UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2024
Commission
File Number: 001-38992
Afya Limited
(Exact name of registrant as specified
in its charter)
Alameda Oscar Niemeyer, No. 119,
Salas 502, 504, 1,501 and 1,503
Vila da Serra, Nova Lima, Minas Gerais
Brazil
+55 (31) 3515 7550
(Address of principal executive office)
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
TABLE OF CONTENTS
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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Afya Limited |
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By: |
/s/ Virgilio Deloy Capobianco Gibbon |
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Name: |
Virgilio Deloy Capobianco Gibbon |
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Title: |
Chief Executive Officer |
Date: November 12, 2024
Afya Limited
Unaudited interim condensed
consolidated financial statements
September 30, 2024
Afya Limited
Unaudited interim condensed consolidated statements of financial position
As of September 30, 2024 and December 31, 2023
(In thousands of Brazilian reais)
|
Notes |
September 30, 2024 |
|
December 31, 2023 |
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(unaudited) |
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Assets |
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|
|
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Current assets |
|
|
|
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Cash and cash equivalents |
5 |
836,876 |
|
553,030 |
Trade receivables |
6 |
552,381 |
|
546,438 |
Inventories |
|
235 |
|
1,382 |
Recoverable taxes |
|
41,424 |
|
43,751 |
Other assets |
8 |
45,304 |
|
58,905 |
Total current assets |
|
1,476,220 |
|
1,203,506 |
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|
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Non-current assets |
|
|
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Trade receivables |
6 |
36,940 |
|
39,485 |
Other assets |
8 |
117,789 |
|
117,346 |
Investment in associate |
9 |
55,365 |
|
51,834 |
Property and equipment |
10 |
639,187 |
|
608,685 |
Right-of-use assets |
12.2.2 |
846,333 |
|
767,609 |
Intangible assets |
11 |
5,541,793 |
|
4,796,016 |
Total non-current assets |
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7,237,407 |
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6,380,975 |
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Total assets |
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8,713,627 |
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7,584,481 |
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Liabilities |
|
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Current liabilities |
|
|
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Trade payables |
|
129,920 |
|
108,222 |
Loans and financing |
12.2.1 |
30,051 |
|
179,252 |
Lease liabilities |
12.2.2 |
45,133 |
|
36,898 |
Accounts payable to selling shareholders |
12.2.3 |
247,192 |
|
353,998 |
Advances from customers |
|
154,759 |
|
153,485 |
Labor and social obligations |
|
269,381 |
|
192,294 |
Taxes payable |
|
32,470 |
|
27,765 |
Income taxes payable |
|
12,066 |
|
3,880 |
Other liabilities |
|
4,213 |
|
2,773 |
Total current liabilities |
|
925,185 |
|
1,058,567 |
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Non-current liabilities |
|
|
|
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Loans and financing |
12.2.1 |
2,115,219 |
|
1,621,523 |
Lease liabilities |
12.2.2 |
929,647 |
|
837,671 |
Accounts payable to selling shareholders |
12.2.3 |
338,850 |
|
212,869 |
Taxes payable |
|
86,016 |
|
88,198 |
Provision for legal proceedings |
21 |
115,042 |
|
104,361 |
Other liabilities |
|
52,025 |
|
18,280 |
Total non-current liabilities |
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3,636,799 |
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2,882,902 |
Total liabilities |
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4,561,984 |
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3,941,469 |
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Equity |
15 |
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Share capital |
|
17 |
|
17 |
Additional paid-in capital |
|
2,344,053 |
|
2,365,200 |
Treasury shares |
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(276,944) |
|
(299,150) |
Share-based compensation reserve |
|
181,372 |
|
155,073 |
Retained earnings |
|
1,861,948 |
|
1,380,365 |
Equity attributable to equity holders of the parent |
|
4,110,446 |
|
3,601,505 |
Non-controlling interests |
|
41,197 |
|
41,507 |
Total equity |
|
4,151,643 |
|
3,643,012 |
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|
|
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Total liabilities and equity |
|
8,713,627 |
|
7,584,481 |
The accompanying notes are an integral part of the unaudited interim condensed
consolidated financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of income and comprehensive
income
For the three and nine-month periods ended September 30, 2024 and 2023
(In thousands of Brazilian reais, except
for earnings per share information)
|
|
Three-month period ended |
|
Nine-month period ended |
|
Notes |
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
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|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
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Revenue |
17 |
841,185 |
723,479 |
|
2,455,314 |
2,146,047 |
Cost of services |
18 |
(324,083) |
(288,234) |
|
(908,429) |
(820,136) |
Gross profit |
|
517,102 |
435,245 |
|
1,546,885 |
1,325,911 |
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|
|
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Selling, general and administrative expenses |
18 |
(280,027) |
(257,002) |
|
(784,953) |
(739,808) |
Other income (expenses), net |
|
(3,183) |
12,043 |
|
(7,868) |
10,365 |
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|
|
|
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Operating income |
|
233,892 |
190,286 |
|
754,064 |
596,468 |
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|
|
|
|
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Finance income |
19 |
30,396 |
34,771 |
|
79,659 |
86,259 |
Finance expenses |
19 |
(130,240) |
(115,306) |
|
(322,420) |
(353,572) |
Net finance result |
|
(99,844) |
(80,535) |
|
(242,761) |
(267,313) |
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Share of income of associate |
9 |
2,526 |
615 |
|
9,726 |
7,671 |
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Income before income taxes |
|
136,574 |
110,366 |
|
521,029 |
336,826 |
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|
|
Income taxes expenses |
20 |
(12,432) |
(12,146) |
|
(26,388) |
(33,296) |
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Net income |
|
124,142 |
98,220 |
|
494,641 |
303,530 |
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Other comprehensive income |
|
- |
- |
|
- |
- |
Total comprehensive income |
|
124,142 |
98,220 |
|
494,641 |
303,530 |
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Income attributable to: |
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Equity holders of the parent |
|
119,979 |
93,347 |
|
481,583 |
288,263 |
Non-controlling interests |
|
4,163 |
4,873 |
|
13,058 |
15,267 |
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|
124,142 |
98,220 |
|
494,641 |
303,530 |
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Basic earnings per common share |
16 |
1.33 |
1.04 |
|
5.35 |
3.21 |
Diluted earnings per common share |
16 |
1.31 |
1.03 |
|
5.28 |
3.18 |
The accompanying notes are an integral part of the unaudited interim condensed
consolidated financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of changes in equity
For the nine-month periods ended September 30, 2024 and 2023
(In thousands of Brazilian reais)
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Equity attributable to equity holders of the parent |
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|
Notes |
Share capital |
Additional paid-in capital |
Treasury shares |
Share-based compensation reserve |
Retained earnings |
Total |
Non-controlling interests |
Total equity |
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Balances at January 1, 2023 |
|
17 |
2,375,344 |
(304,947) |
123,538 |
1,004,886 |
3,198,838 |
51,320 |
3,250,158 |
Net income |
|
- |
- |
- |
- |
288,263 |
288,263 |
15,267 |
303,530 |
Total comprehensive income |
|
- |
- |
- |
- |
288,263 |
288,263 |
15,267 |
303,530 |
Treasury shares |
|
- |
- |
(12,369) |
- |
- |
(12,369) |
- |
(12,369) |
Share-based compensation |
18 |
- |
- |
- |
20,082 |
- |
20,082 |
- |
20,082 |
Restricted shares transferred under the share-based compensation plan |
|
- |
(2,571) |
2,571 |
- |
- |
- |
- |
- |
Treasury shares transferred to executives from exercise of stock options |
|
- |
(1,196) |
4,742 |
- |
- |
3,546 |
- |
3,546 |
Dividends declared |
15.b |
- |
- |
- |
- |
- |
- |
(15,914) |
(15,914) |
Balances at September 30, 2023 (unaudited) |
|
17 |
2,371,577 |
(310,003) |
143,620 |
1,293,149 |
3,498,360 |
50,673 |
3,549,033 |
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Balances at January 1, 2024 |
|
17 |
2,365,200 |
(299,150) |
155,073 |
1,380,365 |
3,601,505 |
41,507 |
3,643,012 |
Net income |
|
- |
- |
- |
- |
481,583 |
481,583 |
13,058 |
494,641 |
Total comprehensive income |
|
- |
- |
- |
- |
481,583 |
481,583 |
13,058 |
494,641 |
Share-based compensation |
18 |
- |
- |
- |
26,299 |
- |
26,299 |
- |
26,299 |
Restricted shares transferred under the share-based compensation plan |
14.b.2 |
- |
(17,753) |
12,771 |
- |
- |
(4,982) |
- |
(4,982) |
Treasury shares transferred to executives from exercise of stock options |
14.b.1 |
- |
(3,394) |
9,435 |
- |
- |
6,041 |
- |
6,041 |
Dividends declared |
15.b |
- |
- |
- |
- |
- |
- |
(13,368) |
(13,368) |
Balances at September 30, 2024 (unaudited) |
|
17 |
2,344,053 |
(276,944) |
181,372 |
1,861,948 |
4,110,446 |
41,197 |
4,151,643 |
The accompanying notes are an integral part of the unaudited interim condensed
consolidated financial statements.
