Good evening, everyone. Thank you for joining us for Afya's first quarter 2022 conference call. With me on the call today is Afya's CEO, Virgilio Gibbon, and Luis Andre Blanco, our CFO. During today's presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance, and involve known and unknown risks, uncertainties and other factors that may cause our 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, the statements related to our business and financial performance, expectations and guidance for future periods or expectations regarding our strategic product initiatives and the related benefits and our expectations regarding the market, as well as the potential 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. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute of the results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures in this presentation. Let me now turn the call over to Virgilio Gibbon, Afya's CEO, starting with slide three.
Thank you, Renata, and thanks everyone for joining us today on our first 2022 conference call. For us in Afya, this quarter shows another great start for the year ahead. We can finally see the pandemic losing its strength, and I'm proud to present, once again, above the expectation results, reaffirming the success and resilience of our business, along with high and predictable growth and another record cash generation. During this call, I will run through four main topics. First, I will remember some key points presented at our last investor and ESG Day, which took place last month. Second, I will reinforce our 2022 disclosed guidance with expectations of another round of growth. Third, we'll talk a little bit about Bertelsmann transaction and Afya's change of control.
Last but not least, on our fourth topic, I will present our financial highlights of the quarter, demonstrate our solid performance. Moving now to page number four. On our last investor and ESG Day, presented to you on April 7, we discussed what makes Afya unique, where are we heading to, how we are building the future, what sustains our strategy, both on the education and digital services segments, and our ESG accomplishes and expectations for the future. Inside these topics, we can highlight first, our digital services ramp-up with the expansion of our ecosystem and implementation of our B2B and B2P strategies, doubling our addressable market with Afya Digital Health. Second, our business resilience, which is guarded by high medical education demands, pricing power and industry barriers to entry.
And third, our ESG evolution, bringing up relevant points successfully performed, such as the adoption of clean energy, social impact in vulnerable areas, and embedded governance and ESG culture in the company. In case you have missed the event, please feel free to check it out on our IR website page. In there, you will find out all this information and much more. Also, our 2021 Annual Sustainability Report is now available for all of you to check it out. This is our third edition of the report and we are very proud of our achievements so far. We have consolidated our leadership position in medicine and continue our inroads into the digital medical service segment, which is consistent with our proposal to be the physician partner in all stages of their academic training in professional journey.
This strategy, which guides our business as well as its unfolding, is detailed in the report, along with the results achieved from our operations. In it, we have also gathered information on our management structure and ESG practice. In addition to the social environment impacts we produce to our operation. We encourage you to join reading. Moving to slide number five. As presented on our last results conference call, the resilience and high predictability of our business model enable us to introduce our new guidance for the entire year of 2022. Take into account the successfully concluded acceptance of new medical students, ensuring once again 100% of occupancy for the year 2022 in all of its medical schools, and also the recovery of continued education segment. Net revenue is expected to be between BRL 2.28 billion and BRL 2.36 billion.
Adjusted EBITDA is expected to be between BRL 935 million and BRL 1.015 billion for 2022, excluding any acquisition that may be concluded after the issuance of this guidance. These figures is showing another strong year ahead and represents an incredible operational growth of more than three times when compared to Afya's results in 2019, when we became a public company almost three years ago. In the next slide, we will talk about this important equity operation, even though it happened after the quarter. This month, we announced the closing of the transaction where Bertelsmann, which has been a relevant partner since 2016, acquired 6 million Class B shares of Afya from Esteves family.
As a result of the closing of this transaction, Bertelsmann and Esteves family will beneficially own approximately 57.5% and 33.1% of the voting interest, and 31% and 17.9% of the total shares, respectively in Afya. As previously said, we are delighted that Bertelsmann, one of the world's leading media companies with a significant footprint in the education sector, has advanced its commitments to Afya long-term strategy through its evaluation of increasing its stake. Also, we reinforce that we will continue to benefit from the vision and commitment of the Esteves family with their significant shareholding and active participation in our company. Now, moving to my last two slides on this presentation, I will show our financial highlights for the first quarter, along with the first session takeaways. As I said at the beginning of this call, we have started 2022 with above the expectation results.
