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 and its related benefits. 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 at the date hereof. We should not rely on them as a prediction 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 a substitute for the results prepared in accordance with IFRS. This presentation has reconciled these non-IFRS financial measures to the most directly comparable IFRS financial measures. Now, let me turn the call over to Virgilio Gibbon, Afya's CEO.
Thank you, João, and welcome to our Second Quarter and First Half Conference Call for 2025 Results. Starting with slide number three, we are pleased to report that Afya continues to deliver strong operational and financial results. This quarter's performance highlights a high predictability of our business model and the successful execution of our strategy, which consistently combines robust growth, increased profitability, and solid cash generation, Afya's three strategic pillars for long-term value creation. This quarter, once again, was marked by significant revenue growth and gross margin expansion in both our undergrad and continuing education segments, reflecting the steady expansion of our business and our ongoing commitment to operational excellence. We are also pleased to reaffirm that Afya remains on track to meet our full-year 2025 guidance, supported by disciplined execution and strong business fundamentals.
Once again, we delivered strong performance closing the first half of 2025 with a notable growth of 15% in revenues, reaching BRL 1.856 billion. Adjusted EBITDA reached BRL 893 million, expanding 20% year-over-year with an impressive margin of 48.1%, an increase of 228 bps over last year. This margin expansion was primarily driven by the solid results of our undergrad and continuing education segments, supported by cost initiatives and our shared service center, helping to boost efficiency and unlock operational synergy across selling, general, and administrative expenses. In addition, supported by the increase in adjusted EBITDA, our basic EPS climbed to BRL 4.69 recently, representing a 17% increase over the previous year. Even after accounting for the effects of the new tax legislation aligned with the OECD Pillar Two rules, we continue to deliver a higher value to our shareholders.
Moving to our operational updates, we have 3,653 approved seats with the closing of the FUNIC acquisition, which contributed an additional 60 seats to our portfolio. Furthermore, our number of undergrad medical students has reached almost 26,000 students, representing nearly 14% growth compared to the first half of 2024. In addition, the medical school net average ticket, excluding the Unidom acquisition, reached BRL 9,140, over a 3% increase year-over-year. In continuing education, revenue increased almost 8% over last year, reaching BRL 138 million, and in medical practice solutions, we saw over 9% growth in revenues compared to the first half of last year, reaching BRL 84 million. Lastly, our ecosystem reached 302,000 active users, reflecting strong engagement and deep penetration among physicians and medical students across Brazil. Moving to slide number four, where we will discuss the highlights across our three business segments.
Starting with the undergraduate segment, medicine costs continue to show strong performance with a student-based increase of 14%. This growth, in addition to the integration of Unidom and the ramp-up of four MICE medical campuses launched in the third quarter of 2022, contributed to a gross margin expansion for the segment. Additionally, as already mentioned, we completed the acquisition of FUNIC, which added 60 new medical seats to our portfolio, with operations starting the second semester of 2025, further strengthening our academic capacity and presence. The continuing education segment was marked by an increase in graduate journey students, in addition to a gross margin expansion driven by our ongoing operational restructuring, which continues to contribute to improving costs. In the medical practice solutions segment, growth was driven by clinical management payers, an increase of 10% year-over-year.
B2P, business-to-physician revenues, for the first semester also saw a growth of almost 12% compared to the same period of the prior year. On the next slide, I would like to share Afya's new share repurchase program approved by the Board of Directors, with plans to repurchase up to 4 million Class A shares by December 31st, 2026, through open market transactions or privately negotiated deals. This initiative reflects our strong commitment of creating shareholder value and ensuring sustainable business performance. It also reaffirms the strength and the robustness of our balance sheet, while reflecting our disciplined and forward-looking capital allocation strategy aligned with the current economic and political landscape. I will turn the call over to Luis Blanco, Afya's CFO, to provide further insight into the financial and operational metrics. Thank you.
Thank you, Virgilio, and good evening, everyone.