Afya Limited
Unaudited interim condensed consolidated statements of cash flows
For the nine-month periods ended September 30, 2024 and 2023
(In thousands of Brazilian reais)
|
Notes |
September 30, 2024 |
|
September 30, 2023 |
|
|
(unaudited) |
|
(unaudited) |
Operating activities |
|
|
|
|
Income before income taxes |
|
521,029 |
|
336,826 |
Adjustments to reconcile income before income taxes |
|
|
|
|
Depreciation and amortization |
18 |
249,135 |
|
212,172 |
Write-off of property and equipment |
|
2,108 |
|
1,209 |
Write-off of intangible assets |
|
243 |
|
288 |
Allowance for expected credit losses |
6 |
41,589 |
|
57,160 |
Share-based compensation |
18 |
26,299 |
|
20,082 |
Net foreign exchange differences |
|
7,462 |
|
448 |
Accrued interest |
19 |
166,343 |
|
224,349 |
Accrued interest on lease liabilities |
12.2.2, 12.5, 19 |
82,803 |
|
74,867 |
Share of income of associate |
9 |
(9,726) |
|
(7,671) |
Provision (reversal) for legal proceedings |
|
4,619 |
|
(27,119) |
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
Trade receivables |
|
(35,619) |
|
(52,169) |
Inventories |
|
1,147 |
|
7,828 |
Recoverable taxes |
|
2,409 |
|
(34,921) |
Other assets |
|
20,107 |
|
35,960 |
Trade payables |
|
19,966 |
|
1,920 |
Taxes payable |
|
(6,625) |
|
25,321 |
Advances from customers |
|
40 |
|
(27,883) |
Labor and social obligations |
|
69,719 |
|
94,465 |
Other liabilities |
|
4,417 |
|
(9,331) |
|
|
1,167,465 |
|
933,801 |
Income taxes paid |
|
(19,290) |
|
(37,599) |
Net cash flows from operating activities |
|
1,148,175 |
|
896,202 |
|
|
|
|
|
Investing activities |
|
|
|
|
Acquisition of property and equipment |
10 |
(93,367) |
|
(88,014) |
Acquisition of intangibles assets |
11 |
(223,399) |
|
(67,113) |
Dividends received |
9 |
6,195 |
|
8,294 |
Acquisition of subsidiaries, net of cash acquired |
12.2.3 |
(579,074) |
|
(726,530) |
Payments of interest from acquisition of subsidiaries and intangibles |
12.2.3 |
(55,898) |
|
(36,674) |
Net cash flows used in investing activities |
|
(945,543) |
|
(910,037) |
|
|
|
|
|
Financing activities |
|
|
|
|
Payments of principal of loans and financing |
12.5 |
(126,666) |
|
(12,216) |
Payments of interest of loans and financing |
12.5 |
(156,897) |
|
(124,468) |
Proceeds from loans and financing |
12.5 |
492,351 |
|
5,288 |
Payments of principal of lease liabilities |
12.2.2, 12.5 |
(30,218) |
|
(22,657) |
Payments of interest of lease liabilities |
12.2.2, 12.5 |
(82,567) |
|
(78,001) |
Treasury shares |
|
- |
|
(12,369) |
Proceeds from exercise of stock options |
|
6,041 |
|
3,546 |
Dividends paid to non-controlling shareholders |
15.b |
(13,368) |
|
(15,914) |
Net cash flows generated (used) in financing activities |
|
88,676 |
|
(256,791) |
Net foreign exchange differences |
|
(7,462) |
|
(448) |
Net increase (decrease) in cash and cash equivalents |
|
283,846 |
|
(271,074) |
Cash and cash equivalents at the beginning of the period |
5 |
553,030 |
|
1,093,082 |
Cash and cash equivalents at the end of the period |
5 |
836,876 |
|
822,008 |
The accompanying notes are an integral part of the unaudited interim condensed
consolidated financial statements.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
Afya Limited (“Afya”),
collectively with its subsidiaries referred to as the “Company”, is a holding company incorporated under the laws of the Cayman
Islands on March 22, 2019. Afya completed its initial public offering (IPO) on July 19, 2019, and its shares are listed on the Nasdaq
under the symbol “AFYA”. The Company’s ultimate parent company is Bertelsmann SE& Co. KGaA (“Bertelsmann”),
as a result of Bertelsmann’s acquisition of control on May 5, 2022.
The Company is formed by a network of higher education and post-graduate
institutions focused on medical schools located in 19 Brazilian States forming the largest educational group by the number of medical
school seats in the country. In non-regulated education, the Company provides services that comprise the development and sale of electronically
distributed educational courses on medicine science and soft skills educational content. The Company also offers solutions to empower
the physicians in their daily routine including supporting clinic decisions through mobile app subscription, delivering practice management
tools through a SaaS (Software as a Service) model and supporting the patient-physician relationship.
On January 24, 2024, the Ministry of Education (“MEC”) authorized
the increase of 40 medical school seats of Faculdades Integradas Padrão (FIP Guanambi) located in the city of Guanambi, State of
Bahia, which resulted in an additional payment of R$49,600. With the authorization, the Company reaches 100 medical school seats on this
campus. The operation of these medical school seats started in the first quarter of 2024.
On July 12, 2024, MEC authorized the increase of 80 medical school seats
of Centro Universitário Tiradentes Alagoas (“UNIMA”) located in the city of Maceió, State of Alagoas, which
resulted in an additional payment of R$1,250 per increased medical school seat updated by IPCA since January 2, 2023, which resulted in
an additional payment of R$107,627. With this authorization, Afya reaches 220 medical school seats on this campus. The operation of these
medical school seats started in the third quarter of 2024. Such additional seats were accounted for as intangible assets (Licenses with
indefinite useful life). See Note 11.
Acquisition in 2024
On July 1, 2024, Afya Participações S.A. ("Afya Brazil”),
a wholly-owned subsidiary of Afya, acquired Unidom Participações S.A. (“Unidom”). Unidom is a post-secondary
education institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and
health, as well as other courses, and encompasses “Unidompedro” and “Faculdade Dom Luiz”, both located in the
State of Bahia with operations in the cities of Salvador, Luis Eduardo Magalhães, Barreiras and Ribeira do Pombal.
As of September 30, 2024, Afya reached 3,593 total approved medical school
seats, including 300 medical school seats from the acquisition of Unidom. Of these, 175 medical school seats are subject to final approval
from MEC. See Note 4.
Acquisition in 2023
On January 2, 2023, Afya Brazil acquired
Sociedade Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”). DelRey is a
post-secondary education institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in
medicine and health, as well as other courses, and encompasses the operations of UNIMA and Faculdade Tiradentes Jaboatão
dos Guararapes (FCM Jaboatão).
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The aggregate purchase price of R$816,236
is comprised of: i) R$809,000 of which R$575,000 was paid in cash on the transaction closing date (R$567,196 of cash paid net of cash
acquired (included in cash flows from investing activities)), and R$234,000 is payable in cash in three annual installments, respectively,
of R$134,000 in January 2024, R$50,000 in January 2025 and R$50,000 in January 2026, adjusted by the SELIC rate; and ii) offer of Afya’s
digital solutions free of charge until December 31, 2030, for students of medicine of universities owned by the sellers which are not
part of the transaction. The fair value of this service was estimated at R$7,236 at the acquisition date.
2 | Material accounting policies |
2.1 Basis for preparation of the unaudited interim
condensed consolidated financial statements
The Company’s unaudited interim
condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and the basis it
will continue to operate as a going concern for the foreseeable future.
The unaudited interim condensed consolidated financial statements have been
prepared on a historical cost basis, except for contingent consideration (earn-outs) that have been measured at fair value.
The unaudited interim condensed consolidated financial
statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction
with the Company’s annual consolidated financial statements as of December 31, 2023.
Afya is a holding company, as such the primary source of revenue derives
from its interest on the operational companies in Brazil. As result, the Brazilian Real has been determined as the Company’s functional
currency.
The unaudited interim condensed consolidated financial statements are presented
in Brazilian reais (“R$”), which is the Company’s functional and presentation currency. All amounts are rounded to the
nearest thousand.
The Company segregated the payments of principal and interest of lease liabilities
in the unaudited interim condensed consolidated statements of cash flows for the nine-month period ended September 30, 2024, in accordance
with the provisions set forth in IAS 7 – Statement of Cash Flows. As a result, Management revised, retrospectively, the prior period
unaudited interim condensed consolidated statements of cash flows for the nine-month period ended September 30, 2023, for comparative
purposes. The Company assessed the materiality of this matter and, based on an analysis of quantitative and qualitative considerations,
determined that the segregation of payments of principal and interest on prior period over such transactions is not material to its unaudited
interim condensed consolidated financial statements. However, even if it is not material, the segregation of payments of principal and
interest regarding such transactions for the nine-month period ended September 30, 2023 are appropriate for the users of the unaudited
interim condensed consolidated financial statements, considering the comparability of such information over the periods presented. The
payments of interest of lease liabilities are classified within the unaudited interim condensed consolidated statements of cash flows
under the same activities of which the payments of principal are classified. As a result, no change occurred in the net cash flows used
in financing activities in the unaudited interim condensed consolidated statements of cash flows for the nine-month period ended September
30, 2023.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
These unaudited interim condensed consolidated financial statements were
approved by the Board of Directors for issuance on November 13, 2024.
2.2 Changes in accounting policies and disclosures
New standards, interpretations and amendments issued
and adopted by the Company
The accounting policies adopted in the preparation of the unaudited interim
condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated
financial statements for the year ended December 31, 2023. Certain amendments apply for the first time in 2024, but do not have significant
impacts on the Company’s interim condensed consolidated financial statements. The Company has not early adopted any standard, interpretation
or amendment that has been issued but is not yet effective.
2.3 Basis consolidation
The table below presents a list of the Company’s subsidiaries and
associate:
|
|
|
|
Direct and indirect interest |
Name |
Main activities |
Location |
Investment type |
September 30, 2024
(unaudited) |
December 31, 2023 |
Afya Participações S.A. (“Afya Brazil”) |
Holding |
Nova Lima - MG |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos Porto S.A. - (“ITPAC Porto”) |
Undergraduate degree programs |
Porto Nacional - TO |
Subsidiary |
100% |
100% |
Instituto Tocantinense Presidente Antônio Carlos S.A. - (“ITPAC Araguaína”) |
Undergraduate degree programs |
Araguaína - TO |
Subsidiary |
100% |
100% |
União Educacional do Vale do Aço S.A. - (“UNIVAÇO”) |
Medicine undergraduate degree program |
Ipatinga - MG |
Subsidiary |
100% |
100% |
IPTAN - Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A. (“IPTAN”) |
Undergraduate degree programs |
São João Del Rei - MG |
Subsidiary |
100% |
100% |
Instituto de Educação Superior do Vale do Parnaíba S.A. (“IESVAP”) |
Undergraduate degree programs |
Parnaíba - PI |
Subsidiary |
80% |
80% |
Centro de Ciências em Saúde de Itajubá S.A. (“CCSI”) |
Medicine undergraduate degree program |
Itajubá - MG |
Subsidiary |
75% |
75% |
Instituto de Ensino Superior do Piauí S.A. (“IESP”) |
Undergraduate and graduate degree programs |
Teresina - PI |
Subsidiary |
100% |
100% |
FADEP - Faculdade Educacional de Pato Branco Ltda. (“FADEP”) |
Undergraduate degree programs |
Pato Branco - PR |
Subsidiary |
100% |
100% |
Medcel Editora e Eventos S.A. (“Medcel”) (i) |
Medical education content |
São Paulo - SP |
Subsidiary |
- |
100% |
Instituto Educacional Santo Agostinho S.A. (“FASA”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda. (“IPEMED”) |
Graduate |
Belo Horizonte - MG |
Subsidiary |
100% |
100% |
Instituto Paraense de Educação e Cultura Ltda. (“IPEC”) |
Medicine degree programs |
Marabá - PA |
Subsidiary |
100% |
100% |
Sociedade Universitária Redentor S.A. (“UniRedentor”) |
Undergraduate and graduate degree programs |
Itaperuna - RJ |
Subsidiary |
100% |
100% |
Centro de Ensino São Lucas Ltda. (“UniSL”) |
Undergraduate degree programs |
Porto Velho - RO |
Subsidiary |
100% |
100% |
Peb Med Instituição de Pesquisa Médica e Serviços Ltda. (“PebMed”) (i) |
Content and clinical tools and online platform |
Rio de Janeiro - RJ |
Subsidiary |
- |
100% |
Sociedade de Educação, Cultura e Tecnologia da Amazônia S.A. - (“FESAR”) |
Undergraduate degree programs |
Redenção - PA |
Subsidiary |
100% |
100% |
Centro Superior de Ciências da Saúde S/S Ltda. (“FCMPB”) |
Medicine degree programs |
João Pessoa - PB |
Subsidiary |
100% |
100% |
iClinic Desenvolvimento de Software Ltda. (“iClinic”) |
Electronic Medical Record, Clinical Management System |
Ribeirão Preto - SP |
Subsidiary |
100% |
100% |
Medicinae Solutions S.A. (“Medicinae”) |
Healthcare payments and financial services |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Medical Harbour Aparelhos Médico Hospitalares e Serviços em Tecnologia Ltda. (“Medical Harbour”) |
Educational health and medical imaging |
Florianópolis - SC |
Subsidiary |
100% |
100% |
Cliquefarma Drogarias Online Ltda. (“Cliquefarma”) |
Online platform |
São Paulo - SP |
Subsidiary |
100% |
100% |
Shosp Tecnologia da Informação Ltda. (“Shosp”) |
Electronic Medical Record, Clinical Management System |
Rio de Janeiro - RJ |
Subsidiary |
100% |
100% |
Sociedade Padrão de Educação Superior Ltda. (“UnifipMoc”) |
Undergraduate degree programs |
Montes Claros - MG |
Subsidiary |
100% |
100% |
Companhia Nilza Cordeiro Herdy de Educação e Cultura (“Unigranrio”) |
Undergraduate and graduate degree programs |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
Policlínica e Centro de Estética Duque de Caxias Ltda. (“Policlínica”) |
Outpatient care |
Duque de Caxias - RJ |
Subsidiary |
100% |
100% |
RX PRO Soluções de Tecnologia Ltda. (“RX PRO”) |
Marketing for pharmaceutical industry |
São Paulo - SP |
Subsidiary |
100% |
100% |
RX PRO LOG Transporte e Logística Ltda. (“RX PRO LOG”) (ii) |
Marketing for pharmaceutical industry |
São Paulo - SP |
Subsidiary |
- |
100% |
BMV Atividades Médicas Ltda. (“Além da Medicina”) (i) |
Medical education content |
São Paulo - SP |
Subsidiary |
- |
100% |
Cardiopapers Soluções Digitais Ltda. (“CardioPapers”) (i) |
Medical education content |
Recife - PE |
Subsidiary |
- |
100% |
Quasar Telemedicina Desenvolvimento de Sistemas Computacionais Ltda. (“Glic”) |
Patient physician relationship |
Barueri - SP |
Subsidiary |
100% |
100% |
Sociedade Educacional e Cultural Sergipe DelRey Ltda. (“DelRey”) |
Undergraduate degree programs |
Maceió - AL |
Subsidiary |
100% |
100% |
Unidom Participações S.A. (“Unidom”) |
Undergraduate degree programs |
Salvador - BA |
Subsidiary |
100% |
- |
União Educacional do Planalto Central S.A. (“UEPC”) |
Undergraduate degree programs |
Brasília - DF |
Associate |
30% |
30% |
(i) PebMed was merged with Afya Brazil in April 2024; Medcel, Além
da Medicina and CardioPapers was merged with Afya Brazil in August 2024
(ii) RX PRO LOG had its operations closed
down in January 2024.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The financial information
of the subsidiaries acquired is included in the Company’s unaudited interim condensed consolidated financial statements beginning
on the respective acquisition dates.