Adjusted net revenue increased 41% year-over-year, reached BRL 567.7 million, followed by an adjusted EBITDA growth of more than 30% year-over-year, reaching BRL 270.8 million, with a margin of 47.7%. One of the highlights of this quarter is the growth in earnings per share, reaching BRL 1.42 per share, more than 22% above last year. Even considering higher net debt level and market interest rate, this result reaffirms our great operational results, capital allocation discipline on buybacks and M&A, and efficient capital structure. We also reported another great adjusted operating cash flow generation, ending the quarter with BRL 293.6 million, 51% higher than last year. We confirm our tripod of strong growth, profitability and cash generation. Moving now to the operational updates of the quarter. Our undergrad medical student reached more than 17,500 students, represented 36% growth compared to the same period last year.
Approved seats grew 29%, also in the same period. These results confirm our growth strategy that combines organic expansion to our capacity to acquire, consolidate, and integrate new seats to our operation. In this quarter, we can gladly see continued education recovery after the pandemic impacts on practical classes, presented strong revenue growth of 24% year-over-year. On the digital service highlight, we ended the quarter with BRL 47.5 million, and our ecosystem reached 260,000 active users, a growth of 17% year-over-year. This represents more than 33% of the Brazilian market of physicians. To summarize all I said so far on the next slide, Afya's predictable strong growth, high profitability, and cash generation are related to high and resilient demand, continuous pricing power, margin expansion, and M&A expertise.
After Q1 2022, even considering the adverse macro scenario, we already targeted the top of 2022 guidance and expecting another round of solid results with continued education taking off and a huge upside on our blue ocean digital health services opportunity. I will now turn the call over to Luis Blanco, our CFO, to give more color on the financial and operational metrics. Thank you.
Thank you, Virgilio, and good evening, everyone. Moving to slide 10 to discuss the financial highlights of the first quarter. It is with a lot of satisfaction that I presented another strong quarter results for Afya. Adjusted net revenue for the quarter was up 41% year-over-year to BRL 568 million, reflecting the maturation of medical seats, increase in the average ticket of medical programs, and consolidations of acquisitions of medical schools and digital service. Also important to mention the continued education recovery, which I will give more color further on, and the adjustment of BRL 1.4 million in discounts in tuition fees granted by individual, collective legal, and public proceedings related to COVID-19, mostly ceased in December due to the Supreme Federal Court decision. Adjusted EBITDA for the quarter was up more than 30% year-over-year to BRL 271 million.
While adjusted EBITDA margin decreased 390 basis points to 47.7%, mainly to the consolidations of acquisitions with lower EBITDA margins and the decrease in Medcel, mainly due to high competition in residency preparatory markets. Adjusted cash flow generations has been shown quarter-after-quarter growth, and in this one, the increase was of 51% year-over-year to BRL 294 million, which resulted in a cash conversions ratio of 113% compared to 103% in the same period of 2021. Adjusted net income for the quarter was BRL 167 million, 4.5% higher than the same period of the prior year. The gap improvements between net income and adjusted net income in this quarter was mainly related to the decreases of 40% and 79% in non-recurring expenses and in share based compensation expenses. Moving to slide 11 for discussions of key operational metrics by business unit. Starting with the undergrad programs.
Our number of medical students grew 36% year-over-year, reaching more than 17,500 students, with approved medical seats increased 29% year-over-year to 2,759 approved seats. Considering additional organic and inorganic seats expectations, we have an upside to achieve more than 32,000 undergrad medical students at maturity. The medical school net average ticket for the year, excluding acquisitions, was BRL 7,900 . An 8% growth compared to BRL 7,300 from the prior year. In terms of total tuition fees for the quarter, we reached BRL 649 million, up from BRL 418 million from the prior year, an increase of 55%. Talking about revenue mix, 77% of these are derived from medical school students and 89% from health-related courses. Present continuing education metrics.