Starting with slide number seven for discussions of key operational metrics by business units, starting with the undergraduate programs. The number of medical students grew almost 14% year-over-year, reaching nearly 26,000 students, while the number of approved medical seats increased 14%, totaling 3,653 seats, considering the FUNIC acquisition. Our medical school net average tickets, excluding the Unidom acquisitions, rose by over 3%, reaching BRL 9,140 at the end of the first semester. As a result, revenue for the undergraduate segment grew over 16%, totaling BRL 1.642 billion. It's worth mentioning that 86% of this revenue comes from the medical medicine programs and 94% from health-related courses, reinforcing our strategic focus and leadership in the sector. On the next page, I will present our continuing education metrics. We approach continuing education through three main journeys.
Starting with the graduate journey, the most relevant within continuing education, it presented a 12% growth, reaching 9,055 students, and other courses and B2B offerings also saw a solid growth of 19% compared to the same period of last year. The residency journey, which includes products focused on the medical residency preparation, ended the quarter with 9,224 students, a 29% decrease year-over-year. Revenue for continuing education rose to BRL 138 million, up from BRL 128 million in the first semester of 2024, representing an 8% growth. This includes a 5% increase in B2B revenue and an impressive 42% increase in B2B. Continuing on the next slide, I'll discuss the medical practice solutions operational metrics. The first graph shows our total active payers, which generate revenues in business to physicians. This semester, we maintained a solid 196,000 paying users, in line with the same period of the prior year.
The second chart highlights our monthly active users, which account for 230,000, a reduction of 9% in comparison to the same period of the prior year. Finally, the third chart presents the revenue for the segment, which grew over 9% year-over-year, reaching BRL 84 million. Of these, BRL 75 million come from B2B, up 12%, and BRL 9 million from B2B, 8% down compared to the same period of the prior year. On the next slide, we present Afya ecosystem. We are proud of the meaningful impacts Afya continues to make across Brazil's healthcare ecosystem. By the end of the second quarter of 2025, 302,000 users were actively engaging with our service and products, reflecting our solid relevance and reach in medical education and medical solutions. Moving forward to page 11, I want to discuss our financial overview for the second quarter and the first half of 2025.
Starting with the next slide, with great satisfaction, I present another strong quarterly performance for Afya. Revenue for the second quarter of 2025 reached BRL 919 million, reflecting a 14% increase over the same quarter of the prior year. For the six-month period, revenue was BRL 1.856 billion, an increase of 15% over the same period of last year. This growth is mainly driven by a 3.2% increase in the net average ticket for medical courses, maturations of medical seats, and acquisitions of Unidom. In the second quarter of 2025, adjusted EBITDA increased 17% to BRL 401 million, with an adjusted EBITDA margin of 43.6%, marking an increase of 110 basis points compared to the second quarter of 2024.
For the six-month period, adjusted EBITDA was BRL 893 million, an increase of over 20% in comparison to the same period of the prior year, with adjusted EBITDA margins of 48.1%, an increase of 220 basis points in the same period. The adjusted EBITDA margin expansion is mainly due to a gross margin expansion within undergraduate and continuing education segments, completion of Unidom integration, the ramp-up of the four MICE medical campus that started operations in the third quarter of 2022, operational restructuring efforts in our continuing education and medical practice solutions segments, and more efficiency in selling, general, and administrative expenses. On the next page, cash flow from operating activities grew 15%, totaling BRL 783 million, driven by our robust operational performance. The operational cash conversion ratio was 88.8% in the second half of 2025.
Net income for the second quarter of 2025 amounted to BRL 177 million, a 9% increase from the same period of 2024. For the six-month period that ended in June 2025, we saw an increase in net income reaching BRL 434 million, representing an increase of 17% year-over-year. Our net income in this quarter reflects not only our strong operational performance but also the impact of the new tax legislation implementing the OECD Pillar Two rules. Our basic EPS reached BRL 1.90 for the quarter, an 8% increase compared to the previous year, and BRL 4.69 per share in the first six months period, a growth of 17%. Now, moving to my two last slides to discuss our cash and net debt positions, I also give you more color on our cost of debt.
