Afya : Announces Third Quarter Financial Statements

Afya Limited

Unaudited interim condensed consolidated financial statements

September 30, 2020

F-1

Afya Limited

Unaudited interim condensed consolidated statements of financial position

As of September 30, 2020 and December 31, 2019

(In thousands of Brazilian reais)

	Notes	September 30, 2020		December 31, 2019
Assets		(unaudited)
Current assets
Cash and cash equivalents	5	1,065,232		943,209
Restricted cash	6	10,902		14,788
Trade receivables	7	231,069		125,439
Inventories		5,835		3,932
Recoverable taxes		24,577		6,485
Derivatives	12.2.1	11,489		-
Other assets		20,667		17,912
Total current assets		1,369,771		1,111,765
Non-current assets
Restricted cash	6	2,055		2,053
Trade receivables	7	11,186		9,801
Other assets		48,640		17,267
Investment in associate	9	52,027		45,634
Property and equipment	10	212,537		139,320
Right-of-use assets	12.2.2	389,846		274,275
Intangible assets	11	1,961,759		1,312,338
Total non-current assets		2,678,050		1,800,688
Total assets		4,047,821		2,912,453
Liabilities
Current liabilities
Trade payables		32,453		17,628
Loans and financing	12.2.1	143,081		53,607
Derivatives	12.2.1	-		757
Lease liabilities	12.2.2	56,628		22,693
Accounts payable to selling shareholders	12.2.3	138,627		131,883
Notes payable	12.2.4	9,646		-
Advances from customers		44,368		36,860
Labor and social obligations		103,130		46,770
Taxes payable		35,311		19,442
Income taxes payable		4,601		3,213
Other liabilities		4,606		376
Total current liabilities		572,451		333,229
Non-current liabilities
Loans and financing	12.2.1	17,175		6,750
Lease liabilities	12.2.2	356,057		261,822
Accounts payable to selling shareholders	12.2.3	223,634		168,354
Notes payable	12.2.4	66,981		-
Taxes payable		22,486		21,304
Provision for legal proceedings	22	22,589		5,269
Other liabilities		2,567		1,999
Total non-current liabilities		711,489		465,498
Total liabilities		1,283,940		798,727
Equity
Share capital	16	17		17
Additional paid-in capital		2,318,044		1,931,047
Share-based compensation reserve		42,763		18,114
Retained earnings		351,243		115,916
Equity attributable to equity holders of the parent		2,712,067		2,065,094
Non-controlling interests		51,814		48,632
Total equity		2,763,881		2,113,726
Total liabilities and equity		4,047,821		2,912,453

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

F-2

Afya Limited

Unaudited interim condensed consolidated statements of income and comprehensive income For the three and nine-month periods ended September 30, 2020 and 2019

(In thousands of Brazilian reais, except earnings per share)

	Notes
Net revenue	18
Cost of services	19
Gross profit
General and administrative expenses	19
Other income, net
Operating income
Finance income	20
Finance expenses	20
Finance result
Share of income of associate	9
Income before income taxes
Income taxes expense	21
Net income
Other comprehensive income
Total comprehensive income
Income attributable to
Equity holders of the parent
Non-controlling interests
Basic earnings per share
Per common share	17
Diluted earnings per share
Per common share	17

Three-month period ended	Nine-month period ended
September 30,
2020		September 30, 2019		September 30, 2020	September 30, 2019
(unaudited)	(unaudited)	(unaudited)	(unaudited)
309,410	206,713	855,925	529,784
(112,292)	(87,350)	(223,997)
(308,226)
197,118		119,363		547,699		305,787
(104,718)	(71,260)		(281,480)	(162,078)
1,997	520		1,249	890
94,397	48,623		267,468	144,599
12,081	29,652		55,801	37,841
(23,701)	(24,586)		(65,443)	(54,915)
(11,620)	5,066		(9,642)	(17,074)
1,488	1,043		6,393	1,963
84,265	54,732		264,219	129,488
(4,690)	(5,748)		(17,088)	(9,702)
79,575	48,984		247,131	119,786
-	-		-	-
79,575		48,984		247,131		119,786
74,832	46,267		235,327	104,119
4,743	2,717	11,804		15,667
79,575		48,984		247,131		119,786
0.80	0.54		2.54		1.21
0.79	0.53		2.52		1.20

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

F-3

Afya Limited

Unaudited interim condensed consolidated statements of changes in equity

For the nine-month periods ended September 30, 2020 and 2019

(In thousands of Brazilian reais)

