20-F: Afya Limited Reports Strong 2025 Growth, Strategic Acquisitions

Afya Limited announced robust financial results for 2025, driven by significant revenue and net income growth, strategic acquisitions, and the maturation of its medical school seats.

Summary

• Revenue for the year ended December 31, 2025, increased by 11.9% to R$3,697.3 million, up from R$3,304.3 million in 2024.
• Net income for 2025 grew by 18.4% to R$768.4 million, compared to R$648.9 million in 2024.
• Operating income for 2025 increased by 19.9% to R$1,213.1 million, from R$1,012.1 million in 2024.
• Total student enrollment reached 86,025 in 2025, an 11.7% increase from 76,988 students in 2024.
• The company's medical school regulatory capacity expanded to 3,755 seats in 2025, with an estimated total capacity at maturation of 27,036 medical school enrollments by 2031.
• Afya Participações S.A. (Afya Brazil) acquired 100% of Faculdade Masterclass Ltda. (FUNIC) on May 7, 2025, adding 60 medical school seats.
• Afya Brazil also acquired Unidom Participações S.A. (Unidom) on July 1, 2024, contributing 300 medical school seats, of which 125 are final and 175 are subject to court proceedings.
• The company repurchased all outstanding Series A perpetual convertible preferred shares from SoftBank for R$831.6 million on November 3, 2025, and subsequently cancelled them.
• Afya Brazil entered into a sustainability-linked loan agreement with the International Finance Corporation (IFC) for R$500.0 million on August 7, 2024, with potential interest rate reductions tied to social targets.
• On October 15, 2025, Afya Brazil issued R$1,500.0 million in commercial notes across two series, maturing in October 2028 and October 2030, to manage liabilities and debt profile.
• The board of directors approved a dividend distribution of R$307.4 million on March 12, 2026, representing 40% of the consolidated net income for 2025.
• The MEC formally cancelled the public call relating to the Mais Médicos III program on February 10, 2026, which had provided for up to approximately 5,700 new undergraduate seats.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant financial growth and strategic expansion. While regulatory changes and tax impacts introduce some headwinds, the company's core business remains robust and well-positioned in a high-demand market.

Positives

• Revenue increased by 11.9% to R$3,697.3 million in 2025, demonstrating strong top-line growth.
• Net income grew by 18.4% to R$768.4 million in 2025, indicating improved profitability.
• Operating income increased by 19.9% to R$1,213.1 million in 2025, reflecting operational efficiency.
• Net cash flows from operating activities were R$1,531.6 million in 2025, an increase of 6.9% from 2024, highlighting strong cash generation.
• The Operating Cash Conversion Ratio was 93.7% in 2025, indicating efficient conversion of operating results into cash.
• Total student enrollment increased by 11.7% to 86,025 in 2025, showing continued demand for educational programs.
• Medical school occupancy rates remained at approximately 100% as of December 31, 2025, underscoring high demand and effective capacity utilization.
• The acquisition of FUNIC added 60 medical school seats, and Unidom contributed 300 seats, expanding the company's medical education footprint.
• The IFC sustainability-linked loan provides R$500.0 million in financing, with potential interest rate reductions for achieving social targets, aligning financial strategy with ESG goals.
• The company declared a dividend distribution of R$307.4 million, representing 40% of 2025 consolidated net income, signaling confidence in financial health and commitment to shareholder returns.
• The company successfully repurchased and cancelled all outstanding Series A perpetual convertible preferred shares from SoftBank, simplifying its capital structure.

Negatives

• Current income taxes expenses significantly increased to R$133.3 million in 2025 from R$24.2 million in 2024, primarily due to the implementation of the OECD's Pillar Two global minimum tax in Brazil.
• Gross profit in the Medical Practice Solutions segment decreased by 2.7% to R$116.6 million in 2025, from R$119.9 million in 2024.
• The MEC formally cancelled the public call relating to the Mais Médicos III program on February 10, 2026, potentially limiting near-term organic expansion opportunities for new medical school seats.
• The company faces increased competitive pressure due to MEC Notice No. 15/2025, which allows hospitals and community-based institutions to open medical degree programs under more flexible criteria, potentially creating competitive disparities.
• Integration of Medical Harbour's ERP system is ongoing, posing potential operational challenges and risks.
• The company is party to approximately 10,672 civil proceedings, 397 labor proceedings, and 149 tax and social security proceedings, with R$128.2 million in provisions for probable losses, indicating ongoing legal risks.

