Thank you for joining us for Afya's fourth quarter and full year 2022 conference call. Today, I am here with Afya 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, 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 refer to 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.
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, the commitment of our team members, and the consistency of our business model. During this presentation, I will first run through some strategic topics such as our performance highlights, the successful business execution within our three segments, 2022 and 2023 guidance, some recent awards recognition, and at the end, Luis Blanco will explore our financial and operational review. Moving now to page number four. Let us start with our performance highlights. First, adjusted net revenue increased 32%, reaching BRL 2.3 billion, followed by an adjusted EBITDA growth of more than 27% year-over-year, reaching BRL 962 million with a margin of 41.5%.
We also reported a strong cash flow generation again, ending the year with BRL 877 million, a 32% increase compared to last year, with a cash conversion of 94%. With an accelerated pace during the whole year, net income reached BRL 393 million in 2022, a growth of 62% year-over-year with an EPS of BRL 4.14, 73% higher than last year, reflecting our capital location discipline in executing our business combination and three buyback programs in a row. Moving to our operational updates of the quarter. We have reached 2,700 operating seats, an increase of over 11% year-over-year with the beginning of four Mais Médicos campuses, along with new seats in Ji-Paraná and Itabuna. In addition, our number of undergrad medical students has reached almost 18,000, representing 12% growth compared to 2021.
We also saw great results in net revenue for our continuing education business. The segment grew more than 49% year-over-year, representing a net revenue of BRL 109 million. Once again, Afya reported great results on the digital health services revenue, which ended the year with an increase of 25% compared to 2021. These results reinforce the opportunity ahead in digital services and is explained by the ramp up on B2B engagements with new contracts with pharmaceutical industry companies, and the continuous ramp up in B2B contracts, as we will discuss further on. Lastly, our ecosystem has 260,000 active users, representing a great penetration among physicians and medical students in Brazil. In the next slide, we will talk about our solid business execution within our three business units. Starting with our core business, the undergrad segment, we saw important movements throughout the year.
First, the successful opening of four Mais Médicos campuses, Abaetetuba, Bragança, Itacoatiara, and Manacapuru, adding more than 200 medical seats to our portfolio. Second, the completeness of UNIGRANRIO integrations process in October, one year after its acquisition, proving our commitment to extract synergies within the operation. Third, the increase of 92 new medical seats, 28 in Ji-Paraná campus located in Rondônia, and 64 in Faculdade Santo Agostinho in the city of Itabuna, situated in the state of Bahia. Last but not least, the announcement of our largest acquisition so far, UNIT Alagoas and FITS Jaboatão dos Guararapes, adding 340 more medical seats to our base, reaching an impressive number of 3,163 medical operating seats today, strengthening our consolidation as the medical undergrad leader in Brazil. We are delighted to see that the most significant growth of the year in terms of revenue come from our continuing education segment.
With a robust intake process, six new campuses and course maturation. Combined with the return of our practical classes, we can finally see our students, employees, and partners extracting the best from our ecosystem again after a challenging scenario during the pandemic. On our digital services segment, we are also proud to see our tools being able to assist physicians during their medical journey. At the same time, we continue to explore the development of our ecosystem, unlocking new interactions and revenue streams that go beyond the physicians, a chieving pharma players, hospitals, labs, and drugstore chains. Proof of that is the engagement on the B2B strategy growth, once we have reached so far almost 100 contracts with 45 different pharmaceutical industry companies, strengthening our land and expanding strategy.
Moving on to slide number six, we can see how the company's financial results reaffirm the resilience and predictability of our business model. Afya's 2022 net revenues was at least 3x higher than in 2019, the year of our IPO. Furthermore, we also have marked an expansion in profitability and cash generation. With more than 200 bps in EBITDA margin expansion, the cash conversion rate has continued to perform above 90%, showing our capacity to deliver strong growth, expanding our profitability and cash generation. Lastly, our EPS has increased more than 2x since 2019, proving our capacity to combine organic and inorganic growth with strong capital allocation discipline, and consequently, great returns to our shareholders. We are also introducing our guidance for 2023, which considers the successful concluded acceptance of new medical students, ensuring 100% of occupancy in all of its medical schools.
Considering the above factors, the guidance for 2023 is defined as shown in the charts. Adjusted net revenue is expected to be between BRL 2.75 billion and BRL 2.85 billion. Adjusted EBITDA is expected to be BRL 1.1 billion and BRL 1.2 billion, excluding any acquisition that may be concluded after the issuance of this guidance. Once again, we are guiding another strong round ahead, improving Afya's resilience and ability to keep delivering solid results with a high predictability. Moving to my last slide. As a reflection of our outstanding results and actions that are being shown to the market, we could joyfully celebrate several awards recognition this year, such as Anuário Época Negócios 360°, 2022 Valor Inovação Brasil, Institutional Investor 2022, Great Place to Work, Bloomberg Gender-Equality Index, Top 100 Open Corporations 2022, among others.
