A. History and Development of the Company Afya Limited is a publicly held company listed on the Nasdaq since July 2019, and therefore subject to certain reporting requirements of the Exchange Act. We were incorporated on March 22, 2019, as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies. Our corporate purposes are unrestricted, and we have the authority to carry out any object not prohibited by law as provided by Section 7(4) of the Companies Act (As Revised) of the Cayman Islands, or the Companies Act. Our affairs are governed principally by (i) our Amended and Restated Memorandum and Articles of Association; (ii) the Companies Act; and (iii) the common law of the Cayman Islands. As provided in our Amended and Restated Memorandum and Articles of Association, subject to Cayman Islands law, we have full capacity to carry on or undertake any business or activity, do any act or enter into any transaction, and, for such purposes, full rights, powers and privileges. Our registered office is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our internet address is https://ir.afya.com.br/. Our History We founded Afya Brazil with the goal of revolutionizing medical education in Brazil by providing a more effective, individualized and intuitive learning experience. In order to achieve that, we have assembled institutions that collectively will help us fulfill our mission. The combination of Afya Brazil, one of the largest Brazilian medical education groups, and Medcel, one of the leaders in residency exams preparatory courses, was the first step toward achieving our goal. 45 Table of Contents Afya benefits from over 25 years of medical education experience through Afya Brazil and Medcel, both of which were founded and managed by physicians, with a focus on academic excellence and deep roots in technology and innovation. We were founded in 1999 with the opening of our first medical school, Centro Universitário ITPAC, by the Esteves Family, a family of medical professionals with a passion for medical education. Since its inception, our focus has been on medical and related health courses. As of December 31, 2024, 22,867 physicians had graduated with us since the founding of our predecessor companies. Over the last decade, Afya Brazil grew into a large medical education group, with several campuses and as of December 31, 2024, had 76,988 undergraduate students, of which 49,825 were health-related students and 27,163 were non-health-related students. Medcel was founded by Dr. Atilio Barbosa in 2004, a pioneer in online medical preparatory courses. In 2007, Medcel launched a proprietary platform to broadcast online classes. Over the years, Medcel evolved from its online platform into an adaptive digital learning environment where students can access digital media, watch medical case studies, listen to podcasts and answer personalized quizzes. In 2018, Medcel began offering its high-quality tech-enabled content in different formats and to other academic institutions. In 2016, the private equity group Crescera Investimentos (formerly Bozano Investimentos) joined forces with Afya Brazil and Medcel, laying out the foundations for the creation of the largest medical education group in Brazil. Crescera has since sold its interest in Afya to Bertelsmann in 2021. See “— Acquisition of Crescera Shares by Bertelsmann” below. The industry expertise of the founders of Afya Brazil and Medcel combined with the governance and financial support of Crescera Investimentos allowed the group to dive deeper into its mission as a thematic educational service provider focused on the lifelong learning career of physicians in Brazil. We achieve this through the production and distribution of high-quality content through technology. In order to achieve our goals, we have laid the foundations of Afya focusing on a four-step process: Management Professionalization Our highly skilled and experienced management team has extensive experience in the education industry and was hired from some of the best health, education and technology institutions in Brazil. Our management team is part of a company-wide strategy to attract and retain the best talent. Our CEO, Virgilio Deloy Capobianco Gibbon, has over 16 years of experience in education. Our CFO, Luis André Blanco, has over 15 years of experience as CFO, and Lélio de Souza Junior, our Vice President of Medical Practice Solutions, has more than 25 years of experience in technology companies. Integration of Processes & Services In order to create synergies, we have developed several initiatives to improve operational efficiency and to integrate processes across all our campuses and operations. Our high standard Shared Services Center and Integrated Systems (ERP + Academic System + Learning Management System) went live in October 2017. These initiatives will help us grow our student base and keep our marginal costs low. In 2017, we began to roll out the integration of the educational curriculum