Afya Limited Announces Fourth-Quarter and Full Year 2021 Financial Results
Consistent Growth
Success in Digital Services
ESG Evolutions
NOVA LIMA, Brazil–(BUSINESS WIRE)–Afya Limited (NASDAQ: AFYA) (“Afya” or the “Company”), the leading medical education group and digital health service provider in Brazil, reported today financial and operating results for the three and twelve-month period ended December 31, 2021 (fourth quarter 2021 and full year 2021, respectively). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).
Fourth Quarter 2021 Highlights
- 4Q21 Adjusted Net Revenue increased 45.3% YoY to R$505.4 million.
- 4Q21 Adjusted EBITDA increased 25.9% YoY reaching R$195.1 million, with an Adjusted EBITDA Margin of 38.6%.
Full Year 2021 Highlights
- FY21 Adjusted Net Revenue increased 45.1% YoY to R$1,752.7 million.
- FY21 Adjusted EBITDA increased 34.0% YoY reaching R$754.8 million, with an Adjusted EBITDA Margin of 43.1%.
- FY21 Adjusted Net Income increased to R$ 440.4 million in 2021 from R$ 437.5 million in 2020.
- Cash conversion of 100.8%, with a cash position of R$ 748.6 million on December 31, 2021.
- 248 thousand monthly active physicians and medical students using Afya’s Digital Services.
| Table 1: Financial Highlights | ||||||||||||||||||||||
| For the three months period ended December 31, | For the twelve months period ended December 31, | |||||||||||||||||||||
| (in thousand of R$) |
2021 |
2021 Ex Acquisitions* |
2020 |
% Chg | % Chg Ex Acquisitions |
2021 |
2021 Ex Acquisitions* |
2020 |
% Chg | % Chg Ex Acquisitions | ||||||||||||
| (a) Net Revenue |
498,259 |
373,733 |
345,266 |
44.3% |
8.2% |
1,719,371 |
1,302,252 |
1,201,191 |
43.1% |
8.4% |
||||||||||||
| (b) Adjusted Net Revenue (1) |
505,407 |
378,633 |
347,896 |
45.3% |
8.8% |
1,752,728 |
1,313,032 |
1,207,735 |
45.1% |
8.7% |
||||||||||||
| (c) Adjusted EBITDA (2) |
195,128 |
150,893 |
155,048 |
25.9% |
-2.7% |
754,836 |
557,838 |
563,112 |
34.0% |
-0.9% |
||||||||||||
| (d) = (c)/(b) Adjusted EBITDA Margin |
38.6% |
39.9% |
44.6% |
-600 bps | -470 bps |
43.1% |
42.5% |
46.6% |
-350 bps | -410 bps | ||||||||||||
| *For the three months period ended December 31, 2021, “2021 Ex Acquisitions” excludes: FCMPB (only October, 2021; Closing of FCMPB was in November, 2020), MedPhone (only October, 2021; Closing of Medphone was in November, 2020), FESAR (only October, 2021; Closing of FESAR was in November, 2020), iClinic, Medicinae, Medical Harbour, Cliquefarma, Shosp, UNIFIPMoc, FIPGuanambi, UNIGRANRIO, RX PRO and Garanhuns (all from October to December, 2021). | |||||||||||
| For the twelve months period ended December 31, 2021 – “2021 Ex Acquisitions” excludes: UniRedentor (only January, 2021; Closing of UniRedentor was in January 31, 2020), UniSL (January to April, 2021; Closing of UniSL was in May, 2020), PEBMED (January to July, 2021; Closing of PEBMED was in July, 2020), FCMPB (January to October, 2021; Closing of FCMPB was in November, 2020), Medphone (January to October, 2021; Closing of Medphone was in November, 2020), FESAR (January to October, 2021; Closing of FESAR was in November, 2020), iClinic (January to December, 2021; Closing of iClinic was in January, 2021), Medicinae (March to December, 2021; Closing of Medicinae was in March, 2021), Medical Harbour (April to December, 2021; Closing of Medical Harbour was in April, 2021), Cliquefarma (April to December, 2021; Closing of Cliquefarma was in April, 2021), Shosp (May to December, 2021; Closing of Shosp was in May, 2021), UNIFIPMoc and FIPGuanambi (June to December, 2021; Closing of UNIFIPMoc and FIPGuanambi was in June, 2021), UNIGRANRIO (August to December, 2021; Closing of UNIGRANRIO was in August, 2021), RX PRO (October to December, 2021; Closing of RX PRO was in October, 2021) and Garanhuns (November to December, 2021; Closing of Garanhuns was in November, 2021). | |||||||||||
| 1. Includes mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on site classes restriction and excludes recognized revenue that relates to discounts that were granted in 2H2020, but were invoiced in 1H21, based on the Supreme Court decision that was released in December 28, 2020. | |||||||||||
| 2. See more information on “Non-GAAP Financial Measures” (Item 08). | |||||||||||
1. Message from Management
Virgilio Gibbon, Afya’s CEO, stated:
I am extremely proud to present another year of Afya showing strong results, resilience in our operational and financial metrics and significant evolutions in the ESG agenda. Our performance in 2021 reflects the successful execution of our assertive strategy, the commitment of our team members and the consistency of our business model, particularly during another year of a worldwide pandemic. This scenario was one of the main reasons for the acceleration of our long-term plan as well as the ramp-up of our digital services strategy, as I will give more color further on.This year’s results reinforce that our strategy has been successful since the beginning, marked by the successive growth in net revenue and EBITDA throughout all quarters. As we hope to see, from now on, the pandemic losing its strength, pushing our students, employees, and partners to continue extracting the best from our campuses and digital services.