The Company consolidates the financial information for all entities it controls.
Control is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
Consolidation of a subsidiary begins when the Company obtains control over
the subsidiary and it ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control
until the date the Company ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries
in order to bring their accounting policies in line with the Company’s accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a change of
control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets
(including goodwill), liabilities, non-controlling interest and other components of equity, while any resulting gain or loss is recognized
in the statement of income.
Non-controlling interests in the results and equity of subsidiaries are
shown separately in the consolidated statements of financial position, consolidated statements of income and comprehensive income and
consolidated statements of changes in equity.
The Company has three reportable segments as follows:
• Undergrad, which provides educational services through undergraduate
courses related to medical school, undergraduate health science and other ex-health undergraduate programs;
• Continuing education, which provides medical education (including
residency preparation programs, specialization test preparation and other medical capabilities), specialization and graduate courses in
medicine, delivered through digital and in-person content; and
• Medical practice solutions, which provides clinical decision, clinical
management and doctor-patient relationships for physicians and provide access, demand and efficiency for the healthcare players.
Segment information is presented consistently with the internal reports
provided to the Company's Chief Executive Officer (CEO), which is the Chief Operating Decision Maker (CODM) and is responsible for allocating
resources, assessing the performance of the Company's operating segments, and making the Company's strategic decisions.
No operating segments have been aggregated to form the reportable operating
segments. There is only one geographic region, and the results are monitored and evaluated as a single business.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
Business units restructuring
In connection with a restructuring
project occurred across the Continuing education and Medical practice solutions segments, the Pilar 1 entities (Medcel, Além da
Medicina, CardioPapers and Medical Harbour), which offer residency preparation programs, specialization test preparation and other medical
capabilities, were moved into the Continuing education segment. This strategic project aims to integrate all continuing education capabilities
into one single structure that will be responsible for offerings that address physicians education and continuous update needs from the
graduation and throughout their careers, while exploring the potential synergies among those operations.
This restructuring project took place
since the first quarter of 2024 and represents how the segments are monitored internally. Due to changes in operating segments, the segment
information as of December 31, 2023 and for the nine-month period ended September 30, 2023 have been retroactively adjusted for comparison
purposes.
The tables below present assets and liabilities information for the Company’s
operating segments as of September 30, 2024 and December 31, 2023, respectively:
As of September 30, 2024
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Adjustments and eliminations |
Total |
|
|
|
|
|
|
|
Total assets |
8,331,696 |
232,615 |
154,918 |
8,719,229 |
(5,602) |
8,713,627 |
Current assets |
1,376,933 |
40,779 |
64,110 |
1,481,822 |
(5,602) |
1,476,220 |
Non-current assets |
6,954,763 |
191,836 |
90,808 |
7,237,407 |
- |
7,237,407 |
|
|
|
|
|
|
|
Total liabilities and equity |
8,331,696 |
232,615 |
154,918 |
8,719,229 |
(5,602) |
8,713,627 |
Current liabilities |
735,546 |
132,703 |
62,538 |
930,787 |
(5,602) |
925,185 |
Non-current liabilities |
3,537,307 |
76,515 |
22,977 |
3,636,799 |
- |
3,636,799 |
Equity |
4,058,843 |
23,397 |
69,403 |
4,151,643 |
- |
4,151,643 |
|
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (i) |
55,365 |
- |
- |
55,365 |
- |
55,365 |
Capital expenditures (ii) |
264,746 |
35,202 |
16,818 |
316,766 |
- |
316,766 |
(i) Investment in UEPC is included in non-current assets in the statement
of financial position.
(ii) Capital expenditures consider the acquisitions of property and equipment
and intangible assets.
As of December 31, 2023 |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Adjustments and eliminations |
Total |
|
|
|
|
|
|
|
Total assets |
7,104,154 |
336,908 |
154,636 |
7,595,698 |
(11,217) |
7,584,481 |
Current assets |
1,001,156 |
155,511 |
58,056 |
1,214,723 |
(11,217) |
1,203,506 |
Non-current assets |
6,102,998 |
181,397 |
96,580 |
6,380,975 |
- |
6,380,975 |
|
|
|
|
|
|
|
Total liabilities and equity |
7,104,154 |
336,908 |
154,636 |
7,595,698 |
(11,217) |
7,584,481 |
Current liabilities |
787,658 |
221,002 |
61,124 |
1,069,784 |
(11,217) |
1,058,567 |
Non-current liabilities |
2,783,855 |
73,960 |
25,087 |
2,882,902 |
- |
2,882,902 |
Equity |
3,532,641 |
41,946 |
68,425 |
3,643,012 |
- |
3,643,012 |
|
|
|
|
|
|
|
Other disclosures |
|
|
|
|
|
|
Investments in associate (i) |
51,834 |
- |
- |
51,834 |
- |
51,834 |
Capital expenditures (ii) |
98,535 |
28,165 |
28,427 |
155,127 |
- |
155,127 |
(i) Investment in UEPC is included in non-current assets in the statement
of financial position.
(ii) Balances for the nine-month period ended September 30, 2023 (unaudited).
Capital expenditures consider the acquisitions of property and equipment and intangible assets.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The tables below present the statements of income for the Company’s
operating segments for the nine-month periods ended September 30, 2024 and 2023:
September 30, 2024
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
2,155,895 |
186,315 |
113,104 |
2,455,314 |
- |
2,455,314 |
Inter-segment |
- |
1,416 |
4,186 |
5,602 |
(5,602) |
- |
Revenue |
2,155,895 |
187,731 |
117,290 |
2,460,916 |
(5,602) |
2,455,314 |
Cost of services |
(809,393) |
(74,097) |
(30,541) |
(914,031) |
5,602 |
(908,429) |
Gross profit |
1,346,502 |
113,634 |
86,749 |
1,546,885 |
- |
1,546,885 |
Selling, general and administrative expenses |
|
|
|
|
|
(784,953) |
Other expenses, net |
|
|
|
|
|
(7,868) |
Operating income |
|
|
|
|
|
754,064 |
Finance income |
|
|
|
|
|
79,659 |
Finance expenses |
|
|
|
|
|
(322,420) |
Share of income of associate |
|
|
|
|
|
9,726 |
Income before income taxes |
|
|
|
|
|
521,029 |
Income taxes expenses |
|
|
|
|
|
(26,388) |
Net income |
|
|
|
|
|
494,641 |
September 30, 2023
(unaudited) |
Undergrad |
Continuing education |
Medical practice solutions |
Total reportable segments |
Elimination (inter-segment transactions) |
Total |
|
|
|
|
|
|
|
External customer |
1,883,089 |
162,513 |
100,445 |
2,146,047 |
- |
2,146,047 |
Inter-segment |
- |
7,497 |
1,844 |
9,341 |
(9,341) |
- |
Revenue |
1,883,089 |
170,010 |
102,289 |
2,155,388 |
(9,341) |
2,146,047 |
Cost of services |
(738,224) |
(65,319) |
(25,934) |
(829,477) |
9,341 |
(820,136) |
Gross profit |
1,144,865 |
104,691 |
76,355 |
1,325,911 |
- |
1,325,911 |
Selling, general and administrative expenses |
|
|
|
|
|
(739,808) |
Other income, net |
|
|
|
|
|
10,365 |
Operating income |
|
|
|
|
|
596,468 |
Finance income |
|
|
|
|
|
86,259 |
Finance expenses |
|
|
|
|
|
(353,572) |
Share of income of associate |
|
|
|
|
|
7,671 |
Income before income taxes |
|
|
|
|
|
336,826 |
Income taxes expenses |
|
|
|
|
|
(33,296) |
Net income |
|
|
|
|
|
303,530 |
Seasonality of operations
Undergrad tuition revenues are related to the intake process, and monthly
tuition fees charged to students and do not significantly fluctuate during each semester.
Continuing education revenues are mostly related to: (i) monthly intakes
and tuition fees on medical education, which do not have a considerable concentration in any period; and (ii) Medcel’s revenue,
derived from e-books transferred at a point of time, which are concentrated at in the first and last quarter of the year due to the enrollments.