Risks

• Significant competition in educational services, potentially leading to market share loss and reduced profitability.
• Changes to FIES rules, judicial interpretations, administrative decisions, or delays/suspension of tuition payments may adversely affect cash flows and business.
• Loss of federal tax exemptions under the PROUNI program could materially adversely affect financial condition and results of operations.
• Increase in delays and/or defaults in tuition fees or license subscription fees may adversely affect income and cash flows.
• Challenges in identifying and acquiring new medical higher education institutions, and difficulties in effectively integrating acquisitions, could hinder strategic and financial goals.
• Need for additional funds to continue expansion strategy, with potential for unfavorable financing terms or dilution of shareholder interests.
• High concentration of revenues in medical course tuition fees, making the company vulnerable to adverse economic, market, or regulatory factors affecting these courses.
• Inability to update, improve, or offer educational content and digital products in a timely or cost-effective manner, especially in response to rapid technological changes like artificial intelligence.
• Adverse changes in government investment strategy in education could heighten competition from public institutions.
• Liability for extraordinary events at campuses, including accidents, negligence, or non-compliance with health and safety standards, potentially harming reputation and financial results.
• Risk of suppliers engaging in improper practices, including inappropriate labor practices, leading to liability and reputational damage.
• Exposure to anti-corruption, anti-bribery, and anti-money laundering laws and regulations, with potential for criminal liability, fines, and reputational harm.
• Subject to the Economic Substance Regime in the Cayman Islands, which may create additional costs or affect management.
• Environmental laws and regulations may become more stringent, increasing compliance obligations and capital expenditures.
• Supervision by MEC and potential sanctions for non-compliance with regulatory requirements, including unsatisfactory evaluation ratings.
• Restrictions and penalties under the Brazilian Consumer Protection Code.
• Failure to obtain or maintain licenses and permits for real estate or construction projects in a timely manner, potentially resulting in penalties or campus closures.
• Inability to effectively manage operational expansion, increased platform complexity, or talent needs due to rapid growth.
• Dependence on dividend distributions from subsidiaries due to holding company structure, with potential adverse effects from subsidiary performance or changes in dividend taxation.
• Failure to protect or enforce intellectual property and other proprietary rights could adversely affect business and financial condition.
• Exposure to occupational health and safety and accident risks in operations and projects.
• Inability to pass on increases in costs and expenses to students, users, and customers through tuition or pricing adjustments.
• Climate change creating transition and physical risks that could adversely affect operations and financial performance.
• Interests of the management team potentially focusing on short-term market price, which may not align with long-term shareholder interests.
• Inability to maintain or renew existing leases for properties.
• Disruption or volatility in global financial and credit markets could adversely affect the Brazilian economy and the company's business.
• Economic uncertainty and political instability in Brazil may harm business and share price.
• High levels of inflation in Brazil could harm business and share price.
• Exchange rate instability may have adverse effects on the Brazilian economy and the company.
• Infrastructure and workforce deficiency in Brazil may impact economic growth.
• Developments and perceptions of risks in other countries, including other emerging markets, the United States, and Europe, may harm the Brazilian economy.
• Further downgrading of Brazil's credit rating could reduce the trading price of Class A common shares.
• An active trading market for Class A common shares may not be sustainable.
• Concentration of ownership and voting power in Bertelsmann limits the ability of other shareholders to influence corporate matters.
• Class A common shares eligible for future sale may cause the market price to drop significantly.
• Anti-takeover provisions in Articles of Association may discourage third-party acquisitions.
• Inaccurate or unfavorable research by securities or industry analysts could cause share price and trading volume to decline.
• No assurance of continued dividend declarations.
• Dual-class equity structure means shares will not be included in certain indices, potentially affecting share price.
• Difficulties in protecting shareholder interests as a Cayman Islands exempted company.
• United States civil liabilities and certain judgments obtained against the company by shareholders may not be enforceable.
• Judgments of Brazilian courts to enforce obligations with respect to Class A common shares may be payable only in reais.
• Class A common shares may not be a suitable investment for all investors, presenting risks and possibility of financial losses.
• Risk of being a Passive Foreign Investment Company (PFIC) for any taxable year, which could subject United States investors to significant adverse U.S. federal income tax consequences.

