Afya Ltd [AFYA] Filings

20-F 1 afyaform20f_2022.htm 20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from to .

Commission file number: 001-38992

AFYA LIMITED
(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

The Cayman Islands
(Jurisdiction of incorporation or organization)

Alameda Oscar Niemeyer, No. 119, Room 504
Vila da Serra, Nova Lima
Minas Gerais – MG, Brazil
(Address of principal executive offices) 34006

Virgilio Deloy Capobianco Gibbon
Chief Executive Officer
Tel.: +55 (31) 3515-7550 Email: ir@afya.com.br
Alameda Oscar Niemeyer, No. 119, Room 504
Vila da Serra, Nova Lima, Minas Gerais
Brazil
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common shares, par value US$0.00005 per share	AFYA	Nasdaq Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares as of December 31, 2022 was 47,920,068 Class A common shares and 45,802,763 Class B common shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

☐

Large Accelerated Filer ☒ Accelerated Filer ☐

Non-accelerated Filer ☐ Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☐ U.S. GAAP

☒ International Financial Reporting Standards as issued by the International Accounting Standards Board

☐ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

table of contents

Page

PART I INTRODUCTION	1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	5
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	5
ITEM 3. KEY INFORMATION	5
A. Selected Financial Data	5
B. Capitalization and Indebtedness	13
C. Reasons for the Offer and Use of Proceeds	13
D. Risk Factors	14
ITEM 4. INFORMATION ON THE COMPANY	52
A. History and Development of the Company	52
B. Business Overview	57
C. Organizational Structure	103
D. Property, Plant and Equipment	104
ITEM 4A. UNRESOLVED STAFF COMMENTS	104
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	104
A. Operating Results	104
B. Liquidity and Capital Resources	117
C. Research and Development, Patents and Licenses	120
D. Trend Information	120
E. Critical Accounting Estimates	121
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	121
A. Directors and Senior Management	121
B. Compensation	125
C. Board Practices	126
D. Employees	128
E. Share Ownership	129
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	129
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	129
A. Major Shareholders	129
B. Related Party Transactions	131
C. Interests of Experts and Counsel	134
ITEM 8. FINANCIAL INFORMATION	134
A. Consolidated Statements and Other Financial Information	134
B. Significant Changes	138
ITEM 9. THE OFFER AND LISTING	139
A. Offer and Listing Details	139
B. Plan of Distribution	139
C. Markets	139
D. Selling Shareholders	139
E. Dilution	139
F. Expenses of the Issue	139
ITEM 10. ADDITIONAL INFORMATION	139
A. Share Capital	139
B. Memorandum and Articles of Association	139
C. Material Contracts	156
D. Exchange Controls	156
E. Taxation	156
F. Dividends and Paying Agents	160
G. Statement by Experts	160
H. Documents on Display	160
I. Subsidiary Information	160
J. Annual Report to Security Holders	160
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	161

Table of Contents

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	162
A. Debt Securities	162
B. Warrants and Rights	162
C. Other Securities	162
D. American Depositary Shares	162
PART II	163
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	163
A. Defaults	163
B. Arrears and delinquencies	163
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	163
A. Material modifications to instruments	163
B. Material modifications to rights	163
C. Withdrawal or substitution of assets	163
D. Change in trustees or paying agents	163
E. Use of proceeds	163
ITEM 15. CONTROLS AND PROCEDURES	163
A. Disclosure Controls and Procedures	163
B. Management’s Annual Report on Internal Control Over Financial Reporting	164
C. Attestation Report of the Registered Public Accounting Firm	164
D. Changes in Internal Control Over Financial Reporting	164
ITEM 16. RESERVED	164
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	164
ITEM 16B. CODE OF ETHICS	165
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	165
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	165
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	166
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	167
ITEM 16G. CORPORATE GOVERNANCE	167
ITEM 16H. MINE SAFETY DISCLOSURE	168
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	168
PART III	168
ITEM 17. FINANCIAL STATEMENTS	168
ITEM 18. FINANCIAL STATEMENTS	168
ITEM 19. EXHIBITS	168
Index to Financial Statements	F-1