These slides present a table detailing our gross debt composition and total cost of debt, covering our primary obligations, the SoftBank transactions, the debentures, other financial liabilities, the IFC financing, and accounts payables to selling shareholders. Afya's capital structure remains solid, with a conservative leverage position and a low cost of debt. Afya's net debt, excluding IFRS 16, divided by the midpoint of the 2025 adjusted EBITDA, was only 0.97 times. On the next page, we can look closely at our net debt variation. As of the second quarter of 2025, our net debt has reduced to BRL 1.621 billion when compared to the end of 2024, a reduction of BRL 194 million, even considering the payment of dividends and acquisitions of FUNIC, reflecting our strong operational performance and capital allocation discipline. This concludes our prepared remarks. We are proud of our strong performance we've delivered this quarter.
Our focus on improving the medical journey through an integrated educational system and medical practice solutions remains strong, helping students to become doctors, supporting ongoing medical learning, and making physicians more accurate and efficient. Looking ahead, we are excited about the opportunities in front of us and confident in our ability to keep creating value in the entire ecosystem. I will now open the conference for the Q&A session. Thank you.
If you'd like to ask a question, please raise your hand. I will begin the Q&A session. Our first question comes from Lucca from Itaú BBA. Lucca, please go ahead.
Good evening, everyone, and thank you for taking our question. Our question regards the main leverages here for profitability expansion in the quarter. You mentioned that one of the levers was improved efficiency in SG&A expenses. If you could provide just more color on which of the segments these efficiencies are focused on, and then going forward, if you expect any further dilution in SG&A expenses, that would be very helpful. Thank you.
Thank you, Luca. Blanco speaking. I will take your first questions. We always chase the higher efficiency performance by our shared service. During this period, we had some additional centralizations regarding some service that was still on the undergraduate units. We centralized it in our shared service. On top of that, remember that last year on the continuing education segment and the practical medical management medical solution segments, we made huge transformations beginning on the first quarter, centralizing all the teams from different products from different units in a single team. All of that helped us to have the expansion that we presented in our margins during 2024. These initiatives are keeping providing results during this year. It's a little bit what we are doing, and we are keep doing capturing all the synergies that we can within the three segments.
Hi, Luca. This is Virgilio, just to add here some points, just remembering that we remember that we launched four MICE medical campuses two years and a half ago, and they are still maturing. It's leveraging operational leverage as we have a very efficient G&A cooperative structure. As the top line goes up, you have all the synergies being captured to the bottom line. Also, Unidom is still maturing. It's a huge operation in Salvador. It's improving the gross margin from the campus side and also helping to leverage and push our bottom line EBITDA margin. It's worth mentioning here that this first half, it's an all-time high first half EBITDA margin since we became publicly traded in 2019. We are talking about efficiency. That's the beautiful older model that we designed in the past, and now we have the full maturation of most of our campuses on our operation.
Also, as Blanco mentioned, also capturing value and leveraging from continuing education and digital services.
Very clear, Blanco and Virgilio. Thank you.
Thank you, Lucca. The next question will come from Flavio from Bank of America. Flavio, you may go ahead, please.
Hi, good evening, Virgilio and Blanco. Thank you for the opportunity to ask questions. I have two on my side. The first one is on the guidance, more specifically on the EBITDA guidance, and taking into consideration what you just mentioned about some more efficiency and more leverage. If we analyze the first half EBITDA, we reached roughly BRL 1.8 billion for the year, which is slightly above the top of the guidance range. Given that there wasn't any guidance revision here, should we expect the EBITDA for the second half to be slightly below the first half, or you guys just prefer to be a little bit more conservative here? My second question is on tax rates.
If we consider not only the second quarter, but also the first half figures, we see an effective tax rate close to 9%, right, which is below the 15% tax rate proposed under the global minimum tax of the OECD. It would be great if you guys could share some more color on what should we expect for the second half of this year related to the tax rate here. Thanks.
