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 November, 2023
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: November 13, 2022
Afya Limited
Unaudited interim condensed
consolidated financial statements
September 30, 2023
Afya Limited
Unaudited interim condensed consolidated statements of financial position
As of September 30, 2023, and December 31, 2022
(In thousands of Brazilian reais)
|
Notes |
September
30, 2023 |
|
December
31, 2022 |
Assets |
|
(unaudited) |
|
|
Current
assets |
|
|
|
|
Cash
and cash equivalents |
5 |
822,008 |
|
1,093,082 |
Trade
receivables |
6 |
480,556 |
|
452,831 |
Inventories |
|
4,501 |
|
12,190 |
Recoverable
taxes |
|
63,319 |
|
27,809 |
Other
assets |
8 |
51,991 |
|
51,745 |
Total current assets |
|
1,422,375 |
|
1,637,657 |
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|
|
|
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Non-current
assets |
|
|
|
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Trade
receivables |
6 |
43,593 |
|
42,568 |
Other
assets |
8 |
144,084 |
|
191,756 |
Investment
in associate |
9 |
53,284 |
|
53,907 |
Property
and equipment |
10 |
598,802 |
|
542,087 |
Right-of-use
assets |
12.2.2 |
770,036 |
|
690,073 |
Intangible
assets |
11 |
4,798,915 |
|
4,041,491 |
Total
non-current assets |
|
6,408,714 |
|
5,561,882 |
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Total
assets |
|
7,831,089 |
|
7,199,539 |
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|
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Liabilities |
|
|
|
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Current
liabilities |
|
|
|
|
Trade
payables |
|
85,655 |
|
71,482 |
Loans
and financing |
12.2.1 |
186,903 |
|
145,202 |
Lease
liabilities |
12.2.2 |
36,705 |
|
32,459 |
Accounts
payable to selling shareholders |
12.2.3 |
382,500 |
|
261,711 |
Notes
payable |
12.2.4 |
50,469 |
|
62,176 |
Advances
from customers |
|
137,664 |
|
133,050 |
Labor
and social obligations |
|
255,235 |
|
154,518 |
Taxes
payable |
|
27,400 |
|
26,221 |
Income
taxes payable |
|
40,582 |
|
16,151 |
Other
liabilities |
|
3,411 |
|
2,719 |
Total
current liabilities |
|
1,206,524 |
|
905,689 |
|
|
|
|
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Non-current
liabilities |
|
|
|
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Loans
and financing |
12.2.1 |
1,721,396 |
|
1,737,699 |
Lease
liabilities |
12.2.2 |
833,024 |
|
737,066 |
Accounts
payable to selling shareholders |
12.2.3 |
268,568 |
|
266,967 |
Taxes
payable |
|
90,578 |
|
92,888 |
Provision
for legal proceedings |
21 |
134,068 |
|
195,854 |
Other
liabilities |
|
27,898 |
|
13,218 |
Total
non-current liabilities |
|
3,075,532 |
|
3,043,692 |
Total
liabilities |
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4,282,056 |
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3,949,381 |
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Equity |
|
|
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Share
capital |
15 |
17 |
|
17 |
Additional
paid-in capital |
|
2,371,577 |
|
2,375,344 |
Share-based
compensation reserve |
|
143,620 |
|
123,538 |
Treasury
stock |
|
(310,003) |
|
(304,947) |
Retained
earnings |
|
1,293,149 |
|
1,004,886 |
Equity
attributable to equity holders of the parent |
|
3,498,360 |
|
3,198,838 |
Non-controlling
interests |
|
50,673 |
|
51,320 |
Total
equity |
|
3,549,033 |
|
3,250,158 |
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|
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Total
liabilities and equity |
|
7,831,089 |
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7,199,539 |
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 nine-month periods ended September 30, 2023 and 2022
(In thousands of Brazilian reais, except
for earnings per share information)
|
|
Three-month
period ended |
Nine-month
period ended |
|
Notes |
September
30, 2023 |
September
30, 2022 |
September
30, 2023 |
September
30, 2022 |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Net
revenue |
17 |
723,479 |
580,575 |
2,146,047 |
1,745,055 |
Cost
of services |
18 |
(288,234) |
(216,691) |
(820,136) |
(622,663) |
Gross
profit |
|
435,245 |
363,884 |
1,325,911 |
1,122,392 |
|
|
|
|
|
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Selling,
general and administrative expenses |
18 |
(257,002) |
(210,692) |
(739,808) |
(596,621) |
Other
income (expenses), net |
|
12,043 |
(7,173) |
10,365 |
(8,739) |
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|
|
|
|
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Operating
income |
|
190,286 |
146,019 |
596,468 |
517,032 |
|
|
|
|
|
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Finance
income |
19 |
34,771 |
29,202 |
86,259 |
76,618 |
Finance
expenses |
19 |
(115,306) |
(91,933) |
(353,572) |
(256,873) |
Finance
result |
|
(80,535) |
(62,731) |
(267,313) |
(180,255) |
|
|
|
|
|
|
Share
of income of associate |
9 |
615 |
3,819 |
7,671 |
10,260 |
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|
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Income
before income taxes |
|
110,366 |
87,107 |
336,826 |
347,037 |
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Income
taxes expenses |
20 |
(12,146) |
(6,697) |
(33,296) |
(25,612) |
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Net
income |
|
98,220 |
80,410 |
303,530 |
321,425 |
|
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Other
comprehensive income |
|
- |
- |
- |
- |
Total
comprehensive income |
|
98,220 |
80,410 |
303,530 |
321,425 |
|
|
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Income
attributable to |
|
|
|
|
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Equity
holders of the parent |
|
93,347 |
75,760 |
288,263 |
306,875 |
Non-controlling
interests |
|
4,873 |
4,650 |
15,267 |
14,550 |
|
|
98,220 |
80,410 |
303,530 |
321,425 |
Basic
earnings per share |
|
|
|
|
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Per
common share |
16 |
1.04 |
0.84 |
3.21 |
3.39 |
Diluted earnings per share
Per common share |
16 |
1.03 |
0.84 |
3.18 |
3.38 |
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 nine-month periods ended September 30, 2023 and 2022
(In thousands of Brazilian reais)
|
Equity attributable to equity holders of the parent |
|
|
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 December 31, 2021 |
17 |
2,375,344 |
(152,630) |
94,101 |
631,317 |
2,948,149 |
51,869 |
3,000,018 |
Net income |
- |
- |
- |
- |
306,875 |
306,875 |
14,550 |
321,425 |
Total comprehensive income |
- |
- |
- |
- |
306,875 |
306,875 |
14,550 |
321,425 |
Treasury shares |
- |
- |
(152,317) |
- |
- |
(152,317) |
- |
(152,317) |
Share-based compensation |
- |
- |
- |
20,414 |
- |
20,414 |
- |
20,414 |
Dividends declared |
- |
- |
- |
- |
- |
- |
(15,726) |
(15,726) |
Balances at September 30, 2022 (unaudited) |
17 |
2,375,344 |
(304,947) |
114,515 |
938,192 |
3,123,121 |
50,693 |
3,173,814 |
|
|
|
|
|
|
|
|
|
Balances at December 31, 2022 |
17 |
2,375,344 |
(304,947) |
123,538 |
1,004,886 |
3,198,838 |
51,320 |
3,250,158 |
Net income |
- |
- |
- |
- |
288,263 |
288,263 |
15,267 |
303,530 |
Total comprehensive income |
- |
- |
- |
- |
288,263 |
288,263 |
15,267 |
303,530 |
Treasury shares |
- |
- |
(12,369) |
- |
- |
(12,369) |
- |
(12,369) |
Share-based compensation |
- |
- |
- |
20,082 |
- |
20,082 |
- |
20,082 |
Restricted shares transferred to executives |
- |
(2,571) |
2,571 |
- |
- |
- |
- |
- |
Treasury
shares transferred to executives from exercise of stock options |
- |
(1,196) |
4,742 |
- |
- |
3,546 |
- |
3,546 |
Dividends declared |
- |
- |
- |
- |
- |
- |
(15,914) |
(15,914) |
Balances at September 30, 2023 (unaudited) |
17 |
2,371,577 |
(310,003) |
143,620 |
1,293,149 |
3,498,360 |
50,673 |
3,549,033 |
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 nine-month periods ended September 30, 2023 and 2022
(In thousands of Brazilian reais)
|
Notes |
September 30, 2023 |
September 30, 2022 |
Operating activities |
|
(unaudited) |
(unaudited) |
|
Income before income taxes |
|
336,826 |
347,037 |
|
|
Adjustments to reconcile income before income taxes |
|
|
|
|
|
|
Depreciation and amortization |
18 |
212,172 |
151,706 |
|
|
|
Write-off of property and equipment |
10 |
1,209 |
683 |
|
|
|
Write-off of intangible assets |
11 |
288 |
6 |
|
|
|
Provision for expected credit losses |
6 |
57,160 |
29,441 |
|
|
|
Share-based compensation expense |
18 |
20,082 |
20,414 |
|
|
|
Net foreign exchange differences |
19 |
448 |
293 |
|
|
|
Accrued interest |
19 |
224,349 |
147,839 |
|
|
|
Accrued lease interest |
12.2.2, 19 |
74,867 |
63,458 |
|
|
|
Share of income of associate |
9 |
(7,671) |
(10,260) |
|
|
|
Provision (reversal) for legal proceedings |
21 |
(27,119) |
8,531 |
Changes in assets and liabilities |
|
|
|
|
Trade receivables |
|
(52,169) |
(60,167) |
|
Inventories |
|
7,828 |
(661) |
|
Recoverable taxes |
|
(34,921) |
(16,931) |
|
Other assets |
|
35,960 |
5,858 |
|
Trade payables |
|
1,920 |
1,398 |
|
Taxes payables |
|
25,321 |
10,709 |
|
Advances from customers |
|
(27,883) |
(16,075) |
|
Labor and social obligations |
|
94,465 |
70,608 |
|
Other liabilities |
|
(9,331) |
(10,066) |
|
|
|
933,801 |
743,821 |
|
Income taxes paid |
|
(37,599) |
(27,940) |
|
|
|
|
|
|
Net cash flows from operating activities |
|
896,202 |
715,881 |
|
|
|
|
|
Investing activities |
|
|
|
|
Acquisition of property and equipment |
10 |
(88,014) |
(116,641) |
|
Acquisition of intangibles assets |
11 |
(67,113) |
(70,423) |
|
Dividends received |
9 |
8,294 |
2,837 |
|
Acquisition of subsidiaries, net of cash acquired |
|
(726,530) |
(225,452) |
|
Payments of interest from acquisition of subsidiaries |
|
(36,674) |
(17,300) |
|
Net cash flows used in investing activities |
|
(910,037) |
(426,979) |
|
|
|
|
Financing activities |
|
|
|
|
Payments of principal of loans and financing |
12.5 |
(12,216) |
(922) |
|
Payments of interest of loans and financing |
12.5 |
(124,468) |
(68,053) |
|
Proceeds from loans and financing |
12.5 |
5,288 |
- |
|
Payments of lease liabilities |
12.2.2, 12.5 |
(100,658) |
(84,509) |
|
Treasury shares buy-back |
15 |
(12,369) |
(152,317) |
|
Proceeds from exercise of stock options |
|
3,546 |
- |
|
Dividends paid to non-controlling shareholders |
12.5 |
(15,914) |
(15,726) |
|
Net cash flows used in financing activities |
|
(256,791) |
(321,527) |
|
Net foreign exchange differences |
|
(448) |
(293) |
|
Net decrease in cash and cash equivalents |
|
(271,074) |
(32,918) |
|
Cash and cash equivalents at the beginning of the period |
|
1,093,082 |
748,562 |
|
Cash and cash equivalents at the end of the period |
|
822,008 |
715,644 |
The accompanying notes are an integral part of the unaudited interim condensed
consolidated financial statements.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
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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. The Company 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”), following
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 medicine located in 19 Brazilian states forming the largest educational group by
the number of medical seats in the country. In non-regulated education, Afya provides services that comprise the development and sale
of electronically distributed educational courses on medicine science, related printed 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.
