Afya Limited (Nasdaq: AFYA) (“Afya” or the
“Company”), the leading medical education group in Brazil, today
reported financial and operating results for the three and
six-month periods ended June 30, 2020 (second quarter 2020, 2Q20
and first half 2020, respectively). Financial results are expressed
in Brazilian Reais and are presented in accordance with
International Financial Reporting Standards (IFRS).
Second Quarter 2020
- Net Revenue in 2Q20 increased 53.6%
year over year (YoY) to R$274.2 million, this value does not
include R$14.4 million of net revenue, that was deferred due to the
interruption of practical activities on campus. Net Revenue
excluding UniRedentor and UniSL grew 22.6%, reaching R$218.8
million.
- Adjusted EBITDA in 2Q20 increased
76.6% YoY reaching R$118.2 million, considering the deferred
revenue recognition of R$14.4 million related to the interruption
of practical activities on campus, with Adjusted EBITDA margin of
43.1%, expanding 560 basis points (bps). Adjusted EBITDA excluding
UniRedentor and UniSL grew 46.6%.
- Adjusted Net Income in 2Q20 of
R$82.6 million was 163.1% higher than 2Q19.
First Half 2020 Highlights
- First Half 2020 Net Revenue of
R$546.5 million, up 69.2% YoY, this value does not include R$14.4
million of net revenue, that was deferred due to the interruption
of practical activities on campus. Net Revenue excluding
UniRedentor and UniSL increased 47.3% YoY reaching R$475.8
million.
- Adjusted EBITDA for first half 2020
(1H20) increased 82.7% YoY reaching R$258.8 million, with Adjusted
EBITDA margin of 47.4%, expanding 360 bps. Adjusted EBITDA
excluding UniRedentor and UniSL increased 66.5% YoY, reaching
R$235.9 million, with Adjusted EBITDA margin of 49.6%.
- Adjusted Net Income in 1H20 of
R$206.6 million was 143.3% higher than 1H19.
- Cash conversion of 82.6% with a
solid cash position of R$1.1 billion at quarter-end.
- Subsequent events:
- Entrance into the digital health
services segment with the acquisition of PEBMED, strengthening
BU-2. PEBMED helps physicians in the decision making process
through Whitebook with more than 165,000 active users per month, of
which 91,000 are paying subscribers. It also provides Nursebook app
and PEBMED portal;
- Entrance into a purchase agreement
for the acquisition of Faculdade Ciências Médicas da Paraíba, or
FCMPB and Faculdade de Ensino Superior da Amazônia Reunida, or
FESAR, adding a combined total of 277 medical seats. The
transactions are subject to customary closing conditions and
antitrust regulatory approvals. It is Afya’s first medical school
in Paraíba state and FESAR, the second one, in the state of
Pará.
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 1: Financial Highlights |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months period ended June 30, |
|
For the six months period ended June 30, |
|
(in thousand
of R$) |
2020 |
|
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
|
2020 |
|
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
|
(a) Net Revenue¹ |
274,211 |
|
218,813 |
|
178,493 |
|
53.6 |
% |
22.6 |
% |
|
546,515 |
|
475,811 |
|
323,071 |
|
69.2 |
% |
47.3 |
% |
|
(b) Pro forma Net Revenue¹ ² |
274,211 |
|
218,813 |
|
184,229 |
|
48.8 |
% |
18.8 |
% |
|
546,515 |
|
475,811 |
|
402,172 |
|
35.9 |
% |
18.3 |
% |
|
(c) Adjusted EBITDA³ |
118,152 |
|
98,072 |
|
66,909 |
|
76.6 |
% |
46.6 |
% |
|
258,796 |
|
235,867 |
|
141,639 |
|
82.7 |
% |
66.5 |
% |
|
(d) = (c )/(a) Adjusted EBITDA Margin² |
43.1 |
% |
44.8 |
% |
37.5 |
% |
560 bps |
730 bps |
|
47.4 |
% |
49.6 |
% |
43.8 |
% |
360 bps |
580 bps |
|
(g) Pro forma Adjusted EBITDA¹ ² |
118,152 |
|
98,072 |
|
68,127 |
|
73.4 |
% |
44.0 |
% |
|
258,796 |
|
235,867 |
|
152,509 |
|
69.7 |
% |
54.7 |
% |
|
(h) = (e)/(b) Pro forma Adjusted EBITDA¹ ² Margin |
43.1 |
% |
44.8 |
% |
37.0 |
% |
610 bps |
780 bps |
|
47.4 |
% |
49.6 |
% |
37.9 |
% |
950 bps |
1170 bps |
|
(i) Adjusted Net Income³ |
82,558 |
|
68,689 |
|
31,376 |
|
163.1 |
% |
118.9 |
% |
|
206,569 |
|
190,654 |
|
84,907 |
|
143.3 |
% |
124.5 |
% |
|
1. Due to the
interruption of pratical classes during the pandemic R$ 14.4
million of 1H2020 Net Revenue will be recognized in the
2H2020. |
|
2. Includes the
pro-forma results of Medcel, IPEMED and FASA, as if the acquisition
had been consummated on January 1, 2019. |
|
3. See more
information on "Non-GAAP Financial Measures" (Item 8). |
|
Message from Management
Virgilio Gibbon, Afya’s CEO,
stated:
Our organization has responded and adapted to
the challenges of the COVID-19 in an incredible and agile
manner. I am extremely proud of the way Afya has adapted and
executed to meet the significant changes and delivered an
outstanding performance during the second quarter, which was ahead
of our expectations.
