Afya Q1 Earnings Call Highlights

Key Points

• Solid Q1 financials: Revenue rose 8% year‑over‑year to BRL 1.013 billion and adjusted EBITDA climbed 4% to BRL 511 million (50.5% margin), with free cash flow of BRL 376 million, BRL 1.3 billion in cash and Moody’s reaffirming an Aaa rating; net debt was about 0.7x the midpoint of 2026 adjusted EBITDA guidance after BRL 70 million of buybacks.
• Undergraduate growth and pricing: Operating medical school seats increased >6% to 3,768 and the medical student base topped 26,000, while net average medical school ticket rose ~5% to BRL 9,634 and gross margin in the segment remained stable at 69%, with M&A pursued only for targets offering >20% IRR and ~200 seats of annual growth targeted.
• Investment-driven margin pressure in Continuing Ed and MPS: Continuing Education revenue grew 11% and MPS revenue grew ~4%, but higher payroll, sales & marketing and lower gross margins in these businesses drove a ~200 bp decline in adjusted EBITDA margin; Afya is investing in the "Afya One" platform and audience-building (with more meaningful MPS/Whitebook revenue gains expected from 2027).

Afya NASDAQ: AFYA executives highlighted revenue growth, steady margins in core undergraduate operations, and continued investment in its digital medical practice tools during the company’s first-quarter 2026 earnings call. CEO Virgilio Gibbon and CFO Luis Blanco also addressed investor questions on the intake cycle, the company’s strategy in non-medical health programs, preparations for the upcoming Enamed exam, and the pace and discipline of medical school M&A.

First-quarter results: revenue up 8%, adjusted EBITDA up 4%

Gibbon said Afya began 2026 with “great operational and financial performance,” citing predictable cash generation alongside growth. Revenue increased 8% year over year to BRL 1.013 billion. Adjusted EBITDA rose 4% to BRL 511 million, with an adjusted EBITDA margin of 50.5%.

Free cash flow was BRL 376 million, up 3% versus the prior year, supported by “solid operational results” and a cash conversion of 92.5%, management said. Afya ended the quarter with BRL 1.3 billion in cash.

Net income totaled BRL 262 million, up 2% year over year, and earnings per share were BRL 2.88, a 3% increase. Gibbon and Blanco said the net income increase reflected stronger operating performance and was “partially offset” by a tax provision tied to the OECD Pillar Two global minimum tax.

Undergraduate business: higher tickets, stable gross margin, seat expansion

In the undergraduate segment, the company reported 3,768 operating medical school seats, an increase of more than 6% year over year. The medical student base grew to more than 26,000 students, up over 2% compared with the first quarter of 2025. Afya’s net average medical school ticket increased by nearly 5% year over year to BRL 9,634.

Gibbon said the segment saw “higher tickets in the medicine course” with a roughly 5% increase that was “above 2025 inflation,” alongside a stable gross margin of 69% in the segment.

Blanco added that undergraduate revenue grew 8% to BRL 892 million, with 86% related to medicine and 94% coming from health-related courses.

Continuing Education and Medical Practice Solutions: growth alongside investment

Management said Continuing Education revenue increased 11% year over year to BRL 79 million, which Gibbon characterized as organic growth. He also pointed to record B2B revenue of BRL 74 million in the quarter and a record student base of 57,000 students.

Blanco broke down Continuing Education into three “journeys”:

• Residency preparation: student count declined 20% to 9,744.
• Graduate journey: student count rose 15% to 9,855.
• Other courses/B2B offerings: increased 41% year over year.

Blanco said the BRL 79 million revenue figure was up from BRL 71 million a year earlier, reflecting 11% growth, and included a 13% increase in B2B revenue alongside a 14% decline in B2C.

In Medical Practice Solutions (MPS), Afya reported revenue growth of more than 4% year over year to BRL 43 million. Blanco said BRL 38 million came from B2B (up 3%), while B2C contributed BRL 5 million (up 17%). However, operational metrics were mixed: total active payers declined 1% year over year to 201,000, and monthly active users fell 10% to 221,000.

