Afya Q1 2025 Earnings Report

Afya EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.46
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Afya Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $923.11 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Afya Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Afya (NASDAQ:AFYA), through its subsidiaries, operates as a medical education group in Brazil. The company operates through three segments: Undergrad, Continuing Education, and Digital Services. It offers educational products and services, including medical schools, medical residency preparatory courses, graduate courses, and other programs to lifelong medical learners enrolled across its distribution network, as well as to third-party medical schools. The company also provides digital health services, such as subscription-based mobile app and website portal that focuses on assisting health professionals and students with clinical decision-making through tools, such as medical calculators, charts, and updated content, as well as prescriptions, clinical scores, medical procedures and laboratory exams, and others. It offers health sciences courses, which comprise medicine, dentistry, nursing, radiology, psychology, pharmacy, physical education, physiotherapy, nutrition, and biomedicine; and degree programs and courses in other subjects and disciplines, including undergraduate and post graduate courses in business administration, accounting, law, civil engineering, industrial engineering, and pedagogy. In addition, the company provides medical postgraduate specialization programs; printed and digital content; and an online medical education platform and practical medical training services. The company was founded in 1999 and is headquartered in Nova Lima, Brazil.

Afya Q1 2025 Earnings Call Transcript

Key Takeaways

• Net revenue increased 16% year-over-year to BRL 936 million, adjusted EBITDA grew almost 24% with a record margin of 52.5%, and EPS rose 23% to BRL 2.79 alongside a strong operating cash flow conversion ratio of 96.8%.
• Undergraduate segment expanded with a 12% increase in approved medical seats to 3,593 (plus 60 from the Funiq acquisition), nearly 50% growth in medical students to ~26,000, a 4% rise in average ticket price, and gross margin expansion driven by acquisitions and new campus ramp-ups.
• Continuing education net revenue grew ~9% organically to BRL 71 million, with graduate journey enrollment up 16%, while residency preparation students declined 70% and other B2B course enrollments fell 3% compared to Q1 2024.
• Afya’s national scale credit rating was upgraded to AAA.br by Moody’s with a stable outlook, the company met IFC ESG targets to earn a 15 bps step-down in interest rates, and received a solid BBB MSCI ESG rating on debut.
• The implementation of the OECD Pillar Two rules led to an additional BRL 23 million in income tax expenses, reflecting a new minimal effective tax rate provision, though payment is deferred until July 2026.

Presentation

[Executive]

And our CFO, Luis Andre Blanco. During today's presentation, our executives will make forward looking statements. Forward looking statements can be related to future events, future financial or operating performance, known and unknown risks, uncertainties, and other factors that may cause Afya's actual results to differ materially from those contemplated by these forward looking statements. Forward looking statements in this presentation include, but are not limited to, statements related to the business and financial performance, expectations and guidance for future periods, or expectations regarding the company's strategic product initiatives and its related benefits. These risks include those more fully described in our filings with the Securities and Exchange Commission.

[Executive]

The forward looking statements in this presentation are based on the information available to us as the date hereof. You should not rely on them as prediction of future events, and we disclaim any obligation to update any forward looking statements except as required by law. In addition, management may reference non IFRS financial measures on this call. These measures are not intended to be considered in isolation or a substitute of the results prepared in accordance with IFRS. This presentation has reconciled these non IFRS financial measures to the most directly comparable IFRS financial measures.

[Executive]

Now, let me turn the call over to Virgilio Gibbon, Afya's CEO.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Thank you, Joao, and welcome to our first conference call of 2025. It is much satisfaction that ASEA starts another year of great operational and financial performance. This quarterly results show the high predictability of our business and successful execution of our strategy that once again combines strong growth with higher profitability and cash generation, Afya's three pillars business model. This quarter was marked by gross margin expansion within our undergrad and continuing education segments combined with solid cash generation and robust EPS growth, showing our consistent business expansion. In this presentation, I will cover key strategic topics including our performance and highlights, the successful business execution across our three segments, and finally, Luis Blanco will provide an in-depth look at our financial and operational performance.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Now turning to Page three. Let's begin by highlighting our performance achievements. Initially, our net revenue increased by 16%, reaching million dollars accompanied by a growth in adjusted EBITDA of almost 24% year over year, reaching R492 million dollars for record margin of 52.5%. We also reported a strong cash flow from operating activities again of R470 million dollars reflecting almost 10% increase compared to the previous year, boosted by the solid operational results of the company with a cash conversion rate of 96.8% and solid cash position of almost R1.2 billion at the end of the first quarter. With consistent momentum, our net income reached R257 million dollars making over 23% growth year over year with an EPS of BRL2.79, a remarkable 23% increase compared to the previous year.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