Table of Contents

PART I
INTRODUCTION

Certain Definitions

Unless otherwise indicated or the context otherwise requires, all references in this annual report to “Afya” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Afya Limited, together with its subsidiaries; all references in this annual report to “Afya Brazil” refer to Afya Participações S.A. (formerly NRE Participações S.A.); all references in this annual report to “BR Health” refer to BR Health Participações S.A.; all references in this annual report to “Medcel” refer to Guardaya Empreendimentos e Participações S.A., or Guardaya, and its subsidiaries Medcel Editora e Eventos S.A., or Medcel, and CBB Web Serviços e Transmissões On Line S.A., or CBB Web; and all references in this annual report to “IPTAN” refer to IPTAN—Instituto de Ensino Superior Presidente Tancredo de Almeida Neves S.A., “IESVAP” refer to Instituto de Educação Superior do Vale do Parnaíba S.A., “CCSI” refer to Centro de Ciências em Saúde de Itajubá S.A., “IESP” refer to Instituto de Ensino Superior do Piauí S.A., “CIS” refer to Centro Integrado de Saúde de Teresina Ltda., “FADEP” refer to FADEP—Faculdade Educacional de Pato Branco Ltda., “FASA” refer to Instituto Educacional Santo Agostinho S.A., “ESMC” refer to ESMC Educação Superior Ltda., “IPEMED” refer to Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda., “IPEC” refer to Instituto Paraense de Educação e Cultura Ltda, “UniRedentor” refer to Sociedade Universitária Redentor S.A., “UniSL” refer to Centro Universitário São Lucas Ltda., “PEBMED” refer to PEBMED Instituição de Pesquisa Médica e Serviços Tecnológicos da Área da Saúde S.A., “FESAR” refer to Faculdade de Ensino Superior da Amazônia Reunida, “MedPhone” refer to MedPhone Tecnologia em Saúde Ltda., “FCMPB” refer to Centro Superior de Ciências da Saúde S/S Ltda., “UNIFIPMoc” refer to Sociedade Padrão de Educação Superior Ltda. and NASPP - Núcleo de Atenção à Saúde e de Práticas Profissionalizantes Ltda., collectively, “iClinic” refer to iClinic Participações S.A., iClinic Desenvolvimento de Software Ltda. and Black River Brazil Participações S.A., collectively, “Medicinae” refer to Medicinae Solutions S.A., “Medical Harbour” refer to Medical Harbour Aparelhos Médico-Hospitalares e Serviços em Tecnologia Ltda., “Cliquefarma” refer to Cliquefarma Drogarias Online Ltda., “Shosp” refer to Shosp Tecnologia da Informação Ltda., “Unigranrio” refer to Companhia Nilza Cordeiro Herdy de Eduação e Cultura, Instituto de Ensino Superior de Palhoça S/S Ltda., Sociedade Educacional de Palhoça S/S Ltda., and Policlínica e Centro de Estética Duque de Caxias Ltda., collectively, “RX PRO” refer to RX PRO Soluções de Tecnologia Ltda. and RX PRO LOG Transporte e Logistica Ltda., collectively, “Garanhuns” refer to Faculdade ITPAC Garanhuns - Instituto Tocantinense Presidente Antonio Carlos Ltda., “Além da Medicina” refer to BMV Atividades Médicas Ltda., “Cardiopapers” refer to Cardiopapers Soluções Digitais Ltda, “Glic” refer to Quasar Telemedicina Desenvolvimento de Sistemas Computacionais Ltda., “DelRey” refer to Sociedade Educacional e Cultural Sergipe DelRey Ltda., “ITPAC Araguaína” refer to ITPAC - Instituto Tocantinense Presidente Antônio Carlos S.A., and “ITPAC Porto Nacional” refer to ITPAC Porto Nacional - Instituto Tocantinense Presidente Antônio Carlos Porto S.A.