We are very proud of all these achievements, as they reflect the work and passion of over thousands of employees around a unique vision. To transform health together with those who have medicine as a vocation. I will now turn the call over to Luis Blanco, Afya's CFO, to give more color on the financial and operational metrics. Thank you.
Thank you, Virgílio, and good evening, everyone. Starting with slide number nine to discuss the financial highlights of the fourth quarter. With much satisfaction, I present another strong quarter results for Afya. Adjusted net revenue for the fourth quarter of 2022 was BRL 595 million, an increase of 18% over the same period of the prior year. In 2022, adjusted net revenue was BRL 2.3 billion, an increase of 32% over 2021, m ainly due to higher tickets in medicine courses, maturations of medical seats, the beginning of four more medical campuses, the continuing education segment recovery after practical activities was resumed after COVID-19 pandemic, and digital service performance. The digital service segment increased 25% year-over-year.
A combination of a great start of the B2B engagements, reaching roughly 100 contracts, including pharma solutions and RX PRO contracts with 45 different pharmaceutical industry companies, and expansions of active players in B2B, mainly in Whitebook, iClinic, and Shosp. Partially offset by the lower performance of Medcel due to a higher competition scenario in the residency preparatory market. Fourth quarter adjusted EBITDA increased 24% to BRL 242 million, with an adjusted EBITDA margin of 41%. For the year, adjusted EBITDA was BRL 962 million, an increase of 27%, with an adjusted EBITDA margin of 41.5%, a decrease of 160 basis points when compared to 2021. The adjusted EBITDA margin reduction in the year is mainly due to the following: digital segments, primarily due to the Medcel performance, increase in corporate expenses in the period, and launch of the four Mais Médicos campuses in the third quarter.
Moving to the next slide. Adjusted cash flow generations over the year was almost 32% higher year- over- year, totaling BRL 877 million. Operating cash flow conversion ratio was 94% for 2022, compared to 101% in 2021. Operating cash flow ratio in 2021 was positively affected by the end of the grace periods of tuitions re negotiations that occurred in 2020. Adjusted net income for the fourth quarter of 2022 was BRL 129 million, an increase of 31% over 2021. In 2022, adjusted net income was BRL 535 million, an increase of 22% year- over- year. Our EPS performance of proposed expansion. For the quarter, EPS grew 53%, and for the year, EPS reached BRL 4.14, reflecting an increase of 73% year- over- year.
Our EPS performance reflected the growth in our net income and capital allocation discipline, executing our business combinations in three buyback programs in a row. Moving to slide number 11, to a discussions of our key operating metrics by business unit. Starting with the undergrad programs. Our number of medical students grew 12% year- over- year, reaching 18,000 students, with operating medical seats increasing 14% due to the encompass of 292 medical seats related to the four Mais Médicos, and Ji-Paraná and Itabuna seats increase as previously said. Therefore, considering our maturation and UNIT acquisitions, we have reached 3,163 approved seats and expected to achieve more than 22,000 undergrad medical students at maturity. With our net average ticket increasing 11% year- over- year, we reached BRL 7,896 compared to BRL 7,126 in 2021.
The last graph shows a 32% growth in combined tuition fees, reaching BRL 2.6 billion, up from BRL 2 billion from the prior year, 77% of which are related to medicine. All this effort means one thing, our medical education business remains and will continue to be the cornerstone of our business in the short and the middle terms, delivering high predictable growth combined with solid profitability and cash generation. On the next page, I will present our continuing education metrics. As said before, we saw another year of great recovery in our continuing education segment, with an increase of more than 34% in the number of students compared to the last year, reaching 4,280 students. In addition, for the year, net revenues grew 49% when compared to 2021.
This recovery is mainly due to a robust intake process due to the return of our practical classes, six new campuses, and courses mix and maturation. Moving to slide number 13, I will discuss the digital service operational metrics. On the first graph, you can see our total active payers, which are the ones that generate revenues in the business to physician. With a continuous growth trend, we reached 203,000 paying users, a 21% growth compared to the last year. As you can see in the second graph, our ecosystem grew 5% compared to the previous year, achieving 260,000 monthly active users, represent almost 40% of all medical students and physicians in Brazil. Finally, on our last graph, we can see our digital service net revenue, which increased more than 25% year- over- year, reaching BRL 119 million.
