AFYA — Afya Limited

Summary of AFYA Q4 2025 Earnings Call

1. Key Financial Results and Metrics:

• Revenue: For 2025, revenue grew 12% year-over-year, reaching BRL 3.697 billion. Q4 2025 revenue was BRL 913 million, an 8% increase from Q4 2024.
• Adjusted EBITDA: Increased by over 50% year-over-year to BRL 1.680 billion, with an adjusted EBITDA margin of 45.4%, up 130 basis points from the previous year. Q4 adjusted EBITDA was BRL 389 million, a 6% increase.
• Net Income: Totaled BRL 768.4 million for the year, an 18% increase, with a basic EPS of BRL 8.32, reflecting a 19% growth.
• Cash Flow: Operating cash flow rose by 6% to BRL 1.548 billion, with a cash conversion rate of 93.7%.
• Leverage: Net debt was BRL 1.369 billion, with a conservative leverage ratio of 0.8x adjusted EBITDA.

2. Strategic Updates and Business Highlights:

• Market Position: Afya maintains its leadership in medical education with 3,755 approved medical seats and over 25,000 undergraduate medical students, reflecting a 5% growth.
• Continuing Education: Revenue grew 11% year-over-year to BRL 284 million, with B2B revenue increasing by 48%.
• Medical Practice Solutions: Revenue rose 6% to BRL 171 million, supported by a growing user base of 196,000 payers.
• Ecosystem Growth: Active users reached 301,000, indicating strong engagement among physicians and medical students.
• Acquisitions: The company completed the acquisition of 60 medical seats and secured additional approvals for 102 seats, enhancing growth potential.

3. Forward Guidance and Outlook:

• 2026 Guidance: Revenue is expected to range from BRL 3.950 billion to BRL 4.100 billion, with adjusted EBITDA anticipated between BRL 1.700 billion and BRL 1.800 billion.
• Margin Expectations: The implied EBITDA margin for 2026 is lower than 2025, reflecting investments in continuing education and medical practice solutions, as well as a shift in revenue mix.

4. Bad News, Challenges, or Points of Concern:

• Operational Expenses: Although operational expenses increased only 1% year-over-year, there were concerns about the sustainability of this low growth rate given previous higher increases.
• B2B Revenue Performance: B2B revenues in medical practice solutions were noted as soft, raising questions about the readiness of the Brazilian market for the offered solutions.
• ENAMED Impact: There are ongoing discussions regarding the ENAMED evaluation system, with potential penalties for underperforming schools, though management does not anticipate significant impact for 2026.
• Margin Compression: The guidance indicates a potential decline in EBITDA margins, attributed to investments in growth initiatives.

5. Notable Q&A Insights:

• Integration Strategy: Management emphasized the importance of integrating products and services for physicians to enhance user experience and engagement, which is expected to drive growth.
• M&A Strategy: Afya remains committed to pursuing M&A opportunities, targeting 200 additional medical seats per year with a focus on institutions generating at least 20% unleveraged IRR.
• CapEx and Investments: Increased CapEx in intangible assets is linked to ongoing investments in continuing education and medical practice solutions.
• Shareholder Returns: Afya announced a cash dividend of BRL 307.4 million, representing 40% of net income, reflecting a balanced approach to capital allocation alongside share buybacks.

Overall, Afya's performance in 2025 showcases strong growth and operational efficiency, although challenges in B2B revenue and potential margin compression raise some concerns for the future.