The term “Esteves Family” refers to Nicolau Carvalho Esteves, Rosângela de Oliveira Tavares Esteves, NRE Capital Ventures Ltd, Renato Tavares Esteves, Vanessa Tavares Esteves and Lílian Tavares Esteves de Carvalho, collectively, our former controlling shareholders. The term “Bertelsmann” refers to Bertelsmann SE & Co. KGaA and Erste WV Gütersloh GmbH, collectively, our currently controlling shareholder.

The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil. “Central Bank” refers to the Brazilian Central Bank (Banco Central do Brasil). References in the annual report to “real,” “reais” or “R$” refer to the Brazilian real, the official currency of Brazil and references to “U.S. dollar,” “U.S. dollars” or “US$” refer to U.S. dollars, the official currency of the United States.

Financial Information

Afya is a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies and incorporated on March 22, 2019. Afya became the holding company of Afya Brazil, formerly denominated NRE Participações S.A., through the completion of the corporate reorganization described in note 1 to our audited consolidated financial statements (as defined below) and in Item 4. Information on the Company—A. History and Development of the Company—Our Pre-IPO Corporate Reorganization.

Table of Contents

The consolidated financial information of Afya contained in this annual report is derived from our audited consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020, together with the notes thereto. All references herein to “our financial statements,” “our audited consolidated financial information,” and “our audited consolidated financial statements” are to Afya’s consolidated financial statements included elsewhere in this annual report.

Afya is a holding company, and as such, the primary source of revenue derives from its interest in its operational companies in Brazil. As a result, Afya’s functional currency as well as of its subsidiaries is the Brazilian real. We prepare our annual consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

The financial results of the companies that we acquire in any given period (such companies, the “Acquired Companies”) are included in our historical results as of the date of closing of the respective acquisition. See “Item 4. Information on the Company—B. Business Overview—Our Recent Acquisitions” for further details on entities acquired since January 1, 2020. The financial results of DelRey are not reflected in the summary consolidated historical financial data included elsewhere in this annual report as the consummation of the acquisition of such entity occurred after the year ended December 31, 2022.

Our fiscal year ends on December 31 of each year, so all references to a particular fiscal year are to the applicable year ended December 31.

Historical Undergraduate Programs Combined Tuition Fees

The term “historical undergraduate programs combined tuition fees” refers to the sum equal to the total tuition fees charged to undergraduate students, as recorded in the historical operating information of Afya Brazil and the Acquired Companies, since the consummation of their respective acquisition.

The historical undergraduate programs combined tuition fees information included elsewhere in this annual report (i) was derived from historical operating information for Afya Brazil and for each of the Acquired Companies since the consummation of their respective acquisition; (ii) is akin to gross tuition fees charged to undergraduate students; (iii) differs from the tuition fees set forth in our audited consolidated financial statements, which are presented as the sum of (a) gross tuition fees charged to undergraduate students, (b) gross tuition fees charged to graduate students and (c) scholarships; and (iv) does not represent revenue as disclosed in our audited consolidated financial statements included elsewhere in this annual report. For the years ended December 31, 2022, 2021 and 2020, historical undergraduate programs combined tuition fees charged to undergraduate students by us were R$2,241.8 million, R$1,990.1 million and R$1,236.5 million, respectively. Historical undergraduate programs combined tuition fees does not include tuition fees we charge graduate students.

Our consolidated operating history and recent acquisitions may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects. We experienced rapid and significant expansion in recent years to the effects of the acquisition of the Acquired Companies. Because the historical and operational information included elsewhere in this annual report may not be representative of our results and operations as a consolidated company, investors may have limited financial and operational information on which to evaluate us and their investment decision. See “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—Our operating history as a consolidated company, our recent acquisitions and the comparability of our results may make it difficult for investors to evaluate our business, financial condition, results of operations and prospects.”

