Prepared remarks
Thank you for joining us for Afya's conference call. I'm here today with Afya's CEO, Virgílio Gibbon; 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 their related benefits. These risks include those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions 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 as a substitute for the results prepared in accordance with IFRS. This presentation has reconciled these non-IFRS financial measures to the most directly comparable IFRS financial measures. Now let me turn the call over to Virgílio Gibbon, Afya's CEO.
Thank you, Renata, and welcome to our second quarter and first half conference call for 2026 results. Starting with Slide 3. Once again, we delivered a solid performance in closing the first half of 2026 with revenue growth of 7% year-over-year, reaching BRL 1.985 billion. Adjusted EBITDA reached BRL 918 million, growing 3% year-over-year with an adjusted EBITDA margin of 46.2%, a contraction of 190 basis points compared to the same period last year. This margin decrease primarily reflects the lower gross profit contribution from continued education, driven by higher sales and marketing expenses associated with the investment cycle outlined at the beginning of the year across continued education and medical practice solutions. Net income reached BRL 463 million, a 7% increase year-over-year. Basic EPS climbed to BRL 5.10, representing a 9% increase over the previous year, reflecting our capital allocation strategy. Operating cash conversion remained strong at 87.8%, broadly in line with the prior year. Turning now to free cash flow to equity. We delivered BRL 423 million in the first half of 2026. These results reflect the strength of our cash generation, disciplined execution and our continued commitment to create long-term shareholder value. Moving now to our operational updates. We have 3,768 operating medical seats with an increase of over 6% year-over-year. Furthermore, our number of undergraduate medical students grew to more than 26,000 students, representing 3% growth compared to the first half of last year. Additionally, we increased the net average ticket of medical school by almost 4% year-over-year, reaching BRL 9,443. In continued education, revenue increased almost 5% over last year, reaching BRL 144 million. And in medical practice solutions, we saw 2% growth in revenue compared to the first half of 2025, reaching BRL 85 million. Our ecosystem now accounts for 295,000 users, reflecting continued meaningful penetration among physicians and medical students across the country. Moving to Slide 4. We will discuss the highlights across our three business segments. The first half of 2026 was marked by favorable pricing trends in medicine courses, where tickets rose by nearly 4% year-over-year. In addition, we continue to deliver strong student base growth momentum in health science courses. Compared to previous years, health science courses delivered 13% growth, reflecting the diversification of our health-related undergraduate portfolio. The continued education segment was once again marked by strong growth in our total student base, which expanded 23% in the first half of 2026, driven by higher intake in short-term programs, which carry a lower average ticket per student. B2B revenue for the segment grew 8% compared to the same period of the prior year. The medical practice solutions segment delivered a 20% increase in clinical management active payers in the first half of this year. In addition, B2B revenue for the first half grew 5% year-over-year. Lastly, shareholder returns remain a key priority. Our disciplined capital allocation framework continues to create sustainable value for shareholders. At the corporate level, supported by strong cash generation, we returned BRL 448 million to our shareholders through dividends and share repurchase in the first half of 2026, representing 106% of our free cash flow to equity. This reflects our disciplined approach to capital allocation. When acquisition opportunities do not meet our return criteria, we return capital to shareholders. The strength of our cash generation gives us the flexibility to pursue acquisitions when attractive and to consistently return capital to shareholders. Now I will turn the call over to Luis Blanco, Afya's CFO, to provide further insight into the financial and operational metrics. Thank you all.
