Afya Limited (AFYA) Earnings

Management highlights

- Overall Financial Performance * H1 2026 total revenue grew 7% YoY to R$1,985 million; Q2 2026 revenue grew 6% YoY to R$972 million * Adjusted EBITDA reached R$918 million in H1 2026, growing 3% YoY with a margin of 46.2% (a 190 basis point contraction YoY, driven by higher sales and marketing investments across continued education and medical practice solutions) * H1 2026 net income grew 7% YoY to R$463 million; Q2 2026 net income grew 14% YoY to R$201 million * Basic EPS reached R$5.10 for H1 2026 (9% YoY growth) and R$2.22 for Q2 2026 (17% YoY growth), with EPS growth outpacing net income growth due to ongoing share buyback programs * Operating cash conversion remained strong at 87.8%, in line with prior year; H1 2026 free cash flow to equity reached R$423 million * As of June 2026, gross debt totaled R$2.4 billion (down from R$2.7 billion YoY), average debt duration increased from 1.9 years to 3.7 years, and average cost of debt is 15.1% per year (~106% of CDI); net debt was R$1,394 million, virtually unchanged from end-2025, with net debt to midpoint guidance EBITDA of 0.8x - Shareholder Capital Allocation * ATES returned R$448 million to shareholders via dividends and share repurchases in H1 2026, representing 106% of H1 free cash flow to equity * The company maintains a disciplined framework: it returns excess capital to shareholders when acquisition opportunities do not meet return requirements, while retaining flexibility to pursue attractive acquisitions * 307 million reais in dividends were paid in Q2 2026, representing 40% of 2025 full-year net income; an active 4 million share buyback program has remaining capacity to repurchase 1.4 million shares through end-2026 - Operational Highlights * The new injunction suspending NMED restrictions restored all previously prohibited seats to ATES institutions, though the company had already front-loaded strong intake in H1 2026 to minimize impact, and only a portion of additional seats will be filled in 2026

Guidance

- Full-year 2026 adjusted EBITDA guidance is maintained at R$1.7 billion to R$1.8 billion, with management committed to delivering within this range - Full-year CAPEX guidance is maintained at R$340 million to R$380 million, with CAPEX expected to accelerate in the second half of 2026; the majority of incremental CAPEX is focused on intangibles for product development across continued education and medical practice solutions - Continued education is expected to deliver high one-digit full-year 2026 growth, in line with original annual guidance - The company's 2026 effective tax rate is expected to be approximately 10%, matching the 2025 rate - Management expects organic volume growth in health science programs of more than 18% for the full year 2026, with current intake pacing more than 20% above 2025 levels at the same point

Segment performance

1. Undergraduate Programs: Total first half 2026 revenue grew 7% year-over-year to R$1,762 million. Medical programs account for 85% of segment revenue, and 93% comes from all health-related courses. The segment represents ~88.8% of ATES' total H1 2026 revenue. Key metrics: 3% YoY medical student base growth to over 26,000 students, 6% YoY operating medical seat growth to 3,768, 4% YoY net average ticket price increase to R$9,443, and 13% YoY growth in health science course enrollment. 2. Continued Education: Total first half 2026 revenue grew 5% YoY to R$144 million, representing ~7.3% of total H1 2026 revenue. B2B revenue grew 8% YoY to R$135 million, accounting for 94% of segment revenue, while B2C revenue declined 25% YoY to R$9 million. Total student base expanded 23% YoY driven by growth in short-term lower-average-ticket programs: residency preparation student base remained stable at 9,244, graduate preparation grew 13% to 10,213, and other B2P/B2B offerings grew 35% to 36,780. 3. Medical Practice Solutions: Total first half 2026 revenue grew 2% YoY to R$85 million, representing ~4.3% of total H1 2026 revenue. Total active payers remained broadly stable YoY at ~201,000, while clinical management active payers grew 20% to over 50,000. Monthly active users declined 8% YoY to 212,000. The company's integrated Ásia ecosystem reached 295,000 total active users across all segments as of Q2 2026.

Risks & headwinds

- AI-powered competitors are putting downward pressure on payer counts and pricing for Whitebook, ATES' clinical decision support product within the Medical Practice Solutions segment; current Whitebook payer declines have outpaced strong growth in the company's clinical management product, leading to low single-digit segment growth in H1 2026 - Higher than planned sales and marketing investments for growth initiatives across continued education and medical practice solutions have compressed adjusted EBITDA margins 190 basis points below prior year levels - NMED regulatory restrictions created uncertainty around available enrollment seats for 2026, requiring the company to front-load intake to minimize financial impact; regulatory uncertainty remains for the 2027 intake cycle - A shift in continued education product mix toward more lower-ticket, short-duration programs has slowed revenue growth relative to student enrollment growth - Declining monthly active users in the Medical Practice Solutions segment signals ongoing engagement challenges amid competitive pressure

Analyst Q&A

• Q: What is the outlook for second half intake and price increases for undergraduate programs, and when will investments in Medical Practice Solutions start driving higher revenue? /

  A: ATES expects full occupancy for H2 2026 intake, with health science program enrollment pacing more than 20% above 2025 levels, on track for over 18% organic volume growth for the full year. No new price increases are planned for H2 2026, and no discounts are being offered for medical programs. For Medical Practice Solutions, AI competitors have pressured Whitebook payer counts, leading to price adjustments, but clinical management products are growing quickly. Management is executing its planned investment cycle to add new functionalities to products and grow teams, and expects revenue improvement after growing audience and product capabilities.

• Q: If H1 EBITDA annualizes to the top of the guided range, why was guidance not raised, and what is ATES' approach to capital allocation and the current M&A environment? /

  A: Management remains focused on delivering EBITDA within the original guided 1.7 to 1.8 billion reais range. ATES requires all acquisitions to meet a minimum 20% nominal unlevered IRR, and only pursues opportunities focused on medicine. When no attractive acquisitions meet this threshold, the company returns all excess free cash flow to shareholders via dividends and buybacks. Currently, ATES has a strong M&A pipeline, maintains low leverage of 0.8x net debt to EBITDA, and is investing in internal product enhancements including new AI features, while retaining capacity for future acquisitions.

• Q: What factors are driving slower continued education revenue growth, and what is the outlook for the second half? /

  A: The slower revenue growth is caused by a shift in product mix: the segment is growing student enrollment strongly (23% YoY), but growth is concentrated in lower-ticket, shorter-duration programs, which pulled down second quarter revenue growth. Management expects continued high one-digit full-year growth for continued education, in line with original 2026 guidance, and does not forecast a material decline or jump in full-year results.

• Q: How does the new NMED injunction affect available enrollment seats, and what explains the lower effective tax rate in the quarter? /

  A: The injunction restores all previously restricted seats for 2026 intake, but since the company already front-loaded strong enrollment in H1 2026 to mitigate impact, only a portion of the additional seats will be filled this year, with no material impact on 2026 results. The lower H1 effective tax rate came from a one-time adjustment to 2025 tax provisions following new regulatory clarifications; the full-year 2026 effective tax rate is expected to return to 10%, matching the 2025 level.