The Company’s past performance, as reflected in the historical undergraduate programs combined tuition fees information included elsewhere in this annual report, may not be indicative of its future performance or any future anticipated synergies, future operating efficiencies or cost savings that may result from these acquisitions.

Convenience Translation

The reporting currency for our audited consolidated financial statements is the Brazilian real and, solely for the convenience of the reader, we have provided convenience translations into U.S. dollars using the selling exchange rates published by the Central Bank on its website. Unless otherwise indicated, convenience translations from reais into U.S. dollars in this annual report use the Central Bank offer exchange rate published on December 31, 2022, which was R$5.218 per US$1.00. No representation is made that the Brazilian reais amounts referred to could have been, or could be, converted into U.S. dollars at any particular rate. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for information regarding historical exchange rates of reais to U.S. dollars.

Table of Contents

Market Data

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this annual report relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, a report by a third-party consulting firm commissioned by us, public information and publications on the industry prepared by official public sources, such as the Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE, the Organisation for Economic Co-operation and Development, or OECD, the Brazilian Ministry of Education (Ministério da Educação), or MEC, the Anísio Teixeira National Institute of Educational Studies and Research (Instituto Nacional de Estudos e Pesquisas Educacionais Anísio Teixeira), or the INEP, the Institute of Applied Economic Research (Instituto de Pesquisa Econômica Aplicada), or the IPEA as well as private sources, such as Bloomberg, consulting and research companies in the Brazilian and international education industry, the Brazilian Economic Institute of Fundação Getulio Vargas (Instituto Brasileiro de Economia da Fundação Getulio Vargas), or FGV/IBRE, the Association of American Medical Colleges, or AAMC among others.

Industry publications, governmental publications and other market sources, including those referred to above, generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. While we are not aware of any misstatements regarding the market and industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section entitled “Item 3. Key Information—D. Risk Factors.” Except as disclosed in this annual report, none of the publications, reports or other published industry sources referred to in this annual report were commissioned by us or prepared at our request. Except as disclosed in this annual report, we have not sought or obtained the consent of any of these sources to include such market data in this annual report.

Rounding

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Forward-Looking Statements

This annual report on Form 20-F contains information that constitute forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act, that are not based on historical facts and are not assurances of future results. The forward-looking statements contained in this annual report, which address our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “potential” and similar expressions. We have made forward-looking statements that address, among other things, our current expectations, plans, forecasts, projections and strategies about future events and financial trends that affect, or may affect, our business, industry, market share, reputation, financial condition, results of operations, margins, cash flow and/or the market price of our common shares, all of which are subject to known and unknown risks and uncertainties. Our actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled “Item 3. Key Information—D. Risk Factors” in this annual report. These risks and uncertainties include factors relating to:

our ability to implement our business strategy;

Table of Contents

changes in government regulations and legislation applicable to the education industry in Brazil, both in the traditional and distance learning segments, including tax regulations and/or legislation;

government interventions, including changes in, or termination of, education industry programs such as the Higher Education Student Financing Fund (Fundo de Financiamento ao Estudante do Ensino Superior), or FIES, and/or the University for All Program (Programa Universidade para Todos), or PROUNI, both in the traditional and distance learning segments, that affect the economic or tax regime, the collection of tuition fees or the regulatory framework applicable to educational institutions;

changes in the financial condition of the students enrolling in our institutions in general and in the competitive conditions in the education industry, both in the traditional and distance learning segments, or changes in the financial condition of our institutions;

our ability to adapt to technological changes in the educational sector, including in relation to distance learning programs;

the availability of government authorizations on terms and conditions and within periods acceptable to us;

health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic and measures taken in response (including legal or regulatory measures or decisions mandating discounted tuition fees as a result of the COVID-19 pandemic);

our ability to continue attracting and retaining new students;

our ability to maintain the academic quality of our programs;

our ability to compete and conduct our business in the future;

the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors;

changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes;

the availability of qualified personnel and the ability to retain such personnel;

our capitalization and level of indebtedness;

the interests of our controlling shareholders;

a decline in the number of students enrolled in our programs or the amount of tuition we can charge;

changes in labor, distribution and other operating costs;

our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us;

general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business;

fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

other factors that may affect our financial condition, liquidity and results of operations;

the effectiveness of our risk management policies and procedures, including our internal control over financial reporting; and

the other factors discussed under the section “Risk Factors” in this annual report on Form 20-F.