Acquisition in 2023
On January 2, 2023, Afya Participações
S.A. (hereafter referred to as "Afya Brazil”) 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 (“UNIT Alagoas”) and Faculdade Tiradentes Jaboatão dos Guararapes (“FITS Jaboatão dos
Guararapes”). See Note 4.
COVID-19
In December 2019, a novel strain of coronavirus (COVID-19) was reported
to have emerged in Wuhan, China. COVID-19 has since spread to most of the countries around the globe, including every state in Brazil.
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and on March 20, 2020 the Brazilian federal
government declared a national emergency with respect to COVID-19.
During 2020, some of the Brazilian states issued decrees granting discounts
to our students because of COVID-19. These mandatory discounts have been suspended as their constitutionality has been challenged in the
superior courts.
On November 18, 2021, the Brazilian Federal Court of Justice (STF)
decided, by a majority of votes, that any lawsuit with decisions to apply linear discounts in monthly tuition fees for private universities
with respect to the COVID-19 pandemic are unconstitutional. Regarding the discounts granted by the date of issuance of these
financial statements, the Company is charging back the students as final legal decisions were given by the Brazilian Federal Court of
Justice.
For the nine-month period ended September 30, 2023, the Company has invoiced
R$1,441 from previous periods, net of discounts granted due to COVID-19 (R$21,062 for the nine-month period ended September 30, 2022).
The outstanding balances are not significant and are classified as current trade receivables and the income statement effects are classified
in net revenue.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
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Conflicts
Worldwide
During years of 2022 and 2023, local conflicts with potential large scale
occurred, included Russia and Ukraine and the recent Israel and Hamas. Those conflicts trigger a number of IFRS accounting considerations
affecting the financial statements.
The Company's operations are focused in Brazil and thus the business was
not directly impacted by such conflict. However, the continuous development of such conflicts may impact entities other than those with
direct interests in the involved countries, for instance, as a result of exposure to fluctuations in commodity prices and foreign exchange
rates, which may impact inflation, as well as the possibility of economic sanctions against such countries.
As of the date of these interim financial statements, both conflicts mentioned
above have not brought significant direct impact over Afya’s operations and results.
2 | Significant accounting policies |
2.1 Basis for preparation of the unaudited interim
condensed consolidated financial statements
Statement of compliance
The unaudited interim condensed consolidated financial statements as of
September 30, 2023 and for the three-month and nine-month periods ended September 30, 2023 and 2022 have been prepared in accordance with
IAS 34 Interim Financial Reporting. The Company has prepared the financial statements on the basis that it will continue to operate as
a going concern.
Measurement basis
The unaudited interim condensed consolidated financial statements have been
prepared on a historical cost basis, except for contingent consideration that has 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, 2022.
Afya Limited 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 assessed as the Company`s functional
currency.
The unaudited interim condensed consolidated financial statements are presented
in Brazilian Reais (“BRL” or “R$”), which is the Company’s functional and presentation currency. All amounts
are rounded to the nearest thousand.
Approval of the unaudited interim condensed consolidated financial statements
These unaudited interim condensed consolidated financial statements as of
September 30, 2023 and for three-month and the nine-month periods ended September 30, 2023 and 2022 were authorized for issuance by the
Board of Directors on November 13, 2023.
Afya Limited Notes to the 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 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, 2022. The Company has not early adopted any standard, interpretation or amendment
that has been issued but is not yet effective.
Certain amendments apply for the first time in 2023, but do not have significant
impacts on the interim condensed consolidated financial statements of the Company.
Definition of Accounting Estimates - Amendments to IAS
8. The amendments to IAS 8 clarify the distinction between changes in accounting estimates, and changes in accounting policies and the
correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments
had no material impact on these interim condensed consolidated financial statements.
Classification of Liabilities as Current or Non-current
- Amendments to IAS 1 paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current.
The amendments clarify: i) What is meant by a right to defer settlement; ii) That a right to defer must exist at the end of the reporting
period; iii) That classification is unaffected by the likelihood that an entity will exercise its deferral right; iv) That only if an
embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.
The amendments had no material impact on these interim condensed consolidated financial statements.
Disclosure of Accounting Policies - Amendments to IAS
1 and IFRS Practice Statement 2 The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and
examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting
policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting
policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the
concept of materiality in making decisions about accounting policy disclosures. The amendments had no material impact on these interim
condensed consolidated financial statements.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
2.3 Basis consolidation
The table below is a list of the Company’s subsidiaries and associate:
|
|
|
|
Direct and indirect interest |
Name |
Principal activities |
Location |
Investment type |
September 30, 2023 (unaudited) |
December 31, 2022 |
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 Araguaina”) |
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 |
60% |
60% |
Instituto de Ensino Superior do Piauí S.A. (”IESP”) |
Undergraduate and graduate degree programs |
Teresina - PI |
Subsidiary |
100% |
100% |
Centro Integrado de Saúde de Teresina (“CIS”) |
Outpatient care |
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% |
ESMC Educação Superior Ltda. (“ESMC”) ** |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
- |
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 Universitário São Lucas Ltda. (“UniSL”) |
Undergraduate degree programs |
Porto Velho - RO |
Subsidiary |
100% |
100% |
Peb Med Instituição de Pesquisa Médica e Serviços Ltda (“PebMed”) |
Content and clinical tools and online platform |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Faculdade de Ensino Superior da Amazônia Reunida – (“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% |
Nucleo de Atenção à Saúde e de Práticas Profissionalizantes (“NASPP) *** |
Outpatient care |
Montes Claros - MG |
Subsidiary |
- |
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”) |
Marketing for pharmaceutical industry |
São Paulo – SP |
Subsidiary |
100% |
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% |
- |
União Educacional do Planalto Central S.A. (“UEPC”) |
Undergraduate degree programs |
Brasília - DF |
Associate |
30% |
30% |
* See Note 4 for further details of the business combination during 2023.