The story of the second quarter was dictated by
the COVID-19 pandemic. Our priorities remain unchanged as we
continue to navigate these challenging times. We are focused on
taking care of our employees and students and operating in a safe
environment that protects both our team members and students. To
that end, in mid-March, we shifted all our classes online and moved
to a remote work situation for all corporate employees. Our ability
to adapt to these changes allowed us to deliver a strong
performance in the second quarter and surpass our first half
guidance. Importantly, we closed the quarter having exceeded all
the key financial targets we laid out for first half 2020.
We began the year with a very strong intake
process, had completed the enrollment process and delivered 100%
occupancy for the first half. We also saw strong demand for medical
seats for the upcoming semester, thus, we are once again assured of
100% occupancy for the remainder of the year.
The COVID-19 pandemic intensified and
accelerated some behavior shifts that were already underway, and
caused us to rethink where best to invest our resources. In
addition, as evidenced by the pandemic, the medical community and
patients alike have embraced a digital component to healthcare. We
discussed in the past that digital assets were appealing to us so
that we can add more services to medical students and
professionals, thus maximizing our product offering. Subsequent to
quarter end, we furthered our Afya Digital with the acquisition of
PEBMED, our first and significant acquisition in the health tech
segment. This acquisition enables us to deepen our relationships
with our students as well as getting our brand in front of many new
doctors, nurses and other medical personnel and students, enhancing
our competitive position and our capabilities.
Additionally, and also subsequent to quarter
end, we announced two medical school acquisitions adding a further
277 seats – marking our entry in the state of Paraíba and
strengthening our presence in the state of Pará. We are
successfully executing on our strategy as we have completed 15
acquisitions over the past 2 years - 6 since we became public one
year ago - and have added close to 700 medical seats in less than
one year, or approximately 70% of our three-year target of 1,000
seats shared during our IPO. Importantly, we have a solid track
record of integrating acquired companies and delivering cost
efficiencies and synergies that can be seen in the margin expansion
we are delivering. These acquisitions set us up to deliver
continued strong results in the months and years to come.
We continue to have a peer-leading capital
structure, providing agility to adapt to the dynamic environment we
are operating in. Given our strong free cash flow and liquidity, we
remain committed to our long-term capital priorities, with a
balanced approach to invest in the business and return strong cash
to our stockholders, all while keeping our students, faculty
members and employees safe and managing through this volatile
environment.
We are celebrating our one year anniversary of
being a public company. Since then, we have all experienced
significant change and new challenges over these past several
months. Things we never predicted are now realities that we are all
adapting to. Things we thought would evolve over the course of
several years have changed in weeks. We are very pleased with our
first half performance and are encouraged with how the back half is
shaping up which is reflected in the guidance that we are
introducing today.
To close, I could not be prouder of the Afya
organization for how they have responded, the way we kept our focus
on our people, students and physicians and delivered superior
execution, leading to an outstanding first half in 2020.
1. First
Half 2020 Guidance
|
|
Guidance for 1H20 |
Actual 1H20 |
Net Revenue(1)(2) |
|
R$475 mn ≤ ∆ ≤ R$510 mn |
R$516.1 mn |
Adjusted EBITDA Margin(3) |
|
45% ≤ ∆ ≤ 46.5% |
48.1% |
(1) Includes Uniredentor starting February 1st, 2020, and
excludes any acquisition that was concluded after the issuance of
the guidance; for instance, it does not include UniSL that was
concluded on May 5, 2020, subsequent to the original issuance of
guidance.(2) Includes the postponement in the recognition of Net
Revenue in the amount of R$14.4 million, due to the interruption of
practical classes during the pandemic. (3) Includes the impact
of the adoption of IFRS16.
2. Second
Half 2020 Guidance
The Company is introducing guidance for 2H20
which takes into account the successfully concluded acceptances of
new medicine students for the second half of 2020 and assuming a
certain degree of potential impacts of COVID-19 into the business
during 2H20. We assume that the practical educational on-campus
activities resume in second half but some portion might be provided
only in 2021.
The global Coronavirus outbreak is an
unprecedented and still evolving situation. When considering Afya’s
guidance for 2H20, it is paramount that shareholders and the market
in general be advised that the COVID-19 pandemic is still evolving
in Brazil, some state authorities may maintain quarentines or
“shelter in place” status for a still undefined period of time
and/or take other actions not contemplated into the guidance, all
of which are outside of the Company’s control.
Considering the above factors, the guidance for 2H20 is defined
in the following table.
Guidance for 2H20 |
Important considerations |
Net Revenue is expected to be between R$600 million – R$640
million |
- Includes PEBMED starting on July 20, 2020.
- Includes R$14.4 million of Net Revenue related to the 1H20 that
was not recognized due to the postponement of practical classes
during the pandemic.
- Excludes any acquisition that may be concluded after the
issuance of the guidance. For instance does not include FCMPB and
FESAR.
|
Adjusted EBITDA margin is expected to be between
45.5-47.0% |
- Includes PEBMED starting on July 20, 2020.
- Includes R$14.4 million of Net Revenue related to the 1H20 that
was not recognized due to the postponement of practical classes
during the pandemic.
- Excludes any acquisition that may be concluded after the
issuance of the guidance. For instance does not include FCMPB and
FESAR.
- Includes the impact of the adoption of IFRS 16.
|
3. Overview
of 2Q20
Operational Review
Afya is the only company offering technological
solutions to support students across every stage of the medical
career, from undergraduate students in its medical school years
through medical residency preparatory courses, medical
specialization programs and continuing medical education.
