Afya Limited Class A Reports Strong Earnings Growth

Afya Limited Class A ((AFYA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Afya Limited Class A recently held its earnings call, revealing a strong financial performance marked by significant revenue and EBITDA growth. The company celebrated strategic achievements, including credit rating upgrades and ESG recognition. However, it also faced challenges such as a decline in residency journey students and active users in the Medical Practice Solution segment, alongside increased tax expenses.

Strong Revenue and EBITDA Growth

Afya reported a remarkable increase in net revenue, which rose by 16% year-over-year to R$936 million. The adjusted EBITDA also saw an impressive growth of almost 24%, reaching R$492 million with a record margin of 52.5%. This financial performance highlights the company’s robust operational efficiency and strategic execution.

Cash Flow and EPS Performance

The company experienced a 10% rise in cash flow from operating activities, totaling R$470 million. Additionally, earnings per share (EPS) increased by 23% year-over-year, reaching R$2.79. This growth in cash flow and EPS underscores Afya’s strong financial health and shareholder value creation.

Significant Increase in Medical Students and Seats

Afya saw a substantial growth in the number of Undergrad Medical students, which increased by almost 50% compared to the first quarter of 2024. The acquisition of Funic contributed to the rise in approved medical seats, now totaling 3,653, reinforcing Afya’s position in the education sector.

Credit Rating Upgrade and ESG Recognition

Moody’s upgraded Afya’s national scale credit rating from AA+.br to AAA.br with a stable outlook, reflecting the company’s strong financial discipline. Additionally, MSCI awarded Afya a BBB ESG rating, highlighting its commitment to sustainable practices.

Growth in Medical Practice Solution and Continuing Education Segments

The Medical Practice Solution segment experienced a 14% increase in net revenue, while the Continuing Education segment saw a 9% growth year-over-year. These segments’ expansion demonstrates Afya’s ability to diversify and strengthen its service offerings.

Decrease in Residency Journey Students

Despite the overall growth, the number of students in the residency journey dropped by 70% to 12,203. This decline presents a challenge for Afya as it seeks to maintain its educational leadership.

Active Users Decline in Medical Practice Solution

The transition from the PEBMED portal to the Afya portal led to a decrease in monthly active users, from 263,000 last year to 245,000. This decline indicates a potential area for improvement in user engagement strategies.

Impact of New Tax Legislation

Afya faced increased income tax expenses of R$23 million due to the new OECD Pillar Two rules, impacting its net income. This highlights the financial challenges posed by evolving tax regulations.

Forward-Looking Guidance

Looking ahead, Afya anticipates continued growth with net revenue for the first quarter of 2025 increasing by 16% year-over-year to R$936 million. The adjusted EBITDA is expected to rise by nearly 24% to R$492 million, maintaining a record margin of 52.5%. The company also forecasts a significant increase in net income and EPS, alongside a strong cash flow from operating activities. Afya plans to expand its ecosystem and maintain financial discipline, as evidenced by its credit rating upgrade and ESG recognition.

In conclusion, Afya Limited Class A’s earnings call showcased a strong financial performance with notable revenue and EBITDA growth. While the company celebrated strategic achievements, it also acknowledged challenges in certain segments. The forward-looking guidance suggests continued growth and expansion, reinforcing Afya’s commitment to maintaining its leadership in the education and healthcare sectors.