In this quarter, we saw a great recovery in our continuing education segment, which reported a strong intake process, increasing the number of students by 9% quarter-over-quarter, despite the decrease of 6% year-over-year. Net revenues increased 24% when compared to the same period of the prior year. This recovery was especially due to better performance of IPEMED, mainly related to the interruption of the effects of COVID-19 pandemic. Moving to slide number 13, I will discuss the digital service operation metrics. On the first graph in the slide, you can see the total active payers, which are the ones that generate revenues in B2P. So far in this quarter, we have reached a number of 176,000 paying users, a 26% growth year-over-year.
Our ecosystem reached 260,000 monthly active users this quarter, 17% higher than the same period of the prior year, representing more than 33% of all medical students and physicians in Brazil, as Virgilio said before. Digital service net revenue decreased 11% due to a lower performance of Medcel in this quarter, which was caused by higher competition in the residence prep markets, as I said before. From now on, since we have disclosed our B2P and B2B strategy expectations, we will start to break down our digital service net revenue within these two, as you can see on the last graph. So from the BRL 47 million of the digital service net revenue, BRL 41 million came from the B2P and BRL 6 million came from the B2B, once the B2B strategy is still in the beginning. Moving to the next slide.
Speaking of our digital service strategy, we have exciting news to share with you today. In addition to Além da Medicina and CardioPapers, we are proud to announce another business combination, our third of 2022. Glic, a free diabetes care and management app solution for physicians and patients that uses technology to improve diabetes education and daily routine practice, connecting users, devices, and healthcare providers. With this acquisition, we will add 1,100 active physicians in our ecosystem and monitor more than 90,000 patients. This business combination represented Afya's entering into the physician-patient relationship pillar and further strengthens our strategy and ecosystem. All information related to Glic's acquisition is now available on our IR website and can be accessed through this QR code. Now moving to my two last 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 quarter were BRL 789 million, a decrease of 18% compared to the same period in the prior year. Net debt totaling BRL 1.4 billion compared with a net debt of BRL 230 million in the first quarter of 2021. This increase was mainly due to nine business combinations and license acquisitions executed during this 12-month period and payments related to shares repurchase programs, partially offset by free cash flow generation. On the next slide, you can see a table with a breakdown of our gross debt and our average cost of debt. Consider our main debts, the SoftBank transactions, loans and finance, and accounts payables to selling shareholders. This ends our prepared remarks. I will now open the conference for a Q&A session. Thank you.
If you want to ask a question, please raise your hand and we will call you. The first question comes from Cepeda from Credit Suisse. Cepeda, you may now go.
Hi, everyone. Thank you. Thank you for the time. I have some questions here. The first is about the continued education. We see that there was a recovery in the tickets, which is very healthy, although there was a small decrease in the student base. My question would be if the tickets that we are now seeing are something that we expect going forward, or if there is additional potential in these tickets. The second question is about the non-health courses that we see that the student base is declining considerably, 11%. We see currently that the other educational groups who have similar businesses, they are at least now stabilizing the student base. My question would be, if it is not the case to double down the effort to sell some of these courses, knowing that the other players are kind of stabilizing the business. Thank you.
Hi, Cepeda. It's Blanco speaking. I'll take the first questions. Regarding the continual medical education segment, we have to have in mind that we have our major operations in this segment being IPEMED. It's not the only one. We have some operations that have postgraduates courses in their offerings. What happened in this quarter, that we continued to decrease these courses in other institutions, and increase the amount of students in the IPEMED. It's a question more of mix between students that we have, because we are focused all our efforts on growing the IPEMED brands, the IPEMED offer as our flagship in the continual medical education. It's more questions of mix, decreasing the other offers other than IPEMED than increase just in tickets. Okay.
