post-graduate courses, both in person and long-distance learning. The Company’s interest in UEPC
is accounted for using the equity method. The tables below summarize the financial information of the Company’s investment in UEPC:
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Current assets |
31,237 |
29,004 |
Non-current assets |
118,269 |
120,289 |
Current liabilities |
(26,977) |
(28,842) |
Non-current liabilities |
(90,341) |
(91,613) |
Equity |
32,188 |
28,838 |
Company’s share in equity - 30% |
9,656 |
8,651 |
Goodwill |
43,183 |
43,183 |
Carrying amount of the investment |
52,839 |
51,834 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Revenue |
78,583 |
77,023 |
Cost of services |
(28,045) |
(29,633) |
Selling, general and administrative expenses |
(23,010) |
(20,396) |
Net finance result |
(2,646) |
(2,589) |
Income before income taxes |
24,882 |
24,405 |
Income taxes expenses |
(883) |
(886) |
Net income |
23,999 |
23,519 |
Company’s share of income |
7,200 |
7,056 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Opening balance |
51,834 |
53,907 |
Share of income |
7,200 |
7,056 |
Dividends received |
(6,195) |
(5,101) |
Dividends receivable |
- |
(3,193) |
Closing balance |
52,839 |
52,669 |
There were no impairment indicatives of goodwill from the investment in associate for
the six-month period ended June 30, 2024.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Building |
Machinery and equipment |
Lands |
Vehicles |
Furniture and fixtures |
IT equipment |
Library books |
Leasehold improvements |
Construction in progress |
Total |
Cost |
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
91,857 |
100,390 |
18,852 |
1,053 |
90,712 |
68,593 |
37,362 |
145,846 |
86,688 |
641,353 |
Additions |
95 |
11,842 |
- |
409 |
11,010 |
10,295 |
717 |
46 |
22,493 |
56,907 |
Business combination |
- |
7,729 |
- |
- |
4,384 |
734 |
1,329 |
10,741 |
63 |
24,980 |
Write-off (i) |
- |
(502) |
- |
(319) |
(288) |
(136) |
(3,133) |
(125) |
(7) |
(4,510) |
Transfer |
400 |
2,371 |
- |
- |
23 |
78 |
- |
57,504 |
(60,376) |
- |
As of June 30, 2023 (unaudited) |
92,352 |
121,830 |
18,852 |
1,143 |
105,841 |
79,564 |
36,275 |
214,012 |
48,861 |
718,730 |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
93,232 |
119,981 |
18,852 |
1,354 |
110,859 |
82,810 |
31,888 |
264,448 |
33,962 |
757,386 |
Additions |
54 |
10,930 |
- |
130 |
7,889 |
8,146 |
226 |
- |
18,614 |
45,989 |
Write-off (i) |
- |
(396) |
- |
(2) |
(281) |
(340) |
- |
(21) |
- |
(1,040) |
Transfer |
661 |
- |
- |
142 |
- |
- |
- |
30,476 |
(31,137) |
142 |
As of June 30, 2024 (unaudited) |
93,947 |
130,515 |
18,852 |
1,624 |
118,467 |
90,616 |
32,114 |
294,903 |
21,439 |
802,477 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
(5,751) |
(20,630) |
- |
288 |
(10,349) |
(21,837) |
(22,888) |
(18,099) |
- |
(99,266) |
Depreciation |
(1,862) |
(7,446) |
- |
(174) |
(6,177) |
(6,049) |
(1,752) |
(12,090) |
- |
(35,550) |
Write-off (i) |
- |
456 |
- |
92 |
150 |
34 |
3,465 |
67 |
- |
4,264 |
As of June 30, 2023 (unaudited) |
(7,613) |
(27,620) |
- |
206 |
(16,376) |
(27,852) |
(21,175) |
(30,122) |
- |
(130,552) |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
(9,679) |
(28,843) |
- |
198 |
(20,377) |
(26,872) |
(18,652) |
(44,476) |
- |
(148,701) |
Depreciation |
(2,071) |
(8,420) |
- |
(191) |
(6,478) |
(7,505) |
(1,522) |
(16,989) |
- |
(43,176) |
Write-off (i) |
- |
363 |
- |
2 |
229 |
286 |
- |
21 |
- |
901 |
Transfer |
- |
- |
- |
(142) |
- |
- |
- |
- |
- |
(142) |
As of June 30, 2024 (unaudited) |
(11,750) |
(36,900) |
- |
(133) |
(26,626) |
(34,091) |
(20,174) |
(61,444) |
- |
(191,118) |
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
As of June 30, 2024 (unaudited) |
82,197 |
93,615 |
18,852 |
1,491 |
91,841 |
56,525 |
11,940 |
233,459 |
21,439 |
611,359 |
As of December 31, 2023 |
83,553 |
91,138 |
18,852 |
1,552 |
90,482 |
55,938 |
13,236 |
219,972 |
33,962 |
608,685 |
(i) Refers to items written-off as result of lack of expectation of future use, in connection
with the Company’s physical inventory procedures.