The Company operates two distinct business
units. The first (Business Unit 1 or BU1), is
comprised of Undergraduate – medical schools, other healthcare
programs and ex-health degrees. Revenue is generated from the
monthly tuition fees the Company charges students enrolled in the
undergraduate programs. The Company also offers Residency
Preparatory and Specialization Programs, as well as Digital Health
Services (Business Unit 2 or BU2). Revenue is
comprised of fees from these programs.
|
|
|
|
|
Table 2: Key Revenue Drivers |
Six months ended June 30, |
|
|
2020 |
2019 |
% Chg |
|
Business Unit 1: Educational Services Segment
¹ |
|
|
|
|
MEDICAL SCHOOL |
|
|
|
|
Approved Seats² |
1,866 |
1,352 |
38.0 |
% |
|
Operating Seats |
1,516 |
1,102 |
37.6 |
% |
|
Total Students |
9,097 |
5,550 |
63.9 |
% |
|
Total Students (ex-UniSL and ex- Uniredentor) |
7,319 |
5,550 |
31.9 |
% |
|
Tuition Fees (ex- UniSL and ex- Uniredentor - R$MM) |
358,214 |
239,280 |
49.7 |
% |
|
Tuition Fees (Total - R$MM) |
406,439 |
239,280 |
69.9 |
% |
|
Medical School Avg, Ticket (ex- UniSL and ex- Uniredentor -
R$/month) |
8,157 |
7,186 |
13.5 |
% |
|
UNDERGRADUATE HEALTH SCIENCE |
|
|
|
|
Total Students |
13,853 |
6,939 |
99.6 |
% |
|
Total Students (ex-UniSL and ex- Uniredentor) |
7,031 |
6,939 |
1.3 |
% |
|
Tuition Fees (ex- UniSL and ex- Uniredentor - R$MM) |
52,249 |
49,570 |
5.4 |
% |
|
Tuition Fees (Total - R$MM) |
68,723 |
49,570 |
38.6 |
% |
|
OTHER UNDERGRADUATE |
|
|
|
|
Total Students |
16,031 |
12,711 |
26.1 |
% |
|
Total Students (ex-UniSL and ex- Uniredentor) |
8,723 |
12,711 |
-31.4 |
% |
|
Tuition Fees (ex- UniSL and ex- Uniredentor - R$MM) |
58,829 |
60,504 |
-2.8 |
% |
|
Tuition Fees (Total - R$MM) |
80,707 |
60,504 |
33.4 |
% |
|
Business Unit 2: Prep Courses & CME and Medical
Specialization |
|
|
|
|
Active Paying Students |
|
|
|
|
Prep Courses & CME - B2C |
10,594 |
8,415 |
25.9 |
% |
|
Prep Courses & CME - B2B |
890 |
732 |
21.6 |
% |
|
Medical Specialization & Others |
4,513 |
1,728 |
161.2 |
% |
|
Medical Specialization & Others (ex-Uniredentor) |
2,188 |
1,728 |
26.6 |
% |
|
Revenue from courses (ex- Uniredentor - R$MM) ³ |
86,643 |
23,371 |
270.7 |
% |
|
|
|
|
|
|
1. Uniredentor average tuition fee for medical school in 1H2020 was
R$9,431 and for UniSL was R$7,691. |
|
2. This number does not includes FCMPB and FESAR that were acquired
in August, 2020 and contribute 277 seats to Afya. |
|
3. As Medcel and Ipemed were acquired on March 31, 2019 and on May
9, 2019 respectively, revenue from courses for BU2 were not
accounted for in 1Q19. The number of students is disclosed to
contribute with investors analysis. |
|
Along with the active paying students, 11,619
medical students from 46 public and private medical schools are
still accessing the Company’s Digital platform with a temporary
free access during the pandemic crisis.
Total monthly active users (MaU) increased 27.6%
quarter over quarter, reaching 20,420 users at the end of June. MaU
represents the number of unique individuals that consumed Afya’s
digital content in the last 30 days. Afya’s offers to its MaU a
significant amount of learning assets, comprised of e-books,
videos, podcasts and question/answer documents.
Table 3: Key
Operational Drivers for BU2 |
2020 |
|
2Q20 |
1Q20 |
% Chg |
Total Monthly Active Users (MaU) |
20,420 |
16,008 |
27.6% |
*Does not include PEBMED’s numbers
Seasonality
Afya’s two businesses are impacted by
seasonality but at different time periods. The first is associated
with the concentration of prep course revenues in the first and
fourth quarters of each year, when new content (books and e-books)
is delivered and most part of the revenues are recognized. The
second is associated with the maturation of several medical
schools, which leads to a higher enrollment base in the second half
of each year. As a result, in a typical year, the first quarter is
normally the strongest. The fourth quarter is normally the second
strongest, followed by the third and second quarters, respectively.
Finally, the second half of the year is normally stronger than the
first half.
Revenue
Total Net Revenue for second quarter 2020 was
R$274.2 million, an increase of 53.6% over the same period of prior
year. Pro forma Net Revenue, which considers results of Medcel,
IPEMED and FASA as if they were acquired on January 1st 2019, was
R$274.2 million in 2Q20, up 48.8% over the same period of the prior
year. Excluding UniSL and UniRedentor, Pro Forma Net Revenue in
2Q20 increased 18.8% YoY, reaching R$218.8 million. This increase
was primarily driven by organic revenue growth, mainly due to the
maturation of medical school seats and increase in average
ticket.
For the six-months ended June 30, 2020 Total Net
Revenue was R$546.5 million, an increase of 69.2% over the same
period of last year. For the six-months ended June 30, 2020, Pro
forma Net Revenue increased 35.9% over the same period of last
year, to R$546.5 million. Excluding UniSL and UniRedentor, Pro
Forma Net Revenue in six-months ended June 30 increased 18.3% YoY,
reaching R$475.8 million.
