Thank you for joining us for Afya’s Fourth Quarter and Full Year 2022 Conference Call. Today I am here with Afya’s CEO, Virgílio Gibbon; and Luis André Blanco, our CFO. During this presentation, our executives will make forward-looking statements. Forward-looking statements can be related to future events, future financial or operating performance, known and unknown risks, uncertainties, and other factors that may cause Afya’s actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to the business and financial performance, expectations and guidance for future periods or expectations regarding the company’s strategic product initiatives, its related benefits and our expectations regarding the market, as well as any remaining impact from COVID-19. These risks include those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events and we disclaim any obligation to update any forward-looking statements except as required by law. In addition, management may reference non-IFRS financial measures on this call. These measures are not intended to be considered in isolation or as a substitute of the results prepared in accordance with IFRS. This presentation has reconciled these non-IFRS financial measures to the most directly comparable IFRS financial measures. Let me now turn the call over to Virgílio Gibbon, Afya’s CEO, starting with slide number three. Virgílio Gibbon: Thank you, Renata. And thanks everyone for joining us today on our last 2022 conference call. We proudly present another year of outstanding operational and financial performance for Afya. Once again, we have proven the resilience of our business, the successful execution of our strategy,…

So if you want to ask the please just raise your hand and we will call you. The first question comes from Marcelo Santos from JPMorgan. Marcelo,, you may go.

Good evening, Virgílio and Luis. Renata, thank you for taking the question. I wanted to ask a bit about the prep course and the environment that you commented in the release. I mean looking at the financial statements, it looks like that the prep course revenue fell more than 50% year-over-year. So just wanted to understand if I am reading this correctly. What is happening and how do you see the outlook for this business? That’s the first question. And the second question is if you could share your expectations for a potential new Mais Médicos program. When, how this should shape up, how are the discussions going with the government? Thank you. Luis André Blanco: Marcelo, it’s Luis speaking. Yes. We faced -- continue to face a competitive environment regarding the prep course in Medcel, and it’s important to remember that this year, we suffered with 2022 collections that mostly come in the first quarter of the year and we continue to see the pressure in the completeness of the process for the 2023 collections that started within the fourth quarter of 2022, okay. These are very competitive landscape for us. We have rebuilt the product. We have implemented new marketing strategy. We implemented a new team in developing that. The recovery is still slow and we think that we could see a more consistent result for the next cycle that will start on the fourth quarter of 2023. Virgílio Gibbon: Marcelo, just to add a point here, it’s important that under the Pillar 1, where Medcel located, we are also combining the offerings coming from Alidamitcina and also Catopapers. So this Medcel is just one type of the course that we are offering under the Pillar 1. So combining all the programs that we are offering under the…

Yeah. As Virgílio said, Marcelo, the trend is aligned on what we believe, that we do need more physicians, but in the right locations, right? So when we see all this effort to have physicians in the countryside of Brazil, we have this feeling that is going to follow what we saw with Mais Médicos has run into.

Perfect. Thank you very much.

Of course. Thank you. So the second question comes from Fred Mendes from Merrill Lynch.

Thank you. Thank you, Renata. Good evening, everyone. I have two questions here as well. The first one is related to, once I look at the guidance, it looks like there’s a margin should be under pressure for 2023, pretty much flat. So just wondering that’s because of Continuing Education should came more relevant. So anyways you are expecting a little improvement here? And then the second one, once I look at the change in net debt, there was a cash burning of R$20 million quarter-over-quarter and your cash conversion is very high like 90%. So I was just wondering why not this high cash conversion is not helping to actually generate cash and if we should expect an improvement in 2023 and this quarter as well? Thank you very much. Luis André Blanco: Hi, Fred. It’s Luis speaking. I will take the two questions. The first was regarding guidance. We are pretty much in terms of midpoint aligned with the guidance. And remember that the guidance included UNITs and included the expansion of the mix with the growth of Digital and the Continuing Education that has lower margins than the Undergrads focused on, you mentioned. So it includes UNITs. UNIT is the first year. We had the transaction year that the service will still be provided by the former sellers until the end of the year when we do the integrations of UNITs to our unit -- our service [ph]. So it’s pretty much the same in terms of margin, the guidance within our 2022 results, but we have to have in mind these UNITs and the mix effect, okay? Regarding net debt, it’s always important to remember that we have seasonality on our operations. The most part of our cash in a quarterly basis generated during the first quarter and the third quarter, because we have the intakes, we have the renegotiations of all the students for the new term. So you are going to see -- you are going to always see a better cash conversion in these two quarters if we compare to the second quarter and the fourth quarter, okay? Virgílio Gibbon: Just to add a point and also on the second half, the fourth quarter, Fred, we also have the vacations, and therefore, there is less payments only in December. So there’s a lot of cash payments in December that reduced the cash position for all higher education sector, actually for all education sector in Brazil, okay?

Perfect. Very clear, Virgílio and Blanco. Thank you.

Of course. So the next question comes from Lukas Magellan [ph] from Morgan Stanley.