Future Outlook

The company anticipates continued growth through the maturation of its existing medical school seats, expansion of medical residency and graduate programs, and increased cross-selling opportunities across its lifelong medical learner base. It plans to enhance B2B capabilities, expand distribution channels, and leverage infrastructure for synergies from acquisitions. Afya will continue to selectively pursue M&A opportunities and explore new markets, including continuing medical education and international expansion. The company has budgeted R$360.8 million for capital expenditures in 2026 to support business growth and operations.

Management Comments

• Virgilio Deloy Capobianco Gibbon, CEO, was honored by the United Nations as an Impact Leader for the Sustainable Development Goals (SDGs) and named the Best Executive in the Education Sector in Brazil by Valor 1000 in 2023.
• Lélio de Souza Junior, Vice President of Medical Practice Solutions, has extensive experience in leading technology and information security departments in large companies.
• Luis André Blanco, Chief Financial Officer, has over 16 years of experience as CFO, overseeing corporate finance, M&A, tax, and accounting operations.

Industry Context

StockSavvy.ai notes that Afya operates in a Brazilian education market characterized by high demand for medical courses, low medical density compared to OECD averages (2.98 doctors per 1,000 inhabitants in Brazil vs. 3.4 OECD average in 2018), an aging population driving healthcare demand, and compelling financial rewards for medical professionals (92% employability, significantly higher salaries). The regulatory environment, particularly the Mais Médicos program, significantly influences market dynamics and expansion opportunities. The cancellation of Mais Médicos III could intensify M&A competition for existing medical schools or approved seats, potentially influencing asset valuations and market saturation. The introduction of more flexible criteria for hospital and community-based institutions to open medical programs (MEC Notice No. 15/2025) may create competitive disparities.

Comparison to Industry Standards

• Afya's average General Course Index (IGC) of 2.60 in 2023 is in line with the Brazilian average of 2.62, indicating satisfactory academic quality.
• Brazil's medical density of 2.98 doctors per 1,000 inhabitants in 2023 is considerably below the OECD average of 3.4 in 2018, highlighting a significant and persistent shortage of medical professionals and strong underlying demand for medical education.
• The reported employability rate of approximately 92% for medical school graduates in Brazil, based on Instituto Semesp 2024 data, suggests a robust job market for Afya's graduates, exceeding typical rates in many other professions.
• Salaries for medical school graduates are on average more than three times higher than those from other fields like engineering, nursing, and law, indicating compelling financial incentives for pursuing a medical career in Brazil.

Management Changes

Corporate Governance

Legal Proceedings

• Provisions for probable losses from legal proceedings totaled R$128.2 million as of December 31, 2025.
• The company is party to approximately 10,672 civil proceedings, with a possible risk of loss of R$59.1 million as of December 31, 2025.
• Approximately 397 labor proceedings are ongoing, with a possible risk of loss of R$36.8 million as of December 31, 2025.
• 149 tax and social security proceedings are pending, with a possible risk of loss of R$30.5 million as of December 31, 2025.
• A civil suit against ITPAC Porto, alleging unconstitutionality of a municipal law and seeking damages, has an estimated possible claim of R$27.9 million.
• Public civil proceedings against the Garanhuns Greenfield unit regarding irregular MEC status resulted in a judicial suspension, with one proceeding awaiting appeal.
• A public proceeding against Centro de Ensino São Lucas concerning alleged non-granting of scholarships was dismissed by the court, with the likelihood of loss considered remote.
• A writ of mandamus was filed on March 28, 2025, challenging the enforceability of Brazil's newly enacted additional CSLL (Pillar Two global minimum tax), with no favorable preliminary relief granted to date.