Taking into account the interruption of
on-campus activities and that some non-practical educational
activities had to be rearranged to 2H20, according to IFRS15, the
Company concluded it was necessary to defer R$14.4 million of its
2Q20 Net Revenue, with no postponement of costs or expenses in the
same period. The Company expects these activities to gradually
resume during 2H20 and the associated deferred revenues to be
recognized at that time.
|
|
|
|
|
|
|
|
|
|
|
|
Table 4:
Revenue & Revenue
Mix |
|
(in thousand
of R$) |
For the three months period ended June 30, |
|
For the six months period ended June 30, |
|
2020 |
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
|
2020 |
|
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
Net Revenue Mix |
|
|
|
|
|
|
|
|
|
|
|
Business Unit-1 |
240,102 |
190,064 |
156,940 |
|
53.0 |
% |
21.1 |
% |
|
451,886 |
|
389,168 |
301,518 |
|
49.9 |
% |
29.1 |
% |
Business Unit-2 |
34,109 |
28,749 |
23,371 |
|
45.9 |
% |
23.0 |
% |
|
95,606 |
|
86,643 |
23,371 |
|
309.1 |
% |
270.7 |
% |
Inter-segment transactions |
- |
- |
(1,818 |
) |
- |
|
- |
|
|
(977 |
) |
- |
(1,818 |
) |
-46.3 |
% |
- |
|
Total Reported Net Revenue |
274,211 |
218,813 |
178,493 |
|
53.6 |
% |
22.6 |
% |
|
546,515 |
|
475,811 |
323,071 |
|
69.2 |
% |
47.3 |
% |
Total Pro Forma Net Revenue¹ |
274,211 |
218,813 |
184,229 |
|
48.8 |
% |
18.8 |
% |
|
546,515 |
|
475,811 |
402,172 |
|
35.9 |
% |
18.3 |
% |
1. Includes the
pro-forma results of Medcel, IPEMED and FASA, as if the acquisition
had been consummated on January 1, 2019. |
Adjusted EBITDA
Adjusted EBITDA in the three-months ended June
30, 2020 increased 76.6% to R$118.2 million, from R$66.9 million in
the same period of the prior year. Adjusted EBITDA margin of 43.1%
was up from 37.5% reported in the three-months ended June 30, 2019.
For the six-months ended June 30, 2020, Adjusted EBITDA increased
82.7% to R$258.8 million, from R$141.6 million in the six-months
ended June 30, 2019. Adjusted EBITDA margin of 47.4% was 360 basis
points higher than the 43.8% reported in the six-months ended June
30, 2019.
Excluding the consolidation of UniRedentor and
UniSL, Pro forma Adjusted EBITDA in the three-months ended June 30,
2020 increased 44.0% YoY to R$98.1 million from R$68.1 million
while Pro forma Adjusted EBITDA margin increased 780 basis points,
to 44.8% from 37.0%. For the six-months ended June 30, 2020, Pro
forma Adjusted EBITDA excluding Uniredentor and UniSL increased
54.7% YoY to R$235.9 million up from R$152.5 million and Pro forma
Adjusted EBITDA margin increased 1170 basis points, to 49.6% from
37.9%. Both improvements reflect mainly operational leverage,
synergies obtained from recent acquisitions and other
improvements.
|
|
|
|
|
|
|
|
|
Table 5: Adjusted EBITDA |
|
|
|
|
|
|
|
|
(in thousand
of R$) |
For the three months period ended June 30, |
|
For the six months period ended June 30, |
|
2020 |
|
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
|
2020 |
|
2020 Ex Uniredentor and UniSL |
2019 |
|
% Chg |
% Chg Ex Uniredentor and UniSL |
Adjusted EBITDA |
118,152 |
|
98,072 |
|
66,909 |
|
76.6 |
% |
46.6 |
% |
|
258,796 |
|
235,867 |
|
141,639 |
|
82.7 |
% |
66.5 |
% |
% Margin |
43.1 |
% |
44.8 |
% |
37.5 |
% |
560 bps |
730 bps |
|
47.4 |
% |
49.6 |
% |
43.8 |
% |
360 bps |
580 bps |
Proforma Adjusted EBITDA¹ |
118,152 |
|
98,072 |
|
68,127 |
|
73.4 |
% |
44.0 |
% |
|
258,796 |
|
235,867 |
|
152,509 |
|
69.7 |
% |
54.7 |
% |
% Margin |
43.1 |
% |
44.8 |
% |
37.0 |
% |
610 bps |
780 bps |
|
47.4 |
% |
49.6 |
% |
37.9 |
% |
950 bps |
1170 bps |
1. Includes the pro-forma results of Medcel, IPEMED and FASA, as if
the acquisition had been consummated on January 1, 2019. |
Net Income
Adjusted Net Income for the second quarter 2020
was R$82.6 million, increasing 163.1% over the same period of the
prior year. For the six-months ended June 30, 2020, the Company
reported Adjusted Net Income of R$206.6 million, compared to an
Adjusted Net Income of R$84.9 million in the six-months ended June
30, 2019, an increase of 143.3%. Both increases reflect mainly the
revenue contribution, synergies captured and margin expansion from
the consolidation of acquisitions as well as organic growth.
|
|
|
|
|
|
|
|
(in thousand
of R$) |
|
|
|
|
|
|
|
|
For the three months period ended June 30, |
|
For the six months period ended June 30, |
|
2020 |
|
2019 |
|
% Chg |
|
2020 |
|
2019 |
|
% Chg |
Net income |
63,886 |
|
21,326 |
|
199.6 |
% |
|
167,556 |
|
70,802 |
|
136.7 |
% |
Amortization of customer relationships and trademark (1) |
12,515 |
|
9,182 |
|
36.3 |
% |
|
24,416 |
|
12,196 |
|
100.2 |
% |
Share-based compensation |
6,157 |
|
868 |
|
609.3 |
% |
|
14,597 |
|
1,909 |
|
664.6 |
% |
Adjusted Net Income |
82,558 |
|
31,376 |
|
163.1 |
% |
|
206,569 |
|
84,907 |
|
143.3 |
% |
|
|
|
|
|
|
|
|
(1) Consists of amortization of customer relationships and
trademark recorded under business combinations. |
|
|
|
|
Balance Sheet and Cash Flow
Cash and cash equivalents, including restricted
cash, at June 30, 2020 were R$1.1 billion, compared to R$1.3
billion at March 31, 2020, a decrease of 19.0% due to the
acquisitions concluded during the 1H20.