Across Afya’s broader ecosystem, the company said it had 304,000 active physicians and medical students using its services and products by the end of the quarter.

Margin pressure tied to investments in Continuing Education and MPS

Blanco attributed the 200 basis point year-over-year decline in adjusted EBITDA margin to higher costs and expenses in the Continuing Education and MPS segments, including “a lower gross margin compared with the first quarter of 2025” and higher payroll, sales, and marketing expenses tied to an “ongoing investment cycle” in both segments.

Operating cash flow increased 0.6% year over year to BRL 473 million, and Blanco reiterated the operating cash flow conversion ratio of 92.5%.

Balance sheet, ratings, and capital allocation

Afya’s leverage remained conservative, with net debt (excluding IFRS 16) equal to 0.7 times the midpoint of 2026 adjusted EBITDA guidance, Blanco said. He added that Moody’s reaffirmed Afya’s credit rating at Aaa with a stable outlook on May 6, citing consistent revenue growth, above-industry-average margins, solid cash generation, and robust liquidity.

Net debt at quarter end was BRL 1.051 billion, down BRL 280 million from the end of 2025, even after BRL 70 million in treasury share repurchases during the quarter, according to Blanco.

In the Q&A session, Gibbon said the first-half intake cycle was “very strong” compared to last year, supported by brand recognition and a centralized enrollment approach the company calls the “National Intake Process,” which he said helped maintain 100% occupancy. He also said early indicators for the second-half intake were positive, with leads tracking ahead of the same period last year.

On non-medical health programs, Gibbon said Afya has been expanding offerings over the last two years and is seeing “almost a 20% growth, organically” from other undergraduate health programs. He framed the strategy as a way to complete campus portfolios with low incremental capex and strong brand leverage in smaller cities.

Addressing Enamed, Gibbon described a preparation plan that includes increasing student engagement, conducting nearly 30 mock tests for students who will sit the exam in September, and creating action plans every two weeks. He also said Afya is adjusting curriculum to match the exam’s updated model versus the prior Enade format. Blanco added that the company’s guidance already reflects expectations for the second-semester testing impact, which he described as “minimal” and “not material.”

On M&A in medical schools, Blanco said Afya remained disciplined, focusing on targets where more than 60% of revenue comes from medicine programs and pursuing deals with an internal rate of return above 20% (nominal, unlevered). He said Afya continues to target growth of 200 seats per year but does not pursue deals “just for the growth itself,” citing instances where target profiles or pricing did not meet return thresholds.

On Medical Practice Solutions, Gibbon said the company is investing more in product development and integration to create what it calls the “Afya One” platform, aiming for a membership-style model across solutions rather than single-product subscriptions. He acknowledged continued payer reductions in Whitebook but said iClinic is growing faster and driving engagement. Gibbon said Afya reached more than 2 million prescriptions per month, “most of them coming through iClinic.” Blanco added that capex was more concentrated in intangible assets year over year and that Whitebook investments in 2026 are focused on growing “audience,” with a more meaningful impact on active payers and revenues expected from 2027 onward.

Finally, responding to a question on sales and marketing expenses, Gibbon attributed the year-over-year increase primarily to intensified intake efforts tied to Enamed timing and expanded health program offerings, as well as efforts to strengthen sales processes in MPS. He characterized these as concentrated in the first semester and said they were embedded in the company’s annual guidance.

About Afya NASDAQ: AFYA

Afya Ltd. operates as a leading provider of medical education and training services in Brazil. The company offers a comprehensive suite of educational programs that span undergraduate medical degrees, residency exam preparation, continuing medical education (CME) and digital learning platforms. Through a network of partner institutions and its own campus operations, Afya supports students at every stage of the medical training continuum, from enrollment in medical schools to ongoing professional development for practicing physicians.

At the core of Afya's offerings is its undergraduate medical program, delivered through a combination of in-person courses at affiliated campuses and fully digital curricula.

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