Thank you, Virgílio, and good evening, everyone. Starting with Slide 6 for discussions of key operational metrics by business unit. Starting with the undergraduate programs. Our medical student base grew by 3% compared with the first half of 2025, reaching over 26,000 students, while operating medical school seats increased by over 6% year-over-year to 3,768. Our medical school net average ticket increased by 4%, reaching BRL 9,443 in the first half of 2026. As a result, revenue for the undergraduate segment grew over 7%, totaling BRL 1,762 million. It's worth mentioning that 85% of this revenue comes from medical programs and 93% from health-related courses, reinforcing our strategic focus and leadership in the sector. On the next page, I will present our continued education metrics. We approach continuing education through three main journeys, starting with the residency journey, which encompasses products focused on residency preparations; the student base remained stable year-over-year, reaching 9,244 students at the end of the period. In the graduate journey, which focuses on specialization test preparations and graduate medical education, the total number of students increased by 13%, reaching 10,213 students supported by the continued demand for advanced medical training programs. Lastly, other B2P and B2B offerings continue to grow strongly with total students increasing 35% year-over-year to 36,780 students, demonstrating the continued expansion of our broader continuing education portfolio. Continuing education revenue increased to BRL 144 million in the six-month period of 2026 compared to BRL 138 million in the same period of 2025, representing growth of 5%. This performance was primarily driven by B2P revenue, which increased 8% year-over-year to BRL 135 million, representing 94% of the continuing education revenue. Meanwhile, the B2B revenue totaled BRL 9 million, declining 25% year-over-year. Moving to the next slide, I will discuss the medical practice solutions operational metrics. The total active payers remained broadly stable year-over-year at approximately 201,000 with clinical management active payers growing 20% to more than 50,000, reflecting the continued penetration of Afya iClinic. Monthly active users reached 212,000 during the period, an 8% year-over-year decrease. Despite the stability in total active payers, medical practice solutions revenue increased 2% year-over-year to BRL 85 million in the first half of 2026. On the next slide, we present the Afya ecosystem. We are proud of the meaningful impact Afya continues to make across Brazil's health care ecosystem. By the end of the second quarter of 2026, 295,000 users were actively engaging with our services and products, reflecting our solid relevance and reach in medical education and medical solutions. Moving forward to Page 10, I want to discuss our financial overview for the second quarter and the first half of 2026. I'm pleased to present another solid set of results for Afya, reflecting the resilience of our business model and our continued focus on sustainable growth and operational efficiency. Revenue for the second quarter of 2026 reached BRL 972 million, representing a 6% increase compared to the same period of the prior year. For the first half of 2026, revenue totaled BRL 1,985 million, a 7% year-over-year increase. Adjusted EBITDA reached BRL 470 million in the second quarter of 2026, an increase of 1% compared to the prior year. For the first half of the year, adjusted EBITDA totaled BRL 918 million, growing 3% year-over-year. Adjusted EBITDA margin reached 41.8% in the quarter and 46.2% in the six-month period. While margins were below those reported in the comparable periods last year, reflecting a combination of continuing investments to support growth initiatives and the investment cycle across continued education and medical practice solutions, profitability remained healthy. On the next page, cash flow from operating activities reached BRL 806 million in the first half of 2026 compared to BRL 783 million in the same period of the prior year, representing a growth of 3%. Cash conversions remained strong at 87.8%, broadly stable compared to the prior year. Net income for the second quarter of 2026 totaled BRL 201 million, an increase of 14% compared to the same period of the prior year. For the first half of 2026, net income reached BRL 463 million, growing 7% year-over-year. Earnings per share increased to BRL 2.22 in the second quarter of 2026, up 17% from BRL 1.90 in the prior year, higher than the net income increase, reflecting the execution of our buyback program. For the six-month period, earnings per share reached BRL 5.10, up 9% from BRL 4.69 in the first half of 2025. Overall, these results reflect Afya's ability to continue to generate solid cash flow while delivering consistent growth in profitability and shareholder returns. And now moving to my last three slides, I will cover our gross debt composition and cost of debt, our net debt reconciliation and close with our shareholder return. This slide details the composition of our gross debt positions as of June 2026, covering its maturity profile and average cost of debt. Afya continued to maintain a solid capital structure and a conservative leverage profile. As of June 30, gross debt totaled BRL 2.4 billion compared to BRL 2.7 billion as of June 30, 2025. At the same time, the average debt duration increased from 1.9 years to 3.7 years, extending our maturity profile in the period. The average cost of debt stood at 15.1% per year, representing approximately 106% of the CDI for the period. On the next page, we can look closely at the net debt variation. As of June 2026, our net debt totaled BRL 1,394 million remaining virtually unchanged from the end of 2025 despite returning BRL 448 million to shareholders through dividends and treasury share repurchase during the first half of the year, reflecting our strong cash generation and disciplined capital allocation. Our net debt positions continue to benefit from the solid cash flow from operating activities, which totaled BRL 806 million during the period, largely offsetting investments, leases, interest expenses and shareholders' distributions. Our Afya net debt, excluding IFRS 16 divided by the midpoint of 2026 adjusted EBITDA guidance was 0.8x. In my last slide, we paid BRL 307 million in dividends during the second quarter of 2026, representing 40% of our 2025 net income, while continuing to execute the share purchase program. Our consistent growth in net income and cash generation has enabled us to enhance shareholder returns while remaining disciplined in our capital allocation decisions and focus on long-term value creation. In the first half of 2026, we returned BRL 448 million to shareholders, surpassing our free cash flow to equity of BRL 423 million for the period, resulting in a 106% ratio. Our last 12 months free cash flow to equity yield stood at 11% calculated on market capitalizations as of June 30, 2026, and basic EPS growth reached 13% for a total equity return of 24% at constant valuation multiples. This concludes our prepared remarks. The first half of 2026 reinforces what we have consistently demonstrated over time: a resilient business, a focused team and a strategy that is working. We remain deeply committed to advancing the physician journey through our integrated ecosystem and confident in our ability to deliver sustainable long-term value for our shareholders, students and health care professionals across Brazil. I will now open the conference for the Q&A session. Thank you.