Before Virgilio gets the second question, Cepeda. It's important to mention here the IPEMED ticket is higher than in other courses that we have. Sometimes we acquire institutions such as UniRedentor that come with grad courses, as Luis Blanco already said, and they have different tickets. Okay, so if you look for IPEMED ticket, it's close to something around BRL 3,000- BRL 4,000 per month. In these other institutions, we have tickets with a lower value, like BRL 1,000-BRL 2,000 per month. Why is that? Remember that mostly of IPEMED activities are related to in-person activities, right? So it's attending patients. In these other acquisitions, we have a different kind of courses, mostly of the theory kind. In the end of the future, we should have just one model. That should be the Medcel model. Okay.
Yeah. Just add, about the Medcel, remembering that we launched seven new campuses just offering this transitional graduate, a lot of practice type of content, for very high value tuition. The trend is that we'll be much more concentrated on this type of program, high value. The mix effect will also help in terms of tickets. Remember that we are resuming growth, and we'll see for the following quarters, the student base continue to grow from being even higher, last year, even considering that we are sharing this offering in other institution different from IPEMED. Taking your second question, about the other programs, it's worth it to mention that we also saw some important growth in other health science programs. We saw on organic base, we resumed growth on our student base for high value ticket that's much more important on our operation.
Also we have some good trend for these programs in terms of our own tuition. Different from health science or other undergrads, this type of program, most of them, we are seeing a negative contribution, mainly on the new acquisition that we had in the last two years. We'll continue our discipline to shut down this type of program that is not generating value, doesn't make sense to continue on our offer, and also is not sustainable in our operation. Of course that if we have any campus that we can separate and sell in the market, we will do it, but remember that is in terms of regulation, this is complicated, because we have the license operating the different type of programs together, on our university center or in a university. But it's lower than 10% of our undergrad total revenue.
We will continue to dilute all the undergrad programs on our operation.
Oh, great. Very clear. Thank you.
You are welcome.
Great. Thank you, Cepeda. Our next question comes from Vitor Tomita. Vitor, you may now speak.
Hello, good e-
Vitor, you are on mute.
Sorry. Hello, good evening, everyone, and thanks for taking our questions. We have two questions from our side. The first one is on what is your more general strategy for physician-patient relationship software, and whether we should expect further acquisitions to complement Afya's offering portfolio in that new pillar. The second question would be also on digital. We saw some reduction in monthly active users for telemedicine and digital prescriptions at the same time as we saw an increase in monthly active users for clinical decision software. Is that being driven mostly by people resuming face-to-face consultations and more activity at clinics and hospitals, or are there any signal factors or other factors that we should take into account? Thank you.
Virgilio speaking here. It is good to hear from you, Tomita. Maybe I will start with the first question. On the physician-patient relationship in which we have just acquired Glic as announced, our main goal here is to improve the relationship on treatment, so mainly on chronical treatments like the case of Glic, which supports the diabetic treatment, generates more demand for physicians, and make it easier for patients to improve the treatment and to adhere the treatment. The idea here is to increase our penetration in senior physician cohort. In most of the case, those are the physicians in charge of chronic diseases treatment. We are also enabling the B2B offerings that we are planning to have demand generation. By chronic disease treatment, we can improve and increase the demand generating for medications, for tests, and for any operations in a hospital, for example.
To allow a more intelligent access from the pharmaceutical to those patients and physicians. This is the first question. On the monthly active users, telemedicine and prescription are both part of our practice management suite. This gets an increase year-over-year. We are seeing more clinics using our practice management tool. Although you are right, telemedicine is kind of maybe steady, not growing so fast anymore. We are not disclosing the access to those functionalities. The overall number of physicians using our solutions are increasing, and this is an important enabler for our B2B strategy.
Tomita, it's Blanco speaking. Just give you more color why we have this reduction on MAU on the clinical management tools.
That is why we exclude from the Q1 2022 numbers all the assistants from the physicians that are users in the systems, but they were not a physician itself. Every time a physician hire iClinic, for instance, they put their assistants as a user as well for free. We are counting the number of users. From the Q1 2022, we exclude these assistants from the MAU, and we put a note on the MAU table explaining that. We are not showing this number. If we put these assistants that are iClinic users on the spreadsheet almost 20,000 monthly active users, we're going to jump to 41,000 users. The growth in the number of the users would be something about 50%. That is in line with the number of the iClinic payers.