The Company assesses at each reporting date, whether there is an indication that a property
and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. There were
no impairment indicatives of property and equipment for the six-month period ended June 30, 2024.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Goodwill |
Licenses with indefinite useful life |
Trademark |
Customer relationships |
Software |
Education content |
Developed technology |
Educational platform |
Software in progress |
Other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
1,257,045 |
2,189,814 |
182,060 |
435,816 |
43,300 |
69,589 |
90,749 |
55,697 |
14,734 |
1,055 |
4,339,859 |
Additions |
- |
- |
- |
- |
481 |
3,722 |
18,922 |
8,439 |
13,686 |
- |
45,250 |
Write-off (i) |
- |
- |
- |
- |
(2,272) |
- |
- |
(893) |
- |
- |
(3,165) |
Remeasurement (ii) |
2,556 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
2,556 |
Transfer |
- |
- |
- |
- |
13,062 |
4,785 |
16 |
(3,058) |
(14,805) |
- |
- |
Business combinations (iii) |
91,390 |
576,604 |
- |
145,987 |
63 |
- |
- |
- |
- |
- |
814,044 |
As of June 30, 2023 (unaudited) |
1,350,991 |
2,766,418 |
182,060 |
581,803 |
54,634 |
78,096 |
109,687 |
60,185 |
13,615 |
1,055 |
5,198,544 |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
1,334,699 |
2,776,077 |
182,060 |
578,267 |
71,150 |
84,201 |
128,477 |
74,892 |
12,134 |
1,055 |
5,243,012 |
Additions (iv) |
- |
49,600 |
- |
- |
961 |
5,010 |
8,616 |
15,150 |
11,782 |
- |
91,119 |
Write-off (i) |
- |
- |
- |
- |
- |
(162) |
(35) |
- |
- |
- |
(197) |
Transfer |
- |
- |
- |
- |
13,885 |
1,041 |
- |
(97) |
(14,829) |
- |
- |
As of June 30, 2024 (unaudited) |
1,334,699 |
2,825,677 |
182,060 |
578,267 |
85,996 |
90,090 |
137,058 |
89,945 |
9,087 |
1,055 |
5,333,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
- |
- |
(14,955) |
(212,363) |
(17,277) |
(26,562) |
(10,093) |
(17,039) |
- |
(79) |
(298,368) |
Amortization |
- |
- |
(3,469) |
(46,007) |
(4,042) |
(6,615) |
(8,787) |
(2,582) |
- |
(51) |
(71,553) |
Write-off (i) |
- |
- |
- |
- |
2,013 |
- |
- |
893 |
- |
- |
2,906 |
As of June 30, 2023 (unaudited) |
- |
- |
(18,424) |
(258,370) |
(19,306) |
(33,177) |
(18,880) |
(18,728) |
- |
(130) |
(367,015) |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
- |
- |
(26,038) |
(301,947) |
(24,094) |
(42,230) |
(31,603) |
(20,900) |
- |
(184) |
(446,996) |
Amortization |
- |
- |
(9,944) |
(39,024) |
(7,203) |
(9,482) |
(11,549) |
(9,340) |
- |
- |
(86,542) |
Write-off (i) |
- |
- |
- |
- |
- |
1 |
33 |
- |
- |
- |
34 |
As of June 30, 2024 (unaudited) |
- |
- |
(35,982) |
(340,971) |
(31,297) |
(51,711) |
(43,119) |
(30,240) |
- |
(184) |
(533,504) |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2024 (unaudited) |
1,334,699 |
2,825,677 |
146,078 |
237,296 |
54,699 |
38,379 |
93,939 |
59,705 |
9,087 |
871 |
4,800,430 |
As of December 31, 2023 |
1,334,699 |
2,776,077 |
156,022 |
276,320 |
47,056 |
41,971 |
96,874 |
53,992 |
12,134 |
871 |
4,796,016 |
(i) Refers to intangible assets written-off as result of lack of expectation of future
use.
(ii) Goodwill: During the measurement period, results of operation differed from the
foreseen, resulting in a remeasurement of the contingent consideration for the acquisitions of Além da Medicina, CardioPapers and
Glic by R$4,773, R$5,082 and (R$7,299), respectively, totaling R$2,556 for the six-month period ended June 30, 2023.
(iii) Business combination: On January 2, 2023, Afya Brazil acquired DelRey, a post-secondary
education institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and
health, as well as other courses.
(iv) On January 24, 2024, MEC authorized the increase of 40 medical school seats of Faculdades
Integradas Padrão (FIP Guanambi) located in the city of Guanambi, State of Bahia, which resulted in an additional payment of R$49,600.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Impairment testing of goodwill and intangible assets with indefinite
lives
The Company performs its annual impairment test in December and when circumstances indicated
that the carrying value may be impaired. The Company’s impairment test for goodwill and intangible assets with indefinite lives
is based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the different cash-generating
units were disclosed in the annual consolidated financial statements for the year ended December 31, 2023. There were no impairment indicatives
of goodwill and intangible assets with indefinite lives for the six-month period ended June 30, 2024.
Other intangible assets
For the six-month period ended June 30, 2024 and for the year ended December 31, 2023
there were no indicatives that the Company’s intangible assets with finite useful lives might be impaired.
| 11 | Financial assets and financial liabilities |
|
June 30, 2024 |
December 31, 2023 |
At amortized cost |
(unaudited) |
|
Trade receivables |
635,074 |
585,923 |
Dividends receivable |
1,668 |
1,668 |
|
636,742 |
587,591 |
Current |
596,802 |
548,106 |
Non-current |
39,940 |
39,485 |
| 11.2 | Financial liabilities |
|
June 30, 2024 |
December 31, 2023 |
At amortized cost |
(unaudited) |
|
Trade payables |
119,677 |
108,222 |
Loans and financing |
1,784,815 |
1,800,775 |
Lease liabilities |
921,701 |
874,569 |
Accounts payable to selling shareholders |
378,322 |
530,915 |
|
3,204,515 |
3,314,481 |
Current |
557,205 |
642,872 |
Non-current |
2,647,310 |
2,671,609 |
|
June 30, 2024 |
December 31, 2023 |
At fair value |
(unaudited) |
|
Accounts payable to selling shareholders (earn-outs) |
19,110 |
35,952 |
|
19,110 |
35,952 |
Current |
15,899 |
35,498 |
Non-current |
3,211 |
454 |
| 11.2.1 | Loans and financing |
Financial institution |
Currency |
Interest rate |
Maturity |
June 30, 2024 |
December 31, 2023 |
|
|
|
|
(unaudited) |
|
Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.75% p.y. |
2024 |
10,609 |
21,405 |
Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.90% p.y. |
2025 |
411,517 |
412,880 |
Softbank |
Brazilian real |
6.5% p.y. |
2026 |
827,327 |
825,957 |
FINEP |
Brazilian real |
TJLP p.y. |
2027 |
9,693 |
11,193 |
Debentures |
Brazilian real |
CDI + 1.80% p.y. |
2028 |
525,669 |
529,340 |
|
|
|
|
1,784,815 |
1,800,775 |
Current |
|
|
|
163,501 |
179,252 |
Non-current |
|
|
|
1,621,314 |
1,621,523 |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The Company has lease contracts for properties. The lease contracts generally have maturities
in the lease terms between five and 30 years. There are no sublease or variable payments in-substance lease agreements in the period.