Medical practice solutions are comprised mainly of Afya Whitebook and Afya
iClinic revenues, which do not have significant fluctuations regarding seasonality.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The preliminary fair values of the identifiable assets acquired and liabilities
assumed as of acquisition date were:
Assets |
|
Cash and cash equivalents |
3,272 |
Trade receivables |
9,368 |
Advances |
94 |
Recoverable taxes |
82 |
Other assets |
854 |
Indemnification assets |
7,185 |
Property and equipment |
5,709 |
Rights-of use assets |
28,989 |
Intangible assets |
467,178 |
|
522,731 |
Liabilities |
|
Trade payables |
1,732 |
Loans and financing |
4,377 |
Labor and social obligations |
7,368 |
Taxes payables |
5,254 |
Advances from customers |
1,234 |
Lease liabilities |
28,989 |
Deferred taxes * |
28,274 |
Provision for legal proceedings |
7,246 |
Other liabilities |
4,393 |
|
88,867 |
Total identifiable net assets at fair value |
433,864 |
Preliminary goodwill arising on acquisition |
186,372 |
|
|
Purchase consideration transferred |
620,236 |
Cash paid |
340,773 |
Consideration to be transferred |
279,463 |
|
|
Analysis of cash flows on acquisition |
|
Transaction costs of the acquisition (included in cash flows from operating activities) |
1,585 |
Cash paid net of cash acquired with the subsidiary (included in cash flows from investing activities) |
337,501 |
Net of cash flow on acquisition |
339,086 |
* Refers to deferred tax liabilities arising from transactions prior
to Afya’s acquisition of Unidom.
On July 1, 2024, Afya Brazil acquired 100% of the share
capital of Unidom, a post-secondary education institution in the State of Bahia with governmental authorization to offer on-campus undergraduate
degrees in medicine, health, and other courses.
The acquisition contributes with 300 operational medical
school seats to Afya in Salvador. The authorization request for these 300 medical school seats was made to MEC before the Mais Médicos
Law was enacted and MEC concluded its analysis and issued Ordinance 630/2020 ("Ordinance") in 2020 to authorize the operation
considering 125 medical school seats. In 2021, as a result of a judicial order, MEC reviewed the Ordinance to authorize the 300 medical
school seats initially requested by Unidompedro. Such decision was confirmed by a federal judge in the State of Bahia in 2023. Currently,
Unidompedro has 300 medical school seats authorized, of which 125 are final and 175 are subject to a final conclusion of the aforementioned
court proceedings.
The total consideration of R$660,000 was adjusted
to R$620,236, net of the estimated Net Debt deducted from the down payment. The price and payment conditions are:
• R$340,773, net of the estimated
Net Debt, paid in cash on July 1, 2024; and
• R$279,463, considering purchase consideration
adjustments, is payable in up to ten annual installments, adjusted by the CDI rate, and it is conditioned upon the maintenance of the
authorization of the 175 medical school seats in each of the prior year. The remaining payment balance is accelerated if a final and non-appealable
conclusion of the aforementioned court proceedings, within the 10-year payment period, confirms the authorization for the 175 medical
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
school seats. In turn, if, within the same
10-year payment period, a final conclusion of the aforementioned court proceedings does not confirm the authorization for such 175 medical
school seats, the remaining payment balance will no longer be due. Based on the current status of aforementioned court proceedings, as
well as other court decisions in relation to medical seats approved by MEC under legal proceedings, Management has assessed that the likelihood
of payment of such consideration is probable.
This acquisition was accounted for under IFRS 3 – Business Combinations.
Furthermore, if Unidom wins the bid processes in the Mais Médicos
III Program, an additional payment of R$250 thousand per granted seat will be made. Such medical seats were not operating nor were approved
as of date of acquisition. The probability of such payout cannot be reliably estimated and thus the contingent consideration was not measured
at the acquisition date. Should the additional seats be approved, it will result in additional licenses, which will be measured accordingly
if and when approved.
Transaction costs to date amount to R$2,547, which R$1,585 were expensed
in the nine-month period ended September 30, 2024 and are included in general and administrative expenses in the consolidated statement
of income.
The Company measured the acquired lease liabilities using the present value
of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities.
At the acquisition date, the fair value of the trade receivables acquired
is substantially the same as its carrying amount.
The goodwill recognized includes the value of expected synergies arising
from the acquisition, which is not separately recognized. Goodwill is allocated entirely to the Undergrad segment. The preliminary goodwill
recognized is not expected to be deductible for income taxes purposes.
The valuation of the identifiable assets acquired and liabilities assumed
in the business combination of Unidom is preliminary, and therefore items such as intangible assets may be adjusted when the valuations
are finalized.
The Company did not recognize deferred taxes related
to the business combination because the tax basis and the accounting basis, including fair value adjustments, were the same at the date
of the business combination.
The valuation techniques used for measuring the fair value of separately
identified intangible assets acquired were as follows:
Intangible assets acquired |
Valuation technique |
Licenses |
With-and-without method
The with-and-without method consists of estimating the
fair value of an asset by the difference between the value of this asset in two scenarios: a scenario considering the existence of the
asset in question and another considering its non-existence. |
Customer relationships |
Multi-period excess earnings method
The method considers the present value of net cash flows
expected to be generated by customer relationships, by excluding any cash flows related to contributory assets. |
Unidom has contributed R$32,421 of revenue and R$16,396 of income before
income taxes to the Company in 2024. If the acquisition had taken place at the beginning of the period, revenue and income before income taxes for the nine-month period ended September 30,
2024 would have been R$2,505,215 and R$531,249, respectively.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
5 | Cash and cash equivalents |
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Cash and bank deposits |
5,594 |
11,746 |
Cash equivalents |
831,282 |
541,284 |
|
836,876 |
553,030 |
Cash equivalents correspond mainly to financial investments in Bank Certificates
of Deposit (CDB) with highly rated financial institutions and investment funds managed by highly rated financial institutions.
As of September 30, 2024, the average interest on these investments is equivalent
to 99.6% of the CDI rate (December 31, 2023: 100.8%). These funds are available for immediate use and have an insignificant risk of changes
in value. Cash equivalents denominated in U.S. dollars totaled R$18,847 as of September 30, 2024 (December 31, 2023: R$23,173).
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Tuition fees |
448,391 |
461,066 |
Educational content (i) |
75,754 |
49,135 |
FIES |
82,034 |
62,971 |
Educational credits (ii) |
26,102 |
29,391 |
Mobile app subscription (iii) |
16,231 |
29,091 |
Other |
11,544 |
15,667 |
|
660,056 |
647,321 |
(-) Allowance for expected credit losses |
(70,735) |
(61,398) |
|
589,321 |
585,923 |
Current |
552,381 |
546,438 |
Non-current |
36,940 |
39,485 |
(i) Related to trade receivables from sales of e-books and medical courses
through Continuing Education’s digital platform.
(ii) Related to the financing programs offered by the Company’s subsidiaries
to its students that existed prior to the acquisitions. The Company closed such programs to new enrolments and maintained only the agreements
that were outstanding as of the acquisition date.
(iii) Related to trade receivables from mobile applications subscriptions
for digital medical content.
As of September 30, 2024 and December 31, 2023, the aging of trade receivables
was as follows:
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Neither past due nor impaired |
330,127 |
323,614 |
Past due: |
|
|
1 to 30 days |
105,100 |
73,563 |
31 to 90 days |
110,496 |
109,908 |
91 to 180 days |
50,897 |
85,193 |
More than 180 days |
63,436 |
55,043 |
|
660,056 |
647,321 |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The changes in the allowance for expected credit losses for the nine-month
periods ended September 30, 2024 and 2023, was as follows:
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Opening balance |
(61,398) |
(44,046) |
Additions |
(41,589) |
(57,160) |
Write-offs |
32,252 |
38,376 |
Closing balance |
(70,735) |
(62,830) |
The tables below summarize the balances and transactions with related parties:
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Assets |
|
|
Trade receivables (i) |
936 |
693 |
Other assets (ii) |
- |
285 |
|
936 |
978 |
Current |
936 |
792 |
Non-current |
- |
186 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Other income (expenses) |
|
|
UEPC (i) |
459 |
393 |
EMIVE Patrulha 24 Horas Ltda. (iii) |
7 |
- |
|
466 |
393 |
|
|
|
Leases (iv) |
|
|
RVL Esteves Gestão Imobiliária S.A. |
18,311 |
17,285 |
UNIVAÇO Patrimonial Ltda. |
2,712 |
2,683 |
IESVAP Patrimonial Ltda. |
3,914 |
3,872 |
|
24,937 |
23,840 |
(i) Refers to sales of educational content from Medcel to UEPC.
(ii) Refers to expenses to be reimbursed by Bertelsmann.
(iii) Refers to amounts of expenses related to security services provided
by a company of which one of Afya’s main shareholders has significant influence.
(iv) The carrying amounts of lease liabilities with related parties as of
September 30, 2024 totaled R$224,483 (December 31, 2023: R$223,496).
Lease agreement with RVL Esteves Gestão Imobiliária
S.A.
On June 14, 2024, RVL Esteves Gestão Imobiliária S.A. (“RVL”)
entered into a lease agreement with DelRey, pursuant to which RVL agreed to lease to DelRey a property for the campus in the city of Jaboatão
dos Guararapes, State of Pernambuco. The lease agreement is for a monthly amount payable equal to R$114, with a grace period of 12 months.
The monthly amount payable should be adjusted by the inflation rate (IPCA) after 12 months. The lease agreement is for a term of 20 years.
Since July 1, 2024, the lease agreement with RVL Esteves Gestão Imobiliária
S.A. of one of the two corporate headquarters floors, located in Nova Lima, State of Minas Gerais, expired and was not renewed.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
Key management personnel compensation
Key management personnel compensation included in the Company’s unaudited
interim condensed consolidated statement of income comprised the following:
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Short-term employee benefits |
16,648 |
10,363 |
Share-based compensation plans |
16,148 |
13,658 |
|
32,796 |
24,021 |
Compensation of the Company’s key management includes short-term employee
benefits comprised by salaries, labor and social obligations, and other ordinary short-term employee benefits. The amounts disclosed in
the table above are the amounts recognized as an expense in selling, general and administrative expenses during the reporting period related
to key management personnel. See further details on the share-based compensation plans in Note 14.