** ESMC was merged with UnifipMoc in February 2023.
*** NASPP was merged with UnifipMoc in July 2023.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
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 loss 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 medicine, other health sciences and other undergraduate programs;
• Continuing Education, which provides specialization
programs and graduate courses in medicine; and
• Digital Services, which provides content and technology for medical
education, clinical decisions software, practice management tools and electronic medical records, doctor-patient relationship, telemedicine
and digital prescription for physicians and provides access and 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 consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The following tables presents assets and liabilities information for the
Company’s operating segments as of September 30, 2023 and December 31, 2022, respectively:
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of September 30, 2023
(unaudited) |
|
|
|
|
|
|
Total assets |
7,379,449 |
176,442 |
284,539 |
7,840,430 |
(9,341) |
7,831,089 |
Current assets |
1,242,524 |
81,022 |
108,170 |
1,431,716 |
(9,341) |
1,422,375 |
Non-current assets |
6,136,925 |
95,420 |
176,369 |
6,408,714 |
- |
6,408,714 |
|
|
|
|
|
|
|
Total liabilities and equity |
7,379,449 |
176,442 |
284,539 |
7,840,430 |
(9,341) |
7,831,089 |
Current liabilities |
959,423 |
80,842 |
175,600 |
1,215,865 |
(9,341) |
1,206,524 |
Non-current liabilities |
2,971,816 |
60,493 |
43,223 |
3,075,532 |
- |
3,075,532 |
Equity |
3,448,210 |
35,107 |
65,716 |
3,549,033 |
- |
3,549,033 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of September 30, 2023 (unaudited) |
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (*) |
53,284 |
- |
- |
53,284 |
- |
53,284 |
Capital expenditures (**) |
98,535 |
11,270 |
45,322 |
155,127 |
- |
155,127 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of December 31, 2022 |
|
|
|
|
|
|
Total assets |
6,775,829 |
149,254 |
275,564 |
7,200,647 |
(1,108) |
7,199,539 |
Current assets |
1,461,802 |
61,673 |
115,290 |
1,638,765 |
(1,108) |
1,637,657 |
Non-current assets |
5,314,027 |
87,581 |
160,274 |
5,561,882 |
- |
5,561,882 |
|
|
|
|
|
|
|
Total liabilities and equity |
6,775,829 |
149,254 |
275,564 |
7,200,647 |
(1,108) |
7,199,539 |
Current liabilities |
711,896 |
57,605 |
137,296 |
906,797 |
(1,108) |
905,689 |
Non-current liabilities |
2,938,960 |
63,990 |
40,742 |
3,043,692 |
- |
3,043,692 |
Equity |
3,124,973 |
27,659 |
97,526 |
3,250,158 |
- |
3,250,158 |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Adjustments and eliminations |
Total |
As of December 31, 2022 |
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (*) |
53,907 |
- |
- |
53,907 |
- |
53,907 |
|
|
|
|
|
|
|
As of September 30, 2022 (unaudited) |
|
|
|
|
|
|
Capital expenditures (**) |
187,791 |
5,637 |
44,940 |
238,368 |
- |
238,368 |
(*) Investment in UEPC is included in non-current assets in the statement
of financial position.
(**) Capital expenditures consider the acquisitions of property and equipment
and intangible assets.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The following tables present the statements of income for the Company’s
operating segments for the nine-month periods ended September 30, 2023 and 2022:
|
September 30, 2023 (unaudited) |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,883,089 |
108,263 |
154,695 |
2,146,047 |
- |
2,146,047 |
Inter-segment |
- |
- |
9,341 |
9,341 |
(9,341) |
- |
Net revenue |
1,883,089 |
108,263 |
164,036 |
2,155,388 |
(9,341) |
2,146,047 |
Cost of services |
(738,224) |
(43,132) |
(48,121) |
(829,477) |
9,341 |
(820,136) |
Gross profit |
1,144,865 |
65,131 |
115,915 |
1,325,911 |
- |
1,325,911 |
General and administrative expenses |
|
|
|
|
|
(739,808) |
Other income, net |
|
|
|
|
|
10,365 |
Operating income |
|
|
|
|
|
596,468 |
Finance income |
|
|
|
|
|
86,259 |
Finance expenses |
|
|
|
|
|
(353,572) |
Share of income of associate |
|
|
|
|
|
7,671 |
Income before income taxes |
|
|
|
|
|
336,826 |
Income taxes expenses |
|
|
|
|
|
(33,296) |
Net income |
|
|
|
|
|
303,530 |
|
September 30, 2022 (unaudited) |
|
Undergrad |
Continuing Education |
Digital Services |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,538,037 |
75,568 |
131,450 |
1,745,055 |
- |
1,745,055 |
Inter-segment |
- |
- |
2,793 |
2,793 |
(2,793) |
- |
Net revenue |
1,538,037 |
75,568 |
134,243 |
1,747,848 |
(2,793) |
1,745,055 |
Cost of services |
(546,493) |
(42,887) |
(36,076) |
(625,456) |
2,793 |
(622,663) |
Gross profit |
991,544 |
32,681 |
98,167 |
1,122,392 |
- |
1,122,392 |
General and administrative expenses |
|
|
|
|
|
(596,621) |
Other expenses, net |
|
|
|
|
|
(8,739) |
Operating income |
|
|
|
|
|
517,032 |
Finance income |
|
|
|
|
|
76,618 |
Finance expenses |
|
|
|
|
|
(256,873) |
Share of income of associate |
|
|
|
|
|
10,260 |
Income before income taxes |
|
|
|
|
|
347,037 |
Income taxes expenses |
|
|
|
|
|
(25,612) |
Net income |
|
|
|
|
|
321,425 |
Seasonality of operations
Undergrad’s tuition revenues are related to the enrollment process
and monthly tuition fees charged to students over the period; thus, does not have significant fluctuations during the year. Continuing
Education revenues are related to monthly intake and tuition fees and do not have a significant concentration in any period. Digital Services
is comprised mainly of Medcel, Pebmed, and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality,
Medcel’s revenue is concentrated in the first and last quarter of the year due to the enrollments of Medcel’s clients’
period. In addition, the majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point
in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results
of operations in the first and last quarters of the year compared to the second and third quarters.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The preliminary fair values of the identifiable assets acquired and liabilities
assumed as of acquisition date were:
Assets |
DelRey |
Cash and cash and equivalents |
7,804 |
Trade receivables |
33,741 |
Inventories |
139 |
Recoverable taxes |
589 |
Other assets |
8,563 |
Property and equipment |
24,980 |
Right-of-use assets |
65,408 |
Intangible assets |
728,777 |
|
870,001 |
Liabilities |
|
Trade payables |
12,253 |
Lease liabilities |
65,408 |
Labor and social obligations |
6,252 |
Taxes and contributions payable |
2,282 |
Advances from customers |
32,497 |
Provision for legal proceedings |
152 |
Other liabilities |
4,188 |
|
123,032 |
Total identifiable net assets at fair value |
746,969 |
|
|
Preliminary goodwill arising on acquisition |
69,267 |
Purchase consideration transferred |
816,236 |
Cash paid |
575,000 |
Consideration to be transferred |
234,000 |
Digital solutions * |
7,236 |
Analysis of cash flows on acquisition: |
|
Transaction costs of the acquisition (included in cash flows from operating activities) |
12,332 |
Cash paid net of cash acquired with the subsidiary (included in cash flows from investing activities) |
567,196 |
Net of cash flow on acquisition |
579,528 |
* In connection with consideration acquisition of DelRey the Company is also
required to offer digital solutions, specially from Medcel, Pebmed and Medical Harbour, through access (free-of-charge) to students of
other medical schools held by the selling shareholders from 2023 to 2030. This purchase consideration was measured using assumptions such
as numbers of approved medical seats, current digital solutions prices, inflation and present value discount rates. The balances of such
consideration are classified in other liabilities on the statement of financial position.
(a) Acquisition
of DelRey
On January 2, 2023, Afya Brazil acquired 100% of the
share capital of DelRey. The original aggregate purchase price of R$832,236 was adjusted by R$16,000, in favor of the Company, to R$816,236
comprised by: i) R$809,000 of which R$575,000 was paid in cash on the transaction closing date, 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 UNIT Sergipe
and FITS Goiânia which are universities owned by the sellers and not part of the transaction. The fair value of this service was
estimated at R$7,236 at date of acquisition. There are 84 additional 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 thus the contingent consideration was not measured at the acquisition
date. Should the additional seats be approved, it will result in additional licenses, which will be measured accordingly if and when approved.
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, in the States of Alagoas
and Pernambuco.
The acquisition of DelRey was accounted for under IFRS 3 – Business
Combinations.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Transaction costs to date amount to R$12,332 and were expensed and are included
in general and administrative expenses in the consolidated statement of income.
At the acquisition date, the fair value of the trade receivables acquired
are substantially the same as its carrying amount.
The goodwill recognized includes the value of expected synergies arising
from the acquisition, which is not separately recognized. Goodwill is allocated entirely to the Undergrad segment. The preliminary goodwill
recognized is not expected to be deductible for income taxes purposes.
The valuation of the identifiable assets acquired and liabilities assumed
in the business combination of DelRey is preliminary and therefore items such as intangible assets and property and equipment, as well
as fair value of the digital solutions consideration, may be adjusted when the valuations are finalized.
The Company did not recognize deferred taxes related
to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date
of the business combination.
The valuation techniques used for measuring the fair value of separately
identified intangible assets acquired were as follows:
Intangible assets acquired |
Valuation technique |
Licenses |
With-and-without method
The with-and-without method consists of estimating the fair value
of an asset by the difference between the value of this asset in two scenarios: a scenario considering the existence of the asset in question
and another considering its non-existence. |
Customer relationships |
Multi-period excess earnings method
The method considers the present value of net cash flows expected
to be generated by customer relationships, by excluding any cash flows related to contributory assets. |
The valuation technique for property and equipment consists of determining
the fair value of an asset by using methodologies like replacement costs and market value.
DelRey has contributed R$180,312 of net revenue and R$56,836 of income before
income taxes to the Company in 2023.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
5 | Cash and cash equivalents |
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Cash and bank deposits |
11,107 |
57,509 |
Cash equivalents |
810,901 |
1,035,573 |
|
822,008 |
1,093,082 |
Cash equivalents correspond mainly to financial investments in Bank Certificates
of Deposit (“CDB”) with highly rated financial institutions and investments funds managed by highly rated financial institutions.
As of September 30, 2023, the average interest on these investments are equivalent to 101.64% of the Interbank Certificates of Deposit
(“CDI”) (December 31, 2022 - 99.21%). These funds are available for immediate use and have insignificant risk of changes in
value. Cash equivalents denominated in U.S. dollars totaled R$15,002 as of September 30, 2023 (December 31, 2022: R$24,447).
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Tuition fees |
417,353 |
356,074 |
Educational content (a) |
36,839 |
50,913 |
FIES |
72,606 |
62,325 |
Educational credits (b) |
28,704 |
27,535 |
Mobile app subscription (c) |
16,090 |
27,675 |
Others |
15,387 |
14,923 |
|
586,979 |
539,445 |
(-) Provision for expected credit losses |
(62,830) |
(44,046) |
|
524,149 |
495,399 |
Current |
480,556 |
452,831 |
Non-current |
43,593 |
42,568 |
(a) Related to trade receivables from sales of printed
books, e-books and medical courses through digital platform from Medcel.