The carrying amounts of right-of-use assets and lease liabilities as of June 30, 2024
and December 31, 2023 and the movements during the six-month periods ended June 30, 2024 and 2023 are shown below:
|
June 30, 2024 (unaudited) |
|
June 30, 2023 (unaudited) |
|
Right-of-use assets |
Lease liabilities |
|
Right-of-use assets |
Lease liabilities |
|
|
|
|
|
|
Opening balance |
767,609 |
874,569 |
|
690,073 |
769,525 |
Additions |
27,783 |
27,783 |
|
2,487 |
2,487 |
Remeasurement |
41,530 |
41,530 |
|
35,138 |
35,138 |
Business combination |
- |
- |
|
65,408 |
65,408 |
Depreciation expense |
(33,589) |
- |
|
(31,161) |
- |
Interest expense |
- |
53,770 |
|
- |
49,033 |
Payments of principal (i) |
- |
(19,859) |
|
- |
(14,026) |
Payments of interest (i) |
- |
(53,924) |
|
- |
(52,213) |
Write-off (ii) |
(1,924) |
(2,168) |
|
(2,433) |
(3,507) |
Closing balance |
801,409 |
921,701 |
|
759,512 |
851,845 |
|
|
|
|
|
|
Balances as of |
June 30, 2024 (unaudited) |
|
December 31, 2023 |
Current |
- |
41,077 |
|
- |
36,898 |
Non-current |
801,409 |
880,624 |
|
767,609 |
837,671 |
(i) Payments of principal and interest from lease liabilities are included in cash flows
from financing activities.
(ii) Refers to anticipated termination of real estate leasing contracts.
The Company recognized lease expense from short-term leases and low-value assets of
R$3,480 for the six-month period ended June 30, 2024 (R$4,644 for the six-month period ended June 30, 2023).
| 11.2.3 | Accounts payable to selling shareholders |
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Earn-outs |
|
|
Medical Harbour |
- |
3,000 |
Shosp |
454 |
454 |
Além da Medicina |
9,149 |
18,325 |
CardioPapers |
9,507 |
14,173 |
|
|
|
Accounts payable at amortized cost |
|
|
IPEMED |
- |
12,805 |
UniRedentor |
28,573 |
27,155 |
UniSL |
- |
15,064 |
FCMPB |
66,466 |
63,168 |
Unigranrio |
164,393 |
156,235 |
DelRey |
118,890 |
256,488 |
|
|
|
|
397,432 |
566,867 |
Current |
248,849 |
353,998 |
Non-current |
148,583 |
212,869 |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
|
|
Opening balance |
566,867 |
528,678 |
Additions |
- |
250,000 |
Payments of principal (i) |
(164,577) |
(52,206) |
Payment of interest (i) |
(25,000) |
(12,191) |
Interest |
19,402 |
47,758 |
Remeasurement of earn-outs (ii) |
740 |
2,556 |
Closing balance |
397,432 |
764,595 |
(i) Payments of principal and interest from acquisition of subsidiaries are included
in cash flows from investing activities.
(ii) During the measurement period, management’s expectation has been reviewed
based on performance for revenue goals and the contingent consideration for the acquisition of Além da Medicina, CardioPapers and
Glic have been remeasured by R$4,773, R$5,082 and (R$7,299), respectively, totaling R$2,556 as of June 30, 2023. These are measured by
the Company at the present value.
The table below compares the carrying amounts and fair values of the Company’s
financial instruments, other than those carrying amounts that are reasonable approximation of fair values:
|
June 30, 2024 (unaudited) |
December 31, 2023 |
|
Carrying amount |
Fair value |
Carrying amount |
Fair value |
Financial liabilities |
|
|
|
|
Loans and financing |
1,784,815 |
1,778,197 |
1,800,775 |
1,795,752 |
|
1,784,815 |
1,778,197 |
1,800,775 |
1,795,752 |
The Company assessed that the fair values of trade receivables,
other assets, trade payables, lease liabilities, accounts payable to selling shareholders and other liabilities approximate their carrying
amounts.
The financial instruments for which the fair value are disclosed
are based on Level 2 fair value measurement hierarchy. There has been no change in fair value hierarchy from December 31, 2023 to June
30, 2024.
The fair value of interest-bearing loans
and financing are determined by using the discounted cash flow (DCF) method using a discount rate that reflects the issuer’s borrowing
rate as of the end of the reporting period. As of June 30, 2024, it was assessed that it is probable that the targets that trigger the
contingent considerations payments (earn-outs) recognized will be met. The fair value of the contingent consideration determined at June
30, 2024 reflects the development, among other factors and the remeasurements charge have been recognized through profit or loss. The
fair value is determined using a DCF method. The own non-performance risk at June 30, 2024 was assessed to be insignificant.
| 11.4 | Financial instruments risk management objectives and policies |
The Company’s main financial liabilities comprise loans
and financing, lease liabilities, accounts payable to selling shareholders and trade payables. The main purpose of these financial liabilities
is to finance the Company’s operations. The Company’s main financial assets include trade receivables and cash and cash equivalents.