Operator instructions. The first question comes from Marcelo Santos from JPMorgan.
Questions and answers
I have two. The first: if you could talk a bit about the competitive intake in the second half and how you're seeing the pressure on tickets and the capacity to increase prices. That's the first question. And the second question is regarding medical practice solutions. It was a bit down this quarter, so I just wanted to get a bit more detail and when we should see the increased investments start showing results on the revenue side.
Related to our intake in the second half, we are once again aiming to have 100% of our occupancy fulfilled. While still not all the ProUni cycle is complete, we are waiting for these enrollments to be completed by September. So once again, we have a solid and healthy intake. Regarding price, we are not changing prices for the second half because we set prices at the beginning of the year. We are also not giving any discounts for medicine programs. For health programs, we are seeing a very strong intake. At this moment we're still completing the process, which will end at the beginning of September. We are more than 20% above last year at the same period. So we are growing organically more than 18% in volume in health and we're expecting to be above that for the second half. So that's on intake and pricing; Blanco will help me here on the medical practice solutions details.
Thank you for your question. Regarding medical practice solutions, we have experienced some pushbacks in terms of active payers on Whitebook. These pushbacks are due to competition from AI tools that are pressuring the number of payers. We decided to reduce the ticket slightly and increase embedded functionalities within Whitebook. On the other side, our clinical management system, primarily iClinic, has a very positive cycle and is growing faster, but this growth has not been sufficient to fully offset the decline on Whitebook. Together, on the business-to-physician side, we are growing semester by semester by only about 1.1%. Having said that, remember that our investment cycle announced at the beginning of the year includes increased CapEx, with higher capitalization of intangibles to increase functionalities both in iClinic and Whitebook, and investments in teams, increasing the number of team members in this segment. We are on plan to add more functionality to the segment, increase the audience first and then, in the future, recover revenue growth.
Second question comes from Flavio Yoshida from Bank of America.
I have two questions. The first is on EBITDA: if we annualize the first half EBITDA, it gets us to roughly BRL 1.8 billion for the year, which is pretty much the top of your guidance range. Since you didn't change guidance, should we expect the second half EBITDA to come a bit below the first half? Or are you simply preferring to be conservative on guidance? Second, on capital allocation strategy going forward: how do you plan to balance potential higher dividend distribution versus a more active M&A approach? Also, how is the recent M&A environment for medical courses?
Thank you, Flavio. Regarding EBITDA, we are focused on delivering the EBITDA guidance we provided to the market, which is between BRL 1.7 billion and BRL 1.8 billion. We guided the market and we remain committed to that guidance. Regarding capital allocation, Afya will always be very conscious in terms of capital allocation. Since the IPO, we've completed 22 business combinations, and we take capital allocation very seriously. If we don't have opportunities that meet our thresholds—mainly concentrated in medicine and with a return on capital employed above our minimum nominal unlevered IRR threshold of 20%—we simply do not pursue the transaction. If we do not find acquisitions that meet these return thresholds, we prefer to return capital to shareholders through buybacks and dividends. We are comfortable with the 0.8x net debt to EBITDA ratio we currently present, and we decided to return essentially all free cash flow to equity for the first semester. It's important to note that we have an open buyback in place announced in August of last year. From the 4 million shares in that buyback, we've repurchased 2.6 million shares so far, leaving remaining firepower to repurchase 1.4 million shares through the end of this year.