throughout all medical school units. This rollout begins with the new entrants curriculum and will be fully completed as the course matures its students. Accordingly, we have been streamlining the teaching methodology and quality across our undergraduate medical courses. Since the second half of 2019, all undergraduate medical students have access to our fully integrated Educational Curriculum. Continuing Innovation We take a blended approach to our methodology, integrating in-person teaching with online tools and features. By integrating face-to-face and online features through data collection and analysis, we are able to individualize the student experience at all times. Through seven key initiatives, we create a 100% student-centric ecosystem. These initiatives include: Medical content mapping, proprietary methodological assembly, significant learning experiences, comprehensive adaptive learning, daily learning process evaluation, and practical learning and knowledge. 46 Table of Contents Organic Growth and Entry into Adjacent Markets In 2018, the MEC awarded new licenses to Afya Brazil, allowing it, subject to the verification by the MEC of the satisfactory implementation by Afya Brazil of all regulatory requirements, to operate seven new medical schools through the “Mais Médicos II” program, with an aggregate amount of 350 new medical school seats per year. As of December 31, 2024, six of these campuses are already operating, as described below. We expect an additional campus to start operations in 2025. On May 9, 2019, we consummated the acquisition of IPEMED, marking our entry into the medical graduate and specialization segment. IPEMED, a leading medical graduate school founded in 2006, was merged into by Afya Brazil in 2024 and subsequently rebranded as Afya Educação Médica. On October 2, 2020, we announced that the Secretary of Regulation and Supervision of Higher Education of the MEC granted authorization for Afya to operate the undergraduate medicine course in Santa Inês in the State of Maranhão, under the “Mais Médicos II” program. This medical school was the first authorized in connection with the “Mais Médicos” program for Afya and contributed 50 seats to our operating seats base. Santa Inês is one of the seven undergraduate campuses Afya was awarded in 2018 in connection with the “Mais Médicos” program, the largest number awarded to any education group. This campus has been operational since October 2020. On December 30, 2020, the Secretary of Regulation and Supervision of Higher Education of the MEC granted the authorization for Afya to operate the undergraduate medicine course in Cruzeiro do Sul in the State of Acre, under the “Mais Médicos II” program. This medical school is the second authorized school in connection with the “Mais Médicos” program for Afya and contributed 50 seats to our operating seats base. This campus has been operational since the first semester of 2021. On November 5, 2021, the Secretary of Regulation and Supervision of Higher Education of the MEC granted the authorization to Afya to operate the undergraduate medicine course in Garanhuns in the State of Pernambuco, under “Mais Médicos II” program. This medical school contributed 120 seats to our operating seats base. This campus has been operational since the second semester of 2022. On February 23, 2022, we announced that the Secretary of Regulation and Supervision of Higher Education of the Ministry of Education (“MEC”) authorized the operations of the medical schools in Abaetetuba, in the State of Pará, and Itacoatiara, in the State of Amazonas, both under the “Mais Médicos II” program. With the authorizations, Afya reaches its third and fourth authorized schools to start operating under the Mais Medicos II program. Each medical school contributed with 50 seats. These campuses have been operational since February 2022. On March 16, 2022, the Secretary of Regulation and Supervision of Higher Education of MEC authorized the operation of medical schools in Bragança, in the State of Pará, and Manacapuru, in the State of Amazonas, both under the “Mais Médicos II” program (our fifth and sixth authorized schools under the Mais Medicos II program, respectively). Each medical school contributed with 50 seats. These campuses have been operational since March 2022. On March 18, 2022, the Secretary of Regulation and Supervision of Higher Education of MEC authorized 28 seats additional at Centro Universitário São Lucas Ji-Parana in the city of Ji-Parana, located in the state of Rondônia. The earn-out related to the seats approval is R$800,000 per seat, adjusted by the CDI rate from the closing until the payment date, of which 50% was paid in April 2022 and the remaining amount was paid in March 2024. The operation of such additional seats started in June 2022. On December 29, 2022, Afya announced that MEC authorized the increase of 64 medical school seats of Faculdade Santo Agostinho, in the city of Itabuna, located in the