For the six-month period ended June 30, 2020,
Afya reported an Adjusted Cash Flow from Operations of R$201.8
million up from R$111.2 million in same period of previous year, an
81.5% year-over-year increase.
Operating Cash Conversion Ratio for the
six-month period ended June 30, 2020 was 82.6% compared with 85.4%
in same period of the previous year. This decrease was mainly due
to the consolidation of Medcel results in 1H20 figures and our
students renegotiation of overdue monthly installments due to
Covid-19 crisis. Prep course’s revenues are recognized mainly in
the first and fourth quarters of each year, but the receivables are
mostly stable during the year, Medcel’s results negatively affects
cash conversion in the first and fourth quarters.
|
|
Table 6: Operating Cash Conversion Ratio
Reconciliation |
For the six
months period ended June 30, |
(in thousand
of R$) |
Considering the adoption of IFRS 16 |
|
2020 |
|
2019 |
|
% Chg |
(a) Cash flow from operations |
189,417 |
|
108,810 |
|
74.1 |
% |
(b) Income taxes paid |
12,397 |
|
2,392 |
|
418.3 |
% |
(c) = (a) + (b) Adjusted cash flow from
operations |
201,814 |
|
111,202 |
|
81.5 |
% |
|
|
|
|
(d) Adjusted EBITDA |
258,796 |
|
141,639 |
|
82.7 |
% |
(e) Non-recurring expenses: |
|
|
|
- Integration of new companies (1) |
4,982 |
|
3,607 |
|
38.1 |
% |
- M&A advisory and due diligence (2) |
5,636 |
|
1,099 |
|
412.8 |
% |
- Expansion projects (3) |
2,091 |
|
943 |
|
121.7 |
% |
- Restructuring Expenses (4) |
1,762 |
|
5,749 |
|
-69.4 |
% |
(f) = (d) - (e) Adjusted EBITDA ex- non-recurring
expenses |
244,325 |
|
130,241 |
|
87.6 |
% |
(g) = (a) / (f) Operating cash conversion
ratio |
82.6 |
% |
85.4 |
% |
-280 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. |
4. Subsequent
Events
Acquisition of PEBMEDOn July
20, 2020, the Company announced the acquisition of 100% of the
total share capital of PEBMED, through its wholly-owned subsidiary
Afya Participações S.A. PEBMED offers content and clinical decision
applications with the aim of assisting healthcare professionals
make quicker and/or better decisions by providing up to date
information at their fingertips, through its products WhiteBook,
Nursebook and Portal PEBMED. The business model consists of both
paid subscriptions and free content. The net purchase price was
R$132.9 million, with the assumption of estimated net debt of R$7.1
million, of which: (i) 86.8% was paid in cash, and (ii) 13.2% was
paid in Afya’s stock. The price multiple is equivalent to 4x
PEBMED’s annual recurring revenue.
Acquisition of
Faculdade Ciências Médicas da Paraíba (FCMPB)On
August 20, 2020, the Company announced it entered into a purchase
agreement for the acquisition, through its wholly-owned subsidiary
Afya Participações S.A., of 100% of the total share capital of
Faculdade Ciências Médicas da Paraíba. FCMPB is a post-secondary
education institution with government authorization to offer
on-campus, undergraduate courses in medicine in the State of
Paraíba. The projected Net Revenue for FCMPB in 2024 is R$107.0
million with an EV/EBITDA post synergies and maturation of 6.3x,
all derived from its medical school. The aggregate purchase price
is R$380.0 million, of which: (i) 50% is payable in cash on the
transaction closing date, and (ii) 50% is payable in cash in four
equal installments through 2024, adjusted by the CDI rate. The
acquisition will contribute 157 medical school seats to Afya,
increasing Afya’s total medical school seats to 2,023.
Acquisition of Faculdade de Ensino
Superior da Amazônia Reunida (FESAR)On
August 26, 2020, the Company announced it entered into a purchase
agreement for the acquisition, through its wholly-owned subsidiary
Afya Participações S.A., of 100% of the total share capital of
Faculdade de Ensino Superior da Amazônia Reunida. FESAR is a
post-secondary education institution with government authorization
to offer on-campus, undergraduate courses in medicine in the State
of Pará. The projected Net Revenue for FESAR in 2024 is R$88.6
million with an EV/EBITDA post synergies and maturation of 4.7x
adjusted by the real estate. The aggregate purchase price is R$260
million, of which 100% is payable in cash on the transaction
closing date. The enterprise value also includes real estate which
is valued at R$21.0 million. The acquisition will contribute 120
medical school seats to Afya, increasing Afya’s total medical
school seats to 2,143.
5. Conference Call and Webcast
Information
When: |
|
August 28, 2020 at 11:00 a.m. ET. |
|
|
|
Who: |
|
Mr. Virgilio Gibbon, Chief
Executive OfficerMr. Luis André Blanco, Chief Financial OfficerMs.