With that in mind, we’re delighted to see that the biggest growth of the year, in terms of revenue, came from our digital services, showing alignment and success in our near-future plan. As evidenced by the pandemic, the medical community has embraced the digital component in the healthcare segment, and, therefore, we are very proud to see our productivity tools being able to help them throughout their entire medical journey. Not only this, but, reaffirming our promises for the digital strategy shown in 2020, our digital ecosystem is being built with multiple offerings, unlocking new interactions and revenue streams that go beyond the physicians, achieving pharma players, labs, pharmacy chains, hospitals, and HC operators through our platforms.
The acquisition we’ve completed this quarter – RXPRO -, is a great example of this: the solution connects physicians with the pharmaceutical industry, providing specialized and personalized marketing for those companies by delivering free samples to a community of pre-selected physicians, using third-party logistics and offering medical updates regarding pharmaceutical products and treatments in a fast and efficient way for doctors. This solution integrates our unique and complete ecosystem, reinforcing a disruptive service offering for the pharma players.
Along with the digital improvements, during the year we’ve successfully executed our strategy to continue to be the market leader in medical school seats in Brazil. The expansion of our offering in the undergrad business continues to grow strong, and, after the acquisition of Unigranrio, in August, we’ve approved the operations of the Garanhuns’ medical school, in November and Ji-Parana’s medical school in March. Also, already in 2022, we have increased 200 seats with four new Mais Médicos authorized units by MEC, with operations to start in the second semester, along with 28 new seats from the UniSL Ji-Paraná campus. So far, Afya has reached 2,759 seats, representing almost 20 thousand students at maturity. Considering all acquisitions and seats approved by MEC, we’ve added 1,307 seats since our IPO and we have become extremely efficient at operating medical schools and we continue to see opportunities in this area. That is why our guidance is to have 200 more seats per year until 2028, starting in 2022. All this effort means one thing: that our medical education business remains, and will continue to be, the cornerstone of our business in the short and midterms.
We also announce a relevant equity operation: our second share repurchase program was successfully completed, resulting in the purchase of 1,383,108 Class A common shares. With that positive result, the Board of Directors has approved a new share repurchase program, under which we may repurchase up to 1,874,457 of our outstanding Class A common shares, depending upon market conditions.
Another main operation to be mentioned, even though it has happened after the 2021 results, is that the Esteves family have made a binding offer to sell 6,000,000 Class B common shares of Afya at the purchase price of US$26.90 per share to an affiliate of Bertelsmann SE& Co. KGaA. If the transaction goes through, Bertelsmann and the Esteves family will beneficially own 57.5% and 33.1% voting interest, and 31.0% and 17.8% of the total shares respectively, in Afya. We are delighted that Bertelsmann, one of the world’s leading media companies with a significant footprint in the education sector, has evidenced its commitment to Afya’s long-term strategy through its evaluation of increasing its stake. We look forward to continuing to benefit from the vision and commitment of the Esteves family with their significant shareholding and active participation in our company.
Last, but not least, one thing is very important to mention: as we’ve promised at the end of 2020, all of our ESG evolutions were reported on an ongoing basis in our earnings releases this year. This proves Afya’s engagement to these topics that are generating a significant impact on society, making our team very proud and even more committed. Along with all the improvements that we’ve already shown during the year – multiple awards won, voluntary commitments aligned with the UN Global Compact, certifications like Women on Board, among others -, we announce that we are now one of the 13 Brazilian companies to join the 2022 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. The inclusion in the Bloomberg Gender-Equality Index reinforces our commitment to this subject and strengthens our goal to improve our metrics with policy development, representation, and transparency, fostering more opportunities for diverse talent to succeed in our organization.