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Indemnification assets |
80,671 |
81,855 |
Advances |
19,392 |
39,890 |
Judicial deposits |
15,741 |
14,187 |
Prepaid expenses |
24,355 |
15,820 |
Other FIES credits |
8,376 |
8,674 |
Dividends |
1,668 |
1,668 |
Deferred tax assets |
- |
3,233 |
Other assets |
12,890 |
10,924 |
|
163,093 |
176,251 |
Current |
45,304 |
58,905 |
Non-current |
117,789 |
117,346 |
The Company holds a 30% interest in UEPC, a medical school located in the
Federal District that offers higher education and post-graduate courses, both in person and long-distance learning. The Company’s
interest in UEPC is accounted for using the equity method. The tables below summarize the financial information of the Company’s
investment in UEPC:
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Current assets |
41,820 |
29,004 |
Non-current assets |
116,307 |
120,289 |
Current liabilities |
(28,876) |
(28,842) |
Non-current liabilities |
(88,643) |
(91,613) |
Equity |
40,608 |
28,838 |
Company’s share in equity - 30% |
12,182 |
8,651 |
Goodwill |
43,183 |
43,183 |
Carrying amount of the investment |
55,365 |
51,834 |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Revenue |
117,084 |
111,730 |
Cost of services |
(44,677) |
(46,081) |
Selling, general and administrative expenses |
(35,002) |
(34,840) |
Net finance result |
(3,378) |
(4,272) |
Income before income taxes |
34,027 |
26,537 |
Income taxes expenses |
(1,606) |
(967) |
Net income |
32,421 |
25,570 |
Company’s share of income |
9,726 |
7,671 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Opening balance |
51,834 |
53,907 |
Share of income |
9,726 |
7,671 |
Dividends received |
(6,195) |
(8,294) |
Closing balance |
55,365 |
53,284 |
There were no impairment indicatives of goodwill from the investment in
associate for the nine-month period ended September 30, 2024.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Building |
Machinery and equipment |
Lands |
Vehicles |
Furniture and fixtures |
IT equipment |
Library books |
Leasehold improvements |
Construction in progress |
Total |
Cost |
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
91,857 |
100,390 |
18,852 |
1,053 |
90,712 |
68,593 |
37,362 |
145,846 |
86,688 |
641,353 |
Additions |
95 |
17,656 |
- |
407 |
14,033 |
17,121 |
850 |
46 |
37,806 |
88,014 |
Business combination |
- |
7,729 |
- |
- |
4,384 |
734 |
1,328 |
10,741 |
65 |
24,981 |
Write-off (i) |
241 |
(4,430) |
- |
(475) |
(3,002) |
(3,346) |
(7,788) |
(165) |
(7) |
(18,972) |
Transfer |
408 |
2,371 |
- |
- |
23 |
78 |
- |
75,415 |
(78,295) |
- |
As of September 30, 2023 (unaudited) |
92,601 |
123,716 |
18,852 |
985 |
106,150 |
83,180 |
31,752 |
231,883 |
46,257 |
735,376 |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
93,232 |
119,981 |
18,852 |
1,354 |
110,859 |
82,810 |
31,888 |
264,448 |
33,962 |
757,386 |
Additions |
319 |
19,465 |
- |
130 |
15,608 |
19,717 |
491 |
1,814 |
35,823 |
93,367 |
Business combination |
2 |
2,528 |
- |
- |
289 |
736 |
372 |
1,782 |
- |
5,709 |
Write-off (i) |
- |
(1,946) |
- |
(42) |
(6,789) |
(501) |
- |
1,294 |
- |
(7,984) |
Transfer |
4,932 |
(226) |
- |
- |
(806) |
480 |
- |
34,830 |
(39,210) |
- |
As of September 30, 2024 (unaudited) |
98,485 |
139,802 |
18,852 |
1,442 |
119,161 |
103,242 |
32,751 |
304.168 |
30,575 |
848,478 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
(5,751) |
(20,630) |
- |
288 |
(10,349) |
(21,837) |
(22,888) |
(18,099) |
- |
(99,266) |
Depreciation |
(2,867) |
(11,278) |
- |
(247) |
(9,348) |
(9,375) |
(2,570) |
(19,386) |
- |
(55,071) |
Write-off (i) |
(121) |
4,138 |
- |
241 |
2,573 |
3,252 |
7,601 |
79 |
- |
17,763 |
As of September 30, 2023 (unaudited) |
(8,739) |
(27,770) |
- |
282 |
(17,124) |
(27,960) |
(17,857) |
(37,406) |
- |
(136,574) |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
(9,679) |
(28,843) |
- |
198 |
(20,377) |
(26,872) |
(18,652) |
(44,476) |
- |
(148,701) |
Depreciation |
(3,134) |
(12,992) |
- |
(285) |
(9,204) |
(11,310) |
(2,289) |
(27,252) |
- |
(66,466) |
Write-off (i) |
- |
1,487 |
- |
42 |
4,441 |
579 |
- |
(673) |
- |
5,876 |
Transfer |
(39) |
(74) |
- |
- |
426 |
(166) |
- |
(147) |
- |
- |
As of September 30, 2024 (unaudited) |
(12,852) |
(40,422) |
- |
(45) |
(24,714) |
(37,769) |
(20,941) |
(72,548) |
- |
(209,291) |
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
As of September 30, 2024 (unaudited) |
85,633 |
99,380 |
18,852 |
1,397 |
94,447 |
65,473 |
11,810 |
231,620 |
30,575 |
639,187 |
As of December 31, 2023 |
83,553 |
91,138 |
18,852 |
1,552 |
90,482 |
55,938 |
13,236 |
219,972 |
33,962 |
608,685 |
(i) Refers to items written-off as result of lack of expectation of future
use, in connection with the Company’s physical inventory procedures.
The Company assesses at each reporting date, whether there is an indication
that a property and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount.
There were no impairment indicatives of property and equipment for the nine-month period ended September 30, 2024.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Goodwill |
Licenses with indefinite useful life |
Trademark |
Customer relationships |
Software |
Education content |
Developed technology |
Educational platform |
Software in progress |
Other |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
1,257,045 |
2,189,814 |
182,060 |
435,816 |
43,300 |
69,589 |
90,749 |
55,697 |
14,734 |
1,055 |
4,339,859 |
Additions |
- |
- |
- |
- |
665 |
6,159 |
27,868 |
14,887 |
17,534 |
- |
67,113 |
Business combination |
69,267 |
586,264 |
- |
142,451 |
62 |
- |
- |
- |
- |
- |
798,044 |
Write-off (i) |
- |
- |
- |
- |
(2,235) |
- |
- |
(893) |
(50) |
- |
(3,178) |
Remeasurement (ii) |
2,556 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
2,556 |
Transfer |
- |
- |
- |
- |
13,062 |
4,785 |
16 |
(3,058) |
(14,805) |
- |
- |
As of September 30, 2023 (unaudited) |
1,328,868 |
2,776,078 |
182,060 |
578,267 |
54,854 |
80,533 |
118,633 |
66,633 |
17,413 |
1,055 |
5,204,394 |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
1,334,699 |
2,776,077 |
182,060 |
578,267 |
71,150 |
84,201 |
128,477 |
74,892 |
12,134 |
1,055 |
5,243,012 |
Additions (iii) |
- |
157,227 |
- |
- |
1,412 |
9,315 |
11,585 |
23,004 |
20,856 |
- |
223,399 |
Business combination |
186,372 |
429,116 |
- |
38,062 |
- |
- |
- |
- |
- |
- |
653,550 |
Write-off (i) |
- |
- |
- |
- |
- |
(161) |
(117) |
- |
- |
- |
(278) |
Transfer |
- |
- |
- |
- |
15,095 |
1,041 |
- |
(97) |
(16,039) |
- |
- |
As of September 30, 2024 (unaudited) |
1,521,071 |
3,362,420 |
182,060 |
616,329 |
87,657 |
94,396 |
139,945 |
97,799 |
16,951 |
1,055 |
6,119,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2023 |
- |
- |
(14,955) |
(212,363) |
(17,277) |
(26,562) |
(10,093) |
(17,039) |
- |
(79) |
(298,368) |
Amortization |
- |
- |
(6,111) |
(67,619) |
(6,306) |
(11,138) |
(14,183) |
(4,565) |
- |
(79) |
(110,001) |
Write-off (i) |
- |
- |
- |
- |
1,997 |
- |
- |
893 |
- |
- |
2,890 |
As of September 30, 2023 (unaudited) |
- |
- |
(21,066) |
(279,982) |
(21,586) |
(37,700) |
(24,276) |
(20,711) |
- |
(158) |
(405,479) |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1, 2024 |
- |
- |
(26,038) |
(301,947) |
(24,094) |
(42,230) |
(31,603) |
(20,900) |
- |
(184) |
(446,996) |
Amortization |
- |
- |
(11,225) |
(62,350) |
(11,997) |
(14,500) |
(15,821) |
(14,957) |
- |
(79) |
(130,929) |
Write-off (i) |
- |
- |
- |
- |
- |
- |
35 |
- |
- |
- |
35 |
Transfer |
- |
- |
- |
- |
(727) |
- |
- |
727 |
- |
- |
- |
As of September 30, 2024 (unaudited) |
- |
- |
(37,263) |
(364,297) |
(36,818) |
(56,730) |
(47,389) |
(35,130) |
- |
(263) |
(577,890) |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2024 (unaudited) |
1,521,071 |
3,362,420 |
144,797 |
252,032 |
50,839 |
37,666 |
92,556 |
62,669 |
16,951 |
792 |
5,541,793 |
As of December 31, 2023 |
1,334,699 |
2,776,077 |
156,022 |
276,320 |
47,056 |
41,971 |
96,874 |
53,992 |
12,134 |
871 |
4,796,016 |
(i) Refers to intangible assets written-off as result of lack of expectation
of future use.
(ii) Goodwill: During the measurement period, results of operation differed
from the foreseen, resulting in a remeasurement of the contingent consideration for the acquisitions of Além da Medicina, CardioPapers
and Glic by R$4,773, R$5,082 and (R$7,299), respectively, totaling R$2,556 for the nine-month period ended September 30, 2023.
(iii) On January 24, 2024, MEC authorized the increase of 40 medical school
seats of Faculdades Integradas Padrão (FIP Guanambi) located in the city of Guanambi, State of Bahia, which resulted in an additional
payment of R$49,600. Additionally, on July 12, 2024, MEC authorized the increase of 80 medical school seats of UNIMA, which resulted in
an additional payment of R$107,627.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
Impairment testing of goodwill and intangible assets
with indefinite lives
The Company performs its annual impairment test in December and when circumstances
indicated that the carrying value may be impaired. The Company’s impairment test for goodwill and intangible assets with indefinite
lives is based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the different cash-generating
units were disclosed in the annual consolidated financial statements for the year ended December 31, 2023. There were no impairment indicatives
of goodwill and intangible assets with indefinite lives for the nine-month period ended September 30, 2024.
Other intangible assets
For the nine-month period ended September 30, 2024 and for the year ended
December 31, 2023 there were no indicatives that the Company’s intangible assets with finite useful lives might be impaired.