state of Bahia. No additional commitment is required regarding this authorization. The operation of such additional seats started in the first semester of 2023. On January 24, 2024, Afya announced that MEC authorized the increase of 40 medical school seats at the Faculdades Integradas Padrão (FIP Guanambi) campus, in the city of Guanambi, located in the state of Bahia, which resulted in an additional payment of R$49.6 million in February 2024. With the authorization, we reached 100 medical school seats on this campus. On July 12, 2024, the MEC authorized the increase of 80 medical school seats at the Centro Universitário Tiradentes Alagoas (UNIMA), campus in the city of Maceió, located in the state of Alagoas, which resulted in an additional payment of R$107.6 million in August 2024 under the DelRey acquisition. With this authorization, Afya reaches 220 medical school seats on this campus. 47 Table of Contents On September 6, 2024, Afya announced that following the conclusion of an administrative procedure, MEC has granted the request for reconsideration submitted by Unigranrio. According to the e-MEC portal, Unigranrio reestablished 10 medical school seats in the city of Rio de Janeiro, reaching 318 medical school seats across both Unigranrio campuses, contributing to Afya´s current 3,593 total approved medical school seats, including 175 seats from Unidom which are subject to a final conclusion of the court proceedings. The continued operation of certain of these campuses was subject to the verification by MEC of the satisfactory implementation by Afya Brazil of all regulatory requirements. See “Item 4. Information on the Company—Business Overview—Our Geographic Presence.” The acquisitions of Medical Harbour, Além da Medicina and CardioPapers strengthened our digital capabilities for our Continuing Education segment, whereas the acquisitions of PEBMED, Medphone, iClinic, Medicinae, Cliquefarma, Shosp, RX PRO and Glic marked our entry into the digital health services sector that now comprises our Medical Practice Solutions, complementing our end-to-end offering to healthcare professionals. For more information on Medical Harbour, Além da Medicina, CardioPapers, PEBMED, Medphone, iClinic, Medicinae, Cliquefarma, Shosp, RX PRO and Glic, see “—B. Business Overview.” Initial Public Offering and Equity Follow-on Offering In July 2019, we completed our initial public offering, in which we sold an aggregate of 15,805,841 of our Class A common shares at a public offering price of US$19.00 per common share. We received approximately US$242.7 million of net proceeds from our initial public offering (i.e., after deducting underwriting discounts, commissions and offering expenses). Our shares began trading on the Nasdaq Global Select Market on July 19, 2019, under the symbol “AFYA.” In February 2020, we completed an equity follow-on offering, in which we sold an aggregate of 3,260,480 of our Class A common shares at a public offering price of US$27.50 per common share. We received approximately US$86.6 million of net proceeds from our follow-on offering (i.e., after deducting underwriting discounts, commissions and offering expenses). SoftBank Investment On April 26, 2021, we announced that the SoftBank Latin America Fund, or SoftBank, agreed to purchase R$822 million, equivalent to US$150 million, of Afya’s Series A perpetual convertible preferred shares. In addition, Crescera Educacional II Fundo de Investimento em Participações Multiestratégia and certain members of the Esteves family agreed to sell 2,270,208 Class A common shares to SoftBank. In connection with such sale, at the time, Paulo Passoni from SoftBank was appointed as a board member of Afya, being replaced by Maria Tereza Azevedo in 2022. The key terms of the Series A perpetual convertible preferred shares, as set forth under the relevant certificate of designations, are: (i) 6.5% per annum cumulative dividend payable quarterly and in Brazilian reais (payable in U.S. dollars in Brazilian reais equivalent); (ii) SoftBank shall have the right at any time, to convert its Series A perpetual convertible preferred shares into 5,917,888 common shares, at an initial conversion price established at US$25.35; (iii) SoftBank shall have the right to redeem any time after the 5th year anniversary at 105% premium; (iv) Afya will have the right to force conversion after the 3rd year anniversary if forced conversion trigger conditions are satisfied; and (v) Afya shall have the right to redeem any time after the 7th year anniversary at 105% premium. For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness—Series A Perpetual Convertible Shares” and note 12.2.1 to our audited consolidated financial statements included elsewhere in this annual report. As of December 31, 2024, SoftBank and its affiliates would beneficially own approximately 6.6 % of our outstanding common shares, excluding treasury shares and including the Series A perpetual convertible preferred shares on an as-converted basis. Acquisition of Crescera Shares by Bertelsmann On June 7, 2021, an affiliate of Bertelsmann acquired the entirety of the 23,074,134 Class B Afya’s common shares held by Crescera Educacional II Fundo de Investimento em Participações Multiestrategia, or “Crescera Educacional,” pursuant to a provision in Afya’s amended and restated memorandum and articles of association then in effect and the shareholders agreement between certain members of the Esteves family and Crescera Educacional, which granted Bertelsmann the right to acquire Crescera Educacional’s Class B common shares and become a party to the shareholders’ agreement. 