Since the beginning of the year, we also started to break down our digital service net revenue within B2P and B2B segments, which accounted for more than BRL 166 million comes from B2P and more than BRL 23 million coming from B2B. Since the B2B strategy is still ramping up, representing a growth of 154% compared to the prior year. Now moving to my last two slides, I will discuss our cash and net debt positions, also giving more color on our cost of debt. Cash and cash equivalents at the end of the fourth quarter were BRL 1.093 billion, an increase of 46% over the same period in 2021, mainly due to the BRL 500 million debenture issued in December of 2022.
In 2022, net debt totaling BRL 1.381 billion, achieving the same level of 2021, supported by strong cash flow generations in 2022 of BRL 844 million, which was offset by investment activities in properties, equipment, and intangible totaling BRL 297 million. BRL 99 million of acquisitions of subsidiaries and BRL 152 million of share repurchase program. Our capital structure remains solid with conservative leverage positions and low cost of debt. Even considering UNIT acquisitions and the mid-guidance of 2023, Afya net debt to adjusted EBITDA for 2023 would be at 1.9 x. On the next slide, you can see a table with the breakdown of our gross debt and total cost of debt, considering our main debts, the SoftBank transactions, debentures, accounts payable to selling shareholders, and other financial obligations.
This ends our prepared remarks, s trong performance, consistent growth, success in all segments, and public recognition. This is how we are evolving and empowering our mission to provide an ecosystem that integrates educational and digital solutions for the entire medical journey, enhancing the development, updating assertiveness and productivity of health professionals. We are very proud of our business and what we have achieved so far, and excited about what we plan for the future. I will now open the conference for the Q&A session. Thank you.
If you want to ask a question, please just raise your hand and we'll call you. The first question comes from Marcelo Santos from JP Morgan. Marcelo, you may go.
Good evening, Virgílio, Luis, Renata, thank you for taking the question. I wanted to ask a bit about the prep course and the environment that you comment in the release. I mean, looking at the financial statements, it looks like the prep course revenue fell more than 50% year-over-year. Just wanted to understand if I am reading this correctly, what is happening, and how do you see the outlook for this business? That is the first question. 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.
Hi, Marcelo, it is Luis speaking. Yes, we continue to face a competitive environment regarding the prep course in Medcel. It is important to remember that this year we suffer with the 2022 collections that mostly come in the first quarter of the year and w e continue to see the pressure in the competitiveness of the process for the 2023 collections that started within the fourth quarter of 2022. Okay. This is a very competitive landscape for us. We have rebuilt the product. We have implemented new marketing strategy. We implemented a new team on developing that. The recovery is still slow, and we think that we could see a more consistent results for the next cycle that will start on the fourth quarter of 2023.
Marcelo, just to add a point here. It is important that under the pillar one, where Medcel is located, we are also combining the offerings coming from Além da Medicina and also CardioPapers. This Medcel, it is just one type of the course that we are offering under the pillar one. Combining all the programs that we are offering under the pillar one, Medcel is just one of them. The prep course environment is quite competitive, and we are expecting to have a resumed growth under the pillar one. That is one part of our B2B business, and the digital services, on the second half of 2023, that is when we are going to launch the new collection for 2023, 2024.
For your second question about the Mais Médicos program, we just saw the release of the new two normatives, establishing the group that will discuss about health, education, how it will be, all the process of medical and also health products related programs. It is very soon in the process, but what we can see is that they are following, at least, the trend that we expecting, having a lot of effort trying to incentivate more physicians in north, northeast region, and the areas that they will define that prioritization under the new government. It is still soon in the process, to say how will be the size of the next wave of the new Mais Médicos. But I think they are trying to support the dynamic that we are having.
I think we still have some weeks to see what this group is going to define and release, what will be the new wave for the new Mais Médicos.
As Virgílio said, Marcelo, the trend is aligned on what they believe, that we do need more physicians, but in the right locations, right? When we see all this effort to have physicians in the countryside of Brazil, we have this feeling that it's going to follow what we saw with Mais Médicos has ran into.
Perfect. Thank you very much.
Of course. Thank you. 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. Just wondering if that's because the coaching education should gain more relevance. Anyway, you're expecting a little improvement here. The second one, once I look at the changing net debt, there was a cash burning of BRL 20 million quarter-over-quarter. Your cash conversion is very high, like 90%. I was just wondering why this high cash conversion is not helping to actually generate cash, and if we should expect an improvement 2023 in this front as well. Thank you very much.
Hi, Fred. It's Luis speaking. I'll take the two questions. The first was regarding guidance. We are pretty much, in terms of mid-points, aligned with the guidance. Remember that the guidance included UNIT 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 in medicine. It includes UNIT. UNIT is the first year. We had the transition year that the service will still be provided by the former sellers until the end of the year when we do the integrations of UNIT to our short service. It's pretty much the same in terms of margin, the guidance within our 2022 results. We have to have in mind these UNIT 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 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. You're going to always see a better cash conversions in these two quarters if we compare to the second and the fourth quarter. Okay?