Renata Costa Couto, Head of Investor Relations |
Dial-in: +55-11-3181-8565 or +1-844- 204-8586
or +1-412-717-9627 (International), conference ID: Afya
Webcast: ir.afya.com.br
Replay: available between
August 28, 2020 until September 9, 2020, by dialing +1-412-317-0088
conference ID: 10147648.
6. About
Afya Limited (Nasdaq: AFYA)
Afya is the leading medical education group in
Brazil based on number of medical school seats, delivering an
end-to-end physician-centric ecosystem that serves and empowers
students to be lifelong medical learners from the moment they
enroll as medical students through their medical residency
preparation, graduation program, and continuing medical education
activities. Afya also offers content and clinical decision
applications for healthcare professionals, through its products
WhiteBook, Nursebook and Portal PEBMED. For more information,
please visit www.afya.com.br.
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, including 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 student and teachers; 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 on 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
is included in 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
uses Proforma Revenue, Adjusted EBITDA, Pro Forma Adjusted EBITDA,
Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio
information for the convenience of investors, which are non-GAAP
financial measures. A non-GAAP financial measure is generally
defined as one that purports to measure financial performance but
excludes or includes amounts that would not be so 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. Pro Forma Adjusted EBITDA is calculated as pro forma net
income plus/minus pro forma net financial result plus pro forma
income taxes expense plus pro forma depreciation and amortization
plus pro forma interest received on late payments of monthly
tuition fees, plus pro forma share-based compensation plus/minus
pro forma income share associate plus/minus pro forma non-recurring
expenses. The calculation for Adjusted Net Income is net income
plus amortization of customer relationships and trademark, plus
shared based compensation. We calculate Operating Cash Conversion
Ratio as the cash flows from operations, adjusted with income taxes
paid divided by Adjusted EBITDA plus/minus non-recurring
expenses.
Management presents Adjusted EBITDA, Pro Forma
Adjusted EBITDA and Pro Forma Adjusted Net Income because it
believes these measures provide investors with a supplemental
measure of the financial performance of the core operations that
facilitates period-to-period comparisons on a consistent basis.
Afya also presents Operating Cash Conversion Ratio because it
believes this measure provides investors with a measure of how
efficiently the Company converts EBITDA into cash. The non-GAAP
financial measures described in this prospectus are not a
substitute for the IFRS measures of earnings. Additionally,
calculations of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro
Forma Adjusted Net Income and Operating Cash Conversion Ratio may
be different from the calculations used by other companies,
including competitors in the education services industry, and
therefore, Afya’s measures may not be comparable to those of other
companies.
9. Unaudited
Pro Forma Condensed Consolidated Financial Information
The unaudited interim pro forma condensed
consolidated statement of income for the three and six months ended
June 30, 2019 is based on the historical unaudited interim
consolidated financial statements of each company, and gives effect
of the acquisition of Medcel, IPEMED and FASA by Afya Brazil as if
it had been consummated on January 1, 2019. Pro forma adjustments
were made to reflect the acquisition of Medcel, IPEMED and FASA by
Afya Brazil.
10. Investor
Relations Contact
Renata Couto, Head of Investor Relations Phone: +55 31
3515.7564 | +55 31 98463.3341
E-mail: renata.couto@afya.com.br
11. Financial
Tables
Interim condensed consolidated statements of income and
comprehensive income
For the three and six-months periods ended June 30, 2020
and 2019
(In thousands of Brazilian Reais, except earnings per
share)
|
|
|
Three-month period ended |
|
Six-month period ended |
|
|
June 30, 2020 |
|
June 30, 2019 |
|
June 30, 2020 |
|
June 30, 2019 |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Net revenue |
|
274,211 |
|
|
178,493 |
|
|
546,515 |
|
|
323,071 |
|
Cost of services |
|
(106,683 |
) |
|
(82,283 |
) |
|
(195,934 |
) |
|
(136,647 |
) |
Gross
profit |
|
167,528 |
|
|
96,210 |
|
|
350,581 |
|
|
186,424 |
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