The Company is exposed to market risk, credit risk and liquidity risk. The Company monitors
market, credit and liquidity risks in line with the objectives of capital management and counts on the support, monitoring and oversight
of the Board of Directors in decisions related to capital management and its alignment with the objectives and risks. The Company’s
policy is that no trading of derivatives for speculative purposes may be undertaken. The Board of
Directors reviews and agrees with policies for managing each of these risks, which are summarized below.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. The Company’s exposure to market risk is related
to interest rate and foreign currency risk. The sensitivity analysis in the following sections relates to the position as of June 30,
2024.
a) Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk
of changes in market interest rates relates primarily to the Company’s cash equivalents, loans and financing and accounts payable
to selling shareholders, with floating interest rates.
Sensitivity analysis
The table below demonstrates the sensitivity to a reasonably
possible change in interest on cash equivalents, loans and financing and accounts payable to selling shareholders. With all variables
held constant, the Company’s income before income taxes is affected through the impact on floating interest rates, as follows:
|
June 30, 2024 |
Index |
Base rate |
|
(unaudited) |
|
|
Cash equivalents |
707,551 |
CDI |
74,167 |
Loans and financing |
(947,795) |
CDI |
(116,037) |
Loans and financing |
(9,693) |
TJLP |
(647) |
Accounts payable to selling shareholders |
(259,432) |
CDI |
(26,981) |
Accounts payable to selling shareholders |
(118,890) |
SELIC |
(12,365) |
Net exposure |
|
|
(81,863) |
|
Increase in basis points |
|
+75 |
+150 |
Net effect on profit before tax |
(4,712) |
(9,424) |
b) Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes
in foreign exchange rates relates to cash and cash equivalents denominated in U.S. dollars in the amount of R$6,935 as of June 30, 2024
(December 31, 2023: R$23,173).
Sensitivity analysis
The table below demonstrates the sensitivity in the Company’s
income before income taxes of a 10% change in the U.S. dollar exchange rate (R$5.5583 to U.S. dollar 1.00) as of June 30, 2024, with all
other variables held constant.
|
Exposure |
+10% |
-10% |
|
6,935 |
694 |
(694) |
Cash equivalents |
|
|
|
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Credit risk is the risk that a counterparty
will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to
credit risk from its operating activities (primarily trade receivables) and from its financing activities, including cash and cash equivalents.
Customer credit risk is managed by the
Company based on the established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables
are regularly monitored. See Note 5 for additional information on the Company’s trade receivables.
Credit risk from balances with banks and
financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments
of surplus funds are made only with approved counterparties and within limits assigned to each counterparty.
The carrying amounts of its financial assets are the Company’s
maximum exposure to credit risk for the components of the statements of financial position on June 30, 2024 and December 31, 2023.
The Company’s Management has responsibility for monitoring liquidity risk. In
order to achieve the Company’s objective, Management regularly reviews the risk and maintains appropriate reserves, including bank
credit facilities with first tier financial institutions. Management also continuously monitors projected and actual cash flows and the
combination of the maturity profiles of the financial assets and liabilities.
The main requirements for financial resources used by the Company arise from the need
to make payments for suppliers, operating expenses, labor and social obligations, loans and financing and accounts payable to selling
shareholders.
The tables below summarize the maturity profile of the Company’s
financial liabilities based on contractual undiscounted amounts:
As of June 30, 2024 (unaudited) |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
119,677 |
- |
- |
- |
119,677 |
Loans and financing |
219,597 |
1,618,926 |
264,929 |
- |
2,103,452 |
Lease liabilities |
147,523 |
282,511 |
272,884 |
1,310,498 |
2,013,416 |
Accounts payable to selling shareholders |
177,064 |
247,337 |
- |
- |
424,401 |
|
663,861 |
2,148,774 |
537,813 |
1,310,498 |
4,660,946 |
|
|
|
|
|
|
As of December 31, 2023 |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
108,222 |
- |
- |
- |
108,222 |
Loans and financing |
298,981 |
1,383,255 |
568,326 |
- |
2,250,562 |
Lease liabilities |
137,735 |
268,724 |
255,456 |
1,261,213 |
1,923,128 |
Accounts payable to selling shareholders |
387,693 |
231,478 |
- |
- |
619,171 |
|
932,631 |
1,883,457 |
823,782 |
1,261,213 |
4,901,083 |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
| 11.5 | Changes in liabilities arising from financing activities |
|
January 1, 2024 |
Payments of principal |
Payments of interest |
Additions and remeasurements |
Interest |
Other |
June 30, 2024 |
|
|
|
|
|
|
|
(unaudited) |
Loans and financing (i) |
1,800,775 |
(11,524) |
(87,933) |
- |
82,136 |
1,361 |
1,784,815 |
Lease liabilities (i) |
874,569 |
(19,859) |
(53,924) |
69,313 |
53,770 |
(2,168) |
921,701 |
Dividends payable |
- |
(9,399) |
- |
9,399 |
- |
- |
- |
|
2,675,344 |
(40,782) |
(141,857) |
78,712 |
135,906 |
(807) |
2,706,516 |
|
January 1, 2023 |
Payments of principal |
Payments of interest |
Additions and remeasurements |
Interest |
Business combination |
Other |
June 30, 2023 |
|
|
|
|
|
|
|
|
(unaudited) |
Loans and financing (i) |
1,882,901 |
(1,116) |
(66,189) |
5,288 |
102,512 |
- |
1,758 |
1,925,154 |
Lease liabilities (i) |
769,525 |
(14,026) |
(52,213) |
37,625 |
49,033 |
65,408 |
(3,507) |
851,845 |
Dividends payable |
- |
(10,300) |
- |
10,300 |
- |
- |
- |
- |
|
2,652,426 |
(25,442) |
(118,402) |
53,213 |
151,545 |
65,408 |
(1,749) |
2,776,999 |
(i) Payments of principal and interest from loans and financing and lease liabilities
are included in cash flows from financing activities.