12 | Financial assets and financial liabilities |
|
September 30, 2024 |
December 31, 2023 |
At amortized cost |
(unaudited) |
|
Trade receivables |
589,321 |
585,923 |
Dividends receivable |
1,668 |
1,668 |
|
590,989 |
587,591 |
Current |
554,049 |
548,106 |
Non-current |
36,940 |
39,485 |
12.2 | Financial liabilities |
|
September 30, 2024 |
December 31, 2023 |
At amortized cost |
(unaudited) |
|
Trade payables |
129,920 |
108,222 |
Loans and financing |
2,145,270 |
1,800,775 |
Lease liabilities |
974,780 |
874,569 |
Accounts payable to selling shareholders |
278,422 |
530,915 |
|
3,528,392 |
3,314,481 |
Current |
422,549 |
642,872 |
Non-current |
3,105,843 |
2,671,609 |
|
September 30, 2024 |
December 31, 2023 |
At fair value |
(unaudited) |
|
Accounts payable to selling shareholders (earn-outs) |
20,067 |
35,952 |
Accounts payable to selling shareholders (Unidom) |
287,553 |
- |
|
307,620 |
35,952 |
Current |
29,747 |
35,498 |
Non-current |
277,873 |
454 |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| 12.2.1 | Loans and financing |
Financial institution |
Currency |
Interest rate |
Maturity |
September 30, 2024 |
December 31, 2023 |
|
|
|
|
(unaudited) |
|
Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.75% p.y. |
2024 |
- |
21,405 |
Itaú Unibanco S.A. |
Brazilian real |
CDI + 1.90% p.y. |
2025 |
300,000 |
412,880 |
Softbank |
Brazilian real |
6.5% p.y. |
2026 |
828,430 |
825,957 |
FINEP |
Brazilian real |
TJLP p.y. |
2027 |
8,948 |
11,193 |
Debentures |
Brazilian real |
CDI + 1.80% p.y. |
2028 |
510,724 |
529,340 |
IFC |
Brazilian real |
CDI + 1.2%p.y. |
2030 |
497,168 |
- |
|
|
|
|
2,145,270 |
1,800,775 |
Current |
|
|
|
30,051 |
179,252 |
Non-current |
|
|
|
2,115,219 |
1,621,523 |
On August 7, 2024, Afya Brazil entered into a loan agreement with International
Finance Corporation ("IFC") to support its expansion program, through acquisitions. The financing is IFC’s first sustainability-linked
loan based on social targets in the education sector. The pricing of IFC’s loan will be linked to Afya reaching performance target
levels in selected social key performance indicators encompassing free medical consultations for the community and quality of education
according to Brazil’s Ministry of Education criteria (“Sustainability KPIs”). According to the financing terms, IFC
will loan up to R$500,000, which shall be repaid in seven equal semi-annual installments starting in April 2027. The interest rate is
the Brazilian CDI rate plus 1.2%, and it may be reduced by 15 bps if the Sustainability KPIs are achieved.
The Company has lease contracts for properties. The lease contracts generally
have maturities in the lease terms between five and 30 years. There are no sublease or variable payments in-substance lease agreements
in the period.
The carrying amounts of right-of-use assets and lease liabilities as of
September 30, 2024 and December 31, 2023 and the movements during the nine-month periods ended September 30, 2024 and 2023 are shown below:
|
September 30, 2024
(unaudited) |
|
September 30, 2023
(unaudited) |
|
Right-of-use assets |
Lease liabilities |
|
Right-of-use assets |
Lease liabilities |
|
|
|
|
|
|
Opening balance |
767,609 |
874,569 |
|
690,073 |
769,525 |
Additions |
32,976 |
32,976 |
|
7,328 |
7,328 |
Remeasurement |
70,443 |
70,443 |
|
56,766 |
56,766 |
Business combination |
28,989 |
28,989 |
|
65,408 |
65,408 |
Depreciation expense |
(51,740) |
- |
|
(47,106) |
- |
Interest expense |
- |
82,803 |
|
- |
74,867 |
Payments of principal (i) |
- |
(30,218) |
|
- |
(22,657) |
Payments of interest (i) |
- |
(82,567) |
|
- |
(78,001) |
Write-off (ii) |
(1,944) |
(2,215) |
|
(2,433) |
(3,507) |
Closing balance |
846,333 |
974,780 |
|
770,036 |
869,729 |
|
|
|
|
|
|
Balances as of |
September 30, 2024 (unaudited) |
|
December 31, 2023 |
Current |
- |
45,133 |
|
- |
36,898 |
Non-current |
846,333 |
929,647 |
|
767,609 |
837,671 |
(i) Payments of principal and interest from lease liabilities are included
in cash flows from financing activities.
(ii) Refers to anticipated termination of real estate leasing contracts.
The Company recognized lease expense from short-term leases and low-value
assets of R$5,450 for the nine-month period ended September 30, 2024 (R$7,688 for the nine-month period ended September 30, 2023).
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
| 12.2.3 | Accounts payable to selling shareholders |
|
Interest rate |
September 30, 2024 |
December 31, 2023 |
|
|
(unaudited) |
|
Accounts payable at amortized cost |
|
|
|
IPEMED |
CDI |
- |
12,805 |
UniRedentor |
CDI |
- |
27,155 |
UniSL |
CDI |
- |
15,064 |
FCMPB |
CDI |
68,215 |
63,168 |
Unigranrio |
CDI |
88,189 |
156,235 |
DelRey |
Selic |
122,018 |
256,488 |
|
|
|
|
Accounts payable at fair value |
|
|
|
Unidom |
CDI |
287,553 |
- |
Medical Harbour (earn-out) |
- |
- |
3,000 |
Shosp (earn-out) |
- |
454 |
454 |
Além da Medicina (earn-out) |
- |
9,600 |
18,325 |
CardioPapers (earn-out) |
- |
10,013 |
14,173 |
|
|
|
|
|
|
586,042 |
566,867 |
Current |
|
247,192 |
353,998 |
Non-current |
|
338,850 |
212,869 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
|
|
Opening balance |
566,867 |
528,678 |
Additions - Consideration to be transferred on business combinations |
279,463 |
234,000 |
Payments of principal (i) |
(241,573) |
(148,535) |
Payment of interest (i) |
(55,898) |
(33,503) |
Interest |
36,443 |
67,872 |
Remeasurement of earn-outs |
740 |
2,556 |
Closing balance |
586,042 |
651,068 |
(i) Payments of principal and interest from acquisition of subsidiaries are
included in cash flows from investing activities.
The table below compares the carrying amounts and fair values of the Company’s
financial instruments, other than those carrying amounts that are reasonable approximation of fair values:
|
September 30, 2024
(unaudited) |
December 31, 2023 |
|
Carrying amount |
Fair value |
Carrying amount |
Fair value |
Financial liabilities |
|
|
|
|
Loans and financing |
2,145,270 |
2,184,409 |
1,800,775 |
1,795,752 |
|
2,145,270 |
2,184,409 |
1,800,775 |
1,795,752 |
The Company assessed that the fair values of trade
receivables, other assets, trade payables, accounts payable to selling shareholders and other liabilities approximate their carrying amounts.
The financial instruments for which the fair value
are disclosed are based on Level 2 fair value measurement hierarchy. There has been no change in fair value hierarchy from December 31,
2023 to September 30, 2024.
The fair value of interest-bearing
loans and financing are determined by using the discounted cash flow (DCF) method using a discount rate that reflects the issuer’s
borrowing rate as of the end of the reporting period. As of September 30, 2024, it was assessed that it is probable that the targets that
trigger the contingent considerations payments recognized will be met. The fair value of the
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
contingent consideration
determined at September 30, 2024 reflects the development, among other factors and the remeasurements charge have been recognized through
profit or loss. The fair value is determined using a DCF method. The own non-performance risk at September 30, 2024 was assessed to be
insignificant.
12.4 | Financial instruments risk management objectives and policies |
The Company’s main financial liabilities
comprise loans and financing, lease liabilities, accounts payable to selling shareholders and trade payables. The main purpose of these
financial liabilities is to finance the Company’s operations. The Company’s main financial assets include trade receivables
and cash and cash equivalents.
The Company is exposed to market risk, credit risk and liquidity risk. The
Company monitors market, credit and liquidity risks in line with the objectives of capital management and counts on the support, monitoring
and oversight of the Board of Directors in decisions related to capital management and its alignment with the objectives and risks. The
Company’s policy is that no trading of derivatives for speculative purposes may be undertaken. The Board of Directors reviews and
agrees with policies for managing each of these risks, which are summarized below.
Market risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s exposure to market
risk is related to interest rate and foreign currency risk. The sensitivity analysis in the following sections relates to the position
as of September 30, 2024.
a) Interest rate risk
Interest rate risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure
to the risk of changes in market interest rates relates primarily to the Company’s cash equivalents, loans and financing and accounts
payable to selling shareholders, with floating interest rates.
Sensitivity analysis
The table below demonstrates the sensitivity to
a reasonably possible change in interest on cash equivalents, loans and financing and accounts payable to selling shareholders. With all
variables held constant, the Company’s income before income taxes is affected through the impact on floating interest rates, as
follows:
|
September 30, 2024 |
Index |
Base rate |
|
(unaudited) |
|
|
Cash equivalents |
812,435 |
CDI |
86,170 |
Loans and financing |
(1,307,892) |
CDI |
(160,149) |
Loans and financing |
(8,948) |
TJLP |
(618) |
Accounts payable to selling shareholders |
(443,957) |
CDI |
(47,281) |
Accounts payable to selling shareholders |
(122,018) |
SELIC |
(12,995) |
Net exposure |
|
|
(134,873) |
|
Increase in basis points |
|
+75 |
+150 |
Net effect on profit before tax |
(8,028) |
(16,056) |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
b) Foreign currency risk
Foreign currency risk is the risk that the fair
value or future cash flows of exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the
risk of changes in foreign exchange rates relates to cash and cash equivalents denominated in U.S. dollars in the amount of R$18,847 as
of September 30, 2024 (December 31, 2023: R$23,173).
Sensitivity analysis
The table below demonstrates the sensitivity in
the Company’s income before income taxes of a 10% change in the U.S. dollar exchange rate (R$5.4475 to U.S. dollar 1.00) as of September
30, 2024, with all other variables held constant.
|
Exposure |
+10% |
-10% |
|
|
|
|
Cash equivalents |
18,847 |
1,885 |
(1,885) |
Credit risk is the risk that
a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company
is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including cash
and cash equivalents.
Customer credit risk is managed
by the Company based on the established policy, procedures and control relating to customer credit risk management. Outstanding customer
receivables are regularly monitored. See Note 6 for additional information on the Company’s trade receivables.
Credit risk from balances
with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy.
Investments of surplus funds are made only with approved counterparties and within limits assigned to each counterparty.
The carrying amounts of its financial assets are
the Company’s maximum exposure to credit risk for the components of the statements of financial position on September 30, 2024 and
December 31, 2023.
The Company’s Management has responsibility for monitoring liquidity
risk. In order to achieve the Company’s objective, Management regularly reviews the risk and maintains appropriate reserves, including
bank credit facilities with first tier financial institutions. Management also continuously monitors projected and actual cash flows and
the combination of the maturity profiles of the financial assets and liabilities.