48 Table of Contents Bertelsmann is a media, services and education company that operates in about 50 countries around the world. It includes the entertainment group RTL Group, the trade book publisher Penguin Random House, the music company BMG, the service provider Arvato, the Bertelsmann Printing Group, the Bertelsmann Education Group and Bertelsmann Investments, an international network of funds. Since Afya’s inception, Bertelsmann has indirectly held a stake in Afya through its investment in Crescera Educacional. In connection with and following such transaction, Bertelsmann appointed Kay Krafft, Shobhna Mohn, Christina Krebs and Benedikt Dalkmann as members of our board of directors. Shobhna Mohn later resigned from our board of directors, effective as of June 30, 2024. For more information, see “Item 6. Directors, Senior Management and Employees”. Acquisition of our Corporate Control by Bertelsmann On May 4, 2022, Bertelsmann acquired 6,000,000 of our Class B common shares from the Esteves Family at a purchase price of US$26.90 per share. As a result of the closing of the transaction, Bertelsmann came to beneficially own approximately a 57.5% voting interest in Afya. We also entered into a new CEO executive employment agreement with Virgilio Deloy Capobianco Gibbon, extending its period through May 2027. The extension was made in connection with the increase of Bertelsmann’s stake in Afya to continue to execute the expansion in the medical education business and the deployment of our digital health services strategy. B. Business Overview We are the leading medical education group in Brazil based on the number of private medical school seats, according to a MEC report as of December 31, 2024, delivering an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners from the moment they join us as medical students through their medical residency preparation, graduate courses, medical graduate courses and continuing medical education activities, or CME, including through digital health services. Our innovative methodological approach combines integrated content, interactive learning, and an adaptive experience for lifelong medical learners. Through our educational content and technology-enabled activities, we focus on effective, personalized learning that mirrors one-on-one tutoring. Based on our number of MEC's approved medical seats, as compared to our main competitors, we have the largest medical education footprint in Brazil. Our undergraduate and graduate campuses are spread across 19 Brazilian states, and our digital medical platform is available across Brazil. As of December 31, 2024, our network of 57 undergraduate and graduate medical school campuses consisted of 20 graduate facilities, 36 undergraduate operating units (i.e., units that have been approved by MEC and that have commenced operations) and one approved unit (i.e., a unit that has been approved by MEC but that has not yet commenced operations), compared to 32 campuses as of December 31, 2023 and 30 campuses as of December 31, 2022. As of December 31, 2024, our network of medical school seats consisted of 3,543 operating seats (seats that have been approved by MEC and that have commenced operations) and 50 approved seats (seats that have been approved by MEC but that have not yet commenced operations), compared to 3,113 operating seats as of December 31, 2023 and 2,773 operating seats as of December 31, 2022. Following our acquisition of Medcel in the first quarter of 2019 and IPEMED in the second quarter of 2019, we also offer residency preparatory courses and medical graduate courses, delivering printed and digital content, an online medical education platform and practical medical training. The acquisitions of Medical Harbour, Além da Medicina and CardioPapers strengthened our digital capabilities for our Continuing Education segment, whereas the acquisitions of PEBMED, Medphone, iClinic, Medicinae, Cliquefarma, Shosp, RX PRO and Glic marked our entry into the digital health services sector that now comprises our Medical Practice Solutions segment, complementing our end-to-end offering to healthcare professionals. Through PEBMED, we have three different products: (i) Whitebook, a mobile and web application that assists doctors and medical professionals in clinical daily decision-making; (ii) Nursebook, a mobile application that assists nurses in clinical decision-making; (iii) Portal PEBMED, a website that offers free content, including opinions, papers and updates in connection with medical news and scientific publications. The acquisition expanded our products and services offerings and offers significant cross-sell and upsell opportunities. As part of our ongoing efforts to enhance our digital platforms, the Portal PEBMED was discontinued in 2024 and replaced by the Afya Portal, which continues to provide high-quality medical content and resources for healthcare professionals. 