(b) Related to the financing programs offered by our
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.
(c) Related to trade receivables from mobile applications
subscriptions for digital medical content.
As of September 30, 2023 and December 31, 2022, the aging of trade receivables
was as follows:
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Neither past due nor impaired |
308,328 |
261,025 |
Past due |
|
|
1 to 30 days |
77,778 |
56,280 |
31 to 90 days |
97,791 |
90,734 |
91 to 180 days |
42,014 |
80,522 |
More than 180 days |
61,068 |
50,884 |
|
586,979 |
539,445 |
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The changes in the provision for expected credit losses for the nine-month
periods ended September 30, 2023 and 2022, was as follows:
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Balances at the beginning of the period |
(44,046) |
(45,013) |
Additions |
(57,160) |
(29,441) |
Write-offs |
38,376 |
29,260 |
Balances at the end of the period |
(62,830) |
(45,194) |
The table below summarizes the balances and transactions with related parties:
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Assets |
|
|
Trade receivables (a) |
724 |
917 |
Other assets (b) |
285 |
1,975 |
|
1,009 |
2,892 |
Current |
1,009 |
2,892 |
|
|
|
Liabilities |
|
|
Accounts payable to selling shareholders (c) |
33,696 |
30,653 |
|
33,696 |
30,653 |
Current |
33,696 |
30,653 |
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Other income |
|
|
UEPC (a) |
393 |
477 |
|
393 |
477 |
Leases |
|
|
RVL Esteves Gestão Imobiliária S.A. |
17,285 |
13,367 |
UNIVAÇO Patrimonial Ltda. |
2,683 |
2,517 |
IESVAP Patrimonial Ltda. |
3,872 |
3,633 |
|
23,840 |
19,517 |
(a) Refers to sales of educational content from Medcel to UEPC.
(b) Refers to amounts incurred of cost sharing to be reimbursed by Bertelsmann
SE& Co. KGaA.;
(c) Refers to amounts to be payable to our shareholder Nicolau Carvalho Esteves
regarding the agreement to which Afya Brazil acquired the right to develop ITPAC Garanhuns medical school, a greenfield unit. The remaining
balance of the last installment is due in November 2023, adjusted by the CDI rate.
Afya Limited Notes to the 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 consolidated
statement of income comprised the following:
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Short-term employee benefits |
10,363 |
10,478 |
Share-based compensation plans |
13,658 |
8,279 |
|
24,021 |
18,757 |
Compensation of the Company’s key management includes short-term employee
benefits comprised by salaries, labor and social charges, and other ordinary short-term employee benefits. The amounts disclosed in the
table above are the amounts recognized as an expense in general and administrative expenses during the reporting period related to key
management personnel.
The executive officers participate in share-based compensation plans described
in Note 15(b).
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Indemnification assets (a) |
110,378 |
145,300 |
Advances |
25,049 |
30,626 |
Judicial deposits |
14,838 |
12,693 |
Prepaid expenses |
20,314 |
18,441 |
Selling shareholders receivables |
1,641 |
6,052 |
Other FIES receivables |
11,979 |
26,440 |
Other assets |
11,876 |
3,949 |
Total |
196,075 |
243,501 |
|
|
|
Current |
51,991 |
51,745 |
Non-current |
144,084 |
191,756 |
(a) 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. As disclosed
in Note 22.b) Unigranrio has entered into a tax amnesty program for settling a tax proceeding, which resulted in the write-off of R$20,000
of indemnification assets.
Afya Limited Notes to the 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 following table illustrates the summarized financial information of the
Company’s investment in UEPC:
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Current assets |
40,310 |
32,651 |
Non-current assets |
115,275 |
122,378 |
Current liabilities |
(30,940) |
(22,840) |
Non-current liabilities |
(90,975) |
(96,442) |
Equity |
33,670 |
35,747 |
Company’s share in equity – 30% |
10,101 |
10,724 |
Goodwill |
43,183 |
43,183 |
Carrying amount of the investment |
53,284 |
53,907 |
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Net revenue |
111,730 |
104,620 |
Cost of services |
(46,081) |
(42,296) |
General and administrative expenses |
(34,840) |
(24,080) |
Finance result |
(4,272) |
(2,909) |
Income before income taxes |
26,537 |
35,335 |
Income taxes expenses |
(967) |
(1,134) |
Net income for the period |
25,570 |
34,201 |
Company’s share of income for the period |
7,671 |
10,260 |
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Opening balance |
53,907 |
48,477 |
Dividends received |
(8,294) |
(2,837) |
Share of income |
7,671 |
10,260 |
Closing balance |
53,284 |
55,900 |
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Cost |
Building |
Machinery
and equipment |
Lands |
Vehicles |
Furniture
and fixtures |
IT
equipment |
Library
books |
Leasehold
improvements |
Construction
in progress |
Total |
|
|
|
|
|
|
|
|
|
|
|
As
of January 1, 2022 |
52,433 |
77,371 |
18,852 |
1,467 |
69,834 |
53,184 |
30,072 |
152,976 |
31,786 |
487,975 |
Additions |
526 |
17,390 |
- |
968 |
21,263 |
10,225 |
4,338 |
2,827 |
59,104 |
116,641 |
Business
combinations |
- |
45 |
- |
- |
- |
35 |
- |
- |
- |
80 |
Write-off |
- |
(2,127) |
- |
(775) |
(935) |
(873) |
- |
2 |
(75) |
(4,783) |
Transfer
and Reclassification |
38,881 |
(1,786) |
- |
(449) |
(9,191) |
7,505 |
2,836 |
(32,153) |
(4,826) |
817 |
As
of September 30, 2022 (unaudited) |
91,840 |
90,893 |
18,852 |
1,211 |
80,971 |
70,076 |
37,246 |
123,652 |
85,989 |
600,730 |
|
|
|
|
|
|
|
|
|
|
|
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 |
17,656 |
- |
407 |
14,033 |
17,121 |
850 |
46 |
37,806 |
88,014 |
Business
combination |
- |
7,729 |
- |
- |
4,384 |
734 |
1,328 |
10,741 |
65 |
24,981 |
Write-off |
241 |
(4,430) |
- |
(475) |
(3,002) |
(3,346) |
(7,788) |
(165) |
(7) |
(18,972) |
Transfer |
408 |
2,371 |
- |
- |
23 |
78 |
- |
75,415 |
(78,295) |
- |
As
of September 30, 2023 (unaudited) |
92,601 |
123,716 |
18,852 |
985 |
106,150 |
83,180 |
31,752 |
231,883 |
46,257 |
735,376 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As
of January 1, 2022 |
(1,673) |
(16,391) |
- |
(220) |
(12,496) |
(14,922) |
(13,600) |
(8,865) |
- |
(68,167) |
Depreciation |
(3,056) |
(8,384) |
- |
(204) |
(4,959) |
(7,789) |
(2,356) |
(6,289) |
- |
(33,037) |
Write-off |
- |
1,829 |
- |
644 |
737 |
892 |
- |
(2) |
- |
4,100 |
Transfer
and Reclassification |
- |
(124) |
- |
1 |
10,047 |
(3,311) |
(6,102) |
(511) |
- |
- |
As
of September 30, 2022 (unaudited) |
(4,729) |
(23,070) |
- |
221 |
(6,671) |
(25,130) |
(22,058) |
(15,667) |
- |
(97,104) |
|
|
|
|
|
|
|
|
|
|
|
As
of January 1, 2023 |
(5,751) |
(20,630) |
- |
288 |
(10,349) |
(21,837) |
(22,888) |
(18,099) |
- |
(99,266) |
Depreciation |
(2,867) |
(11,278) |
- |
(247) |
(9,348) |
(9,375) |
(2,570) |
(19,386) |
- |
(55,071) |
Write-off |
(121) |
4,138 |
- |
241 |
2,573 |
3,252 |
7,601 |
79 |
- |
17,763 |
As
of September 30, 2023 (unaudited) |
(8,739) |
(27,770) |
- |
282 |
(17,124) |
(27,960) |
(17,857) |
(37,406) |
- |
(136,574) |
|
|
|
|
|
|
|
|
|
|
|
Net
book value |
|
|
|
|
|
|
|
|
|
|
As
of September 30, 2023 (unaudited) |
83,862 |
95,946 |
18,852 |
1,267 |
89,026 |
55,220 |
13,895 |
194,477 |
46,257 |
598,802 |
As
of December 31, 2022 |
86,106 |
79,760 |
18,852 |
1,341 |
80,363 |
46,756 |
14,474 |
127,747 |
86,688 |
542,087 |
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 indications of impairment of property and equipment as of and for the nine-month
period ended September 30, 2023.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
11 | Intangible assets and goodwill |
|
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, 2022 |
1,184,336 |
2,165,406 |
133,369 |
431,277 |
21,759 |
17,305 |
34,397 |
76,444 |
28,847 |
- |
4,093,140 |
Additions (i) (ii) |
39,100 |
24,408 |
- |
90 |
1,093 |
7,214 |
23,952 |
8,854 |
17,011 |
- |
121,722 |
Remeasurement (iii) |
(8,637) |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(8,637) |
Transfer and Reclassification |
- |
- |
(2,472) |
530 |
10,184 |
29,505 |
17,954 |
(35,498) |
(21,020) |
- |
(817) |
Business combinations |
46,735 |
- |
46,793 |
3,829 |
33 |
2,627 |
5,520 |
- |
- |
1,055 |
106,592 |
As of September 30, 2022 (unaudited) |
1,261,534 |
2,189,814 |
177,690 |
435,726 |
33,069 |
56,651 |
81,823 |
49,800 |
24,838 |
1,055 |
4,312,000 |
|
|
|
|
|
|
|
|
|
|
|
|
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 |
- |
- |
- |
- |
665 |
6,159 |
27,868 |
14,887 |
17,534 |
- |
67,113 |
Write-off |
- |
- |
- |
- |
(2,235) |
- |
- |
(893) |
(50) |
- |
(3,178) |
Remeasurement (iv) |
2,556 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
2,556 |
Transfer and Reclassification |
- |
- |
- |
- |
13,062 |
4,785 |
16 |
(3,058) |
(14,805) |
- |
- |
Business combination (v) |
69,267 |
586,264 |
- |
142,451 |
62 |
- |
- |
- |
- |
- |
798,044 |
As of September 30, 2023 (unaudited) |
1,328,868 |
2,776,078 |
182,060 |
578,267 |
54,854 |
80,533 |
118,633 |
66,633 |
17,413 |
1,055 |
5,204,394 |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2022 |
- |
- |
(8,529) |
(142,270) |
(12,699) |
(16,672) |
(657) |
(11,478) |
- |
- |
(192,305) |
Amortization |
- |
- |
(4,630) |
(50,238) |
(3,310) |
(7,173) |
(6,959) |
(4,787) |
- |
(53) |
(77,150) |
As of September 30, 2022 (unaudited) |
- |
- |
(13,159) |
(192,508) |
(16,009) |
(23,845) |
(7,616) |
(16,265) |
- |
(53) |
(269,455) |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
- |
- |
(14,955) |
(212,363) |
(17,277) |
(26,562) |
(10,093) |
(17,039) |
- |
(79) |
(298,368) |
Amortization |
- |
- |
(6,111) |
(67,619) |
(6,306) |
(11,138) |
(14,183) |
(4,565) |
- |
(79) |
(110,001) |
Write-off |
- |
- |
- |
- |
1,997 |
- |
- |
893 |
- |
- |
2,890 |
As of September 30, 2023 (unaudited) |
- |
- |
(21,066) |
(279,982) |
(21,586) |
(37,700) |
(24,276) |
(20,711) |
- |
(158) |
(405,479) |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2023 (unaudited) |
1,328,868 |
2,776,078 |
160,994 |
298,285 |
33,268 |
42,833 |
94,357 |
45,922 |
17,413 |
897 |
4,798,915 |
As of December 31, 2022 |
1,257,045 |
2,189,814 |
167,105 |
223,453 |
26,023 |
43,027 |
80,656 |
38,658 |
14,734 |
976 |
4,041,491 |
(i) Licenses with indefinite useful life: On March 18, 2022, Afya announced
that MEC authorized the increase of 28 seats of Centro Universitário São Lucas, in Ji-Parana located in the State of Rondônia.