Okay, Flavio, thank you for your question. I'll take the first one, and Blanco will help me with the tax rate. Regarding the guidance, we prefer to keep on the conservative side here, mostly because we have like a seasonality on continuing education. The warm-up of the new cohort of the new season, it's after September. We are in the very beginning here. We still have some uncertainty ahead, even considering that we have a successful intake on the undergraduate segment. That's the most important business. Our side here, we are confident with our guidance, and we prefer to keep the same range as we released in the first semester.
Flavio, regarding the tax rate, you are completely right. The minimum tax rate is 15%. On the first quarter and here in the second quarter, we could recognize two tax-deferred assets in our balance sheet.
With these recognitions, we could reduce the effective tax rate in this semester. Coming ahead, the impact of the OECD Pillar Two is this 15% in the long run. There is an adoption effect that is growing, but at the end of the day, keeping its effective tax rates change to converge to 15%.
All right. That's very clear. Thank you.
Thank you, Flavio. Our next question will come from Marcelo Santos from JPMorgan. Marcelo, you may go ahead, please.
Hi, good evening, Virgilio, Blanco, all the Afya team. Thanks for the opportunity. My two questions are about the medical business. The first is, could you please comment a bit on the competitive outlook for the second half intake? How did that go? How did you see competition? Whatever you could add there. The second question will be a bit about medical tickets. Could you discuss a bit? I mean, it grew 3.3%, if I'm not mistaken, and it's a bit below inflation. What are the facts that drive this? Maybe mix, maybe ramp-ups. I just want to hear from you guys. Thank you.
I'm sorry. We were on mute here. Just repeating what was mentioned, Marcel. Regarding the medical competition, as everybody knows, we had a lot of new approvals on medical seats and also institutions during the first half. We didn't have a new cohort of new or fresh students coming from high school. The competition in the second half to fulfill the seats was higher. We reduced the candidates' ratio from seven last year to around five this year. We have a good trend on the enrollments. We already started our classes. It's something that we keep our 100% of occupancy. For that, we just launched our first half 2026 intake for next year. It's very in the beginning.
We are very confident on that because now we don't have so many new seats coming as expected, but we have a new and fresh cohort of students coming, graduating from high school. The candidate ratio was reduced from 7 to 5, and it was a little bit more competition in some of the cities that we operate. About medical tickets, although we passed our gross tuition a little bit above inflation, as we are having more discounts coming from FIES, the net effect was a little bit below inflation, but we continue to pass around inflation on our strategy moving ahead. The main effect here was the 27% discount coming from FIES. Depending on the campuses, we have around 10%- 15% of our student base enrolled on medical programs on that campus level.
Perfect. Just following up on this, regarding this a bit more competitive second half, did this entail discounts, or were you able to pursue your normal pricing policy despite this bit more intense competition?
Zero discounts. The same policy.
Thank you very much.
Okay.
Thank you, Marcelo. The next question will come from Samuel from BTG.
Hi, Virgilio, Blanco. Good evening, everyone. Just one question on our end about this new taxation that you guys were commenting before. Imagine the company seeking to challenge the tax charge here through legal or like administrative means. My question is if you guys could elaborate on that opportunity, if you guys see a more likelihood or a more likely scenario through administrative efforts or through legal process. Thank you.
Hi, Samuel. Blanco speaking. I'll take this question. It's very good to have this question to make clear for you guys how we see that. We have two fronts that we are working right now regarding the new Pillar Two taxations. One is to define it in the justice level. We enter a protection asking for protections regarding these new taxations, questioning some points about how it was defined and implemented. We don't have any concrete outcome from this questioning for this challenging yet, but we are questioning on the justice level. In parallel of that, we are presenting to the executive and the lower house representatives that these taxations at the end of the day, how it was implemented, takes all the benefit from the Prouni program.
At the end of the day, as Prouni is not qualified as a qualified credit under this pillar, all the effects of the Prouni is withdrawn from the Pillar Two calculations. Because of it, major because of it, we have these higher taxations. We are showing that Prouni is being directly affected. We have more than 10,000 students in medicine, other health, and other courses being supported by Prouni. We don't want to review our policy regarding Prouni. We want to keep it because it's a very important program for the population itself. With these Pillar Two taxations, these make Prouni at risk for the companies that are affected by Pillar Two. We have these two fronts. It's very hard right now to define a probability regarding which one becomes these two successes, but we are working these two fronts.
