Afya Limited’s Q1 2025 Results Signal Resilience and Strategic Momentum in Medical Education

Afya Limited, a leading provider of medical and health science education in Brazil, delivered robust financial and operational results for the first quarter of 2025, reinforcing its position as a growth-oriented player in a dynamic sector. With net revenue up 16.4% year-over-year to R$936.4 million and adjusted EBITDA margins expanding to a record 52.5%, the company demonstrated strong execution across its three-pillar strategy: growth, profitability, and cash generation.

Financial Strength Anchors Expansion

The quarter’s standout performance was driven by both organic growth and strategic acquisitions. Excluding acquisitions, revenue rose 10.9% to R$891.5 million, while adjusted EBITDA surged 23.7% to R$492.0 million. The Adjusted EBITDA margin expansion of 300 basis points underscores Afya’s ability to scale efficiently, a critical advantage in an industry often constrained by operational complexity.

The company’s cash position also strengthened, reaching R$1,154.9 million—a 26.8% increase from year-end 2024—providing ample liquidity to pursue acquisitions and organic initiatives. Net income climbed 23.4% to R$257.0 million, while operating cash flow rose 9.6% to R$470.2 million, reflecting disciplined capital allocation.

Operational Gains and Ecosystem Synergies

Afya’s ecosystem of undergraduate medical programs, continuing education, and medical practice solutions continues to expand its user base. Key metrics include:
- Undergraduate Medical Students: 25,879 enrolled, up 14.5% YoY, with approved seats increasing 12.2% to 3,593.
- Medical Practice Solutions (MPS): Monthly active users hit 244,518, driven by Clinical Management tools, which saw a 9.8% YoY rise.
- Continuing Education: Graduate Journey enrollments grew 16% despite a 16.9% dip in Residency Journey enrollments, signaling a shift toward higher-margin, post-graduate programs.

The acquisition of Unidom in 2023 proved transformative, with its Salvador campus achieving 100% occupancy within two years—a stark contrast to its previous sub-60% occupancy. This success laid the groundwork for Afya’s May 2025 acquisition of Funic, which added 60 medical seats in Belo Horizonte. Funic’s pre-operational status (launching late 2025) and the potential for contingent payments tied to regulatory approvals highlight Afya’s disciplined approach to scaling capacity.

ESG Leadership and Regulatory Challenges

Afya’s ESG initiatives garnered significant recognition this quarter. Moody’s upgraded its credit rating to AAA.br (stable), citing financial discipline and sector leadership. The company also achieved an MSCI ESG Rating of BBB, driven by data privacy advancements and its social impact metrics, including 212,549 free clinical consultations provided (a 43.3% YoY increase).

However, the quarter also highlighted regulatory headwinds. The OECD’s Pillar Two tax law added R$23.2 million to income expenses in Q1. Afya is challenging the tax on constitutional grounds, a move that could either alleviate future costs or prolong uncertainty.

Outlook: Sustained Growth and Valuation Catalysts

Afya reaffirmed its 2025 guidance:
- Net Revenue: R$3.67–3.77 billion
- Adjusted EBITDA: R$1.62–1.72 billion
- CAPEX: R$250–290 million

With its EV/EBITDA multiple expected to reach 3.3x by 2030, Funic’s integration and the broader ecosystem expansion—linking education, certification, and clinical tools—position Afya to capitalize on Brazil’s growing healthcare needs. The company’s focus on medical ecosystem scalability, bolstered by its AAA.br rating and ESG progress, reinforces its appeal to investors prioritizing long-term resilience.

Conclusion: A Case for Sustained Outperformance

Afya Limited’s Q1 results underscore its ability to navigate both growth and regulation with discipline. Key drivers include:
1. Margin Expansion: A 52.5% adjusted EBITDA margin reflects operational excellence.
2. Acquisition Synergies: Unidom’s success and Funic’s potential illustrate effective M&A strategy.
3. ESG Credibility: Moody’s AAA.br rating and MSCI’s BBB score signal institutional trust.

While the OECD tax poses a near-term hurdle, Afya’s cash reserves and legal arguments provide a buffer. With user growth across its ecosystem and a focus on lifelong healthcare education, the company is well-positioned to deliver on its 2025 targets. For investors, Afya’s blend of scalability, profitability, and ESG integration makes it a compelling play on Brazil’s evolving healthcare landscape—a sector where demand for skilled professionals is projected to grow at 6–8% annually through 2030. This quarter’s results are more than a snapshot of performance; they are a blueprint for sustained leadership.