The earn-out related to the seats approval is R$800 per seat, adjusted by the CDI rate from the closing until the payment date, of which
50% was paid in April 2022 and the remaining amount is payable in cash in two equal installments through 2024.
(ii) Goodwill: During the measurement period, the preliminary goodwill for
the acquisition of Unigranrio was adjusted by R$39,100 (R$130,073 initial goodwill) as a result of an increase of liabilities regarding
tax contingencies and judicial deposits to be reimbursed by selling shareholders.
(iii) Goodwill: During the measurement period, R$8,637 of goodwill arising
from the acquisition of RX PRO was reduced, in connection with management’s view of remote likelihood of RX PRO achieving the revenue
goals estimated at the terms of the earn-out.
(iv) Goodwill: During the measurement period, results of operation such as
net revenue differed from the foreseen, resulting in a remeasurement of the contingent consideration for the acquisitions of Além
da Medicina, CardioPapers and Glic. Contingent consideration has been remeasured by R$4,773, R$5,082 and R$(7,299), respectively, totaling
R$2,556 for the period ended September 30, 2023.
(v) 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. See Note 4.
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, 2022. There were no indications of
impairment of goodwill and intangible assets with indefinite lives for the nine-month period ended September 30, 2023.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Intangible assets with definite lives
For the nine-month
period ended September 30, 2023, there were no indicatives that the Company’s
intangible assets with finite useful lives might be impaired.
12 | Financial assets and financial liabilities |
Financial assets |
September 30, 2023 |
December 31, 2022 |
At amortized cost |
(unaudited) |
|
Trade receivables |
524,149 |
495,399 |
Total |
524,149 |
495,399 |
Current |
480,556 |
452,831 |
Non-current |
43,593 |
42,568 |
12.2 | Financial liabilities |
Financial liabilities |
September 30, 2023 |
December 31, 2022 |
At amortized cost |
(unaudited) |
|
Trade payables |
85,655 |
71,482 |
Loans and financing |
1,908,299 |
1,882,901 |
Lease liabilities |
869,729 |
769,525 |
Accounts payable to selling shareholders |
651,068 |
528,678 |
Notes payable |
50,469 |
62,176 |
Total |
3,565,220 |
3,314,762 |
Current |
742,232 |
573,030 |
Non-current |
2,822,988 |
2,741,732 |
| 12.2.1 | Loans and financing |
Financial institution |
Currency |
Interest rate |
Maturity |
September 30, 2023 |
December 31, 2022 |
|
|
|
|
(unaudited) |
|
Banco Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.90% p.y. |
2025 |
537,095 |
518,134 |
FINEP (a) |
Brazilian real |
TJLP p.y. |
2027 |
11,939 |
8,418 |
Banco Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.75% p.y. |
2024 |
20,722 |
32,252 |
Softbank |
Brazilian real |
6.5% p.y. |
2026 |
826,106 |
824,258 |
Debentures |
Brazilian real |
CDI + 1.80 p.y. |
2028 |
512,437 |
499,839 |
|
|
|
|
1,908,299 |
1,882,901 |
Current |
|
|
|
186,903 |
145,202 |
Non-current |
|
|
|
1,721,396 |
1,737,699 |
On March 3, 2023 and June 12, 2023, the Company received a new tranche
from FINEP, totaling R$5,288. The terms and conditions are the same as the previous tranches disclosed in the annual financial statements
for the year ended December 31, 2022.
Afya Limited Notes to the 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 5 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
September 30, 2023 and December 31, 2022 and the movements during the nine-month periods ended September 30, 2023 and 2022, are described
below:
|
Right-of-use assets |
Lease liabilities |
As of January 1, 2022 |
663,686 |
714,085 |
Additions |
41,693 |
41,693 |
Remeasurement |
67,747 |
67,747 |
Depreciation expense |
(41,519) |
- |
Interest expense |
- |
63,458 |
Payments of lease liabilities |
- |
(84,509) |
Write-off |
(19,539) |
(20,250) |
As of September 30, 2022 (unaudited) |
712,068 |
782,224 |
|
|
|
As of January 1, 2023 |
690,073 |
769,525 |
Additions |
7,328 |
7,328 |
Remeasurement |
56,766 |
56,766 |
Business combinations |
65,408 |
65,408 |
Depreciation expense |
(47,106) |
- |
Interest expense |
- |
74,867 |
Payments of lease liabilities |
- |
(100,658) |
Write-off |
(2,433) |
(3,507) |
As of September 30, 2023 (unaudited) |
770,036 |
869,729 |
|
|
|
As of December 31, 2022 |
|
|
Current |
- |
32,459 |
Non-current |
690,073 |
737,066 |
As of September 30, 2023 (unaudited) |
|
|
Current |
- |
36,705 |
Non-current |
770,036 |
833,024 |
The Company recognized lease expense from short-term leases and low-value
assets of R$7,688 for the nine-month period ended September 30, 2023 (R$9,012 for the nine-month period ended September 30, 2022).
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
| 12.2.3 | Accounts payable to selling shareholders |
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Acquisition of IPEMED |
12,452 |
22,654 |
Acquisition of UniRedentor |
26,406 |
72,064 |
Acquisition of UniSãoLucas |
14,648 |
37,301 |
Acquisition of FCMPB |
122,849 |
111,755 |
Acquisition of Medical Harbour |
1,236 |
4,053 |
Acquisition of Shosp |
454 |
2,206 |
Acquisition of Unigranrio |
153,382 |
216,716 |
Acquisition of RX PRO |
1,948 |
1,781 |
Acquisition of Garanhuns |
33,696 |
30,653 |
Acquisition of Além da Medicina |
17,889 |
11,996 |
Acquisition of CardioPapers |
13,858 |
7,979 |
Acquisition of Glic |
2,841 |
9,520 |
Acquisition of DelRey (a) |
249,409 |
- |
|
651,068 |
528,678 |
Current |
382,500 |
261,711 |
Non-current |
268,568 |
266,967 |
|
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
Opening balance |
528,678 |
679,826 |
Payments and deductions (c) |
(148,535) |
(161,275) |
Payments
of interest (d) |
(33,503) |
(15,173) |
Additions (a) |
234,000 |
52,330 |
Interest |
67,872 |
51,296 |
Remeasurement (b) |
2,556 |
(8,637) |
Closing balance |
651,068 |
598,367 |
(a)
On January 2, 2023, Afya Brazil acquired 100% of DelRey.
The aggregate purchase price is R$809,000 of which R$575,000 was paid in cash on the transaction closing date, and R$234,000 (which includes
R$16,000 purchase consideration adjustment, in favor of the Company) 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.
(b)
During the measurement period, management’s expectation
has been reviewed based on performance for net 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 for the period ended September
30, 2023. These are measured by the Company at the present value.
(c)
On August 10, 2023, Unigranrio entered into a tax amnesty program on interest and penalties to settle a tax proceeding in respect to ISS
(tax on services) with the municipality of Rio de Janeiro, which result in a payment of R$14,819 to settle the claim. The selling shareholders
of Unigranrio agreed to pay R$5,438 regarding this matter, which were deducted from the accounts payable to selling shareholders. See
Note 21.