This underscores our disciplined capital allocation and an efficient capital structure. Moving to our operational updates, we have 3,593 approved seats, but with the closing of the Funiq acquisition, which will contribute to additional 60 seats, our total number of approved medical seats will increase to 3,653 seats. Additionally, our number of undergrad medical students has reached almost 26,000 students, representing almost 50% growth compared to the first quarter of twenty twenty four. Furthermore, we increased the net average ticket of medical school by almost 4% year over year, reached 9,240 hats. In addition, we continue to observe improving performance in the continuing education and medical practice solutions segments.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

In continued education, net revenue increased almost 9% year over year pure organically, reaching R71 million dollars In Medical Prep Solutions, we saw 14% growth in net revenue compared to the first quarter of twenty twenty four, reaching almost R42 million dollars Lastly, our ecosystem has 317,000 active users exemplifies substantial penetration among physician and medical students in Brazil. Moving to Slide four, we will discuss our performance across our three business segments. Starting with the undergrad segment, we observed important movements throughout the quarter such as higher tickets in the medicine course with almost 4% increase over a year. This growth was accompanied by gross margin expansion driven by the consolidation of Omidon acquired in July 2024 and the continuous ramp up of our four Mysmetical campuses launched in the third quarter of twenty twenty two. It's also important to note that we concluded the Funiq acquisition, which will enhance our operation of six additional medical seats for the next semester.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

The continued education segment was marked by an increase in graduate journey students in addition to a gross margin expansion driven by our ongoing operational restructuring, which continues to contribute to improve cost management cross selling, general and administrative expenses. In Medical Press Solutions segment, growth is being driven by the ramp up of B2B contracts and the continued expansion of active payers as well as B2B engagements and the addition of new contracts with pharmaceuticals and industry partners. Before moving to the next slide, I am proud to share that in April, we received two significant recognitions. Moody's agency in Brazil upgraded our national scale credit rating from AAplus.br to AAA.br with a stable outlook, reflecting our strong growth, cash generation and financial discipline. I'm also pleased to highlight that we successfully achieved all the IFC defined targets for 2024, including the number of free medical consultations provided and the percentage of medical costs rated with the highest quality scores.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Meeting these targets will trigger a 15 bps step down in our lower interest rate over the next twelve months, reinforcing both our social impact and financial discipline. Additionally, we received our first ESG rating for MSCI, debuting with a solid BBB score. MSCI's sector relative methodology underscore that we outperformed significant portion of its peers, particularly in areas like the data privacy and security, where our practice was stronger than many in the industry. This further solidifies our commitment to sustainability. On the next page, we would like to highlight that the latest NHG and CPC results released by INEP showcase outstanding academic performance across Afya's medical schools.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

These results reinforce our ongoing commitment to academic excellence, innovative teaching and the development of highly qualified professionals. Among the results, we are proud to celebrate our achievements and congratulate our institutions that performed above expectation, which continues to strengthen position as a leader in medical education in Brazil. And now I will turn the call over to Luis Blanco, Afya's CFO, to provide further insights into the financial operation metrics. Thank you.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Thank you, Vigilio, and good evening, everyone. Starting with Slide seven for discussions of key operational metrics by business units. Starting with the undergrad programs, our number of medical students grew 15% over the first quarter twenty twenty four, reaching almost 26,000 students and approved medical seats increased 12% yearly to 3,593. Our medical school net average tickets increased by 4%, reaching BRL9240 in the first quarter of twenty twenty five. In addition, net revenues for the undergrad segments saw over 17% increase, achieving BRL827 million, 80 6 percent of which are related to medicine and 94 from health related courses.