		Equity attributable to equity holders of the parent
		Additional	Share-based	Earnings reserves			Non-
	Share		Retained
	paid-in compensation	Legal	earnings	Retained		controlling	Total
	capital	capital	reserve	reserve	reserve	earnings	Total	interests	equity
Balances at December 31, 2018	315,000	125,014	2,161	7,223	52,584	-	501,982	88,372	590,354
Net income for the period	-	-	-	-	-	104,119	104,119	15,667	119,786
Total comprehensive income	-	-	-	-	-	104,119	104,119	15,667	119,786
Capital increase with cash	150,000	-	-	-	-	-	150,000	-	150,000
Capital increase from the corporate reorganization	122,062	137,051	-	-	-	-	259,113	-	259,113
Capital increase from shares contribution of shareholders	48,768	36,358	-	-	-	-	85,126	(44,774)	40,352
Share-based compensation	1	17,627	9,864	-	-	-	27,492	-	27,492
Dividends cancelled	-	-	-	-	4,107	-	4,107	-	4,107
Dividends declared to shareholders	-	-	-	-	-	(38,000)	(38,000)	(11,295)	(49,295)
Allocation to additional paid-in capital	-	33,001	-	-	(33,001)	-	-	-	-
Corporate reorganization	(635,830)	668,904	(2,161)	(7,223)	(23,690)	-	-	-	-
Issuance of common shares in initial public offering	16	992,762	-	-	-	-	992,778	-	992,778
Shares issuance cost	-	(79,670)	-	-	-	-	(79,670)	-	(79,670)
Balances at September 30, 2019 (unaudited)	17	1,931,047	9,864	-	-	66,119	2,007,047	47,970	2,055,017
Balances at December 31, 2019	17	1,931,047	18,114	-	-	115,916	2,065,094	48,632	2,113,726
Net income for the period	-	-	-	-	-	235,327	235,327	11,804	247,131
Total comprehensive income	-	-	-	-	-	235,327	235,327	11,804	247,131
Issuance of common shares	-	389,170	-	-	-	-	389,170	-	389,170
Shares issuance cost	-	(19,704)	-	-	-	-	(19,704)	-	(19,704)
Capital increase from shares contribution of shareholders	-	17,531	-	-	-	-	17,531	-	17,531
Share-based compensation	-	-	24,649	-	-	-	24,649	-	24,649
Dividends declared	-	-	-	-	-	-	-	(8,622)	(8,622)
Balances at September 30, 2020 (unaudited)	17	2,318,044	42,763	-	-	351,243	2,712,067	51,814	2,763,881

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

F-4

Afya Limited

Unaudited interim condensed consolidated statements of cash flows For the nine-month periods ended September 30, 2019 and 2018 (In thousands of Brazilian reais)

	September 30, 2020		September 30, 2019
	(unaudited)	(unaudited)
Operating activities	264,219		129,488
Income before income taxes
Adjustments to reconcile income before income taxes
Depreciation and amortization	77,729		50,703
Disposals of property and equipment	-		111
Allowance for doubtful accounts	22,899		13,278
Share-based compensation expense	24,649		9,864
Net foreign exchange differences	1,613		(13,608)
Net (gain) loss on derivatives	(22,199)		1,181
Accrued interest	16,161		14,642
Accrued lease interest	32,123		23,337
Share of income of associate	(6,393)		(1,963)
Provision for legal proceedings	(93)		(624)
Changes in assets and liabilities
Trade receivables	(95,563)		(24,688)
Inventories
(1,436)		777
Recoverable taxes
(1,437)		(5,594)
Other assets
(6,820)		(2,713)
Trade payables
1,759		2,985
Taxes payables	(5,612)		5,588
Advances from customers	(18,882)		18,521
Labor and social obligations	42,033		22,992
Other liabilities	(4)		(9,597)
	324,746		234,680
Income taxes paid	(15,830)		(4,033)
Net cash flows from operating activities	308,916		230,647
Investing activities
Acquisition of property and equipment	(60,887)		(41,684)
Acquisition of intangibles assets	(12,741)		(59,644)
Restricted cash	3,886		2,512
Payments of accounts payable to selling shareholders	(95,406)		(27,962)
Payments of notes payable	(3,847)		-
Acquisition of subsidiaries, net of cash acquired	(354,853)		(148,880)
Loans to related parties	-		(161)
Net cash flows used in investing activities	(523,848)		(275,819)
Financing activities
Payments of loans and financing	(106,019)		(43,094)
Issuance of loans and financing	100,911		-
Payments of lease liabilities	(40,527)		(27,811)
Capital increase	-		167,628
Proceeds from issuance of shares	389,170		992,778
Shares issuance cost	(19,704)		(79,670)
Dividends paid to non-controlling interests	(8,622)		(47,964)
Net cash flows from financing activities	315,209		961,867
Net increase in cash and cash equivalents	100,277		916,695
Net foreign exchange differences	21,746		14,531
Cash and cash equivalents at the beginning of the period	943,209		62,260
1,065,232		993,486
Cash and cash equivalents at the end of the period

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

F-5