(90,039 |
) |
|
(59,584 |
) |
|
(176,762 |
) |
|
(90,818 |
) |
Other (expenses) income, net |
|
(689 |
) |
|
576 |
|
|
(748 |
) |
|
370 |
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
76,800 |
|
|
37,202 |
|
|
173,071 |
|
|
95,976 |
|
|
|
|
|
|
|
|
|
|
Finance income |
|
13,954 |
|
|
4,650 |
|
|
42,780 |
|
|
9,817 |
|
Finance expenses |
|
(23,130 |
) |
|
(19,721 |
) |
|
(40,802 |
) |
|
(31,957 |
) |
Finance result |
|
(9,176 |
) |
|
(15,071 |
) |
|
1,978 |
|
|
(22,140 |
) |
|
|
|
|
|
|
|
|
|
Share of income of
associate |
|
2,603 |
|
|
920 |
|
|
4,905 |
|
|
920 |
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
70,227 |
|
|
23,051 |
|
|
179,954 |
|
|
74,756 |
|
|
|
|
|
|
|
|
|
|
Income taxes
expense |
|
(6,341 |
) |
|
(1,725 |
) |
|
(12,398 |
) |
|
(3,954 |
) |
|
|
|
|
|
|
|
|
|
Net
income |
96 |
63,886 |
|
|
21,326 |
|
|
167,556 |
|
|
70,802 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Total comprehensive
income |
|
63,886 |
|
|
21,326 |
|
|
167,556 |
|
|
70,802 |
|
|
|
|
|
|
|
|
|
|
Income attributable to |
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
60,679 |
|
|
16,317 |
|
|
160,495 |
|
|
57,852 |
|
Non-controlling interests |
|
3,207 |
|
|
5,009 |
|
|
7,061 |
|
|
12,950 |
|
|
|
63,886 |
|
|
21,326 |
|
|
167,556 |
|
|
70,802 |
|
Basic earnings per
share |
|
|
|
|
|
|
|
|
Per common share |
|
0.65 |
|
|
0.23 |
|
|
1.74 |
|
|
0.91 |
|
Diluted earnings per
sharePer common share |
|
0.65 |
|
|
0.23 |
|
|
1.73 |
|
|
0.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim condensed consolidated statements of financial
position
As of June 30, 2020 and December 31,
2019
(In thousands of Brazilian
Reais)
|
|
June 30, 2020 |
|
December 31, 2019 |
Assets |
|
(unaudited) |
|
|
Current
assets |
|
|
|
|
Cash and cash equivalents |
|
1,041,462 |
|
943,209 |
Restricted cash |
|
10,902 |
|
14,788 |
Trade receivables |
|
238,874 |
|
125,439 |
Inventories |
|
5,375 |
|
3,932 |
Recoverable taxes |
|
18,774 |
|
6,485 |
Derivatives |
|
8,720 |
|
- |
Other assets |
|
14,108 |
|
17,912 |
Total current assets |
|
1,338,215 |
|
1,111,765 |
|
|
|
|
|
Non-current
assets |
|
|
|
|
Restricted cash |
|
2,053 |
|
2,053 |
Trade receivables |
|
13,611 |
|
9,801 |
Other assets |
|
41,240 |
|
17,267 |
Investment in associate |
|
50,539 |
|
45,634 |
Property and equipment |
|
192,686 |
|
139,320 |
Right-of-use assets |
|
376,023 |
|
274,275 |
Intangible assets |
|
1,835,823 |
|
1,312,338 |
Total non-current assets |
|
2,511,975 |
|
1,800,688 |
|
|
|
|
|
Total
assets |
|
3,850,190 |
|
2,912,453 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current
liabilities |
|
|
|
|
Trade payables |
|
23,234 |
|
17,628 |
Loans and financing |
|
42,094 |
|
53,607 |
Derivatives |
|
- |
|
757 |
Lease liabilities |
|
46,920 |
|
22,693 |
Accounts payable to selling shareholders |
|
149,879 |
|
131,883 |
Notes payable |
|
9,322 |
|
- |
Advances from customers |
|
40,621 |
|
36,860 |
Labor and social obligations |
|
98,916 |
|
46,770 |
Taxes payable |
|
32,483 |
|
19,442 |
Income taxes payable |
|
4,395 |
|
3,213 |
Other liabilities |
|
14,662 |
|
376 |
Total current liabilities |
|
462,526 |
|
333,229 |
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
Loans and financing |
|
19,308 |
|
6,750 |
Lease liabilities |
|
347,320 |
|
261,822 |
Accounts payable to selling shareholders |
|
245,567 |
|
168,354 |
Notes payable |
|
69,115 |
|
- |
Taxes payable |
|
23,924 |
|
21,304 |
Provision for legal proceedings |
|
19,807 |
|
5,269 |
Other liabilities |
|
3,048 |
|
1,999 |
Total non-current liabilities |
|
728,089 |
|
465,498 |
Total
liabilities |
|
1,190,615 |
|
798,727 |
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
17 |
|
17 |
Additional paid-in capital |
|
2,300,513 |
|
1,931,047 |
Share-based compensation reserve |
|
32,711 |
|
18,114 |
Retained earnings |
|
276,411 |
|
115,916 |
Equity attributable to
equity holders of the parent |
|
2,609,652 |
|
2,065,094 |
Non-controlling interests |
|
49,923 |
|
48,632 |
Total
equity |
|
2,659,575 |
|
2,113,726 |
|
|
|
|
|
Total liabilities and
equity |
|
3,850,190 |
|
2,912,453 |
|
|
Interim condensed consolidated statements of cash
flows
For the six-months periods ended June
30, 2020 and 2019
(In thousands of Brazilian
Reais)
|
June 30, 2020 |
|
June 30, 2019 |
|
(unaudited) |
|
(unaudited) |
Operating
activities |
|
|
|
|
Income before
income taxes |
179,954 |
|
|
74,756 |
|
|
|
Adjustments to
reconcile income before income taxes |
|
|
|
|
|
|
Depreciation and amortization |
51,330 |
|
|
28,441 |
|
|
|
|
Allowance for doubtful
accounts |
13,953 |
|
|
8,606 |
|
|
|
|
Share-based compensation