[Luis Andre Blanco, Chief Financial Officer at Afya]

On the next page, I will present our continuing educational metrics. We approach continuing educational through three main journeys. Starting with the residency journey, which encompass products focused on residents preparation. We saw a 70% decrease reaching 12,203 students by the end of the period. In the graduate journeys focused on the specialization test preparations and graduate courses in medicine, students grew by 16% reaching 8,542 students.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Lastly, our other course in b to b offerings decreased by 3% over the same three month period of the prior year. Continuing education net revenue rose to BRL71 million in the three months period of 2025, up from the BRL65 million in the three months period of 2024, reflecting growth almost 9%. This includes an 8% increase in B2B revenue and 16% increase in B2B. Moving to slide number nine, I'll discuss the medical practice solutions operator operational metrics. The first graph shows our total active payers, which are the ones that generate revenues in the business to physicians B2B.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Following the stat growth trends, the number of paying users increased to over 198,000, a 4% increase over the same quarter last year. The second graph highlights our monthly active users, which accounts for 245,000, slightly lower than the 263,000 record last year. This reduction still reflects the transitional fall from the PepMed portal to the Afya portal. Lastly, in our final graph, we present the net revenue of our Medical Practice Solutions segments, which has expanded by 14% compared to the same quarter of the last year, reaching R42 million dollars Of this total, R37 million was generated by B2P, showing an increase of 14%, while B2B contributed to R4 million dollars a 16% increase over the same quarter last year. The next slide represents our Afya ecosystem.

[Luis Andre Blanco, Chief Financial Officer at Afya]

We are pleased to highlight Afya's substantial contributions to the Brazilian healthcare community. By the end of the first quarter of twenty twenty five, our ecosystem encompassed over 370,000 physicians and medical students using our service and products. Moving forward to Page 11, I want to discuss our financial overview for the first quarter of twenty twenty five, starting with the next slide. With great satisfactions, I present another strong quarterly performance for Afya. Net revenue for the first quarter of twenty twenty five reached BRL936 million, representing a 16% increase compared to the same quarter last year.

[Luis Andre Blanco, Chief Financial Officer at Afya]

The yearly revenue increase was mainly due to higher tickets in medicine courses, the maturation of medical school seats, the consolidations of Unidol and advancements of medical practice solutions and continuing educational segments. In the first quarter of twenty twenty five, adjusted EBITDA rose by 24%, reaching million dollars with an adjusted EBITDA margins of 52.5%, a gain of 300 basis points compared to the first quarter twenty twenty four. The expansion in adjusted EBITDA margin is largely attributed to a strong performance of the undergrad segment. The gross margin expansions in the undergrad and continue educational segments. The hump up of the four of my medical campuses that started operations in the February.

[Luis Andre Blanco, Chief Financial Officer at Afya]

The operate operational restrictions efforts in continued educational and medical practice solutions segments. The centralizations of academic process and expansions of service provide by our shared service center, and also more efficiency in selling general and administrative expenses. Moving to the next slide. The first quarter cash flow from operating activities rose by almost 10%, reaching R470 million dollars reflecting a strong operational performance. Operating cash flow conversion ratio was 96.8%.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Net income for the first quarter of twenty twenty five, totaling R257 million dollars representing a 23% increase from the same period in 2024. Adjusted net income was R294 million dollars a 17% increase. This net income reflects not only our strong operational performance, but also the impact of the new tax legislations implementing the OECD Pillar two rules, which introduced an additional social contributions to ensure a minimal effective tax rates for multinational groups. This result in an increase of BRL23 million in our income tax expenses for the period ended in March 2025. Despite this effect, net income grew robustly underscoring the resilience and efficiency of our business model.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Regarding EPS, we achieved R2.79 dollars per share in the three months periods, representing a 23% increase year over year. And now moving to my last two slides, I will discuss our cash and net debt positions, also giving more color on our cost of debts. This slide presents a table detailing our gross debt compositions and total cost of debt covering our primarily obligations, the SoftBank transactions, debentures, other financial liabilities, the IFC financials and accounts payables to selling shareholders. Afya's capital structure remains solid with a conservative leverage positions and the low cost of debt. Afya net stats, excluding IFRS 16 divided by the midpoint of the 2025 adjusted EBITDA was 0.9 times.

[Luis Andre Blanco, Chief Financial Officer at Afya]

On the next page, we can look at it closely at our net debt variation. As of the first quarter twenty twenty five, our net debt had reduced to R1,524 million dollars when compared to the end of twenty twenty four, a reduction of BRL291 million, reflecting our strong operational performance and capital allocation discipline. This concludes our prepared remarks. We are proud of our accomplishments and robust performance across all areas. Our commitment to advancing the medical journey through an integrated educational systems and medical practice solutions remain strong, supporting students in becoming physicians, promoting continuous medical learnings and enhancing physicians' accuracy and productivity.