Hey. Good evening. Thank you for taking our questions. We have two questions. The first one is a follow-up on regulation. The question is, should another Mais Médicos program happen anytime soon after the end of the suspension or do you need to wait for Supreme Court’s definition? And the second question is related to Continuing Education, how much growth can you achieve at -- for maturation and what are the perspectives for future expansion of campuses? Virgílio Gibbon: Okay. Lukas, I will take the first one here and what will happen on the Continuing Education here. So under the regulation, it’s likely to happen this semester, another process that will release more capacity to the entire sector. So the Minister of Education doesn’t have to wait any Supreme Court decision to release the Mais Médicos release or any program that is similar. So the expectation is that once we have the freezing process finished in April, they will be ready to announce the new program. The issues that they just put this group together that we analyze would be the new frame, the new characteristics for this new Mais Médicos and still have to wait to come up a solution and to release to the entire market. Under the Continuing Education, so it’s a lot of opportunities here in terms of growth. We are growing year-over-year almost 50% in terms of revenues in 2022. Just remembering that we almost stopped our operation during the pandemic. So this is a very beginning -- this is a market that is a very high growth in terms of addressable market. We have 15% to 20% physicians growth that will enter in this market, looking for new Continuing Education and we are outperforming the market growth here. So remember that we just launched seven new units offering 100% of under -- of graduate programs and most of them related to new capitals -- located in new capitals and we have more than 60 programs offering right now on our portfolio. So today it’s more than 4,000 students. We are aiming at least to reach 10,000 students by 2026. That’s what we are aiming as an opportunity here in three years to four years.

Yeah. If I can complement, Lukas, as Virgílio said, we expand the number of units that we had during the pandemic and 2022 was the first year to ramp up these units. And 2023 comes with the same trend to mature these units and we can expect to outgrow this market that, Virgílio mentioned, that’s around 20%. And just coming back to Fred’s question, that as we said, is one of the reasons that we see stability in margins as we have a different mix of Continuing Education and Digital Services growing more in topline than the Undergrad Services. Virgílio Gibbon: Yeah. This is also important. Remember that as we launched seven new campuses, they are maturing. So the density of students per campus is still low. We have a lot of opportunity. So as semester-over-semester we are going to have more students. We have more fixed costs that will be diluted. And as you can see on our financial statement, we have gross margin improvements on Continuing Education and also in Digital Services 2022 over 2021 but -- and we expect to have the same dynamic for this next year. The questions on margin is that, the mix effect will be different because we have a high growth business in on Digital and also on Continuing Education.

Very clear. Thank you, Virgílio, Luis and Renata. Virgílio Gibbon: Thanks, Lukas.

Our next question comes from Lucca Marquezini from Itau.

Good evening, Virgílio and Luis, Renata. Thank you for taking our question. Just a quick follow-up on the Mais Médicos topic. So assuming a new program that should bring additional medical seats to the industry, how do you believe this should impact the company’s ability to readjust tickets in the medical school business going forward, not only for 2023, but especially in the long run? Thank you. Virgílio Gibbon: Hi, Lucca. This is a difficult question here. But based on what happened on Mais Médicos school, Mais Médicos stories and also what they are at least aiming to do with these new announcements, they try to incentivate more physicians in North and Northeast area, in an area that they want to prioritize as critical of physician for inhabitants. I think that we will release maybe 1 time or 2 times bigger than the last portion that was in 2018, maybe 8,000, 10,000 seats. But I don’t think this will change the balance between supply and demand. I think it could be more small adjustments in some areas, and I think at least on our expectations here, we have fully commitment and good expectation that we will keep continuing to have 100% of occupancy and best at least inflation to our tuition for the following years.

Yeah. In using the space here, just remember that we are increasing prices -- the average price for 2023, 7.5% and with the maturation effect that could increase one other percentage point.

That’s very clear. Thanks, guys.

And also just remember, if you want to ask question, please just raise your hand. Our next question comes from Pedro Caravina from Credit Suisse. Pedro, you may go.

Hi, guys. Thanks for taking our questions. First of all, congratulation on the results. So most of the questions we had were already answered. Just a follow-up. On the reshaping of Medcel, how is the intake going for the first quarter and what level of ticket adjustments should we expect for the new Medcel after the reshape? And also we saw an increase in margin for the quarter year-over-year. I was wondering what was the reason? It was like 230 bps for the fourth quarter 2022 versus fourth quarter 2021? Luis André Blanco: Yeah, Hi, Pedro. Regarding Medcel, we established for the 2023 collection that started in the fourth quarter and will continue in the first quarter of 2023. We have a very important price increase. We are talking about roughly 50% of the price so to speak increase in terms of tickets. So we put that these in place for the Medcel cycle that started in the fourth quarter and will continue in the first quarter. So this was a part of this product restructuration that we have done. We changed the team. We changed the product. We changed how we deliver the content for the students. We focus a lot on helping the physicians to pass the test to have a more focused product. So we are confident that we made the right moves on that and we are confident that we will revert these situations for the next cycle. It’s -- what’s important is to change the way we are -- we were expanding the gap between the next year. We are not seeing more than that. We are closing the gap. But I think more results we will be seeing on the next cycle of 2024. Regarding the expansion -- the margin expansion for the fourth quarter, you are right, we have this margin expansions. And remember that, as Virgílio mentioned before, during 2021 we faced a lot of pressure coming from the Continuing Education sites and the COVID crisis started to be released -- to be relieved at the fourth quarter. So the fourth quarter, it was the first quarter that where we started to see the intakes and started to rebound the revenues of the payment of the Continuing Education. So it was the beginning of it, and now as we mentioned before, Itanaji [ph] is -- with a huge growth right now and is one of the main reasons to the margins if you compare fourth quarter 2022 regarding 2021. Virgílio Gibbon: And Pedro, besides that in Continuing Education, so the Undergrad are kind of flat margins quarter-over-quarter. But also, we have Digital Services because of -- although we have the issue on Medcel, have strong results coming on B2B. So the contribution margin -- the gross margin come on Digital Service is much higher when you compare the fourth quarter 2022 to fourth quarter 2021. So, overall, we have this bps of margin increase on our fourth quarter.

Very clear. Thank you. Virgílio Gibbon: Thanks.

So as we don’t have any more questions, I would like to thank you all for participating today with us. If you have any more questions, please do not hesitate to contact me or our IR team. It was a pleasure. See you next quarter.