Another Year of Strong Performance

Robust EPS Expansion

Guidance Achievement

Afya Limited (Nasdaq: AFYA; B3: A2FY34) (“Afya” or the “Company”), the leading medical education group and digital health services provider in Brazil, reported today financial and operating results for the fourth quarter and full-year period ended December 31, 2023. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

Fourth Quarter 2023 Highlights

• 4Q23 Adjusted Net Revenue increased 22.6% YoY to R$729.5 million. Adjusted Net Revenue excluding acquisitions grew 12.5% to R$669.7 million.
• 4Q23 Adjusted EBITDA increased 19.3% YoY, reaching R$288.9 million, with an Adjusted EBITDA Margin of 39.6%. Adjusted EBITDA excluding acquisitions grew 6.4% to R$257.7 million with an Adjusted EBITDA Margin of 38.5%.
• 4Q23 Adjusted Net Income increased 27.7% YoY, reaching R$164.4 million, with an adjusted EPS growth of 29.6% in the same period.

Full-Year 2023 Highlights

• FY23 Adjusted Net Revenue increased 23.9% YoY to R$2,874.1 million. Adjusted Net Revenue excluding acquisitions grew 13.3% to R$2.626.9 million.
• FY23 Adjusted EBITDA increased 21.2% YoY reaching R$1,165.7 million, with an Adjusted EBITDA Margin of 40.6%. Adjusted EBITDA excluding acquisitions grew 9.5% to R$1,052.8 million with an Adjusted EBITDA Margin of 40.1%.
• FY23 Adjusted Net Income increased 10.5% YoY, reaching R$591.1 million, with an adjusted EPS growth of 11.5% in the same period.
• Cash conversion of 97.1% generating R$1,088.8 million of cash flow from operating activities that resulted in a cash position of R$553.0 million.
• Around 268 thousand monthly active physicians and medical students using Afya’s Digital Service, an increase of 2.8% over the same period last year.

Message from Management

We are delighted to showcase another year of remarkable operational and financial achievements for Afya. Once more, we have demonstrated the robustness of our business, the effective implementation of our strategy, the dedication of our team members, and the reliability of our business model.

This year we disclosure notable rises in net revenue across our three segments, strong cash generation, and substantial growth in EPS, underscoring our ongoing business expansion. The convergence of these elements has empowered us to meet our 2023 targets, and we are now looking ahead to the objectives set for 2024.

For another year we are pleased to disclose that the most significant growth of the year, in terms of revenue, stemmed from our Continuing Education segment. Through a robust intake process, the establishment of three new campuses, and course maturation, we can see once more, our students, employees, and partners benefit from our constantly developing ecosystem.

Our second most noteworthy growth originated from our undergrad business — our core business remains as robust as ever, with Medicine courses increasing tickets higher than inflation, maturation of medical seats and the completion of UNIMA and Faculdade de Ciências Médicas Jaboatão integration process in November, less than one year after its acquisition, proving our commitment to extract synergies within the operation.

In our Digital Services Segment we are proud to see another year of organic growth, reaffirming the immense potential of the business. This surge can be attributed to the success of our B2B engagements, where we have secured new contracts with pharmaceutical industry leaders. Furthermore, the continuous growth in B2P subscribers reflects our unwavering dedication to expanding our reach.

Afya´s 2023 Net Revenues was almost four times higher than in 2019, the year of our IPO. Furthermore, there has been a notable increase in cash generation. We have witnessed the cash conversion rate consistently above 90%, demonstrating our ability to achieve substantial growth while enhancing profitability and cash generation. Lastly, our earnings per share (EPS) have more than doubled since 2019 and is still growing, underscoring our capability to blend organic and inorganic growth with disciplined capital allocation, resulting in significant returns to propel our growth.

Besides its results achievements, Afya also has been investing in building its sustainability strategy and ESG (Environmental, Social, and Governance) vision to enhance value generation and impact for its stakeholders, as well as to contribute to the longevity of the business with socio-environmental responsibility. Aware of the role we play, ESG-related aspects permeate our strategies and routines. We aim to contribute to the social and economic development of the communities in which we operate and enable physicians to experience the best aspects of their profession.

As an indication of our outstanding results and impactful initiatives that are being shown to the market, the announcement of our sponsored BDRs this year, marked the entrance of Afya in B3 and we proudly celebrate several awards recognitions this year, such as "Executivo de Valor” recognizing Virgilio Gibbon as the top CEO in the Education Sector, “Valor Econômico's Best Education Company in Innovation", and another prestigious recognition for being the best Company in the Education Sector in the "Valor 1000" award and “Great Place to Work”.

Strong performance, consistent growth, success in all segments, social responsibility and public recognition: this is how we are evolving and empowering our mission to provide an ecosystem that integrates education and digital solutions for the entire medical journey. We are very proud of our business and what we have achieved so far, and excited the future.