[Luis Andre Blanco, Chief Financial Officer at Afya]

As we look ahead, we are enthusiastic about opportunities that lies before us. I will now open the conference for the Q and A session. Thank

[Operator]

If you wanna ask a question, please raise your hand. We're gonna start the q and a session with Flavio Oshira from Bank of America. Flavio, you may go ahead, please.

[Flavio Yoshida, Vice President - Equity Research Analyst at Bank of America Merrill Lynch]

Hi. Good evening, everyone. So I I have, two questions on my side. The first one is on, the EBITDA margin. So we noticed a very strong print on the quarter.

[Flavio Yoshida, Vice President - Equity Research Analyst at Bank of America Merrill Lynch]

So I I would like you to share some details on what drove this performance. Was it related to the ramp up of new units to greater efficiency or maybe contribution for other businesses? And also, the strong print on the quarter, if you see room for an upward revision on the guidance for this year. And then my second question is on the intake process. So are you guys seeing a greater challenge on the intake process given the seats offering expansion from of medical courses over the past year.

[Flavio Yoshida, Vice President - Equity Research Analyst at Bank of America Merrill Lynch]

Are you guys feeling that it's getting hard to fill all the seats? If you could comment on the the intake process, we would like a lot. Thank you.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Hi, Flavio. Thank you for your question. It's Blanco speaking. I will take the first one, and Virgilio we'll get the the second one regarding the intake. So regarding the margin expansions that we had compared to the same period of the the prior year, the main drivers was the higher gross margins that we we got from and the margin expansion that we got from the undergrad and the continued education segments, the continuing ramp up of the four MICE, Magic, and Compasses that we've launched in the February.

[Luis Andre Blanco, Chief Financial Officer at Afya]

The continually initiatives that we got with higher efficiency coming from the continued education segments and medical practice solutions. Remember that we've made a huge transformations in the first quarter of of two thousand thirty four, moving some functionalities between the segments and restructuring these segments internally, and we got a lot of efficiencies on on these movements. So it's like the the full year of these these changes. Hence, the improved cost and efficiency in SG and A still that we got from the the applications of the zero budget project that we've started in 02/2023. And on top of that, we came with Unidom Pedro where we got almost a % occupancy with that and with a very, very smooth acquisitions that will make that on this month of May, we're gonna put Winidon Piedron in our shared service.

[Luis Andre Blanco, Chief Financial Officer at Afya]

So we are very happy with these these these results that we achieved in the first quarter. Regarding the the the the the the year, we we have a view that we have a very strong start of the year, but we keep our guidance that we provided provided in March for for the year. We are ahead in terms of margins, but right now, we we we keep the guidance that we provide both in terms of revenues and the EBITDA for the year. If we had second semester intake, we might might review it. But right now, we we keep our our view for the year. Okay?

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Thank you, Blanco. So just to add in on that, a very strong start for 02/2025, Lavio. And just remembering, we just closed yesterday six additional seats in Contagion City close to to Belo Horizonte where we are right now. And any update that we may have or not on our guidance for 02/2025. That would only happen on the after the second semester intake, so also depending on on all the process to be completed.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

And regarding the intake process that we had on the first semester, was a very healthy intake process. Around seven to eight candidates for every seat that we have in Brazil. We saw a very strong recognition of our brand, the the brand project that was kicked off in 02/2023. I think it's paying out, and I think this is a a good news for all campuses that's using now Afya's brand around the country. So not only on the medical intake was a health process, but if you may see on the table too, we have a very strong intake and renewal for also health and nonhealth programs that also happen to grow organically all the student base in 02/2025.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

This is ahead of our expectation. Here, we have a very strong intake and a better renewal rate that, was result of a very good renewal process that we started back in November, make a very strong, student, base, for 02/2025. So that's it.

[Flavio Yoshida, Vice President - Equity Research Analyst at Bank of America Merrill Lynch]

Alright. Thank you.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Thank you, Flavio.

[Operator]

Thank you, Flavio. The next question comes from Luca Makizini from Itau.

[Lucca Generali Marquezini, Equity Research Associate at Itau BBA]

Hi. Good evening, everyone, and thank you for taking our questions. A couple of questions from our side. The first one would be, regarding the undergrad medical school average ticket. It grew 4%, year over year, which is pretty much in line with inflation.