Related Party Transactions

• Lease agreements with RVL Esteves Gestão Imobiliária S.A. (controlled by Nicolau Carvalho Esteves), including campuses leased to ITPAC Araguaína, ITPAC Porto, IPTAN, ITPAC Garanhuns, and DelRey, with lease liabilities totaling R$83.99 million, R$65.33 million, R$15.96 million, R$26.33 million, and R$10.91 million respectively as of December 31, 2025.
• Lease agreement with UNIVAO Patrimonial Ltda. (controlled by Nicolau Carvalho Esteves) for UNIVAO's campus, with lease liabilities of R$22.80 million as of December 31, 2025.
• Lease agreement with IESVAP Patrimonial Ltda. (controlled by Nicolau Carvalho Esteves) for IESVAP's campus, with lease liabilities of R$35.48 million as of December 31, 2025.
• Expenses incurred with EMIVE Patrulha 24 Horas Ltda. (significant shareholder influence) for security services, totaling R$7 thousand in 2025.
• Revenue generated from the sale of educational content to UEPC (Afya Brazil has a 30% minority interest), totaling R$0.5 million in 2025.

Stakeholder Impact

• Shareholders: Potential for increased returns through dividends (R$307.4 million declared) and share repurchase programs, but also dilution risk from future equity issuances and concentrated voting power with controlling shareholders.
• Students: Continued access to expanding medical education programs and digital solutions, but potential impact from regulatory changes (Mais Médicos III cancellation, MEC Notice No. 15/2025) affecting seat availability and competitive landscape. Quality of education is a key focus, with NPS scores showing improvement in some segments.
• Employees: Share-based compensation plans (stock options, RSUs) provide incentives, but organizational restructuring in acquired companies may lead to redundancies. Emphasis on diversity, equity, and inclusion (DEI) initiatives aims to foster a positive work environment.
• Customers (physicians/healthcare professionals): Expansion of Medical Practice Solutions offers enhanced clinical decision support and management tools, but potential for increased competition in digital health solutions.
• Communities: Instituto Afya partnership aims to promote solutions to chronic non-communicable conditions and expand access to healthcare, with a pledge to deliver an additional five million free healthcare consultations by 2030. Local hiring and community development are encouraged.
• Creditors: The company's financial health and ability to meet debt obligations are supported by strong operating cash flows and active liquidity management, including new commercial notes and an IFC sustainability-linked loan. Financial covenants are in place to protect creditors' interests.

Next Steps

• Continue to mature current authorized medical school seats, with an estimated total medical student base of 27,130 by 2031.
• Expand medical residency preparation enrollments, leveraging academic outcomes and digital platforms.
• Expand graduate programs enrollments, developing business-to-business strategies and increasing marketing/sales efforts.
• Deepen relationships across the lifelong medical learner base through cross-selling opportunities.
• Expand B2B capabilities by increasing partners and student enrollments.
• Expand distribution channels by increasing presence in direct and third-party channels, and through partnerships for continuing medical education.
• Leverage infrastructure and extract synergies from acquisitions, including streamlining fee discounts, integrating operations, and aligning faculty training.
• Continue to selectively pursue M&A opportunities, focusing on expanding medical school footprint and complementing existing services.
• Enter new markets, with a future focus on expanding into continuing medical education and potentially international markets.
• Develop new products, including new medical web-series seasons, corporate medical training, extension health programs, tutoring suites, peer-to-peer suites, and virtual reality products.
• Address the enforceability challenge of the additional CSLL from Pillar Two global minimum tax through judicial measures and engagement with legislative bodies.

Key Dates

Recommendation

Afya Limited demonstrates robust financial performance with significant revenue and net income growth, driven by strategic acquisitions and the maturation of its medical school seats. The company's end-to-end physician-centric ecosystem and high occupancy rates indicate a strong market position in Brazil's undersupplied medical education sector. While regulatory changes like the Mais Médicos III cancellation and new tax regimes introduce some uncertainty and potential costs, Afya's proactive M&A strategy, operational efficiencies, and commitment to ESG initiatives position it for continued long-term growth. The recent dividend declaration also signals confidence in future profitability, making it an attractive investment for long-term growth-oriented investors.

Keywords

Medical Education, Brazil, Higher Education, Digital Health, Acquisitions, Financial Performance, SEC Filing, 20-F, Afya Limited, IFC Loan, Commercial Notes, Mais Médicos, PROUNI, ESG, Share Repurchase, Dividends, Pillar Two Tax, Student Enrollment, EBITDA, Net Income, Operating Cash Flow, Cayman Islands, Nasdaq