Table of Contents

Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements. The accompanying information contained in this annual report on Form 20-F, including without limitation the information set forth under the heading “Item 5. Operating and Financial Review and Prospects,” identifies important factors that could cause such differences. In light of the risks, uncertainties and assumptions associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Additional risks that we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in this annual report on Form 20-F not to occur.

Our forward-looking statements speak only as of the date of this annual report on Form 20-F, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following table sets forth selected consolidated historical financial data of Afya as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020. The selected consolidated historical financial data as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020 has been derived from our audited consolidated financial statements, included elsewhere in this annual report. The financial results of the Acquired Companies are included in our historical results for the periods following the closing of each such transaction, respectively. See “Part I—Introduction—Financial Information.”

The selected audited consolidated historical financial data should be read in conjunction with “Part I—Introduction—Financial Information,” “Item 5. Operating and Financial Review and Prospects” and our audited consolidated financial statements, including the respective notes thereto, included elsewhere in this annual report.

The selected audited consolidated historical financial data presented in this annual report may not be indicative of future performance.

	For the Year Ended December 31,
	2022	2022	2021	2020
	(in US$ millions(1))	(in R$ millions)
Statement of Income
Revenue	446.4	2,329.1	1,719.4	1,201.2
Cost of services	(164.7)	(859.6)	(652.3)	(434.7)
Gross profit	281.7	1,469.5	1,067.1	766.5
General and administrative expenses	(153.0)	(798.2)	(622.6)	(402.9)
Other expenses, net	(1.4)	(7.3)	(3.6)	(0.3)
Operating income	127.3	664.0	440.9	363.3
Finance income	19.6	102.0	64.6	62.3
Finance expenses	(67.1)	(349.9)	(243.8)	(98.3)
Finance result	(47.5)	(247.9)	(179.2)	(36.0)
Share of income of associate	2.3	12.2	11.8	7.7
Income before income taxes	82.1	428.3	273.5	335.0
Income taxes expenses	(6.8)	(35.7)	(31.2)	(27.1)
Net income	75.3	392.6	242.3	307.9
Income attributable to:
Equity holders of the parent	71.6	373.6	223.3	292.1
Non-controlling interests	3.7	19.2	19.0	15.9

Table of Contents

	US$	R$	R$	R$
Earnings per share
Basic earnings per share
Common shares	0.79	4.14	2.39	3.15
Diluted earnings per share
Common shares	0.79	4.12	2.37	3.12

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2022 have been translated to U.S. dollars using an exchange rate of R$5.218 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2022, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.

