Afya Ltd Annual Report - How They Did This Year

I’ve put together this guide to help you understand Afya Ltd’s performance. Instead of digging through dense financial filings, we’ll break down the business so you can decide if it’s a company you want to watch.

1. What does this company do?

Afya is a "one-stop shop" for doctors in Brazil. They operate in two areas: Education (medical degrees and training) and Digital Services (clinical software and medical content). Think of it as a career-long subscription. They train students in school, help them pass residency exams, and provide the software doctors use in their daily practice. With over 560,000 potential physician customers in Brazil, Afya captures value at every stage of a doctor's career.

2. Financial Performance & Growth

Afya is in a strong growth phase. By the end of 2025, they had 86,025 enrolled students, up 11.7% from 2024. Their core business is stable, with 95.7% of revenue coming from tuition fees, totaling R$3.58 billion in 2025.

They are successfully raising prices; the average monthly tuition rose to R$9,060, a 2.8% increase. Their "bad debt"—money they are owed but might not collect—dropped to 1.5% in 2025, down from 1.8%. This shows they are getting better at collecting payments.

The company generates significant cash. They brought in R$1.53 billion from operations in 2025, up from R$1.43 billion in 2024. They also track the "Lifetime Value" of a student—the total profit they expect from one person over their time with Afya—which grew to R$488,020. Their operating profit (Adjusted EBITDA) reached R$1.34 billion, a 37.4% margin.

3. Major Wins and Strategy

Afya is Brazil’s largest medical education provider, with 62 campuses. Because government rules make opening new schools difficult, they grow by buying existing ones. For example, they recently bought FUNIC for R$240 million, adding 240 medical seats.

• The Buying Strategy: They follow a strict four-stage process to integrate new schools within 12 months. This keeps costs low and helps them boost profit margins by 5-10% within two years.
• Quality Control: Student satisfaction is a mixed bag. While satisfaction among senior students is rising, it dipped slightly for first-year students due to the shift toward digital-hybrid learning.

4. Financial Health and Risks

• The "Control" Issue: Afya uses a "dual-class" share structure. The controlling shareholder, Bertelsmann, holds shares with more voting power than yours. They make the decisions, meaning you have little influence over board appointments or strategy.
• Regulatory Hurdles: The government cancelled a program that would have allowed Afya to open more seats. This forces them to buy schools, which is more expensive. Additionally, government programs like "Mais Médicos" pressure tuition prices and student quotas.
• Legal & Tax Risks: Because they are based in the Cayman Islands, it is difficult for U.S. investors to sue them or inspect records. They also face tax disputes regarding certain revenues, with a potential liability of R$180 million.

5. Competitive Positioning

Afya is building a "sticky" ecosystem. By embedding AI into their clinical software, they make themselves essential to a doctor's daily work. They have over 300,000 users, creating a "network effect" where the more tools they offer, the harder it is for a doctor to leave. Their digital segment now accounts for 15% of revenue and is growing quickly, helping them rely less on tuition alone.

6. Future Outlook

Because medical school is a six-year cycle, Afya already knows how many students they will have through 2031. They believe their ecosystem is too difficult for competitors to copy. Management plans to pay down debt, aiming to keep their debt-to-profit ratio below 1.5x by the end of 2026, while investing R$400 million annually in new digital products.

Investor Takeaway: Afya is a cash-generative business with a clear path to growth through acquisitions and digital expansion. However, you should weigh this against the lack of voting control and the regulatory risks inherent in the Brazilian medical education market. If you are comfortable with the "buy-to-grow" model and the influence of the controlling shareholder, the company’s long-term visibility into student enrollment makes it a unique play in the healthcare space.