49 Table of Contents iClinic is a SaaS model physician-focused technology company and one of the leading medical practice management software in Brazil. They seek to empower doctors to be more independent and have more control over their careers by digitalizing their daily routine, so they can increase their productivity and deliver better healthcare services. Their portfolio includes: (i) Electronic Medical Record: the first electronic medical record as a SaaS model in Brazil focused on the physician experience; (ii) Clinical Management System: with this software, doctors can schedule patients online, organize their financial records, use marketing tools to promote their clinics and others; (iii) Telemedicine: a platform to provide online consultations fully integrated with doctor’s schedule and records; and (iv) Physicians Marketplace: a website that connects doctors and patients to schedule consultations. The platform is currently used for almost 27 million medical consultations per year, of which around 187,489 were through telemedicine and prescribed more than 10.8 million electronic medical prescriptions. Medicinae is a healthcare technology company specializing in healthcare payments and financial services. It offers a financial platform that allows healthcare professionals to manage receivables in an efficient and scalable way using FIDC (receivables investment fund). We believe Medicinae relieves a number of challenges in the healthcare payments industry, by reducing long payment cycles for professionals and consolidating financial information, improving the consumer financial experience. Medical Harbour offers educational health and medical imaging solutions through an interactive platform for anatomical study, 3D virtual dissection and analysis of medical images, which allow the exploration, and knowledge of human anatomy with digital resources: (i) educational health solutions: Athena Hub specialized in anatomy was created to support dynamic teaching and allow physicians, teachers and students to interact and manipulate a real human body on a digital platform. Considering the high prices, restriction policies and difficulty on maintaining a human body for anatomy classes, Athena Hub allows students to interact with a digital human body instead of the aged and degenerate bodies for educational purposes. The solution count with virtual body, anatomy modules, and real exam analysis with photorealistic rendering; and (ii) medical imaging solutions: Athena DICOM and MH Cloud specialized in medical imaging with a range of products that simplifies radiology and teleradiology. Allow physicians to visualize, manipulate, share and store medical imaging with the certification of ANVISA (Brazilian Health Agency). Cliquefarma is a healthtech company operating a free-to-use website that tracks prescription drugs, cosmetics and personal hygiene product prices in Brazil. Users of Cliquefarma can search for medications or healthcare products and compare prices from over 9,404 pharmacies in Brazil. The traffic generated is monetized through a cost-per-click model, where drugstores pay for each click on their ads, and a cost-per-acquisition model, where drugstores pay for each concluded sale. In 2024, Cliquefarma generated traffic of 6.6 million visitors. Shosp is a clinical management software that offers all functionalities needed for clinics all over Brazil to manage their financials, patients’ appointments, medical records, marketing, and others. The acquisition of Shosp reinforces the digital prescription digital pillar and creates synergies with iClinic and Medicinae solutions. RX PRO is a digital platform that connects physicians with the pharmaceutical industry, providing specialized and personalized marketing for those companies, in a more convenient way for physicians. RX PRO has already delivered free samples to more than 72,000 physicians with an innovative digital experience, with a Net Promoter Score, or NPS, of 84.6 and as of the date of this annual report has 12 pharmaceutical companies using its platform. RX PRO is monetized by providing a B2B subscription service to the pharmaceutical industry. Além da Medicina is an online medical content platform for physicians and medical students that provides educational tools and technical medical content to assist them throughout their careers. Its robust content includes