Thank you, Blanco.
Thank you, Samuel. Our next question will come from Mauricio Cepeda from Morgan Stanley. Please go ahead.
Hi, Virgilio, Blanco . Thanks for the opportunity. We have two questions. The first one about the M&A environment, how we are seeing that because we have seen some transactions that are being performed in Brazil by your competitors that seem to be cheaper than what we saw in the past. Are you seeing the sellers being pressured somehow? Can you take advantage of this new environment? How did this wave that you did of, or how this wave of new seats has changed the environment during the diligence process? The second question is about a little bit this buyback program. We understand that 4 million shares is a significant portion of your free float and some, several times your daily traded volume. How are you considering this trade-off between the return to shareholder versus the stock liquidity? Thanks.
Thank you, Cepeda. I'll take the questions, and Virgilio, please jump in if you want. Regarding the M&A environment, we always chase the right opportunity, the right profile at the right price. Good brand, good reputations, and good location, good municipality are becoming even more relevant for defining the price from transactions. With these new entities coming to the market with all these judicializations crop, I would say that comes to the market. Of course, we have offers and we stake together with good locations, with good reputations that we can take apart and get the right pricing for it. Location, reputation is very, very important in this scenario. Regarding the buyback itself, as you mentioned, that's relevant. It's something about 4% of our number of shares and has an impact in terms of liquidity. We see that as an opportunity in capital allocation.
In all the shareholder remunerations, we discussed it a lot in the last past months. We decided that a combination between dividends and buybacks would make sense to return to shareholders, to increase the shareholders' remunerations. With the buyback, we can take opportunity about the price. We can take a price-to-action strategy on that. For the shareholders for the long term, we increase EPS in a very consistent manner. Of course, we are going to follow up liquidity to see if it's a pressure in the short term. When we implemented the buyback itself, it could increase the trading volume. In the long run, we'll increase value for our shareholders because we are increasing the EPS.
Clear, Blanco. Thank you.
Thank you, Cepeda. Just a quick reminder, if you'd like to ask questions, please raise your hand. Our next question will come from Renan Prata from Citibank.
Hi, guys. Thank you for the space. Just a very quick question here. I think the colleagues covered all my points, but it caught my attention that the residents' journey dropped significantly year over year. I just want to know if there's like any meaningful trend on the market or if this is just a punctuality on this quarter. Lastly, you guys commented on the release about the ENAMED exams. I just wanted to hear your thoughts regarding these new exams. I mean, is there any additional CapEx that you envisage to put Afya to benefit from these new standards? I don't know, just want to hear your thoughts on these new exams. Thank you.
Okay, Renan, Virgilio here. Regarding the residents' journey, we had a very low cycle in 2024, at the end of 2024, that reduced a lot the intake over 2023. As the highest seasonality is at the end of the third and fourth quarter, we are just in the beginning. We changed a lot our approach and our product at the end of the first half. In July and August, we are seeing a very good trend, but it's a very small intake when compared to the entire year. We will have an increase of all volume coming in September. It's too soon. I think the main point here is that we are seeing that residency is a very high competitive landscape. In 2024, we didn't have a successful intake, reduced, and since then, we are reducing the overall revenues.
On the other side, the ENAMED, as you mentioned, I think it's a very important opportunity in continuing education besides the graduate business that is continuing to grow and pushing our revenues as the most important product in continuing education. ENAMED, the CapEx required, it's marginal because we have all the assets in place, as also we can leverage what we are using in residents' prep and all the learning objectives that we already have in our learning and our curriculum here in Afya. It's marginal. It's just a good opportunity, not only in B2C, but also in B2B, leveraging the relationship that we had with some institutions, not only for [MTAJI], but also now for ENAMED. Okay?
Great. Thank you.
Thank you, Renan. As there are no further questions at this time, I would like to thank everyone for joining us today. On behalf of the Investor Relations team, we will remain available for any follow-up questions. We look forward to talking with you again during our next conference call. Thank you.