For the purposes of the Company’s capital management,
capital considers total equity. The primary objective of the Company’s capital management is to maximize shareholder value.
In order to achieve its overall objective, the Company’s
capital management, among other things, aims to ensure that it meets financial covenants attached to the debentures and other loans and
financing, including net debt ratio to adjusted EBITDA. Breaches in meeting the financial covenants would permit the bank to immediately
call loans and financings. There have been no breaches of the financial covenants of any loans and financing in the current period.
No changes were made in the objectives, policies or processes
for managing capital during the six-month period ended June 30, 2024.
| 13 | Labor and social obligations |
a) Variable compensation (bonuses)
The bonuses related to variable compensation of employees
and management of R$8,047 and R$9,538 are recognized in cost of services and selling, general and administrative expenses in the statements
of income for the six-month periods ended June 30, 2024 and 2023, respectively.
b) Afya Limited share-based compensation plans
b.1) Stock options plan
The stock options plan was approved on August 30,
2019 and granted to senior executives and other employees of the Company from that date, with subsequent changes in the strike price,
as approved, on July 29, 2020, July 8, 2022 and July 31, 2023. Such changes were assessed as modifications by the Company and were accounted
in accordance with IFRS 2.
On July 31, 2023, the People and ESG Committee approved a change in the share-based
compensation plan to retain talents and reinforce the compensation plan. All the holders of stock options granted before July 11, 2022,
with strike price based on the IPO price in Brazilian Reais or above, were offered the possibility to exchange the stock options for a
number of Restricted Stock Units (RSUs), resulting in a weighted average conversion ratio of 0.12 RSUs per stock option, with conversion ratios based on fair value of the original plan, at modification date,
so that the total fair value of the modified award remained the same as the original plan.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
As result of those modifications, the expense related to the share-based payment of
the Company reflects the cost of the original award at grant date over the vesting period plus the incremental fair values of the repriced
options at modification dates over the vesting period of the stock options.
During the six-month period ended June 30, 2024 there were no stock options granted
by the Company (June 30, 2023: 45,000 stock options granted).
The table below presents the number and movements in stock
options for the six-month periods ended June 30, 2024 and 2023:
|
Weighted average strike price
(in Brazilian Reais) |
Number of stock options |
June 30, 2024 |
June 30, 2023 |
|
|
(unaudited) |
(unaudited) |
Outstanding at January 1 |
64.33 |
1,696,064 |
3,729,287 |
Granted |
- |
- |
45,000 |
Exercised |
61.75 |
(90,373) |
- |
Forfeited |
61.19 |
(4,182) |
(333,111) |
Expired |
61.27 |
(14,148) |
(211,882) |
Outstanding at June 30 |
65.71 |
1,587,361 |
3,229,294 |
Exercisable |
74.29 |
496,784 |
1,578,045 |
The share-based compensation expense recognized in selling,
general and administrative expenses in the statements of income for the six-month periods ended June 30, 2024 and 2023 was R$11,387 and
R$9,672, respectively.
b.2) Restricted Stock Units (RSU) Program
On July 8, 2022, the Company approved the new Restricted Stock
Units (RSU) program for employees. The participant's right to effectively receive ownership of the restricted shares will be conditioned
on the participant's continuance as an employee or director in the business group from the grant date until vesting. The executives will
be entitled to these shares in a proportion of 10%, 20%, 30%, 40% each year.
The Company accounts for the RSU plan as an equity-settled plan, except for the portion
of labor and social securities obligations.
During the six-month period ended June 30, 2024 there were no RSUs granted by the Company
(June 30, 2023: 24,000 RSUs granted).
The table below presents the number and movements in restricted shares for the six-month
periods ended June 30, 2024 and 2023:
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Outstanding at January 1 |
854,431 |
447,224 |
Granted |
- |
24,000 |
Exercised |
(222,910) |
(44,725) |
Forfeited |
(8,554) |
(21,894) |
Outstanding at June 30 |
622,967 |
404,605 |
Total RSU expenses recognized in selling, general and administrative expenses in the
consolidated statement of income for the six-month periods ended June 30, 2024 and 2023 were R$9,041 and R$3,726, respectively. Labor and social obligations were R$5,737 and R$2,357 for
the six-month periods ended June 30, 2024 and 2023, respectively.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
a) Share capital
As of June 30, 2024 and December 31, 2023, the Company’s
share capital was R$17 represented by 93,722,831 shares comprised by 49,920,068 class A common shares and 43,802,763 class B common shares
as of June 30, 2024 and 47,920,068 class A common shares and 45,802,763 class B common shares as of December 31, 2023. As of June 30,
2024 and December 31, 2023, the Company’s authorized capital was US$50 thousand.
b) Dividends
In the six-month period ended June 30, 2024, CCSI and IESVAP approved the payment of
dividends of R$40,340, which R$30,941 was distributed to the Company and R$9,399 to non-controlling shareholders (June 30, 2023: R$34,774,
which R$24,474 was distributed to the Company and R$10,300 to non-controlling shareholders).
c) Share repurchase program
On March 24, 2023, the Company’s board of directors approved the fourth share
repurchase program. Afya may repurchase up to 2,000,000 of its outstanding Class A common shares in the open market, based on prevailing
market prices, beginning on March 24, 2023, until the earlier of the completion of the repurchase or December 31, 2024, depending upon
market conditions.