Consistent growth, success in our digital services and ESG evolutions: this is how we are evolving and empowering our mission to become the reference in medical education and digital services, encouraging students and physicians to transform their ambitions into rewarding lifelong experiences. We are proud of our business and of what we have achieved so far, as well as of what we are planning for the future.
2. Key Events in the Quarter:
- Closing of RX PRO acquisition, on October 2021 – a solution that connects physicians with the pharmaceutical industry, providing specialized and personalized marketing for those companies, in a more convenient way for physicians. RX PRO does this by delivering free samples to a community of pre-selected physicians and offering medical updates on pharmaceutical products and treatments in a fast and efficient way for doctors.
- Second share repurchase program, on October 2021 – after the completion of its first share repurchase program on October 21, 2021 that resulted in the purchase of 1,015,844 Class A common shares, the Board of Directors has approved a new share repurchase program. Under this share repurchase program, Afya may repurchase up to 1,383,108 of its outstanding Class A common shares in the open market, based on prevailing market prices, or in privately negotiated transactions.
- Garanhuns medical school approved, on November 2021 – the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) has authorized the operation of the medical school in Garanhuns in the State of Pernambuco on November 2021. This authorization is in connection with a previous requirement made by ITPAC, a subsidiary of Afya, to expand their operation and open a branch in the city of Garanhuns. ITPAC Garanhuns authorization guaranteed 120 medical seats to Afya.
3. Subsequent Events in the Quarter
- Afya announced, on January 2022, that Júlio de Angeli, Vice President of Innovation & Digital Services, left the company for personal reasons. “We are grateful for the time Mr. de Angeli has spent with us developing our digital services strategy and we wish him all the best” said Virgilio Gibbon, our CEO. Lelio de Souza, who has joined Afya effective as of November 2021 and has 22 years of experience in tech companies, assumed the position of Vice President of Innovation & Digital Services.
- Third share repurchase program, on January 2022 – after the completion of its second share repurchase program, which resulted in the purchase of 1,383,108 Class A common shares, the Board of Directors has approved a new share repurchase program. Under this share repurchase program, Afya may repurchase up to 1,874,457 of its outstanding Class A common shares, which represents 4% of its free float, in the open market, based on prevailing market prices, or in privately negotiated transactions, beginning on January 27, 2022 until the earlier of the completion of the repurchase or December 31, 2022, depending upon market conditions.
- Reinforcing our ESG commitment, Afya announced, on January 2022, that it is one of 418 companies across 45 countries and regions to join the 2022 Bloomberg Gender-Equality Index (GEI), a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. This reference index measures gender equality across five pillars: female leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and pro-women brand. Afya was included on this year’s index for scoring above a global threshold established by Bloomberg to reflect disclosure and the achievement or adoption of best-in-class statistics and policies.
- Afya announced, on February 2022, that the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the operations of the medical schools in Abaetutuba, in the State of Pará, and Itacoatiara, in the State of Amazonas, both under the Mais Médicos II program. With these authorizations, Afya reaches its third and fourth schools authorized to start operating under the Mais Medicos II program. Each medical school will contribute with 50 seats and, with that, Afya will reach 2.581 operating seats out of 2.731 approved seats.
- Afya announced, on March 2022, the acquisition of 100% of the total share capital of Além da Medicina, a medical content online platform for physicians and medical students that provides educational tools in addition to technical medical content that can assist them throughout their careers. Its robust content includes mentoring for residency, soft skills, finance, accounting, and investment basics for physicians. Além da Medicina had more than 4.000 subscribers in 2021, with a general NPS of 77 and almost 100.000 followers on Instagram. The company expects a R$12.7 million gross revenue for 2022.
- Afya announced, on March 2022, that it was notified that the Esteves family has made a binding offer to sell 6,000,000 Class B common shares of Afya at the purchase price of US$26.90 per share to an affiliate of Bertelsmann SE& Co. KGaA, or “Bertelsmann”. Bertelsmann’s acceptance of the offer remains subject to due diligence and Bertelsmann board approval. If the transaction proceeds, following the transaction, Bertelsmann and the Esteves family will beneficially own 57.5% and 33.1% voting interest, and 31.0% and 17.8% of the total shares respectively, in Afya. Afya was notified that if Bertelsmann accepts the offer, the Esteves family and Bertelsmann have agreed to amend Afya’s articles of association and the current shareholder’s agreement between Bertelsmann and the Esteves family in order to allow Bertelsmann to consolidate its investment in Afya under International Financial Reporting Standards as a controlling shareholder.