expense |
14,597 |
|
|
1,909 |
|
|
|
|
Net foreign exchange
differences |
(14 |
) |
|
(1,858 |
) |
|
|
|
Net (gain) loss on
derivatives |
(19,430 |
) |
|
2,809 |
|
|
|
|
Accrued interest |
11,017 |
|
|
9,873 |
|
|
|
|
Accrued lease interest |
20,428 |
|
|
14,540 |
|
|
|
|
Share of income of associate |
(4,905 |
) |
|
(920 |
) |
|
|
|
Provision for legal
proceedings |
1,183 |
|
|
(347 |
) |
Changes in
assets and liabilities |
|
|
|
|
Trade
receivables |
(104,831 |
) |
|
(28,624 |
) |
|
Inventories |
(976 |
) |
|
884 |
|
|
Recoverable
taxes |
(11,464 |
) |
|
(2,827 |
) |
|
Other assets |
2,940 |
|
|
(15,758 |
) |
|
Trade payables |
996 |
|
|
5,257 |
|
|
Taxes payables |
10,214 |
|
|
1,139 |
|
|
Advances from
customers |
(13,317 |
) |
|
1,428 |
|
|
Labor and social
obligations |
39,605 |
|
|
13,352 |
|
|
Other
liabilities |
10,534 |
|
|
(1,458 |
) |
|
|
201,814 |
|
|
111,202 |
|
|
Income taxes
paid |
(12,397 |
) |
|
(2,392 |
) |
|
Net cash
flows from operating activities |
189,417 |
|
|
108,810 |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Acquisition of
property and equipment |
(37,583 |
) |
|
(20,674 |
) |
|
Acquisition of
intangibles assets |
(7,766 |
) |
|
(718 |
) |
|
Restricted cash |
3,870 |
|
|
(1,153 |
) |
|
Payments of accounts
payable to selling shareholders |
(67,304 |
) |
|
(30,674 |
) |
|
Payments of notes
payable |
(1,611 |
) |
|
- |
|
|
Acquisition of
subsidiaries, net of cash acquired |
(240,631 |
) |
|
(148,880 |
) |
|
Loans to related
parties |
- |
|
|
(1,695 |
) |
|
Net cash
flows used in investing activities |
(351,025 |
) |
|
(203,794 |
) |
|
|
|
|
Financing
activities |
|
|
|
|
Payments of loans and
financing |
(99,096 |
) |
|
(23,868 |
) |
|
Issuance of loans and
financing |
911 |
|
|
- |
|
|
Payments of lease
liabilities |
(25,538 |
) |
|
(17,316 |
) |
|
Capital increase |
- |
|
|
150,000 |
|
|
Proceeds from
issuance of common shares |
389,170 |
|
|
- |
|
|
Shares issuance
cost |
(19,704 |
) |
|
- |
|
|
Dividends paid to
non-controlling interests |
(5,770 |
) |
|
(7,621 |
) |
|
Net cash
flows from financing activities |
239,973 |
|
|
101,195 |
|
|
Net foreign
exchange differences |
19,888 |
|
|
- |
|
|
Net
increase in cash and cash equivalents |
78,365 |
|
|
6,211 |
|
|
Cash and cash
equivalents at the beginning of the period |
943,209 |
|
|
62,260 |
|
|
Cash and cash
equivalents at the end of the period |
1,041,462 |
|
|
68,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation between Net Income and Adjusted EBITDA,
Pro Forma Adjusted EBITDA
|
|
|
|
|
|
(in thousand
of R$) |
|
|
For the three months period ended June 30, |
|
For the six months period ended June 30, |
|
2020 |
|
2019 |
|
% Chg |
|
2020 |
|
2019 |
|
% Chg |
Net income |
63,886 |
|
21,326 |
|
199.6 |
% |
|
167,556 |
|
70,802 |
|
136.7 |
% |
Net financial result |
9,176 |
|
15,071 |
|
-39.1 |
% |
|
(1,978 |
) |
22,140 |
|
n.a. |
Income taxes expense |
6,341 |
|
1,725 |
|
267.6 |
% |
|
12,398 |
|
3,954 |
|
213.6 |
% |
Depreciation and amortization |
26,383 |
|
19,387 |
|
36.1 |
% |
|
51,330 |
|
28,441 |
|
80.5 |
% |
Interest received (1) |
1,810 |
|
1,410 |
|
28.4 |
% |
|
5,327 |
|
3,915 |
|
36.1 |
% |
Income share associate |
(2,603 |
) |
(920 |
) |
182.9 |
% |
|
(4,905 |
) |
(920 |
) |
433.2 |
% |
Share-based compensation |
6,157 |
|
868 |
|
609.3 |
% |
|
14,597 |
|
1,909 |
|
664.6 |
% |
Non-recurring expenses: |
7,002 |
|
8,042 |
|
-12.9 |
% |
|
7,002 |
|
8,042 |
|
-12.9 |
% |
- Integration of new companies (2) |
1,862 |
|
2,607 |
|
-28.6 |
% |
|
4,982 |
|
3,607 |
|
38.1 |
% |
- M&A advisory and due diligence (3) |
2,886 |
|
959 |
|
200.9 |
% |
|
5,636 |
|
1,099 |
|
412.8 |
% |
- Expansion projects (4) |
1,308 |
|
638 |
|
105.0 |
% |
|
2,091 |
|
943 |
|
121.7 |
% |
- Restructuring expenses (5) |
946 |
|
3,838 |
|
-75.4 |
% |
|
1,762 |
|
5,749 |
|
-69.4 |
% |
Adjusted EBITDA |
118,152 |
|
66,909 |
|
76.6 |
% |
|
258,796 |
|
141,639 |
|
82.7 |
% |
Adjusted EBITDA Margin |
43.1 |
% |
37.5 |
% |
560 bps |
|
47.4 |
% |
43.8 |
% |
360 bps |
Adjusted EBITDA comparable to guidance |
107,363 |
|
66,909 |
|
60.5 |
% |
|
248,007 |
|
141,639 |
|
75.1 |
% |
Adjusted EBITDA Margin comparable to guidance |
44.0 |
% |
37.5 |
% |
650 bps |
|
48.1 |
% |
43.8 |
% |
430 bps |
Pro
Forma Adjusted EBITDA |
118,152 |
|
68,127 |
|
73.4 |
% |
|
258,796 |
|
152,509 |
|
69.7 |
% |
Pro Forma Adjusted EBITDA Margin |
43.1 |
% |
37.0 |
% |
610 bps |
|
47.4 |
% |
37.9 |
% |
950 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. |
|
|
|
|
|
|
|
|
|
|
Afya (NASDAQ:AFYA)
Historical Stock Chart
From Aug 2024 to Sep 2024
Afya (NASDAQ:AFYA)
Historical Stock Chart
From Sep 2023 to Sep 2024