The following table illustrates the number and movements in treasury shares during the
six-month periods ended June 30, 2024 and 2023:
|
June 30, 2024 (unaudited) |
|
June 30, 2023 (unaudited) |
|
Number of shares |
Average price
(in Brazilian Reais) |
|
Number of shares |
Average price
(in Brazilian Reais) |
Outstanding at January 1 |
3,773,478 |
79.28 |
|
3,786,285 |
80.54 |
Repurchased |
- |
- |
|
216,339 |
57.17 |
Transferred under the share-based compensation plan |
(243,534) |
79.28 |
|
(32,429) |
79.28 |
Outstanding at June 30 |
3,529,944 |
79.28 |
|
3,970,195 |
79.28 |
| 15 | Earnings per share (EPS) |
Basic EPS is calculated by dividing net income attributable
to the equity holders of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is calculated by dividing net income attributable
to the equity holders of the parent by the weighted average number of common shares outstanding during the period plus the weighted average
number of shares that would be issued on conversion of all potential shares with dilutive effects.
Diluted earnings per share are computed including stock options granted to key management
using the treasury shares method when the effect is dilutive. The Company has the stock option and restricted share unit plans in the
category of potentially dilutive shares.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Softbank’s series A perpetual convertible preferred shares are dilutive for the
six-month period ended June 30, 2024 and are included on diluted earnings per share (Antidilutive, and not included on diluted earnings
per share for the three-month period ended June 30, 2024 and for the three and six-month periods ended June 30, 2023).
The table below presents the basic and diluted earnings per
share calculations:
|
Three-month period ended |
|
Six-month period ended |
|
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Numerator |
|
|
|
|
|
Net income attributable to equity holders of the parent |
158,211 |
82,789 |
|
361,604 |
194,916 |
Interest on convertible preferred shares |
- |
- |
|
25,456 |
- |
Profit attributable to equity holders adjusted for the effect of the dilution |
158,211 |
82,789 |
|
387,060 |
194,916 |
Denominator |
|
|
|
|
|
Weighted average number of shares outstanding |
90,072,647 |
89,808,434 |
|
90,021,039 |
89,872,136 |
Effects of dilution from stock options and restricted share units |
1,096,430 |
473,143 |
|
1,239,242 |
557,174 |
Effects of dilution from convertible preferred shares |
- |
- |
|
5,917,888 |
- |
Weighted average number of outstanding shares adjusted for the effect of dilution |
91,169,077 |
90,281,577 |
|
97,178,169 |
90,429,310 |
|
|
|
|
|
|
Basic earnings per share (R$) |
1.76 |
0.92 |
|
4.02 |
2.17 |
Diluted earnings per share (R$) |
1.74 |
0.92 |
|
3.98 |
2.16 |
|
Three-month period ended |
|
Six-month period ended |
|
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Tuition fees |
986,598 |
866,746 |
|
1,967,573 |
1,729,136 |
Other |
73,094 |
62,108 |
|
145,773 |
127,092 |
Deductions |
|
|
|
|
|
Discount and scholarships |
(67,621) |
(59,431) |
|
(143,258) |
(112,067) |
Early payment discounts |
(51,827) |
(45,283) |
|
(100,051) |
(100,000) |
Returns |
(3,310) |
(5,385) |
|
(11,544) |
(13,271) |
Taxes |
(42,161) |
(34,834) |
|
(80,858) |
(70,556) |
PROUNI |
(84,883) |
(71,314) |
|
(163,506) |
(137,766) |
|
809,890 |
712,607 |
|
1,614,129 |
1,422,568 |
|
|
|
|
|
|
Timing of revenue recognition of revenue from contracts with customers |
|
|
|
|
|
Tuition, digital content and app subscription fees - Transferred over time |
800,302 |
698,664 |
|
1,590,451 |
1,393,180 |
Other - Transferred at a point in time |
9,588 |
13,943 |
|
23,678 |
29,388 |
The Company’s revenue from contracts with customers
are all in Brazil. The Company is not subject to the payment of the Social Integration Program tax (Programa de Integração
Social, or PIS) and the Social Contribution on Revenue tax (Contribuição para o Financiamento da Seguridade Social,
or COFINS) on the revenue from under graduation degrees under the PROUNI program.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
The tables below present the statements of income
for the Company’s operating segments for the six-month periods ended June 30, 2024 and 2023:
|
Undergrad |
Continuing education |
Medical practice solutions |
Elimination (inter-segment transactions) |
June 30, 2024 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,414,166 |
127,506 |
76,854 |
(4,397) |
1,614,129 |
Tuition fees |
1,405,444 |
80,054 |
- |
- |
1,485,498 |
Other |
8,722 |
47,452 |
76,854 |
(4,397) |
128,631 |
|
|
|
|
|
|
Timing of revenue recognition |
1,414,166 |
127,506 |
76,854 |
(4,397) |
1,614,129 |
Transferred over time |
1,405,444 |
116,556 |
72,848 |
(4,397) |
1,590,451 |
Transferred at a point in time |
8,722 |
10,950 |
4,006 |
- |
23,678 |
|
Undergrad |
Continuing education |
Medical practice solutions |
Elimination (inter-segment transactions) |
June 30, 2023 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,246,240 |
113,675 |
67,839 |
(5,186) |
1,422,568 |
Tuition fees |
1,237,508 |
70,423 |
- |
- |
1,307,931 |
Other |
8,732 |
43,252 |
67,839 |
(5,186) |
114,637 |
|
|
|
|
|
|
Timing of revenue recognition |
1,246,240 |
113,675 |
67,839 |