- Afya announced, on March 2022, that the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the operations of the medical schools in Bragança, in the State of Pará, and Manacapuru, in the State of Amazonas, both under Mais Médicos II program. With these authorizations, Afya reaches its fifth and sixth authorized schools to start operating under the Mais Medicos II program. Each medical school will contribute with 50 seats and with that, Afya will reach 2.681 operating seats out of 2.731 approved seats.
- Afya announced, on March 2022, that the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the increase of 28 seats of Centro Universitário São Lucas, in Ji-Parana located in the state of Rondônia. With the authorization, Afya reaches 2.759 approved seats, which will represent around 19.865 students at maturity, considering FIES and PROUNI.
4. Second Half 2021 Guidance Achievement
The Company’s financial results reaffirmed the resiliency of its business model, which took into account the successfully concluded acceptances of new medical students for the second half of 2021 and the consolidation of the digital companies and medical schools acquisitions during the year. The Adjusted Net Revenue of R$ 1,751.8 million was R$ 12 million above the mid-guidance range, while the EBITDA margin was within the mid-guidance range.
| Guidance for 2021 | Actual 2021 | ||
| Adjusted Net Revenue* | R$ 1.720 mn ≤ ∆ ≤ R$ 1.760 mn |
R$ 1.752 mn |
|
| Adjusted EBITDA Margin | 42.0% ≤ ∆ ≤ 44.0% |
43.1% |
|
| *Excludes RX PRO (Closing of RX PRO was in October, 2021) and Garanhuns (Closing of Garanhuns was in November, 2021). | |||
5. 2022 Guidance
The Company is introducing guidance for 2022 which takes into account the successfully concluded acceptances of new medical students, ensuring 100% occupancy in all of its medical schools.
Considering the above factors, the guidance for 2022 is defined in the following table:
|
Guidance for 2022 |
Important considerations |
|
|
2022 Adjusted Net Revenue is expected to be between R$2,280.0 million – R$2,360.0 million |
Includes four Mais Médicos units start operating in 2H22; |
|
|
2022 Adjusted EBITDA is expected to be between R$935.0 million – R$1,015 million |
||
6. Overview of 2021 & 4Q21
Operational Review
Afya is the only company offering educational and technological solutions to support physicians across every stage of the medical career, from undergraduate students in their medical school years through medical residency preparatory courses, medical specialization programs and continuing medical education. Afya is also positioned in digital health services, providing clinical decision apps and practice management tools as SAAS (Software as a Service).
The Company reports results for three distinct business units. The first, Undergrad – medical schools, other healthcare programs and ex-health degrees. Revenue is generated from the monthly tuition fees the Company charges students enrolled in the undergraduate programs. The second, Continuing Education – specialization programs and graduate courses. Revenue is also generated from the monthly tuition fees the Company charges students enrolled in the specialization and graduate courses. The third is Digital Services – digital services offered by the Company at every stage of the medical career. This business unit is divided into 6 pillars: Content & Technology for Medical Education, Clinical Decision Software, Practice Management Tools & Electronic Medical Records, Physician-Patient Relationship, Telemedicine, and Digital Prescription. Revenue is generated from printed books and e-books, which is recognized at the point in time when control is transferred to the customer, and subscription fees (SaaS model).