	As of December 31,
	2022	2022	2021
	(in US$ millions(1))	(in R$ millions)
Balance Sheet Data
Assets
Current assets
Cash and cash equivalents	209.5	1,093.1	748.6
Trade receivables	86.8	452.8	378.4
Inventories	2.3	12.2	11.8
Recoverable taxes	5.3	27.8	25.6
Other assets	9.9	51.8	42.5
Total current assets	313.8	1,637.6	1,206.9
Non-current assets
Trade receivables	8.2	42.6	27.4
Other assets	36.8	191.8	180.3
Investment in associate	103.9	542.1	48.4
Property and equipment	10.3	53.9	419.8
Right-of-use assets	132.3	690.1	663.7
Intangible assets	774.5	4,041.5	3,900.9
Total non-current assets	1,066.1	5,562.0	5,240.5
Total assets	1,379.9	7,199.6	6,447.4
Liabilities
Current liabilities
Trade payables	13.7	71.5	59.1
Loans and financing	27.8	145.2	128.7
Lease liabilities	6.2	32.5	25.0
Accounts payable to selling shareholders	50.2	261.7	239.8
Notes payable	11.9	62.2	14.5
Advances from customers	25.5	133.1	114.6
Labor and social obligations	29.6	154.5	131.3
Taxes payable	5.0	26.2	26.7
Income taxes payable	3.1	16.2	11.6
Other liabilities	0.6	2.7	15.2
Total current liabilities	173.5	905.8	766.5
Non-current liabilities
Loans and financing	333.0	1,737.7	1,246.2
Lease liabilities	141.3	737.1	689.1
Accounts payable to selling shareholders	51.2	267.0	440.0
Notes payable	—	—	58.2
Taxes payable	17.8	92.9	96.6
Provision for legal proceedings	37.5	195.9	148.3
Other liabilities	2.5	13.2	2.5
Total non-current liabilities	583.3	3,043.8	2,680.9
Total liabilities	756.8	3,949.6	3,447.4
Equity
Additional paid-in capital	455.2	2,375.3	2,375.3
Share-based compensation reserve	23.7	123.5	94.1
Treasury stock	(58.4)	(304.9)	(152.6)
Earnings reserves	192.6	1,004.9	631.3
Equity attributable to equity holders of the parent	613.1	3,198.8	2,948.1
Non-controlling interests	9.8	51.3	51.9
Total equity	622.9	3,250.1	3,000.0
Total liabilities and equity	1,379.7	7,199.7	6,447.4

(1)

For convenience purposes only, amounts in reais as of December 31, 2022 have been translated to U.S. dollars using an exchange rate of R$5.218 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2022, as reported by the Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.

Table of Contents

Non-GAAP Financial Measures

This annual report presents our Adjusted EBITDA and Operating Cash Conversion Ratio information for the convenience of investors, which are non-GAAP financial measures. A non-GAAP financial measure is generally defined as one that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. Although Adjusted EBITDA and Operating Cash Conversion Ratio are used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for the IFRS measures of earnings. Additionally, our calculations of Adjusted EBITDA and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

We present Adjusted EBITDA because we believe this measure provides investors with a supplemental measure of the financial performance of our core operations that facilitates period-to-period comparisons on a consistent basis. We calculate our Adjusted EBITDA as net income plus/minus finance result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, minus income share associate, plus share-based compensation expense plus/minus non-recurring expenses.

We also present Operating Cash Conversion Ratio because we believe this measure provides investors with a measure of how efficiently we convert our EBITDA into cash. We calculate our Operating Cash Conversion Ratio as the cash flows from operations plus/minus income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.

The following tables set forth the Adjusted EBITDA reconciliation to our net income and the Operating Cash Conversion Ratio reconciliation to our cash flow from operations for the years ended December 31, 2022, 2021 and 2020, in each case, our most recent directly comparable financial measures calculated and presented in accordance with IFRS.

Table of Contents

Reconciliation between Net Income and Adjusted EBITDA

	For the Year Ended December 31,
	2022	2022	2021	2020
	(in US$ millions(1))	(in R$ millions)
Net income	75.3	392.6	242.3	308.0
Finance result	47.5	247.9	179.2	36.0
Income taxes expense	6.8	35.7	31.2	27.1
Depreciation and amortization	39.5	206.2	154.2	108.7
Interest received(2)	5.2	27.2	23.0	11.9
Income share associate	(2.3)	(12.2)	(11.8)	(7.7)
Share-based compensation expense	6.0	31.3	43.4	32.6
Non-recurring expenses(3):
Integration of new companies(4)	4.7	24.8	18.9	9.8
M&A advisory and due diligence(5)	0.5	2.5	13.5	6.2
Expansion projects(6)	0.7	3.4	10.2	18.1
Restructuring expenses(7)	2.4	12.3	17.4	5.9
Mandatory discounts in tuition fees(8)	(1.9)	(9.9)	33.4	6.5
Adjusted EBITDA	184.4	962.1	754.9	563.1

(1)

(2)

Consists of interest received on late payments of monthly tuition fees.