1. Key Event in the Quarter:

• On October 31st, Afya announced, through its wholly owned subsidiary Afya Participações S.A. (“Afya Brazil”), the acquisition of an additional 15% in Centro de Ciências em Saúde de Itajubá S.A. ("CCSI”;” FMIT”), consolidating our position of ownership to 75% of the total share capital. The aggregate purchase price for the additional 15% was R$21.0 million paid 100% in cash on the closing date.

2. Subsequent Event

• On January 24, 2024, the Ministry of Education (MEC) authorized the increase of 40 medical seats of Faculdades Integradas Padrão (FIP Guanambi), located in the city of Guanambi, State of Bahia, which will result in an additional payment of R$49.6 million. With the authorization, Afya reaches 100 medical seats on this campus, and 3,203 total approved seats.

3. Full Year 2023 Guidance Achievement

The Company’s financial results reaffirmed the resiliency and predictability of Afya’s business model.

4. 2024 Guidance

The guidance for FY2024 is defined in the following table:

5. 4Q23 and 2023 Overview

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. The Company also offers solutions to empower physicians in their daily routine including supporting clinic decisions through mobile app subscription, delivering practice management tools through a Software as a Service (SaaS) model, and assisting physicians in their relationship with their patients.

The Company reports results for three operating segments. 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 for physicians. 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 operating segment is divided into Business to Physician (which encompasses Content & Technology for Medical Education, Clinical Decision Software, Practice Management Tools & Electronic Medical Records, Physician-Patient Relationship, Telemedicine, and Digital Prescription) and Business to Business (which provides access and demand for the healthcare players). 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, which are recognized as the services are transferred over time.

Key Revenue Drivers – Undergraduate Courses

Key Revenue Drivers – Continuing Education and Digital Services

Key Operational Drivers – Digital Services

Monthly Active Users (MaU) represents the number of unique individuals that consumed Digital Services content in each one of our products in the last 30 days of a specific period. Total monthly active users reached around 268 thousand.

Monthly Active Unique Users (MUAU) represents the number of unique individuals, without overlap of users among products, in the last 30 days of a specific period.

Seasonality

Undergrad’s tuition revenues are related to the enrollment and re-enrollment process and monthly tuition fees charged to students over the period; thus, does not have significant fluctuations during the year. Continuing Education revenues are related to monthly intakes and tuition fees and do not have a considerable concentration in any period. Digital Services is comprised mainly of Medcel, Pebmed, and iClinic revenues. While Pebmed and iClinic do not have significant fluctuation regarding seasonality, Medcel’s revenue is concentrated in the first and last quarter of the year due to the enrollments. In addition, the majority of Medcel’s revenues are derived from printed books and e-books, which are recognized at the point in time when control is transferred to the customer. Consequently, the Digital Services segment generally has higher revenues and results of operations in the first and last quarters of the year than in the second and third quarters.

Revenue

Adjusted Net Revenue for the fourth quarter of 2023 was R$729.5 million, an increase of 22.6% over the same period of the prior year, mainly due to UNIMA and FCM Jaboatão acquisition, higher net tickets in Medicine courses, maturation of medical seats and the growth of Continuing Education and Digital Services segments.

Net Revenue of Continuing Education for the fourth quarter of 2023 was R$38.6 million, an increase of 16.0% YoY, boosted by the growth in the number of students.

Digital services increased 17.1% YoY, totaling R$65.2 million for this quarter. The organic growth is a combination of (a) an increase in the B2B engagements, increasing B2B Net Revenue by 63.8%, and (b) the expansion of the active payers in the B2P, mainly in Whitebook, Medical Harbour, Shosp, IClinic, Cardiopapers and Além da Medicina.

For the full year ended December 31, 2023, Adjusted Net Revenue was R$2,874.1 million, an increase of 23.9% over the same period of last year. Excluding acquisitions, Adjusted Net Revenue grew 13.3% over the same period.

Adjusted EBITDA

Adjusted EBITDA for the three-month period ended December 31, 2023, increased 19.3% to R$288.9 million, up from R$242.2 million in the same period of the prior year, while the Adjusted EBITDA Margin decreased 110 basis points to 39.6%. For the full year ended December 31, 2023, Adjusted EBITDA was R$1.165.7 million, an increase of 21.2% over the same period of the prior year, with an Adjusted EBITDA Margin decrease of 90 basis points in the same period. The Adjusted EBITDA Margin reduction this year is due to: (a) Mix of Net Revenue, with higher participation of Continuing Education segment, and (b) the consolidation of 4 new Mais Médicos campuses (operation started on 3Q22).