The main requirements for financial resources used by the Company arise
from the need to make payments for suppliers, operating expenses, labor and social obligations, loans and financing and accounts payable
to selling shareholders.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The tables below summarize the maturity profile
of the Company’s financial liabilities based on contractual undiscounted amounts:
As of September 30, 2024 (unaudited) |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
129,920 |
- |
- |
- |
129,920 |
Loans and financing |
174,112 |
1,743,650 |
629,381 |
155,400 |
2,702,543 |
Lease liabilities |
151,300 |
287,796 |
279,063 |
1,335,775 |
2,053,934 |
Accounts payable to selling shareholders |
256,598 |
134,406 |
95,925 |
349,833 |
836,762 |
|
711,930 |
2,165,852 |
1,004,369 |
1,841,008 |
5,723,159 |
|
|
|
|
|
|
As of December 31, 2023 |
Less than 1 year |
1 to 3 years |
3 to 5 years |
More than 5 years |
Total |
Trade payables |
108,222 |
- |
- |
- |
108,222 |
Loans and financing |
298,981 |
1,383,255 |
568,326 |
- |
2,250,562 |
Lease liabilities |
137,735 |
268,724 |
255,456 |
1,261,213 |
1,923,128 |
Accounts payable to selling shareholders |
387,693 |
231,478 |
- |
- |
619,171 |
|
932,631 |
1,883,457 |
823,782 |
1,261,213 |
4,901,083 |
12.5 | Changes in liabilities arising from financing activities |
|
January 1, 2024 |
Payments of principal |
Payments of interest |
Additions and remeasurements |
Interest |
Business combination |
Other |
September 30, 2024 |
|
|
|
|
|
|
|
|
(unaudited) |
Loans and financing (i) |
1,800,775 |
(126,666) |
(156,897) |
492,351 |
129,160 |
4,377 |
2,170 |
2,145,270 |
Lease liabilities (i) |
874,569 |
(30,218) |
(82,567) |
103,419 |
82,803 |
28,989 |
(2,215) |
974,780 |
Dividends payable |
- |
(13,368) |
- |
13,368 |
- |
- |
- |
- |
|
2,675,344 |
(170,252) |
(239,464) |
609,138 |
211,963 |
33,366 |
(45) |
3,120,050 |
|
January 1, 2023 |
Payments of principal |
Payments of interest |
Additions and remeasurements |
Interest |
Business combination |
Other |
September 30, 2023 |
|
|
|
|
|
|
|
|
(unaudited) |
Loans and financing (i) |
1,882,901 |
(12,216) |
(124,468) |
5,288 |
154,180 |
- |
2,614 |
1,908,299 |
Lease liabilities (i) |
769,525 |
(22,657) |
(78,001) |
64,094 |
74,867 |
65,408 |
(3,507) |
869,729 |
Dividends payable |
- |
(15,914) |
- |
15,914 |
- |
- |
- |
- |
|
2,652,426 |
(50,787) |
(202,469) |
85,296 |
229,047 |
65,408 |
(893) |
2,778,028 |
(i) Payments of principal and interest from loans and financing and lease
liabilities are included in cash flows from financing activities.
For the purposes of the Company’s capital
management, capital considers total equity. The primary objective of the Company’s capital management is to maximize shareholder
value.
In order to achieve its overall objective, the
Company’s capital management, among other things, aims to ensure that it meets financial covenants attached to the debentures and
other loans and financing, including net debt ratio to adjusted EBITDA. Breaches in meeting the financial covenants would permit the bank
to immediately call loans and financings. There have been no breaches of the financial covenants of any loans and financing in the current
period.
No changes were made in the objectives, policies
or processes for managing capital during the nine-month period ended September 30, 2024.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
14 | Labor and social obligations |
a) Variable compensation (bonuses)
The bonuses related to variable compensation
of employees and management of R$22,629 and R$14,307 are recognized in cost of services and selling, general and administrative expenses
in the statements of income for the nine-month periods ended September 30, 2024 and 2023, respectively.
b) Afya Limited share-based compensation plans
b.1) Stock options plan
The stock options plan was approved on
August 30, 2019 and granted to senior executives and other employees of the Company from that date, with subsequent changes in the strike
price, as approved, on July 29, 2020, July 8, 2022 and July 31, 2023. Such changes were assessed as modifications by the Company and were
accounted in accordance with IFRS 2.
On July 31, 2023, the People and ESG Committee approved a change in the
share-based compensation plan to retain talents and reinforce the compensation plan. All the holders of stock options granted before July
11, 2022, with strike price based on the IPO price in Brazilian Reais or above, were offered the possibility to exchange the stock options
for a number of Restricted Stock Units (RSUs), resulting in a weighted average conversion ratio of 0.12 RSUs per stock option, with conversion
ratios based on fair value of the original plan, at modification date, so that the total fair value of the modified award remained the
same as the original plan.
As result of those modifications, the expense related to the share-based
payment of the Company reflects the cost of the original award at grant date over the vesting period plus the incremental fair values
of the repriced options at modification dates over the vesting period of the stock options.
During the nine-month period ended September 30, 2024 there were no stock
options granted by the Company (September 30, 2023: 198,000 stock options granted).
The table below presents the number and movements
in stock options for the nine-month periods ended September 30, 2024 and 2023:
|
Weighted average strike price
(in Brazilian Reais) |
Number of stock options |
September 30, 2024 |
September 30, 2023 |
|
|
(unaudited) |
(unaudited) |
Outstanding at January 1 |
64.33 |
1,696,064 |
3,729,287 |
Granted |
- |
- |
198,000 |
Exercised |
61.63 |
(98,010) |
(59,826) |
Stock options exchanged to RSUs |
- |
- |
(1,751,599) |
Forfeited |
107.34 |
(25,845) |
(333,111) |
Expired |
62.15 |
(28,730) |
(244,282) |
Outstanding at September 30 |
64.99 |
1,543,479 |
1,538,469 |
Exercisable |
71.59 |
464,902 |
406,449 |
The share-based compensation expense recognized
in selling, general and administrative expenses in the statements of income for the nine-month periods ended September 30, 2024 and 2023
was R$14,572 and R$13,522, respectively.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
b.2) Restricted Stock Units (RSU) Program
On July 8, 2022, the Company approved the new Restricted
Stock Units (RSU) program for employees. The participant's right to effectively receive ownership of the restricted shares will be conditioned
on the participant's continuance as an employee or director in the business group from the grant date until vesting. The executives will
be entitled to these shares in a proportion of 10%, 20%, 30%, 40% each year.
The Company accounts for the RSU plan as an equity-settled plan, except
for the portion of labor and social securities obligations.
During the nine-month period ended September 30, 2024 there were no RSUs
granted by the Company (September 30, 2023: 177,490 RSUs granted).
The table below presents the number and movements in restricted shares for
the nine-month periods ended September 30, 2024 and 2023:
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Outstanding at January 1 |
854,431 |
447,224 |
Granted |
- |
177,490 |
Stock options exchanged to RSUs |
- |
215,797 |
Exercised |
(222,910) |
(44,725) |
Forfeited |
(15,754) |
(21,894) |
Outstanding at September 30 |
615,767 |
773,892 |
Total RSU expenses recognized in selling, general and administrative expenses
in the consolidated statement of income for the nine-month periods ended September 30, 2024 and 2023 were R$11,727 and R$6,560, respectively.
Labor and social obligations were R$7,177 and R$3,301 for the nine-month periods ended September 30, 2024 and 2023, respectively.
a) Share capital
As of September 30, 2024 and December 31, 2023,
the Company’s share capital was R$17 represented by 93,722,831 shares comprised by 49,920,068 class A common shares and 43,802,763
class B common shares as of September 30, 2024 and 47,920,068 class A common shares and 45,802,763 class B common shares as of December
31, 2023. As of September 30, 2024 and December 31, 2023, the Company’s authorized capital was US$50 thousand.
b) Dividends
In the nine-month period ended September 30, 2024, CCSI and IESVAP approved
the payment of dividends of R$58,236, which R$44,868 was distributed to the Company and R$13,368 to non-controlling shareholders (September
30, 2023: R$53,291, which R$37,377 was distributed to the Company and R$15,914 to non-controlling shareholders).
c) Share repurchase program
On March 24, 2023, the Company’s board of directors approved the fourth
share repurchase program. Afya may repurchase up to 2,000,000 of its outstanding Class A common shares in the open market, based on prevailing
market prices, beginning on March 24, 2023, until the earlier of the completion of the repurchase or December 31, 2024, depending upon
market conditions.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
The following table illustrates the number and movements in treasury shares
during the nine-month periods ended September 30, 2024 and 2023:
|
September 30, 2024 (unaudited) |
|
September 30, 2023 (unaudited) |
|
Number of shares |
Average price
(in Brazilian Reais) |
|
Number of shares |
Average price
(in Brazilian Reais) |
Outstanding at January 1 |
3,773,478 |
79.28 |
|
3,786,285 |
80.54 |
Repurchased |
- |
- |
|
216,339 |
57.17 |
Transferred under the share-based compensation plan |
(280,240) |
79.28 |
|
(92,255) |
79.28 |
Outstanding at September 30 |
3,493,238 |
79.28 |
|
3,910,369 |
79.28 |
16 | Earnings per share (EPS) |
Basic EPS is calculated by dividing net income
attributable to the equity holders of the Company by the weighted average number of common shares outstanding during the period.
Diluted EPS is calculated by dividing net income
attributable to the equity holders of the parent by the weighted average number of common shares outstanding during the period plus the
weighted average number of shares that would be issued on conversion of all potential shares with dilutive effects.
Diluted earnings per share are computed including stock options granted
to key management using the treasury shares method when the effect is dilutive. The Company has the stock option and restricted share
unit plans in the category of potentially dilutive shares.
Softbank’s series A perpetual convertible preferred shares are antidilutive
for the three and nine-month periods ended September 30, 2024 and 2023 and are not included on diluted earnings per share.
The table below presents the basic and diluted
earnings per share calculations:
|
Three-month period ended |
|
Nine-month period ended |
|
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Numerator |
|
|
|
|
|
Net income attributable to equity holders of the parent |
119,979 |
93,347 |
|
481,583 |
288,263 |
Denominator |
|
|
|
|
|
Weighted average number of outstanding shares |
90,208,018 |
89,752,636 |
|
90,083,878 |
89,831,865 |
Effects of dilution from stock options and restricted share units |
1,068,418 |
937,240 |
|
1,198,835 |
676,409 |
Weighted average number of outstanding shares adjusted for the effect of dilution |
91,276,436 |
90,689,876 |
|
91,282,713 |
90,508,274 |
|
|
|
|
|
|
Basic earnings per share (R$) |
1.33 |
1.04 |
|
5.35 |
3.21 |
Diluted earnings per share (R$) |
1.31 |
1.03 |
|
5.28 |
3.18 |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
|
Three-month period ended |
|
Nine-month period ended |
|
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Tuition fees |
1,040,956 |
890,562 |
|
3,008,529 |
2,619,698 |
Other |
72,860 |
59,045 |
|
218,633 |
186,137 |
Deductions |
|
|
|
|
|
Discount and scholarships |
(80,420) |
(63,136) |
|
(223,678) |
(175,203) |
Early payment discounts |
(51,443) |
(44,761) |
|
(151,494) |
(144,761) |
Returns |
(9,122) |
(8,173) |
|
(20,666) |
(21,444) |
Taxes |
(44,761) |
(36,301) |
|
(125,619) |
(106,857) |
PROUNI |
(86,885) |
(73,757) |
|
(250,391) |
(211,523) |
|
841,185 |
723,479 |
|
2,455,314 |
2,146,047 |
Timing of revenue recognition |
|
|
|
|
|
Tuition, digital content and app subscription fees - Transferred over time |
828,865 |
715,456 |
|
2,419,316 |
2,108,636 |
Other - Transferred at a point in time |
12,320 |
8,023 |
|
35,998 |
37,411 |
The Company’s revenue from contracts
with customers are all in Brazil. The Company is not subject to the payment of the Social Integration Program tax (Programa de Integração
Social, or PIS) and the Social Contribution on Revenue tax (Contribuição para o Financiamento da Seguridade Social,
or COFINS) on the revenue from under graduation degrees under the PROUNI program.