[Lucca Generali Marquezini, Equity Research Associate at Itau BBA]

So my question would be whether the company has seen any significant change in the competitive landscape that maybe brought some challenges in, implementing price hikes. So that's the first question. And then the second question will be regarding the medical practice solution segment. We saw a decrease in the number of monthly active users. So we were just wondering if there was a a change also in the in the competitive landscape, and what is expectation for the rest of the the year for this segment? Thank you.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Luca, thank you. So the undergrad ticket, it's around 4%. We expect a little bit higher than that, but they have an impact on the increase of FIA's percentage that keep the that that start impacting our campuses last year. So last year, we had around 10 campuses that was impacted by the 27.5% retention on the FIES, and that is impact a little bit the increase that we had on our tuition on our average tuition. So moving ahead, the price that we passed, it was a little bit above than that.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

So as soon as we have same compare same stores comparison that with the institutions that had this impact, I think that it can be even a little bit further than that for the for the next spot, but close to four to 5%. We are not we are not expecting any diff difficult year to change close to inflation or to our campuses. So it's just more than the same what we are doing every semester, every year when we start the the intake process for the following year. Based on the active users, Blank will will will add something here.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Hi, Luca. Thank you for your questions. Regarding the the the most active users on the medical practice solutions, we still see a a kind of a a a pushback in the in the the movements that we changed the PepMed portal to the the Afya portal. And as you you you you you remember, when we we make these these changes, we put it a lot of this contents that related to the content of the portals regarding with a a information. So keep going, we see this this this this pushback being being being smaller.

[Luis Andre Blanco, Chief Financial Officer at Afya]

So the changes, if I'm not wrong, happening in April. So the most part part of these changes has already happened. There is no changes on the the the kind of profile of assets that's we are seeing right now.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

And, Luca, just to add a point here, just the the rationale behind it, we changed the portal back in April 2024. And the reason of that that we that we decide to be more strict to have the users sign our our our portal here, it's more difficult to have the active user. We are getting more information. The reason of that is that, well, we have more information. We have more behavior, and, also, we can leverage the relationship with the industry, with the b two b contracts, having more details, more data about these users that is logging into our ecosystem.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

On the other side, the payers keep improving in a healthy way. That was a decision, that we took, to be more restrictive, but it's, it's running as expected. Okay?

[Lucca Generali Marquezini, Equity Research Associate at Itau BBA]

Thank you, Virgilio Blanco. That was very clear.

[Operator]

Thank you, Luca. The next question comes from Mauricio Sepeda from Morgan Stanley.

[Mauricio Cepeda, Analyst at Morgan Stanley]

Hi, Virgilio Blanco. Thank you. Thank you for the opportunity here. I have two two questions. One, if you you could clarify all this kind of minimum tax according to the, pillar two of, OCD.

[Mauricio Cepeda, Analyst at Morgan Stanley]

How a little bit on, why were you classified as a multinational company? What are your perspectives, in terms of, let's say, this this kind of tax behaving? I understand that you were provisioning, not necessarily paying, if I understood correctly, from the tax. What are your expectations here? And, and the second about the SoftBank convertible debt.

[Mauricio Cepeda, Analyst at Morgan Stanley]

Right? Do we have this? We are getting closer to to to the to the to the deadline, and how are you preparing in terms of cash if if this debt is not converted into equity? Thank you.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Hi, Sepeda. It's Blanket speaking. I'll take the the the two questions here. Regarding the pillar two, that's it was a law that was enacted in December 27 and being effective in January 2025. This law aligns the Brazilian tax list list legislations with the OCDA GLOBE rules and introduce minimal taxation.

[Luis Andre Blanco, Chief Financial Officer at Afya]

So it's a it's a complex calculations, very, very different from the Brazilian calculations of that we are our usage to have here. So this was approved in the last minute of 02/2024 and effective in in for for this quarter. This applies to multinational groups that have entities in in the country with that's the multinational group has more than €750,000,000 in the last in the last years in the the last fiscal year. So in our understanding, we are we are we are under the perimeter of this law. So what we did, we we make this provisioning.

[Luis Andre Blanco, Chief Financial Officer at Afya]

The payment of it is is due to July 2026. That's the the the the the when we we should pay it. And right now, we started at the the March. We started to questioning to to do the power injections going to justice to to question these these effect, the constitutionality and some some points about about this because how it is implemented has some some some is reducing the impacts of the the the problem. It's a it's a complex case.

[Luis Andre Blanco, Chief Financial Officer at Afya]

We we have a conservative approach of provisioning that until we are discussing that in the justice. Okay? So it's a provision. It's not a cash disbursement right now. Regarding the the the SoftBank transactions, the we had this early redemption, the the right of early redemption from SoftBank in May 2026.