That's just a question to better show the monthly active users on this metric. We decided to exclude this number from the Q1 2022 ahead.
Very clear. Thank you very much. Sorry.
No, no problem. Just to remember you all that we have been doing great work with our data. We made a data lake that we also said about that during Afya Day. That's what we want. We want to have the better quality of data to understand who is the persona that is using our product. We understood that was fair to the investors to see and to understand how many physicians were using not only assistants. We didn't have the same view of this data when we acquired the company and what we have right now. So it's just a way to be more clear for you guys.
Very clear. Thank you all very much.
Of course. Next question comes from Lucca from Itaú BBA. Lucca, you may now go.
Hi. Good evening, everyone, and thank you for taking our question. Can you please give us a further detail on the competitive landscape for Medcel and what could we expect for the top line dynamics for the rest of the year? Secondly, if you could please comment on the integration process of Unigranrio and the recent developments on this end, it would be very helpful. Thank you.
I can start here with Medcel competition landscape. In 2019, we used to have four to six players in the market, and the benchmark was, and it still is somehow, Medgrupo with a more physical course. During the pandemic time and all the advance of internet and digital influencer, a lot of new competitors arose. We have nowadays 24- 30 new competitors in the market, most of them with simpler offerings. The options are more sophisticated in the market. There are a lot of competitors offering a specific content for a specific residence program or a specific part of the content like, for example, question simulations or much more competitiveness in the market right now.
We are working on our content, that is a very good content, high quality, to repackage it to be more competitive in this new scenario of the residency program market. We are also seeing some delay in the residence testing. It seems that most of the students, or some of the students are preferring to have higher salaries in the market as there are a lot of open positions for physicians, and delay a little bit the decision to take residence program. Or they may be also more in debt along all these years with the pandemic, the families struggle a little bit. We are seeing more competition on the company side and maybe a more steady demand on the demand side.
Yeah. Taking your second question here, Lucca. I do not know if you have any additional questions or comments about Luis explanation.
No, that was very clear, sir. If you just could please comment on Unigranrio's integration process, that would be great.
Okay, Lucca. Unigranrio, we are very anticipated in the process. All the academic integration, the new curriculum in place that helped us to move our tuition price for fresh student, for new students that enrolled the beginning of this year, and we will enroll in the second half of 2022. It is already in place, so all the top-line and guarantee 100% of occupancy was already implemented. Also, we have a successful record intake for ex-medicine programs, health programs, and also different than other undergraduate programs, so helping us to ramp up our results on Unigranrio. Remember that when we closed the operation, the contribution margin on Unigranrio was close to 25%, and we are close to 40% as a contribution margin coming from the Unigranrio units.
What we have in front of us for the next quarters, we expecting to have the full integration process, our shared services and Afya roll out by October of this year, second half. So you will have another round of synergy that you can extract and also maturing and scaling the medical program will help us to even go further in terms of margin contribution. Just a summary here. So we are better than expected in terms of integration in our calendar here, and we expect to be fully integrated by October of 2022.
That is very clear. Thank you all for your answers.
Okay, just a reminder, if you want to ask a question, just raise your hand and we will call you. Next question comes from Jessica from JP Morgan. You may now go, Jessica.
Hi. Thank you for taking my question. How have the candidate seat ratio been behaving within Afya units, and how are medicine tickets expected to behave going forward? Thank you.
Hi, Jessica. We closed this first half intake, on average, around 5.1 candidates per seat, all seats in Brazil. Of course, we have some region that we have higher ratio candidates per seat. But the national average was 5.1. It is a kind of a flat year-over-year in terms of this ratio. In terms of tuition moving forward, we are changing our price a little bit over 8% in this first quarter. The highest changing on price was for the new acquisition, that was only UNIFIPMoc and also Unigranrio. That was not counted on when you consider the average, because we exclude the acquisition to count the average tuition year-over-year. We keep considering everything together, we would move around 8% and 10% by the end of this year in terms of medical programs, okay?