(d)
Payment of interest from acquisition of subsidiaries has been included on the investing activities of the statements of cash flows.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
With the acquisition of UniSL, Afya Brazil assumed
notes payable regarding the previous acquisition of a portion of the operations of Universidade Luterana do Brasil (ULBRA) by UniSL in
auction by the end of 2018. Two of the UniSL campuses, located in the cities of Ji-Paraná and Porto Velho in the State of Rondônia,
were acquired in such transaction. As of September 30, 2023, the notes payable of R$50,469 has a final maturity in December 2023 and is
adjusted by 100% of IPCA-E (Brazilian inflation rate).
Set out below are the carrying amount of notes payable and the movements
during the nine-month periods:
|
Notes payable |
As of January 1, 2022 |
72,726 |
Payments (*) |
(9,000) |
Payments of interest (**) |
(2,127) |
Monetary indexation |
4,149 |
As of September 30, 2022 (unaudited) |
65,748 |
|
|
As of January 1, 2023 |
62,176 |
Payments (*) |
(10,799) |
Payments of interest (**) |
(3,171) |
Monetary indexation |
2,263 |
As of September 30, 2023 (unaudited) |
50,469 |
|
|
As of December 31, 2022 |
|
Current liabilities |
62,176 |
Non-current liabilities |
- |
|
|
As of September 30, 2023 (unaudited) |
|
Current liabilities |
50,469 |
Non-current liabilities |
- |
(*) The amounts have been included on the investing activities
of the statements of cash flow.
(**) The amount has been included in the payment of interest on
the investing activities of the statements of cash flow.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The table below is a comparison of the carrying amounts and fair values
of the Company’s financial instruments, other than those carrying amounts that are reasonable approximation of fair values:
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
|
Carrying amount |
Fair value |
Carrying amount |
Fair value |
Financial assets |
|
|
|
Trade receivables (non-current) |
43,593 |
43,593 |
42,568 |
42,568 |
Total |
43,593 |
43,593 |
42,568 |
42,568 |
|
|
|
|
|
Financial liabilities |
|
|
|
|
Loans and financing |
1,908,299 |
1,899,523 |
1,882,901 |
1,934,295 |
Lease liabilities |
869,729 |
869,729 |
769,525 |
769,525 |
Accounts payable to selling shareholders |
651,068 |
651,068 |
528,678 |
528,678 |
Notes payable |
50,469 |
50,469 |
62,176 |
62,176 |
Total |
3,479,565 |
3,470,789 |
3,243,280 |
3,294,674 |
The Company assessed that the fair values of current
trade receivables and other current assets, trade payables, advances from customers and other current liabilities approximate their carrying
amounts largely due to the short-term maturities of these instruments. 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 during the periods ended September
30, 2023 and 2022.
The fair value of interest-bearing borrowings and
loans are determined by using the DCF method using discount rate that reflects the issuer’s borrowing rate as of the end of the
reporting period. The own non-performance risk at September 30, 2023 was assessed to be insignificant.
12.4 | Financial instruments risk management objectives and policies |
The Company’s principal financial liabilities
comprise loans and financing, lease liabilities, accounts payable to selling shareholders, notes payable, trade payables and advances
from customers. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal
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 in capital management and counts with 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.
| 12.4.1 | Financial instruments risk management objectives and policies |
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 risk and foreign currency risk.
The sensitivity analysis in the following sections relate to the position
as of September 30, 2023.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
(i) 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, accounts
payable to selling shareholders and notes payable, with floating interest rates.
Sensitivity analysis
The following table demonstrates the sensitivity
to a reasonably possible change in interest and inflation rates on cash equivalents, debentures, loans and financing, accounts payable
to selling shareholders and notes payable. With all variables held constant, the Company’s income before income taxes is affected
through the impact on floating interest and inflation rates, as follows:
|
September 30, 2023 |
Index – % per year |
Base rate |
|
|
|
|
Cash equivalents |
795,899 |
101.64% of CDI |
102,331 |
Loans and financing |
(512,437) |
CDI + 1.80% |
(74,047) |
Loans and financing |
(537,095) |
CDI + 1.90% |
(78,147) |
Loans and financing |
(20,722) |
CDI + 1.75% |
(2,983) |
Accounts payable to selling shareholders |
(368,871) |
CDI |
(46,662) |
|
|
|
(99,508) |
|
|
|
|
Loans and financing |
(11,939) |
TJLP |
(835) |
|
|
|
|
Accounts payable to selling shareholders |
(256,409) |
SELIC |
(31,800) |
|
|
|
|
Notes payable |
(50,469) |
IPCA |
(2,619) |
|
|
|
|
|
|
Increase in basis points |
|
|
+75 |
+150 |
Net effect on profit before tax |
|
(7,163) |
(14,326) |
(ii) 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$15,002 as
of September 30, 2023 (December 31, 2022: R$24,447).
Foreign currency sensitivity
The following table demonstrates the sensitivity
in the Company’s income before income taxes of a 10% change in the U.S. dollar exchange rate (R$5.0070 to U.S. dollar 1.00) as of
September 30, 2023, with all other variables held constant.
|
Exposure |
+10% |
-10% |
As of September 30, 2023 |
|
|
|
Cash equivalents |
15,002 |
1,500 |
(1,500) |
Afya Limited Notes to the 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 6 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 Company’s maximum exposure to credit
risk for the components of the statements of financial position on September 30, 2023 and December 31, 2022 is the carrying amounts of
its financial assets.
The Company’s Management has responsibility for monitor 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 September 30, 2023 (unaudited) |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
85,855 |
- |
- |
- |
85,855 |
Loans and financing |
313,314 |
1,538,663 |
574,165 |
- |
2,426,142 |
Lease liabilities |
138,016 |
267,133 |
252,533 |
1,272,621 |
1,930,303 |
Accounts payable to selling shareholders |
404,703 |
326,899 |
- |
- |
731,602 |
Notes payable |
50,646 |
- |
- |
- |
50,646 |
Advances from customers |
137,664 |
- |
- |
- |
137,664 |
|
1,130,198 |
2,132,695 |
826,698 |
1,272,621 |
5,362,212 |
As of December 31, 2022 |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
71,482 |
- |
- |
- |
71,482 |
Loans and financing |
287,741 |
788,190 |
1,237,599 |
- |
2,313,530 |
Lease liabilities |
117,506 |
234,688 |
219,127 |
1,139,771 |
1,711,092 |
Accounts payable to selling shareholders |
282,481 |
339,281 |
- |
- |
621,762 |
Notes payable |
62,176 |
- |
- |
- |
62,176 |
Advances from customers |
133,050 |
- |
- |
- |
133,050 |
|
954,436 |
1,362,159 |
1,456,726 |
1,139,771 |
4,913,092 |
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
12.5 | Changes in liabilities arising from financing activities |
|
January 1, 2023 |
Payments |
Additions |
Interest |
Business combinations |
Other |
September 30, 2023 |
|
|
|
|
|
|
|
(unaudited) |
Loans and financing
(*) |
1,882,901 |
(136,684) |
5,288 |
154,180 |
- |
2,614 |
1,908,299 |
Lease liabilities |
769,525 |
(100,658) |
64,094 |
74,867 |
65,408 |
(3,507) |
869,729 |
Dividends payable |
- |
(15,914) |
15,914 |
- |
- |
- |
- |
Total |
2,652,426 |
(253,256) |
85,296 |
229,047 |
65,408 |
(893) |
2,778,028 |
|
January 1, 2022 |
Payments |
Additions |
Interest |
Business combinations |
Other |
September 30, 2022 |
|
|
|
|
|
|
|
(unaudited) |
Loans and financing
(*) |
1,374,876 |
(68,975) |
- |
92,394 |
- |
1,429 |
1,399,724 |
Lease liabilities |
714,085 |
(84,509) |
109,440 |
63,458 |
- |
(20,250) |
782,224 |
Dividends payable |
- |
(15,726) |
15,726 |
- |
- |
- |
- |
Total |
2,088,961 |
(169,210) |
125,166 |
155,852 |
- |
(18,821) |
2,181,948 |
(*) Payment of interest of loan and financing has been included on the financing activities of the statements of cash flow.
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 the shareholder
value.
No changes were made in the objectives, policies
or processes for managing capital during the nine-month period ended September 30, 2023 compared to those adopted by the Company in its
annual consolidated financial statements.
14 | Labor and social obligations |
a) Variable compensation (bonuses)
The Company recorded bonuses related to
variable compensation of employees and management in cost of services and general and administrative expenses of R$14,307 and R$18,571
in the nine-month periods ended September 30, 2023 and 2022, 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 and July 8, 2022, resulting in the strike price still to be vested, at the later date, having their
strike price modified to the IPO price in Brazilian Reais (R$71.22), adjusted from the IPO date until the exercise date using the Certificado
de Depósito Interbancário (CDI index), excluding dividends. Such changes were assessed as modifications by the Company and
were accounted in accordance with IFRS 2.
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.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The average incremental fair value, as result of the modification occurred
on July 8, 2022, was R$3.84 Brazilian Reais per option. The following table list the inputs to the model used to determine the incremental
fair value of the stock options as result of the modification:
|
Modified plan |
Original plan |
Strike price at the measurement date |
R$76 |
R$85 – R$126 |
Dividend yield (%) |
0.0% |
0.0% |
Expected volatility (%) |
48% - 59% |
42% - 69% |
Risk-free interest rate (%) |
13% - 15% |
5% - 13% |
Expected life of stock options (years) |
1 – 5 |
1 – 5 |
Share price at the measurement date |
R$48 |
R$80 – R$145 |
Model used |
Binomial |
Binomial |
Weighted average fair value at the measurement date |
R$53.06 |
R$49.22 |
On July 31, 2023, the People and ESG Committee approved a further 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) with conversion ratios based on fair value of the original plan, at modification
date, so that the total fair value of the modified award remains the same as the original plan, resulting in a weighted average conversion
ratio of 0.12 RSUs per stock option. As result, the exchange from stock options to RSUs was deemed as a replacement award and thus assessed
as a modification by the Company and accounted in accordance with IFRS 2, since the beneficiaries will have a 'value for value’
benefit of settling its award for no cash consideration.