(5,186) |
1,422,568 |
Transferred over time |
1,237,508 |
97,459 |
63,399 |
(5,186) |
1,393,180 |
Transferred at a point in time |
8,732 |
16,216 |
4,440 |
- |
29,388 |
| 17 | Costs and expenses by nature |
|
Three-month period ended |
|
Six-month period ended |
|
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Payroll |
(293,645) |
(280,772) |
|
(554,192) |
(529,916) |
Hospital and medical agreements |
(24,835) |
(22,230) |
|
(48,754) |
(41,446) |
Depreciation and amortization |
(84,038) |
(72,306) |
|
(163,307) |
(138,264) |
Lease expenses |
(2,148) |
(2,017) |
|
(3,480) |
(4,644) |
Utilities |
(6,100) |
(5,624) |
|
(10,246) |
(9,776) |
Maintenance |
(26,163) |
(26,101) |
|
(54,005) |
(48,622) |
Share-based compensation |
(11,798) |
(6,902) |
|
(20,428) |
(13,398) |
Tax expenses |
(3,401) |
(2,753) |
|
(5,959) |
(4,892) |
Pedagogical services |
(24,966) |
(19,242) |
|
(41,577) |
(31,994) |
Sales and marketing |
(18,378) |
(15,803) |
|
(34,656) |
(29,389) |
Allowance for expected credit losses |
(14,754) |
(21,392) |
|
(30,018) |
(39,086) |
Travel expenses |
(4,647) |
(3,683) |
|
(7,253) |
(6,794) |
Consulting fees |
(13,698) |
(12,558) |
|
(23,718) |
(32,488) |
Other |
(50,033) |
(42,498) |
|
(91,679) |
(83,999) |
|
(578,604) |
(533,881) |
|
(1,089,272) |
(1,014,708) |
Cost of services |
(314,842) |
(284,295) |
|
(584,346) |
(531,902) |
Selling, general and administrative expenses |
(263,762) |
(249,586) |
|
(504,926) |
(482,806) |
|
(578,604) |
(533,881) |
|
(1,089,272) |
(1,014,708) |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
|
Three-month period ended |
|
Six-month period ended |
|
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Income from financial investments |
13,641 |
18,291 |
|
25,468 |
34,944 |
Interest received |
8,619 |
4,842 |
|
21,034 |
15,141 |
Other |
1,473 |
759 |
|
2,761 |
1,494 |
Finance income |
23,733 |
23,892 |
|
49,263 |
51,579 |
|
|
|
|
|
|
Interest expense |
(50,533) |
(74,867) |
|
(102,278) |
(152,404) |
Interest expense on lease liabilities |
(27,026) |
(23,507) |
|
(53,770) |
(49,033) |
Financial discounts granted |
(7,170) |
(6,828) |
|
(14,949) |
(13,878) |
Bank fees |
(1,027) |
(1,560) |
|
(2,557) |
(3,531) |
Taxes on financial transactions (IOF) |
(50) |
(221) |
|
(682) |
(1,511) |
Other |
(6,478) |
(7,135) |
|
(17,944) |
(18,000) |
Finance expenses |
(92,284) |
(114,118) |
|
(192,180) |
(238,357) |
|
|
|
|
|
|
Net finance result |
(68,551) |
(90,226) |
|
(142,917) |
(186,778) |
Income taxes are comprised of taxation over operations in Brazil, related to Corporate
Income Tax ("IRPJ") and Social Contribution on Net Profit ("CSLL"). According to Brazilian tax legislation, income
taxes and social contribution are assessed and paid by legal entity and not on a consolidated basis.
Reconciliation of income taxes expense
The table below presents the reconciliation
of income tax expense for the six-month periods ended June 30, 2024 and 2023:
|
Three-month period ended |
|
Six-month period ended |
|
June 30, 2024 |
June 30, 2023 |
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Income before income taxes |
165,291 |
89,627 |
|
384,455 |
226,460 |
Statutory income taxes rate |
34% |
34% |
|
34% |
34% |
Income taxes at statutory rate |
(56,199) |
(30,473) |
|
(130,715) |
(76,996) |
Reconciliation adjustments: |
|
|
|
|
|
Tax effect on loss from entities not subject to taxation |
(8,949) |
(7,758) |
|
(16,910) |
(15,518) |
PROUNI - Fiscal incentive (i) |
89,502 |
77,210 |
|
193,615 |
167,681 |
Unrecognized deferred taxes |
(27,216) |
(42,133) |
|
(60,271) |
(91,241) |
Presumed profit income tax regime effect (ii) |
(210) |
(1,919) |
|
(185) |
(3,417) |
Permanent adjustments |
(1,766) |
(884) |
|
(3,265) |
(5,378) |
Other |
1,747 |
3,867 |
|
3,775 |
3,719 |
Income taxes expense |
(3,091) |
(2,090) |
|
(13,956) |
(21,150) |
Effective rate |
1.9% |
2.3% |
|
3.6% |
9.3% |
(i) The Company adhered to PROUNI, established by Law 11,096 / 2005,
which is a federal program that exempts companies of paying income taxes and social contribution upon compliance with certain requirements
required by said Law.
(ii) Brazilian tax law establishes that companies that generate
gross revenues of up to R$78,000 in the prior fiscal year may calculate income taxes as a percentage of gross revenue, using the presumed
profit tax regime. The effect of the presumed profit of certain subsidiaries represents the difference between the taxation based on this
method and the amount that would be due based on the statutory rate applied to the taxable profit of the subsidiaries.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Deferred income taxes
As of June 30, 2024, the Company had accumulated unrecognized deferred income tax assets
on temporary differences and tax losses in the amount of R$1,326,587 of tax-basis (December 31, 2023: R$1,211,909) which does not have
any tax planning opportunities available that could support the recognition of these temporary differences as deferred tax assets. Accordingly,
the Company did not recognize deferred tax assets over these amounts, except for R$6,413 of tax basis from one subsidiary, where the Company
recognize deferred tax assets as result of expected future taxable income (December 31, 2023: R$9,508).