Yes, Flavio, just to add to what Blanco mentioned: we remain vigilant regarding M&A opportunities considering our thresholds. As you saw in the first semester, we returned essentially 100%—indeed more than 100%—of the cash we generated to shareholders via buybacks and dividends while keeping very low leverage. In parallel, we are investing heavily in product: enhancing features, embedding more AI capabilities and improving physician engagement in our solutions. We are integrating clinical decision support into our clinical management solution and increasing users in iClinic; we have more than 50,000 users on iClinic. We are funding internal investments, reducing leverage, buying back shares, distributing dividends and remaining ready to pursue M&A when it meets our thresholds.
Next question comes from Lucca Marquezini from Itaú.
A question regarding the continuing education segment, following up on the previous discussion. We saw a decline in net revenue. Could you comment on the competitive environment and the factors that led to this decline? Also, what are your expectations for the second half of the year—should we continue to see a decline or when do you expect a resumption in growth?
Lucca, for continued medical education we saw growth in student numbers, but a lower revenue growth pace in the first quarter and into the second quarter. The reason is mix: we have more students but more enrollment in lower-duration programs that carry a lower ticket, and that impacted the second quarter, which also faces seasonality in preparation courses. Having said that, we expect to maintain at least a high single-digit growth for the second half. We are not forecasting a sharp jump or a further decrease for continuing education for the full year. We are aiming to reach our guidance for 2026 based on the results embedded in this first half across all three segments.
Next question comes from Lucas Nagano from Morgan Stanley.
We have two questions. First: regarding the new injunction from last week that suspended the Enem restrictions, are you now allowed to fill all your authorized seats? And would that remain valid after this year's Enem for next years as well? Second: the income tax expense this quarter was very low compared to previous quarters and the minimum Pillar Two tax rate. Could you give some color on that and what the level looks like going forward?
I'll take the first one regarding the injunctions. Yes, after the decision last week, all the seats that were previously prohibited returned to the institutions. On the other hand, we are very advanced in the intake process and we did not register some seats for ProUni and FIES earlier because they were not allowed at that time. For some campuses and some institutions, yes, we will be able to fulfill these additional seats. That said, considering the issue earlier in the year, we had already concentrated much of the year's intake in the first half to minimize the effect. Even considering these additional seats, we will leave some seats unfilled. This will not materially impact our second half results, positive or negative, but yes, we will be able to fill some additional seats where timing allows.
Lucas, I'll take the second question on taxation. During the first semester of 2026 we had clarifications under new regulations related to Pillar Two, and we saw an opportunity regarding payments we should make for 2025 taxes that reduced the provision amount on our balance sheet. In gross numbers, we disbursed approximately BRL 8 million to BRL 9 million related to these 2025 tax payments in July. At the end of 2025 we had BRL 109 million as a provision; this development resulted in a positive effect of about BRL 20 million. Going forward, as these recommendations evolve, we expect the effective tax rate for 2026 to be very similar to last year, around 10% for the year.
Just a follow-up. Assuming after the new Enem results later this year—Enem results expected in December—would the injunction still be valid and continue to suspend any restrictions that Enem might try to impose?
What we understand from the new normative rule and from ongoing conversations with the Ministry of Education is that once the Enem 2026 results are released, which is expected at the beginning of December, the updated results will be considered for the 2027 intake cycle. The injunction decision last week relates to the results that were released last year. The new results to be released at the beginning of December will be separate and considered for the next intake cycle. So the injunction that changed last week's results is related only to last year's release and not to the upcoming Enem results.
Operator instructions. Next question comes from Renan Prata from Citi.
I have one question regarding CapEx. We saw CapEx at about 30% of your full-year guidance for the first half. How do you see CapEx accelerating during the second half of the year? Also, could you provide some breakdown of CapEx—will it be more concentrated on PPE or intangibles or licenses?
I'll take this one. We are running CapEx for the year as expected and we want to meet our guidance of between BRL 340 million and BRL 380 million for the year. We expect an acceleration of CapEx in the second half. Looking at the first semester breakdown, CapEx on property and equipment was down year-over-year, but we saw a high acceleration on intangibles, mostly concentrated on the investment plan around continued education and medical practice solutions. We don't disclose a split of guidance between property and equipment versus intangibles, but you should expect a clear acceleration in the second half and continued investment focused on intangibles and product functionality.
Okay. Since we do not have any other questions, we will end this call. We appreciate the presence of you all. Have a good night.