The key inputs to the model used to determine the total fair value of the
stock options for conversion to RSUs are as follows:
|
Original plan |
Strike price at the measurement date |
R$71 – R$126 |
Dividend yield (%) |
0.0% |
Expected volatility (%) |
37% - 76% |
Risk-free interest rate (%) |
2% - 15% |
Expected life of stock options (years) |
1 – 5 |
Share price at the measurement date |
R$48 – R$145 |
Model used |
Binomial |
Weighted average conversion rate (RSUs/Stock options) |
0.12 |
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Moreover, the People and ESG Committee also approved, on July 31, 2023,
a modification in the index rate to the strike prices of its granted stock options. The result is that strike prices are now adjusted
by the Brazilian inflation rate (IPCA) instead of the CDI rate. These changes were accounted as modifications in accordance with IFRS
2. The average incremental fair value, as result of the modification occurred on such date, was R$ 2.14 Brazilian Reais per stock option.
The following table list the inputs to the model used to determine the incremental fair value of the stock options as result of the modification:
|
Modified plan |
Original plan |
Strike price at the measurement date |
R$59 |
R$52 |
Dividend yield (%) |
0.0% |
0.0% |
Expected volatility (%) |
45% - 54% |
48% - 59% |
Risk-free interest rate (%) |
10% - 12% |
13% - 15% |
Expected life of stock options (years) |
1 – 5 |
1 – 5 |
Share price at the measurement date |
R$75 |
R$48 |
Model used |
Binomial |
Binomial |
Weighted average fair value at the measurement date |
R$53.06 |
R$49.22 |
On February 13, 2023, April 17, 2023 and August 1, 2023, the Company granted
15,000, 30,000 and 153,000, respectively, additional stock options:
|
February 2023 |
April 2023 |
August 2023 |
Strike price at the measurement date |
R$56 |
R$57 |
R$59 |
Dividend yield (%) |
0.0% |
0.0% |
0.0% |
Expected volatility (%) |
46% - 56% |
48% - 55% |
47% - 56% |
Risk-free interest rate (%) |
13% |
11% - 13% |
10% - 12% |
Expected life of stock options (years) |
1 – 5 |
1 – 5 |
1 – 5 |
Share price at the measurement date |
R$ 70.69 |
R$ 62.51 |
R$ 76.45 |
Model used |
Binomial |
Binomial |
Binomial |
Weighted average fair value at the measurement date |
R$ 29.54 |
R$ 32.04 |
R$ 37.04 |
The following table illustrates the number and
movements in stock options during the period:
|
Weighted average exercise price (in Reais) |
Number of stock options |
|
2023 |
2022 |
Outstanding at January 1 |
79.47 |
3,729,287 |
3,086,728 |
Granted |
58.89 |
198,000 |
1,234,919 |
Exercised |
59.27 |
(59,826) |
- |
Stock options exchanged to RSUs |
- |
(1,751,599) |
- |
Forfeited |
80.55 |
(333,111) |
(361,749) |
Expired |
76.40 |
(244,282) |
(203,611) |
Outstanding at September 30 |
63.25 |
1,538,469 |
3,756,287 |
Exercisable |
|
406,449 |
1,137,774 |
The share-based compensation expense recognized
in general and administrative expenses in the interim statement of income for the nine-month period ended September 30, 2023 was R$13,522
(September 30, 2022: R$18,503).
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
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.
In July 2022 and September 2022, 442,546 and 4,678
RSUs were granted, respectively, to Afya’s executives, with vesting periods from May 2023 to May 2026. Fair values at grant date
were R$48.24 and R$72.59, respectively. On February 2, 2023 and April 17, 2023, 8,000 and 16,000 RSUs were granted to Afya’s executives,
respectively, with vesting periods from May 2024 to May 2027. Fair value at grant date was R$70.69 and R$62.51, respectively.
As described above, on July 31, 2023, the holders
of stock options granted before July 11, 2022 were offered the possibility to exchange the stock options for a number of Restricted Stock
Units (RSUs).
The following table illustrates the number and
movements in RSUs during the period:
Number of RSUs |
2023 |
2022 |
|
|
|
Outstanding at January 1 |
447,224 |
- |
Granted |
177,490 |
447,224 |
Stock options exchanged to RSUs |
215,797 |
- |
Exercised |
(44,725) |
- |
Forfeited |
(21,894) |
- |
Outstanding at September 30 |
773,892 |
447,224 |
The Company accounts for the RSU plan as an equity-settled plan, except
for the portion of labor and social securities obligations.
Total RSU expense recognized in general and administrative expenses in the
statement of income for the nine-month period ended September 30, 2023 amount R$6,560 (September 30, 2022: R$1,911). Social charges amount
R$3,301 on social obligations liabilities as of September 30, 2023 (September 30, 2022: R$907).
a) Share capital
As of September 30, 2023 and December 31, 2022,
the Company’s share capital was R$ 17 represented by 93,722,831 shares comprised by 47,920,068 class A common shares and 45,802,763
class B common shares.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
b) Dividends
In the nine-month period ended September 30, 2023,
CCSI and IESVAP approved the payment of interim dividends of R$53,291, which R$37,377 was distributed to the Company and R$15,914 to non-controlling
shareholders.
c) Share repurchase program
On January 27, 2022, the Company’s board of directors approved the
third share repurchase program. Afya may repurchase up to 1,874,457 of its outstanding Class A common shares in the open market, based
on prevailing market prices, beginning on January 27, 2022, until the earlier of the completion of the repurchase or December 31, 2022,
depending upon market conditions. The Company completed the acquisition of the approved shares repurchase under this program. The Company
repurchased R$152,317 in the nine-month period ended September 30, 2022, regarding this 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 Company repurchased R$12,369 in the nine-month period ended September 30, 2023, regarding this program.
The following table illustrates the number and
movements in treasury shares during the nine-month periods ended September 30, 2023 and 2022:
|
Number of shares |
Average price (in Brazilian Reais) |
Outstanding at January 1, 2022 |
1,654,927 |
92.23 |
Repurchased |
2,131,358 |
71.40 |
Outstanding at September 30, 2022 |
3,786,285 |
80.54 |
|
|
|
Outstanding at January 1, 2023 |
3,786,285 |
80.54 |
Repurchased |
216,339 |
57.17 |
Delivered under share-based compensation plans |
(92,255) |
79.28 |
Outstanding at September 30, 2023 |
3,910,369 |
79.28 |
16 | 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.
Softbank’s series A perpetual convertible preferred shares are antidilutive
as of September 30, 2023 and 2022 and are not included on diluted earnings per share.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The following table reflects the net income and
share data used in the basic and diluted EPS calculations:
|
Three-month period ended |
Nine-month period ended |
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
Numerator |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Net income attributable to equity holders of the parent |
93,347 |
75,760 |
288,263 |
306,875 |
Denominator |
|
|
|
|
Weighted average number of outstanding shares |
89,752,636 |
89,936,546 |
89,831,865 |
90,469,327 |
Effects of dilution from stock options and restricted share units |
937,240 |
562,376 |
676,409 |
200,468 |
Weighted average number of outstanding shares adjusted for the effect of dilution |
90,689,876 |
90,498,922 |
90,508,274 |
90,669,795 |
|
|
|
|
|
Basic earnings per share (R$) |
1.04 |
0.84 |
3.21 |
3.39 |
Diluted earnings per share (R$) |
1.03 |
0.84 |
3.18 |
3.38 |
|
Three-month period ended |
Nine-month period ended |
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Tuition fees |
890,562 |
718,820 |
2,619,698 |
2,119,751 |
Other |
59,045 |
53,863 |
186,137 |
152,556 |
Deductions |
|
|
|
|
Discounts and scholarship |
(63,136) |
(66,755) |
(175,203) |
(174,340) |
Early payment discounts |
(44,761) |
(21,968) |
(144,761) |
(62,888) |
Returns and cancellations |
(8,173) |
(18,358) |
(21,444) |
(43,567) |
Taxes |
(36,301) |
(27,983) |
(106,857) |
(78,463) |
PROUNI |
(73,757) |
(57,044) |
(211,523) |
(167,994) |
Net revenue from contracts with customers |
723,479 |
580,575 |
2,146,047 |
1,745,055 |
Timing of revenue recognition of net revenue from contracts with customers |
|
|
|
|
Tuition, digital content and app subscription fees - Transferred over time |
715,456 |
568,448 |
2,108,636 |
1,699,104 |
Other - Transferred at a point in time |
8,023 |
12,127 |
37,411 |
45,951 |
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 revenues 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 consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
The following table presents statements
of income for the Company’s operating segments for nine-month periods ended September 30, 2023 and 2022. Recently acquired DelRey
is presented in the undergrad segment.