(3)

We believe these adjustments are appropriate to provide additional information to investors about certain material non-cash or non-recurring items that we do not expect to continue at the same level in the future.

(4)

Consists of expenses related to the integration of recently acquired companies, such as expenses with personnel and third party consulting firms.

(5)

Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.

(6)

Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.

(7)

Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.

(8)

Consists of mandatory discounts in tuition fees granted by state decrees and individual/collective legal proceedings and public civil proceedings due to COVID 19 on-site class restriction, and excludes any recovery of these discounts that were invoiced based on the decision by the Brazilian Federal Supreme Court (Supremo Tribunal Federal), or the Brazilian Supreme Court, with respect to this matter.

Reconciliation between Cash Flow from Operations and Operating Cash Conversion Ratio

	For the Year Ended December 31,
	2022	2022	2021	2020
	(in US$ millions(1))	(in R$ millions)
	(except percentages)
Net cash flows from operating activities	161.7	843.9	630.8	371.5
Income taxes paid	6.3	33.1	35.7	19.4
Net cash flows from operating activities, before income taxes paid	168.1	877.0	666.5	390.9
Adjusted EBITDA	184.4	962.1	754.9	563.1
Integration of new companies(2)	4.7	24.8	18.9	9.8
M&A advisory and due diligence(3)	0.5	2.5	13.5	6.2
Expansion projects(4)	0.7	3.4	10.2	18.1
Restructuring expenses(5)	2.4	12.4	17.4	5.9
Mandatory discounts in tuition fees(6)	(1.9)	(9.9)	33.4	6.5
Adjusted EBITDA ex. non-recurring expenses	178.0	928.8	661.4	516.6
Operating Cash Conversion Ratio(7)	94.4%	94.4%	100.8%	75.7%

(1)

(2)

Consists of expenses related to the integration of recently acquired companies, such as expenses with personnel and third-party consulting firms.

(3)

Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.

(4)

Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.

(5)

Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.

(6)

(7)

We calculate Operating Cash Conversion Ratio as the cash flows from operations plus/minus income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.

Table of Contents

Operating Data (Historical)

Key Revenue Drivers – Undergrad Segment

	As of and For the Year Ended December 31,
	2022	2021	2020
UNDERGRAD SEGMENT
*Medical School*
Approved Seats(1)	2,823	2,731	2,143
Operating Seats(1)	2,773	2,481	1,893
Total Students (end of period)	17,968	16,017	11,030
Average Total Students	17,761	14,492	9,413
Average Total Students (ex-Acquisitions)(2)	15,883	10,872	9,413
Tuition Fees (Total) (in R$ thousands)	2,032,888	1,511,442	910,966
Tuition Fees (ex-Acquisitions) (in R$ thousands)(2)	1,791,590	1,123,944	910,966
Medical School Gross Avg. Ticket (ex-Acquisitions)(R$/month)(2)(3)	9,400	8,615	8,065
Medical School Net Avg. Ticket (ex-Acquisitions)(R$/month)(2)(4)	7,896	6,433	N/A

*Undergraduate Health Science*
Total Students (end of period)	17,967	19,882	10,325
Average Total Students	19,441	15,918	10,733
Average Total Students (ex-Acquisitions)(2)	15,293	11,173	10,733
Tuition Fees (Total) (in R$ thousands)	336,238	239,512	152,539
Tuition Fees (ex-Acquisitions) (in R$ thousands)(2)	249,550	148,381	152,539

*Other Undergraduate*
Total Students (end of period)	22,265	25,219	14,851
Average Total Students	23,376	20,198	14,087
Average Total Students (ex-Acquisitions)(2)	16,209	10,734	14,087
Tuition Fees (Total)(in R$ thousands)	266,306	239,235	172,961
Tuition Fees (ex-Acquisitions)(in R$ thousands)(2)	200,690	147,239	172,961