| 20 | Legal proceedings and contingencies |
The provisions related to labor, civil and taxes proceedings whose likelihood of loss
is assessed as probable are as follows:
|
Labor |
Civil |
Taxes |
Total |
|
|
|
|
|
Balances as of January 1, 2023 |
22,484 |
24,664 |
148,706 |
195,854 |
Additions |
2,246 |
2,835 |
4,868 |
9,949 |
Reversals |
(394) |
(904) |
(1,717) |
(3,015) |
Business combination |
64 |
88 |
- |
152 |
Balances as of June 30, 2023 (unaudited) |
24,400 |
26,683 |
151,857 |
202,940 |
|
|
|
|
|
Balances as of January 1, 2024 |
22,721 |
21,300 |
60,340 |
104,361 |
Additions |
5,166 |
4,594 |
12,797 |
22,557 |
Reversals |
(5,892) |
(1,357) |
(20,413) |
(27,662) |
Balances as of June 30, 2024 (unaudited) |
21,995 |
24,537 |
52,724 |
99,256 |
The major labor proceedings to which the Company is a party were filed by former employees
or outsourced service providers seeking enforcement of labor rights allegedly not provided by us. The judicial proceedings relates to
employment bonds (judicial proceedings filed by former service providers), overtime, premiums for hazardous workplace conditions, statutory
severance, fines for severance payment delays, and compensation for workplace-related accidents.
The civil claims to which the Company is a party generally relate to consumer claims,
including those related to student complaints.
The tax claims to which the Company is party are mostly tax foreclosures filed by Brazilian
federal and municipal tax authorities.
There are other civil, labor and taxes proceedings assessed by Management and its legal
counsels as possible risk of loss, for which no provisions are recognized, as follows:
|
June 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Labor |
32,554 |
32,683 |
Civil |
52,657 |
51,319 |
Taxes |
6,251 |
5,669 |
|
91,462 |
89,671 |
The Company has judicial deposits, related to taxes, civil and labor proceedings, recorded
in other non-current assets in the amount of R$14,653 as of June 30, 2024 (December 31, 2023: R$14,187).
Under the terms of the Share Purchase and Sale Agreements ("Agreements") between
the Company and the selling shareholders of the subsidiaries acquired, the Company assesses that the selling shareholders are exclusively responsible for any provisions (including
labor, tax and civil), which are or will be the subject of a claim by any third party, arising from the act or fact occurred, by action
or omission, prior to or on the closing dates of the acquisitions.
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Considering that the provisions for legal proceedings recorded by the Company that result
from causes arising from events occurring prior to the closing dates of the acquisitions, any liability for the amounts to be disbursed,
in case of their effective materialization in loss, belongs exclusively to the selling shareholders. In this context, the Agreements state
that the Company and its subsidiaries are indemnified and therefore exempt from any liability related to said contingent liabilities and,
therefore, the provision amounts related to such contingencies are presented in the non-current liabilities and the correspondent amount
of R$73,710 (December 31, 2023: R$81,855) is presented in non-current other assets.
During the six-month periods ended June 30, 2024 and 2023, the Company carried out non-cash
transactions which are not reflected in the statements of cash flows. The main non-cash transactions are as follows:
|
June 30, 2024 |
June 30, 2023 |
|
(unaudited) |
(unaudited) |
Additions and remeasurements of right-of-use assets and lease liabilities |
69,313 |
37,625 |
Remeasurement of earn-out of Além da Medicina, CardioPapers and Glic |
- |
2,556 |
Additions (reversals) of provision for legal proceedings with corresponding indemnification asset, net |
(8,145) |
- |
Acquisition of Unidom
On July 1, 2024, Afya Brazil acquired 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 with 300 operational medical school seats to Afya in Salvador,
one of Brazil's largest cities. The authorization request for these 300 medical school seats was made to MEC before the Mais Médicos
Law was enacted and MEC concluded its analysis and issued Ordinance 630/2020 ("Ordinance") in 2020 to authorize the operation
considering 125 medical school seats. In 2021, as a result of a judicial order, MEC reviewed the Ordinance to authorize the 300 medical
school seats initially requested by Unidompedro. Such decision was confirmed by a federal judge in the State of Bahia in 2023. Currently,
Unidompedro has 300 medical school seats authorized, of which 125 are final and 175 are subject to a final conclusion of the aforementioned
court proceedings.
The aggregate purchase price is R$660,000, net of the estimated Net Debt deducted from
the down payment. The price and payment conditions are:
| · | R$340,773, net of the estimated Net Debt, paid in cash on July 1, 2024;
and |
| · | R$312,200 will be paid in up to 10 annual installments of R$31,220,
adjusted by the CDI rate, and it is conditioned upon the maintenance of the authorization of the 175 medical school seats in each of
the prior year. The remaining payment balance is accelerated if a final and non-appealable conclusion of the aforementioned court
proceedings, within the 10-year payment period, confirms the authorization for the 175 medical school seats. In turn, if, within the
same 10-year payment period, a final conclusion
of the aforementioned court proceedings does not confirm the authorization for such 175 medical school seats, the remaining payment balance
will no longer be due. |
| Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| |
Additionally, if Unidompedro or Faculdade Dom Luiz
wins the bid process in the Mais Médicos III Program an additional payment of R$250 thousand per granted medical school seat will
be made. Given the future event that will trigger the potential payout is not under the Company’s control, the probability of such
payout cannot be reliably estimated and thus the contingent consideration was not measured at the acquisition date. Should the additional
medical school seats be approved, it will result in additional licenses, which will be measured accordingly if and when approved.
The acquisition date fair value of each major class of consideration, including the
allocation of the purchase price has not been completed by the Company as of the issuance date of these interim financial statements.
The impact on the combined Company's revenue and profit or loss for the current reporting period as if the acquisition date had been as
of the beginning of the reporting period is not available as the Company did not conclude this acquisition by June 30, 2024. Therefore,
these financial statements do not include this information. The transaction costs to date amounted to R$2.225. Any goodwill generated
in the transaction is not expected to be deductible for tax purposes.
Medical school seats increase in DelRey
On July 12, 2024, 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$1,250 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.
Loan agreement
On August 7, 2024, Afya Brazil 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$500.000, 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.
***
Afya (NASDAQ:AFYA)
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