Thank you. Very clear.
Yeah, complementing this question, Jessica, remember that we are gaining more value to our students' curriculum, right, Virgilio? We now have Whitebook integrated to all of our students. Medcel was something that we already did. We have now Internato 4.0. That's a new initiative. All of this we are doing so the student can perceive and have more value when they are in Afya. In the end of the day, we want to have reasons that we can increase prices in the future, and the student can perceive why they are receiving a premium offer.
Having said that, and that is important to highlight as well, that we've added to our offering to our students, AfyaHub Medical Center as well. Mostly that we've launched for Unigranrio students, the Medcel Station offer. That's the digital way, digital value propositions for the students for the first to the fourth year. It's being tested through all the students in Unigranrio. This offer is very interesting and getting the feedback, we're going to provide these solutions for every Afya student, and afterwards to offer these to other institutions as well.
Thank you. Very clear.
Okay. Thank you, Jessica. Our next question comes from Vinicius Ribeiro from UBS.
Yeah. Hi, guys. Good afternoon, everyone. Hope everyone is listening to me. Two questions on our end, and the first not necessarily tied to results. We saw last week a change in rules that regulate the Mais Médicos seat granting process. I just wanted you guys to clarify if that changes at all something about your operations and your prospects of gaining new seats going forward. Our second question, it is also a little bit on the competitive side. We are seeing, in addition to the pressure on the public and equity markets, the venture capital work is also being hit with higher interest rates and all that, which might have some repercussions going forward.
Just wanted to get your sense on how that changes your strategy on capital deployment going forward, if you guys are already seeing some better opportunities, if valuations should change to a certain extent. So just if you guys could provide some thought there would be thanks.
If it is, I will get your first question here, then Blanco will help me with the capital allocation question. So under the Mais Médicos, the normative rule that was released last week was a kind of, they were regulating, and creating the procedure, how each institution can ask for additional seats under the Mais Médicos programs. So that was the main idea behind this normative rule last week. For today, in the morning, we have this normative rule canceled. So they return what was before the normative rule released last week. That was, you can only ask for once, to increase the seats for any Mais Médicos campuses, for Mais Médicos 2 and Mais Médicos. So no change. The idea was trying to give that a more clarification for this new process, but to keep the same rule that was expected before the rule was released.
Luis Blanco was speaking about your second questions. When you mentioned the VCs pressures, I understand that you want to talk about the digital completeness of our ecosystem. Within these Glic acquisitions that was just announced today, we completed all the pillars in our view. So we have the most completed ecosystem offering for physicians in the country, with these 260,000 active physicians and medical students using our physicians. What we want with these solutions, to increase usage, to increase penetrations within that. So in terms of offer, we are now satisfied with the completeness of it, and we are going to move forward. We can move forward in acquisition if these acquisitions add volume on these offers, okay? But for now on, as we complete the physicians' relationship, we completed the ecosystem as a whole.
Giving more color, it's like we talk about digital, let's talk about undergraduate as well. What you can expect that we keep our disciplines on business combinations. We still see that we can grow 200 seats per year, as we guided the market. We are working on that. And of course, we know that the increase in capital, the cost of capital that we had with this increase of interest rate, increase of risk, and we keep our discipline in allocating the capital. And allocating the capital, we have to mention the buyback as well. We just concluded in May our third buyback program. So we are 100% completed. And we keep evaluating opportunities, keeping evaluating the possibility to put in place another buyback. But as of today, we disclose to the market that we have completed our third buyback program 100% in the beginning of May.
Got it. Thanks, Virgilio and Blanco.
As we don't have any more questions, I would like to thank you all for participating today. I make myself available if you need anything else from the investor relations. And just a reminder that we just disclosed today our sustainability report. Okay, guys. Thank you so much and have a good night.