Adjusted Net Income

Net Income for the fourth quarter of 2023 was R$101.9 million, an increase of 42.8% over the same period of the prior year, mainly due to the increase in operational results and the recognition of income tax credit. Adjusted Net Income for the fourth quarter of 2023 was R$164.4 million, an increase of 27.7% over the same period of the prior year, mainly due to the reasons previously mentioned and lower non-recurring expenses in the quarter when compared to the same period of the prior year.

For the twelve-month period ended December 31, 2023, Net Income increased 3.2%, from R$392.8 million to R$405.4 million. Adjusted Net Income for the twelve-month period of 2023 was R$591.1 million, an increase of 10.5% year over year. Adjusted EPS reached R$6.37 per share for the full year of 2023 ended December 31, an increase of 11.5% year over year, reflecting the increase in our Net Income and capital allocation discipline executing our business combination.

Cash and Debt Position

On December 31, 2023, Cash and Cash Equivalents were R$553.0 million, a decrease of 49.4% over December 31, 2022, due to UNIMA and FCM Jaboatão dos Guararapes business combinations.

For the full year ended December 31, 2023, Afya reported cash flow from operating activities of R$1,088.8 million, up from R$877.0 million in the same period of the previous year, an increase of 24.1% YoY, boosted by the solid operational results. Operating Cash Conversion Ratio was strong once again, achieving 97.1% for the full year of 2023 ended December 31, 2023, compared to 94.4% in the same period of the previous year.

On December 31, 2023, Net Debt, excluding the effects of IFRS 16, totaled R$1,814.6 million. When compared to December 31, 2022, Net Debt added to R$825 million related to UNIMA and FCM Jaboatão dos Guararapes business combinations closed on January 2, 2023, the Net Debt reduced R$ 391.0 million due to the strong Cash flow from operating activities.

The following table shows more information regarding the cost of debt for 2023, considering loans and financing, capital market and accounts payable to selling shareholders. Afya’s capital structure remains solid with a conservative leveraging position and a low cost of debt, Afya’s Net Debt (excluding the effect of IFRS16) divided by Adjusted EBITDA of 2023 is 1.6x.

CAPEX

Capital expenditures consists of the purchase of property and equipment and intangible assets, including expenditures mainly related to the expansion and maintenance of our campuses and headquarters including leasehold improvements, and the development of new solutions in the digital segment, among others.

For the full year of 2023 ended December 31, CAPEX went from R$318.2 million to R$218.4 million, a decrease of 31.3% over the same period of the prior year. As of December 31, 2023, the Capex to Revenue, excluding licenses acquisition and goodwill remeasurement, was 7.6% a decrease from 10.9% in the same period of the previous year, reflecting the discipline on capital allocation.

ESG Metrics

ESG commitment is an important part of Afya’s strategy and permeates the Company’s core values. Afya has been advancing year after year on its core pillars and, since 2021, ESG metrics have been disclosed in the Company’s quarterly financial results.

The 2022 Sustainability Report can be found at: https://ir.afya.com.br/corporate-governance/sustainability/

6. Conference Call and Webcast Information

7. About Afya Limited (Nasdaq: AFYA)

Afya is the leading medical education group in Brazil based on number of medical school seats. It delivers an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners, from the moment they enroll as medical students, through their medical residency preparation, graduate program, and continuing medical education activities. Afya also offers content and clinical decision applications for healthcare professionals through its products WhiteBook, Nursebook and Portal PEBMED. For more information, please visit www.afya.com.br.

8. Forward – Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact could be deemed forward looking, and include risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of students and professors; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and the Brazilian economy.

The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company’s financial results are included in the filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled “Risk Factors” in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

9. Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board—IASB, Afya uses Adjusted EBITDA and Operating Cash Conversion Ratio information, which are non-GAAP financial measures, for the convenience of investors. A non-GAAP financial measure is generally defined as one that intends to measure financial performance but excludes or includes amounts that would not be equally adjusted in the most comparable GAAP measure.

Afya calculates Adjusted EBITDA as net income plus/minus net financial result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, plus share-based compensation plus/minus share of income of associate plus/minus non-recurring expenses. The calculation of Adjusted Net Income is net income plus amortization of customer relationships and trademark, plus share-based compensation. We calculate Operating Cash Conversion Ratio as the Cash flow from operating activities, adjusted with income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses. The calculation of Adjusted EPS is our Adjusted Net Income, minus the Minority Net Income divided by the Weighted average number of outstanding shares.

Management presents Adjusted EBITDA, because it believes these measures provide investors with a supplemental measure of financial performance of the core operations that facilitates period-to-period comparisons on a consistent basis. Afya also presents Operating Cash Conversion Ratio because it believes this measure provides investors with a measure of how efficiently the Company converts EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, calculations of Adjusted EBITDA and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya’s measures may not be comparable to those of other companies.

10. Investor Relations Contact

E-mail: ir@afya.com.br

11. Financial Tables

Reconciliation between Net Income and Adjusted EBITDA

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