The tables below present the statements
of income for the Company’s operating segments for the nine-month periods ended September 30, 2024 and 2023.
|
Undergrad |
Continuing education |
Medical practice solutions |
Elimination (inter-segment transactions) |
September 30, 2024 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
2,155,895 |
187,731 |
117,290 |
(5,602) |
2,455,314 |
Tuition fees |
2,142,582 |
122,391 |
- |
- |
2,264,973 |
Other |
13,313 |
65,340 |
117,290 |
(5,602) |
190,341 |
|
|
|
|
|
|
Timing of revenue recognition |
2,155,895 |
187,731 |
117,290 |
(5,602) |
2,455,314 |
Transferred over time |
2,142,582 |
170,391 |
111,945 |
(5,602) |
2,419,316 |
Transferred at a point in time |
13,313 |
17,340 |
5,345 |
- |
35,998 |
|
Undergrad |
Continuing education |
Medical practice solutions |
Elimination (inter-segment transactions) |
September 30, 2023 |
|
|
|
|
|
(unaudited) |
Types of services or goods |
1,883,089 |
170,010 |
102,289 |
(9,341) |
2,146,047 |
Tuition fees |
1,869,963 |
107,994 |
- |
- |
1,977,957 |
Other |
13,126 |
62,016 |
102,289 |
(9,341) |
168,090 |
|
|
|
|
|
|
Timing of revenue recognition |
1,883,089 |
170,010 |
102,289 |
(9,341) |
2,146,047 |
Transferred over time |
1,869,963 |
152,114 |
95,900 |
(9,341) |
2,108,636 |
Transferred at a point in time |
13,126 |
17,896 |
6,389 |
- |
37,411 |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
18 | Costs and expenses by nature |
|
Three-month period ended |
|
Nine-month period ended |
|
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Payroll |
(301,705) |
(283,507) |
|
(855,897) |
(813,423) |
Hospital and medical agreements |
(24,404) |
(21,115) |
|
(73,158) |
(62,561) |
Depreciation and amortization |
(85,828) |
(73,908) |
|
(249,135) |
(212,172) |
Lease expenses |
(1,970) |
(3,044) |
|
(5,450) |
(7,688) |
Utilities |
(5,354) |
(4,689) |
|
(15,600) |
(14,465) |
Maintenance |
(34,747) |
(28,776) |
|
(88,752) |
(77,398) |
Share-based compensation |
(5,871) |
(6,684) |
|
(26,299) |
(20,082) |
Tax expenses |
(3,557) |
(4,543) |
|
(9,516) |
(9,435) |
Pedagogical services |
(30,243) |
(14,071) |
|
(71,820) |
(46,065) |
Sales and marketing |
(27,631) |
(15,279) |
|
(62,287) |
(44,668) |
Allowance for expected credit losses |
(11,571) |
(18,074) |
|
(41,589) |
(57,160) |
Travel expenses |
(6,935) |
(4,011) |
|
(14,188) |
(10,805) |
Consulting fees |
(9,490) |
(19,640) |
|
(33,208) |
(52,128) |
Other |
(54,804) |
(47,895) |
|
(146,483) |
(131,894) |
|
(604,110) |
(545,236) |
|
(1,693,382) |
(1,559,944) |
Cost of services |
(324,083) |
(288,234) |
|
(908,429) |
(820,136) |
Selling, general and administrative expenses |
(280,027) |
(257,002) |
|
(784,953) |
(739,808) |
|
(604,110) |
(545,236) |
|
(1,693,382) |
(1,559,944) |
|
Three-month period ended |
|
Nine-month period ended |
|
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Income from financial investments |
13,642 |
22,754 |
|
39,110 |
57,698 |
Interest received |
13,945 |
10,619 |
|
34,979 |
25,760 |
Other |
2,809 |
1,398 |
|
5,570 |
2,801 |
Finance income |
30,396 |
34,771 |
|
79,659 |
86,259 |
|
|
|
|
|
|
Interest expense |
(64,065) |
(71,945) |
|
(166,343) |
(224,349) |
Interest expense on lease liabilities |
(29,033) |
(25,834) |
|
(82,803) |
(74,867) |
Financial discounts |
(10,667) |
(8,246) |
|
(25,616) |
(22,124) |
Bank fees |
(1,136) |
(1,663) |
|
(3,693) |
(5,194) |
Taxes on financial transactions (IOF) |
(350) |
(620) |
|
(1,032) |
(2,131) |
Other |
(24,989) |
(6,998) |
|
(42,933) |
(24,907) |
Finance expenses |
(130,240) |
(115,306) |
|
(322,420) |
(353,572) |
|
|
|
|
|
|
Net finance result |
(99,844) |
(80,535) |
|
(242,761) |
(267,313) |
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
Income taxes are comprised of taxation over operations in Brazil, related
to Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL). According to Brazilian tax legislation, income taxes and
social contribution are assessed and paid by legal entity and not on a consolidated basis.
Reconciliation of income taxes expense
The table below presents
the reconciliation of income tax expense for the nine-month periods ended September 30, 2024 and 2023:
|
Three-month period ended |
|
Nine-month period ended |
|
September 30, 2024 |
September 30, 2023 |
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
|
(unaudited) |
(unaudited) |
Income before income taxes |
136,574 |
110,366 |
|
521,029 |
336,826 |
Statutory income taxes rate |
34% |
34% |
|
34% |
34% |
Income taxes at statutory rate |
(46,435) |
(37,524) |
|
(177,150) |
(114,521) |
Reconciliation adjustments: |
|
|
|
|
|
Tax effect on loss from entities not subject to taxation |
(7,633) |
(7,725) |
|
(24,543) |
(23,243) |
PROUNI - Fiscal incentive (i) |
85,872 |
72,530 |
|
279,487 |
240,211 |
Unrecognized deferred taxes |
(44,039) |
(34,314) |
|
(104,310) |
(125,555) |
Recognized deferred taxes |
(3,234) |
- |
|
(3,234) |
- |
Presumed profit income tax regime effect (ii) |
563 |
(2,017) |
|
378 |
(5,434) |
Permanent adjustments |
(917) |
(2,795) |
|
(4,182) |
(8,173) |
Other |
3,391 |
(301) |
|
7,166 |
3,419 |
Income taxes expense |
(12,432) |
(12,146) |
|
(26,388) |
(33,296) |
Effective rate |
9.1% |
11.0% |
|
5.1% |
9.9% |
(i) The Company adhered to PROUNI, established by Law
11,096 / 2005, which is a federal program that exempts companies of paying income taxes and social contribution upon compliance with certain
requirements required by said Law.
(ii) Brazilian tax law establishes that companies that
generate gross revenues of up to R$78,000 in the prior fiscal year may calculate income taxes as a percentage of gross revenue, using
the presumed profit tax regime. The effect of the presumed profit of certain subsidiaries represents the difference between the taxation
based on this method and the amount that would be due based on the statutory rate applied to the taxable profit of the subsidiaries.
Deferred income taxes
As of September 30, 2024, the Company had accumulated unrecognized deferred
income tax assets on temporary differences and tax losses in the amount of R$1,363,576 of tax-basis (December 31, 2023: R$1,211,909) which
does not have any tax planning opportunities available that could support the recognition of these temporary differences as deferred tax
assets. Accordingly, the Company did not recognize deferred tax assets over these amounts.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
21 | Legal proceedings and contingencies |
The provisions related to labor, civil and taxes proceedings whose likelihood
of loss is assessed as probable are as follows:
|
Labor |
Civil |
Taxes |
Total |
|
|
|
|
|
Balances as of January 1, 2023 |
22,484 |
24,664 |
148,706 |
195,854 |
Additions |
3,948 |
4,034 |
6,838 |
14,820 |
Reversals |
(536) |
(7,630) |
(68,592) |
(76,758) |
Business combination |
64 |
88 |
- |
152 |
Balances as of September 30, 2023 (unaudited) |
25,960 |
21,156 |
86,952 |
134,068 |
|
|
|
|
|
Balances as of January 1, 2024 |
22,721 |
21,300 |
60,340 |
104,361 |
Additions |
9,953 |
6,320 |
18,787 |
35,060 |
Reversals |
(7,800) |
(2,347) |
(21,478) |
(31,625) |
Business combination |
721 |
481 |
6,044 |
7,246 |
Balances as of September 30, 2024 (unaudited) |
25,595 |
25,754 |
63,693 |
115,042 |
The major labor proceedings to which the Company is a party were filed by
former employees or outsourced service providers seeking enforcement of labor rights allegedly not provided by us. The judicial proceedings
relates to employment bonds (judicial proceedings filed by former service providers), overtime, premiums for hazardous workplace conditions,
statutory severance, fines for severance payment delays, and compensation for workplace-related accidents.
The civil claims to which the Company is a party generally relate to consumer
claims, including those related to student complaints.
The tax claims to which the Company is party are mostly tax foreclosures
filed by Brazilian federal and municipal tax authorities.
There are other civil, labor and taxes proceedings assessed by Management
and its legal counsels as possible risk of loss, for which no provisions are recognized, as follows:
|
September 30, 2024 |
December 31, 2023 |
|
(unaudited) |
|
Labor |
26,911 |
32,683 |
Civil |
51,601 |
51,319 |
Taxes |
17,395 |
5,669 |
|
95,907 |
89,671 |
The Company has judicial deposits, related to taxes, civil and labor proceedings,
recorded in other non-current assets in the amount of R$15,741 as of September 30, 2024 (December 31, 2023: R$14,187).
Under the terms of the Share Purchase and Sale Agreements ("Agreements")
between the Company and the selling shareholders of the subsidiaries acquired, the Company assesses that the selling shareholders are
exclusively responsible for any provisions (including labor, tax and civil), which are or will be the subject of a claim by any third
party, arising from the act or fact occurred, by action or omission, prior to or on the closing dates of the acquisitions.
Considering that the provisions for legal proceedings recorded by the Company
that result from causes arising from events occurring prior to the closing dates of the acquisitions, any liability for the amounts to
be disbursed, in case of their effective materialization in loss, belongs exclusively to the selling shareholders. In this context, the
Agreements state that the Company and its subsidiaries are indemnified and therefore exempt from any liability related to said contingent
liabilities and, therefore, the provision amounts related to such contingencies are presented
in the non-current liabilities and the correspondent amount of R$80,671 (December 31, 2023: R$81,855) is presented in non-current other
assets.
Afya Limited Notes to the unaudited interim condensed consolidated financial statements Expressed in thousands of Brazilian reais, unless otherwise stated |
During the nine-month periods ended September 30, 2024 and 2023, the Company
carried out non-cash transactions which are not reflected in the statements of cash flows. The main non-cash transactions are as follows:
|
September 30, 2024 |
September 30, 2023 |
|
(unaudited) |
(unaudited) |
Additions and remeasurements of right-of-use assets and lease liabilities |
103,419 |
64,094 |
Remeasurement of earn-out of Além da Medicina, CardioPapers and Glic |
- |
2,556 |
Additions (reversals) of provision for legal proceedings with corresponding indemnification asset, net |
(1,184) |
- |
***
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