*Total Tuition Fees*
Tuition Fees (Total)(in R$ thousands)	2,635,432	1,990,189	1,236,466
Tuition Fees (ex-Acquisitions)(in R$ thousands)(2)	2,241,830	1,419,574	1,236,466

*Revenue*
Revenue (Total)(in R$ thousands)	2,037,889	1,498,408	1,002,461
Revenue (ex-Acquisitions)(in R$ thousands)(2)	1,777,484	1,136,404	1,002,461

(1)

Approved Seats and Operating Seats do not include the acquisition of UNIT Alagoas and FITS Jaboatão dos Guararapes, which closed on January 2, 2023.

(2)

Ex-Acquisitions” figures accounts for revenue received by our acquired companies in a given period only after the date of their acquisition, i.e. for a period of less than 12 months, and excludes any revenue prior to such date. For the year ended December 31, 2022, “ex-Acquisitions” excludes: UNIFIPMoc and FIPGuanambi (from January to May 2022; closing of the UNIFIPMoc and FIPGuanambi acquisitions was in June 2021); Unigranrio (from January to July 2022; closing of the Unigranrio acquisition was in August 2021); and Garanhuns (from January to October 2022; closing of the Garanhuns acquisition was in November 2021). For the year ended December 31, 2021, “ex-Acquisitions” excludes: UniRedentor (for January 2021; closing of the UniRedentor acquisition was on January 31, 2020); UniSL (from January to April 2021; closing of the UniSL acquisition was in May 2020); FCMPB (from January to October 2021; closing of the FCMPB acquisition was in November 2020); FESAR (from January to October 2021; closing of the FESAR acquisition was in November 2020); UNIFIPMoc and FIPGuanambi (from June to December 2021; closing of the UNIFIPMoc and FIPGuanambi acquisitions was in June 2021); Unigranrio (from August to December 2021; closing of the Unigranrio acquisition was in August 2021); and Garanhuns (from November to December 2021; closing of the Garanhuns acquisition was in November 2021).

(3)

Medical School Gross Avg. Ticket (ex-Acquisitions) is calculated as Tuition Fees (ex-Acquisitions) divided by the Average Total Students (ex-Acquisitions), divided by the number of months in the period.

(4)

Medical School Net Average Ticket (ex-Acquisitions) disclosure is presented beginning with the year ended December 31, 2021 (and future periods), as information for calculation of this metric is not available for prior periods.

Table of Contents

Key Revenue Drivers – Continuing Education Segment

	As of and For the Year Ended December 31,
	2022	2021	2020
CONTINUING EDUCATION SEGMENT
*Medical Specialization & Others*
Total Students (end of period)	4,280	3,189	4,181
Average Total Students	3,835	3,252	4,266
Average Total Students (ex-Acquisitions)	3,835	3,064	4,266
Revenue (Total)(in R$ thousands)	108,806	72,983	107,196
Revenue (ex-Acquisitions)(in R$ thousands)(1)	108,806	70,822	107,196

(1)

For the year ended December 31, 2021, “ex-Acquisitions” excludes UniRedentor (for January 2021; closing of the UniRedentor acquisition was on January 31, 2020).

Table of Contents

Key Revenue Drivers – Digital Services Segment

	As of and For the Year Ended December 31,
	2022	2021	2020
DIGITAL SERVICES SEGMENT
*Content & Technology for Medical Education*
Medcel Active Payers
Prep Courses & CME - B2P	14,569	17,171	11,316
Prep Courses & CME - B2B	5,887	4,460	1,723
Além da Medicina Active Payers	6,081	—	—
Cardio Papers Active Payers	5,034	—	—
Medical Harbour Active Payers	7,668	—	—

*Clinical Decision Software*
Whitebook Active Payers	137,767	125,372	106,977