Just to add a point, also on the second half, on the fourth quarter, Fred, we also have the vacations, and that's when they're still payments all in December. There's a lot of cash payments in December that reduce 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. The next question comes from Lucas Nagano from Morgan Stanley.
Hey, good evening. Thanks 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 we need to wait for Supreme Court's definition? The second question is related to continuing education. How much growth can you achieve at full maturation, and what are the perspectives for future expansion of campuses?
Okay, Lucas. I will take the first one here, and what will happen on the continuing education here. Under the regulation, it is likely to happen this semester, another process that will release more capacity to the entire sector. The Ministry of Education does not have to wait any Supreme Court decision to release the Mais Médicos release or any program that is similar. The expectation is that once you have the freezing process finished in April, they will be ready to announce the new program. The issue is that they just put this group together that we analyze what will be the new frame, the new characteristics for this new Mais Médicos, and still have to wait to come up with a solution and to release to the entire market. Under the continuing education, it is 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, this is the very beginning. This is a market that is a very high growth in terms of addressable market. We have 15%-20% physicians growth that will enter in this market looking for new continuing education, and we are outperforming the market growth here. Remember that we just launched seven new units offering 100% of graduate programs, and most of them located in capitals. We have more than 60 programs offering right now in our portfolio. Today, it is more than 4,000 students. We are aiming at least to reach 10,000 students by 2026. That is what we are aiming as an opportunity here in three to four years.
Yeah. If I can complement, Lucas. As Virgílio said, we expanded the number of units that we had during the pandemic, and 2022 was the first year to ramp up these units. 2023 comes with the same trend to mature these units, and we can expect to outgrow this market that Virgílio mentioned, that is around 20%. 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 top line than the undergrad services.
Yeah. This is also important. Remember that as we launch seven new campuses, they are maturing, so the density of the students per campus is still low. We have a lot of opportunity. Semester- over- semester, we are going to have more students. We have more fixed costs that will be diluted. As you can see on our financial statement, we have gross margin improvements on continuing education and also in digital services 2022 over 2021 and w e 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 units on digital and also on continuing education.
Very clear. Thank you, Virgílio and Renata.
Welcome, Lucas.
Our next question comes from Lucca Marquezini from Itaú.
Good evening, Virgílio, Luis, Renata. Thank you for taking our question. Just a quick follow-up on the Mais Médicos topic. 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.
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 this new announcement, they are trying to incentivate more physicians in north and northeast area, in an area that they want to prioritize as critical of physician per inhabitants. I think they will release maybe one or 2x 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 a small adjustment in some areas. I think at least on our expectations here, have fully a commitment, and good expectation that we'll keep continuing to have 100% of occupancy and pass at least inflation to our tuition for the following years.
Yeah. Using this space here, just remember that we are increasing prices, the average price for 2023, 7.5%. With the maturation effect, that could increase one other percentage point.
That is very clear. Thanks, guys.
Just remember, if you want to ask a 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, congratulations on the results. 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 adjustment should we expect for the new Medcel after the reshape? Also, we saw an increase in margin for the quarter year-over-year, and I was wondering what was the reason. It was like 230 bps for the fourth quarter 2022 versus fourth quarter 2021.
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. We put these in place for the Medcel cycle that started on the fourth quarter and will continue in the first quarter. This was a part of this product restructuration that we have done. We changed the teams, 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. 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.
What is important is to change the way we were expanding the gap between the next year. We are not seeing more than that. We are closing the gap. I think more results will be seen on the next cycle of 2024. Regarding the margin expansion for the fourth quarter, you are right. We have these margin expansions. Remember that, as Virgílio mentioned before, during 2021, we faced a lot of pressure coming from the continuing education side. The COVID crisis started to be relieved at the fourth quarter. The fourth quarter, it was the first quarter that we started to see the intakes and started to rebound the revenues of the payment of the continuing education. It was the beginning of it.
Now, as we mentioned before, IPEMED is with a huge role right now and is one of the main reasons to the margins if you compare fourth quarter 2022 regarding 2021.
Pedro, besides that, in continuing education, the undergrads are kind of flat margins quarter-over-quarter, but also have digital services because of although we have the addition on Medcel, have a strong results coming on B2B, so the contribution margin, the gross margin come on digital service much higher when you compare the fourth quarter 2022 to fourth quarter 2021. Overall, we have this bps of margin increase on our fourth quarter.
Very clear. Thank you.
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.