Afya Limited (NASDAQ:AFYA) Q3 2019 Earnings Conference Call - Preliminary Transcript
Dec 02, 2019 • 11:00 am ET
million represented approximately 50% of net revenues in the third quarter. It is important to remember that business unit 2 revenues are concentrated in the third and fourth quarter of each year. And while (inaudible) a smaller portion of our business, we are very excited about the growth opportunity for the segment of medical tuition.Moving on to profitability on Slide number 7, Adjusted EBITDA increased a 147% year-over-year to approximately BRL81 million, end of this quarter of 2019 with the EBITDA margin expanding 380 basis points to 39.2%, driven by operating leverage from the maturation of medical schools.higher (inaudible) distribution and synergies from acquisitions. For the first 9 months of 2019, Adjusted EBITDA increased a 150% year-over-year to BRL203 million, with adjusted EBITDA margin expanding 260 basis points to 38.3%. Note that on a pro forma basis adjusted EBITDA for the 9 months, reached BRL231 million.
Moving to Slide 8, adjusted net income increased 155% year-over-year to BRL72 million in the third quarter of 2019. Our net income benefited from top-line growth, margin expansion and higher financial income in FX gains, associated with the cash proceeds from our IPO. For the 9-month period, our adjusted net income increased 130% year-over-year to BRL164 million.
Moving next to a discussion of balance sheet in cash flow on Slide number 9, we maintain a healthy financial position with net cash of BRL911 million, which should be -- need to be sufficient to support our growth strategy. The increase in cash, compared to the year end of 2018, reflects the IPO proceeds. In addition, and show in the right side of this slide. We continue to deliver a strong operating cash flow generation with a cash conversion of approximately 180% of EBITDA in the
9 months of 2019 Supported by (ph) tuition prepayments and seasonality of business Unit 2, especially because of this is a nice effect, we recommend to focus on longer periods rather than on quarters for the analysis of discussion conversion metric.Somehow I would like to conclude my remarks with a discussion about market consensus. Our guidance for the second half of 2019 and the seasonality of our business.
On slide 10, we show that our adjusted EBITDA, both approximately BRL81 million in the quarter is approximately 9% above the average consensus, of BRL74 million that we have gathered from the analysts and published on November 11 2019. As a reminder, it is important to normalize consensus estimates for the impact of IFRS 16 and for the impact of acquisitions and that is why we published the normalized consensus for this quarter and plan to continue to provide that in the future.
Moving to Slide 11. Our results for the third quarter of 2019, are well aligned with our guidance, before we are maintaining our guidance for the second half of 2019, which include net revenues between BRL415 million and BRL430 million and adjusted EBITDA margin in the range of 38% and 40%.
As a reminder, our guidance eliminates the