Revenue by segment |
Undergrad |
Continuing Education |
Digital Services |
Elimination (inter-segment transactions) |
September 30, 2023 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,883,089 |
108,263 |
164,036 |
(9,341) |
2,146,047 |
Tuition fees |
1,869,963 |
107,994 |
- |
- |
1,977,957 |
Other |
13,126 |
269 |
164,036 |
(9,341) |
168,090 |
|
|
|
|
|
|
Timing of revenue recognition |
1,883,089 |
108,263 |
164,036 |
(9,341) |
2,146,047 |
Transferred over time |
1,869,963 |
108,263 |
139,751 |
(9,341) |
2,108,636 |
Transferred at a point in time |
13,126 |
- |
24,285 |
- |
37,411 |
Revenue by segment |
Undergrad |
Continuing Education |
Digital Services |
Elimination (inter-segment transactions) |
September 30, 2022 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,538,037 |
75,568 |
134,243 |
(2,793) |
1,745,055 |
Tuition fees |
1,527,261 |
75,568 |
- |
- |
1,602,829 |
Other |
10,776 |
- |
134,243 |
(2,793) |
142,226 |
|
|
|
|
|
|
Timing of revenue recognition |
1,538,037 |
75,568 |
134,243 |
(2,793) |
1,745,055 |
Transferred over time |
1,527,261 |
75,568 |
96,275 |
- |
1,699,104 |
Transferred at a point in time |
10,776 |
- |
37,968 |
(2,793) |
45,951 |
Revenues from digital services segment are classified as other type
of revenues and a part of it is recognized as transferred over time and another part at point in time (specially books and E-Books, Cliquefarma
– website for tracking prescription drugs and RX PRO).
18 | Expenses and costs by nature |
|
Three-month period ended |
Nine-month period ended |
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Cost of services |
(288,234) |
(216,691) |
(820,136) |
(622,663) |
General and administrative expenses |
(257,002) |
(210,692) |
(739,808) |
(596,621) |
Total |
(545,236) |
(427,383) |
(1,559,944) |
(1,219,284) |
|
|
|
|
|
Payroll |
(283,507) |
(238,008) |
(813,423) |
(657,205) |
Depreciation and amortization |
(73,908) |
(52,617) |
(212,172) |
(151,706) |
Maintenance |
(28,776) |
(20,013) |
(77,398) |
(55,646) |
Hospital and medical agreements |
(21,115) |
(15,791) |
(62,561) |
(45,922) |
Provision for expected credit losses |
(18,074) |
1,082 |
(57,160) |
(29,441) |
Consulting fees |
(19,640) |
(10,115) |
(52,128) |
(24,984) |
Pedagogical services |
(14,071) |
(12,197) |
(46,065) |
(35,086) |
Sales and marketing |
(15,279) |
(12,200) |
(44,668) |
(36,704) |
Share-based compensation |
(6,684) |
(8,833) |
(20,082) |
(20,414) |
Utilities |
(4,689) |
(3,855) |
(14,465) |
(13,254) |
Travel expenses |
(4,011) |
(3,259) |
(10,805) |
(9,880) |
Tax expenses |
(4,543) |
(3,963) |
(9,435) |
(8,036) |
Lease expenses |
(3,044) |
(3,906) |
(7,688) |
(9,012) |
Other |
(47,895) |
(43,708) |
(131,894) |
(121,994) |
Total |
(545,236) |
(427,383) |
(1,559,944) |
(1,219,284) |
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
|
Three-month period ended |
Nine-month period ended |
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Income from financial investments |
22,754 |
19,185 |
57,698 |
48,888 |
Interest received |
10,619 |
9,400 |
25,760 |
21,979 |
Foreign exchange gain, net |
91 |
27 |
- |
- |
Other |
1,307 |
590 |
2,801 |
5,751 |
Finance income |
34,771 |
29,202 |
86,259 |
76,618 |
|
|
|
|
|
Interest expense |
(71,945) |
(52,680) |
(224,349) |
(147,839) |
Interest expense on lease liabilities |
(25,834) |
(22,066) |
(74,867) |
(63,458) |
Financial discounts granted |
(8,246) |
(7,965) |
(22,124) |
(19,761) |
Bank fees |
(1,663) |
(2,179) |
(5,194) |
(6,610) |
Foreign exchange loss, net |
- |
- |
(448) |
(293) |
IOF taxes (taxes on financial transactions) |
(620) |
(197) |
(2,131) |
(605) |
Other |
(6,998) |
(6,846) |
(24,459) |
(18,307) |
Finance expenses |
(115,306) |
(91,933) |
(353,572) |
(256,873) |
|
|
|
|
|
Finance result |
(80,535) |
(62,731) |
(267,313) |
(180,255) |
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 following is a reconciliation
of income tax expense to profit for the period, calculated by applying the combined Brazilian statutory rates at 34% for the nine-month
periods ended September 30, 2023 and 2022:
|
Three-month period ended |
Nine-month period ended |
|
September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
Income before income taxes |
110,366 |
87,107 |
336,826 |
347,037 |
Combined statutory income taxes rate - % |
34% |
34% |
34% |
34% |
Income taxes at statutory rates |
(37,524) |
(29,616) |
(114,521) |
(117,992) |
Reconciliation adjustments: |
|
|
|
|
Tax effect on loss from entities not subject to taxation |
(7,725) |
(8,773) |
(23,243) |
(24,030) |
PROUNI - Fiscal Incentive (a) |
72,530 |
65,835 |
240,211 |
210,799 |
Unrecognized deferred tax assets |
(34,314) |
(29,103) |
(125,555) |
(86,759) |
Presumed profit income tax regime effect (b) |
(2,017) |
(1,114) |
(5,434) |
(1,435) |
Permanent adjustments |
(2,795) |
(3,614) |
(8,173) |
(8,372) |
Other |
(301) |
(312) |
3,419 |
2,177 |
Income taxes expense – current |
(12,146) |
(6,697) |
(33,296) |
(25,612) |
Effective rate |
11.0% |
7.7% |
9.9% |
7.4% |
(a) The Company adhered to PROUNI, established
by Law 11,096 / 2005, which is a federal program that exempt companies of paying income taxes and social contribution upon compliance
with certain requirements required by said Law.
(b) 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 consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Deferred income taxes
As of September 30, 2023, the Company had accumulated unrecognized deferred
income tax assets on temporary differences and tax losses in the amount of R$1,123,071 (tax-basis) (R$778,080 tax-basis) as of December
31, 2022 which does not have any tax planning opportunities available that could support the recognition of these temporary differences
as deferred tax assets.
21 | Insurance contracts and contingencies |
a) Insurance contracts
The Company and its subsidiaries have a risk management program with the
purpose of delimiting the risks, seeking in the market coverage compatible with its size and operations.
b) 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 (i) |
Total |
|
|
|
|
|
Balances as of January 1, 2022 |
25,490 |
22,928 |
99,869 |
148,287 |
Additions |
937 |
6,353 |
57,452 |
64,742 |
Reversals |
(3,785) |
(2,457) |
(1,636) |
(7,878) |
Balances as of September 30, 2022 (unaudited) |
22,642 |
26,824 |
155,685 |
205,151 |
|
|
|
|
|
Balances as of January 1, 2023 |
22,484 |
24,664 |
148,706 |
195,854 |
Business combination |
64 |
88 |
- |
152 |
Additions |
3,948 |
4,034 |
6,838 |
14,820 |
Reversals (ii) |
(536) |
(7,630) |
(68,592) |
(76,758) |
Balances as of September 30, 2023 (unaudited) |
25,960 |
21,156 |
86,952 |
134,068 |
(i) During the nine-month period ended September 30, 2022, R$48,333 of tax
contingencies from Unigranrio were recorded with a corresponding increase of goodwill (see Note 11) and indemnification assets.
(ii) On August 10, 2023, Unigranrio entered into a tax amnesty program on
interest and penalties to settle a tax proceeding with respect to ISS (tax on services) with the municipality of Rio de Janeiro, which
result in a payment of R$14,819. The selling shareholders of Unigranrio agreed to pay R$5,438 regarding this matter. The Company had a
provision of R$53,302 and an indemnification asset from the selling shareholders of R$20,000 (in light of the indemnification clauses
as defined at acquisition of Unigranrio), in respect to such tax proceeding. The difference between the provision, indemnification asset
and the actual paid amount was recorded as Other income (expenses), net on the consolidates statement of income and comprehensive income.
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
There are other civil, labor, taxes and social security proceedings assessed
by Management and its legal counsels as possible risk of loss, for which no provisions are recognized, as follows:
|
September 30, 2023 |
December 31, 2022 |
|
(unaudited) |
|
Labor |
32,583 |
13,914 |
Civil |
51,263 |
59,603 |
Taxes and social security |
7,417 |
4,931 |
Total |
91,263 |
78,448 |
The Company has judicial deposits, related to taxes, civil and labor proceedings,
recorded in other assets (non-current) in the amount of R$14,838 as of September 30, 2023 (December 31, 2022: R$ 12,693).
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 litigation (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.
Accordingly, and 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$110,378 (December 31, 2022: R$ 145,300) is presented in non-current other assets.
During the nine-month periods ended September 30, 2023 and 2022, the Company
carried out non-cash transactions which are not reflected in the statement of cash flows. The main non-cash transactions were (i) additions
and remeasurements of right-of-use assets and lease liabilities; and (ii) non-cash consideration on business combinations (Note 4).
Afya Limited Notes to the consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Acquisition of additional interest of CCSI
On October 31, 2023, Afya Brazil acquired an additional
15% of CCSI, increasing the position of ownership to 75% of the total share capital.
The aggregate purchase price for the additional 15% was R$21,000, 100% in
cash on the date of the closing. The carrying value of the net assets as of September 30, 2023 was R$12,409 and the excess of consideration
paid over the carrying value as of October 31, 2023 will be recognized in retained earnings in the equity attributable to equity holders
of the parent.
Share-based compensation
In October 2023, 37,000 additional stock options were granted, with an exercise price of R$59.47 (in Brazilian Reais). These stock options
will vest in five annual tranches.
Also, in October 2023 56,000 RSUs were granted to some executives and will
vest in four annual tranches.
***
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