Key Revenue Drivers – Undergraduate Courses
| Table 2: Key Revenue Drivers | Twelve months period ended December 31, | ||
|
2021 |
2020 |
% Chg | |
| Undergrad Programs | |||
| MEDICAL SCHOOL | |||
| Approved Seats |
2,731 |
2,143 |
27.4% |
| Operating Seats |
2,481 |
1,893 |
31.1% |
| Total Students (end of period) |
16,017 |
11,030 |
45.2% |
| Average Total Students |
14,492 |
9,413 |
54.0% |
| Average Total Students (ex-Acquisitions)* |
10,872 |
9,413 |
15.5% |
| Tuition Fees (Total – R$MM) |
1,511,442 |
910,966 |
65.9% |
| Tuition Fees (ex- Acquisitions* – R$MM) |
1,123,944 |
910,966 |
23.4% |
| Medical School Avg. Ticket (ex- Acquisitions* – R$/month) |
8,615 |
8,065 |
6.8% |
| UNDERGRADUATE HEALTH SCIENCE | |||
| Total Students (end of period) |
19,882 |
10,325 |
92.6% |
| Average Total Students |
15,918 |
10,733 |
48.3% |
| Average Total Students (ex-Acquisitions)* |
11,173 |
10,733 |
4.1% |
| Tuition Fees (Total – R$MM) |
239,512 |
152,539 |
57.0% |
| Tuition Fees (ex- Acquisitions* – R$MM) |
148,381 |
152,539 |
-2.7% |
| OTHER UNDERGRADUATE | |||
| Total Students (end of period) |
25,219 |
14,851 |
69.8% |
| Average Total Students |
20,198 |
14,087 |
43.4% |
| Average Total Students (ex-Acquisitions)* |
10,734 |
14,087 |
-23.8% |
| Tuition Fees (Total – R$MM) |
239,235 |
172,961 |
38.3% |
| Tuition Fees (ex- Acquisitions* – R$MM) |
147,249 |
172,961 |
-14.9% |
| TOTAL TUITION FEES | |||
| Tuition Fees (Total – R$MM) |
1,990,189 |
1,236,466 |
61.0% |
| Tuition Fees (ex- Acquisitions* – R$MM) |
1,419,574 |
1,236,466 |
14.8% |
| For the twelve months period ended December 31, 2021 – “2021 Ex Acquisitions” excludes: UniRedentor (only January, 2021; Closing of UniRedentor was in January 31,2020), UniSL (January to April, 2021; Closing of UniSL was in May, 2020), FCMPB (January to Octobe, 2021; Closing of FCMPB was in November 2020), FESAR (January to October, 2021; Closing of FESAR was in November 2020), UNIFIPMoc and FIPGuanambi (June to December, 2021; Closing of UNIFIPMoc and FIPGuanambi was in June, 2021), UNIGRANRIO (August to December, 2021; Closing of UNIGRANRIO was in August, 2021) and Garanhuns (November to December, 2021; Closing of Garanhuns was in November, 2021). |
Key Revenue Drivers – Continuing Education and Digital Services
| Table 3: Key Revenue Drivers | Twelve months period ended December 31, | ||
|
2021 |
2020 |
% Chg | |
| Continuing Education | |||
| Medical Specialization & Others |
|
||
| Total Students (end of period) |
3,189 |
4,181 |
-23.7% |
| Average Total Students |
3,252 |
4,266 |
-23.8% |
| Average Total Students (ex-Acquisitions) |
3,064 |
4,266 |
-28.2% |
| Net Revenue from courses (Total – R$MM) |
72,983 |
107,196 |
-31.9% |
| Net Revenue from courses (ex- Acquisitions¹) |
70,822 |
107,196 |
-33.9% |
| Digital Services |
|
||
| Content & Technology for Medical Education |
|
||
| Active Paying Students |
|
||
| Prep Courses & CME – B2C |
17,171 |
11,316 |
51.7% |
| Prep Courses & CME – B2B |
4,460 |
1,723 |
158.9% |
| Clinical Decision Software |
|
||
| Whitebook Active Payers |
125,372 |
106,977 |
17.2% |
| Clinical Management Tools² |
|
||
| iClinic Active Payers |
17,978 |
– |
n.a |
| Digital Services Total Active Payers (end of period) |
164,981 |
120,016 |
37.5% |
| Net Revenue from Services (Total – R$MM) |
151,958 |
93,152 |
63.1% |
| Net Revenue From Services (ex-Acquisitions³) |
99,003 |
93,152 |
6.3% |
| (1) For the twelve months period ended December 31, 2021 – “2021 Ex Acquisitions” excludes: UniRedentor (only January, 2021; Closing of UniRedentor was in January 31, 2020). | |||
| (2) Clinical management tools includes Telemedicine and Digital Prescription features. | |||
| (3) For the twelve months period ended December 31, 2021 – “2021 Ex Acquisitions” excludes: PEBMED (January to July, 2021; Closing of PEBMED was in July, 2020), Medphone (January to October, 2021; Closing of Medphone was in November 2020), iClinic (January to December, 2021; Closing of iClinic was in January, 2021), Medicinae (March to December, 2021; Closing of Medicinae was in March, 2021), Medical Harbour (April to December, 2021; Closing of Medical Harbour was in April, 2021), Cliquefarma (April to December, 2021; Closing of Cliquefarma was in April, 2021), Shosp (May to December, 2021; Closing of Shosp was in May, 2021) and RX PRO (October to December, 2021; Closing of RX PRO was in October, 2021). |
Key Operational Drivers – Digital Services
Monthly Active Users (MaU) represents the number of unique individuals that consumed Digital Services content in the last 30 days of a specific period.
Contacts
Investor Relations Contact
Renata Couto, Director of Investor Relations
Phone: +55 31 3515.7564 | +55 31 98463.3341
E-mail: renata.couto@afya.com.br