[Luis Andre Blanco, Chief Financial Officer at Afya]

Right now, we don't have any official positions on that. But as we are getting closer, what we did in 02/1934, we started to provision the the premium from this this this loan that is due, this premium, if they exercise this early early early early redemption. That, we started to talk with SoftBank regarding their views on that. We don't have any official positions regarding regarding the the the the extension or not of these these operations. But what we did, we started to to get in 02/2004 the provision of this this premium of 5%.

[Luis Andre Blanco, Chief Financial Officer at Afya]

But we are prepared with our cash flow generations to to to pay to pay these instruments if it's required, if SoftBank exercised the the early redemption on May 2026.

[Mauricio Cepeda, Analyst at Morgan Stanley]

That's clear. Thank you, Blanco.

[Operator]

Thank you, Seppetta. As a reminder, if you wanna ask a question, please raise your hand. Our next question comes from Marcelo Santos from JPMorgan.

[Marcelo Santos, Equity Analyst at JP Morgan]

Hello. Good evening. Thanks for taking the questions. I have two as well. The first, I wanna touch on continued education.

[Marcelo Santos, Equity Analyst at JP Morgan]

So we saw the revenue trends starting to improve, but still single digits. What could what's could you provide an update on what's going on, on this segment? And what's the expectation for this year? And the second question is about the b to b business within medical practice solutions. I remember last year that there was kind of let's say, revenue that was supposed to take place in the first quarter happened in the second.

[Marcelo Santos, Equity Analyst at JP Morgan]

Looks like this year, something like is this a seasonality? How how is the b two b business going on the medical practice solutions? Thank you very much.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

Hey, Marcelo. I'll get the first one, and Blanco help me with the second one here. So on continuing education, we have a very good intake process and also the end of year process coming from graduates, all the specialization, that long term and higher ticket. Brazil facing some competition on the residency and small programs with a lower ticket. So that was the combination.

[Virgilio Deloy Gibbon, Chief Executive Officer at Afya]

We accelerate our growth when you compare to the speed that we were on the third and the fourth quarter last year, a little bit higher, expecting to be even a little bit better for the following quarters. But, yes, we are growing on graduates, the speed that we would like to to grow, but still facing strong competition on residency prep programs. So that's the main reason why we are close to 10% on continuing education this first quarter, and, also, I think it would be something close to that for the rest of the year. Regarding the b to b conference, Blanco, like to

[Luis Andre Blanco, Chief Financial Officer at Afya]

Yeah. Thank you, Marcelo, for for your questions. As you remember that we had some some postponement of recognition of revenues in 02/2024 moving from the the first to to the second semester that made at that time, if compared to thousand twenty four with 02/2023, we have even a a decrease on that. What happened and you you clearly see that in the b to b, that we've had some some kind of seasonality on how the pharmaceutical industry make the contracts with with the the the adversement products that we have. The fourth quarter, it's always more active in terms of contracts if you compare it to the the the first the first quarter.

[Luis Andre Blanco, Chief Financial Officer at Afya]

So you you can see in the b to b sides that the the the first quarter always will be a little bit below what we had to find in in the fourth quarter just just to to to to see if we got the the growth of 02/2024 as as a whole of the year. The b to b contracts grew last year almost 30% in terms of revenues. Right now, we we we started with with the lower with 16 compared to minus 6.2 in the same period of last year. So it's kind of a little bit of seasonality in the pharmaceutical industry, but we are very conf confident regarding the the b to b business, mostly supported by the pharmaceutical player the the pharmaceutical players.

[Marcelo Santos, Equity Analyst at JP Morgan]

Perfect. Thank you very much for the answers.

[Operator]

Thank you, Marcello. Since we don't have any further questions, I would like to thank your participation here today. We inform the investor relations teams are available if you have any follow-up questions. See you again in our next conference call. Thank you.

Participants

Executives

• Virgilio Deloy Gibbon, Chief Executive Officer
• Luis Andre Blanco, Chief Financial Officer

Analysts

• Executive
• Flavio Yoshida, Vice President - Equity Research Analyst at Bank of America Merrill Lynch
• Lucca Generali Marquezini, Equity Research Associate at Itau BBA
• Mauricio Cepeda, Analyst at Morgan Stanley
• Marcelo Santos, Equity Analyst at JP Morgan