mentoring for residency, soft skills, finance, accounting, and investment basics for physicians. The platform also has a strong digital presence, with more than 135,000 followers on Instagram. Afya Papers is the main medical content and education platform in the Cardiology, Endocrinology, Dermatology, Gynecology and Obstetrics, Pediatric and Psychiatrist field, offering courses and books developed by physicians and for physicians, covering all phases of the medical career, aligned with Afya’s overall business strategy. The platform was formerly known as CardioPapers and has been rebranded as part of Afya’s identity. Afya Papers had over 500,000 followers on Instagram in 2024. The platform includes medical update courses, such as a cardiology specialist degree preparatory course, cardiological emergencies course, preoperative course, dyslipidemia course, electrocardiogram (EKG) course and diabetes course, exploring the cardiologic medical field and also expanding to other medical areas. 50 Table of Contents Glic is a free diabetes care and management app solution for physicians and patients that uses technology to improve diabetes education and daily routine practices, connecting users, devices and healthcare providers. In addition to health sciences courses, which comprise medicine, dentistry, nursing, radiology, psychology, pharmacy, physical education, physiotherapy, nutrition and biomedicine, we also offer degree programs and courses in other subjects and disciplines across several of our campuses, including undergraduate and graduate courses in business administration, accounting, law, civil engineering, industrial engineering and pedagogy. These non-health courses are not part of our core business, although the number of non-health sciences courses we offer has increased as a consequence of our strategic acquisitions of multi-disciplinary schools with strong health sciences programs, which are our principal focus. Although non-health courses are not part of our growth strategy, we expect to continue to offer them to the extent they generate local demand. Following our acquisition of Medcel in the first quarter of 2019 and IPEMED in the second quarter of 2019, we also offer residency preparatory courses and medical graduate courses, delivering printed and digital content, an online medical education platform and practical medical training. As of December 31, 2024, we had 76,988 enrolled students, compared to 66,034 enrolled students as of December 31, 2023, representing an increase of 16.6% from 2023, and 58,200 enrolled students as of December 31, 2022, representing an increase of 13.5% from 2022. Our business model is characterized by high revenue visibility and operating leverage. Approximately 90% of our revenue for the years ended December 31, 2024, 2023 and 2022 was composed of the monthly tuition fees we charge students enrolled in our undergraduate and graduate courses. Our ability to execute our strategy and business model through acquisitions and organic growth has led to growth, profitability and cash generation: · Our revenue totaled R$3,304.3 million, R$2,875.9 million and R$2,329.1 million in the years ended December 31, 2024, 2023 and 2022, respectively, representing a compound annual growth rate, or CAGR, of 19.1% since 2022; · Medical school’s revenue represented 85.9%, 85.5% and 83.4% of our undergraduate programs revenue in 2024, 2023 and 2022, respectively. The average monthly net ticket for medical school tuition fees was R$8,849 for the year ended December 31, 2024, which represented an increase of 4.6% from R$8,460 for the year ended December 31, 2023, which, in turn, represented an increase of 6.1% from R$7,973 for the year ended December 31, 2022; · Continuing Education and Medical Practice Solutions revenues totaled R$417.2 million, R$376.1 million and R$298.8 million in revenue for the years ended December 31, 2024, 2023 and 2022, respectively; · We generated net income of R$648.9 million, R$405.4 million and R$392.7 million in the years ended December 31, 2024, 2023 and 2022, respectively, representing a CAGR of 28.5% since 2022; · Our Adjusted EBITDA totaled R$1,455.6 million, R$1,165.7 million and R$961.9 million in the years ended December 31, 2024, 2023 and 2022, respectively, representing a CAGR of 23.0% since 2022; · Our Net cash flows from operating activities was R$1,433 million, R$1,044 million and R$844 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our Operating Cash Conversion Ratio was 102.2%, 97.1% and 94.4% for the years ended December 31, 2024, 2023 and 2022, respectively. Quality is a cornerstone of our value proposition. As of the date of this annual report, our average General Course Index score, which is measured and published by MEC, and is based on certain institutional planning and development, academic, and management criteria, was 2.62 on a scale of 1 to 5, in line with the Brazilian average of 2.62. Recent Developments On April 23, 2025, MEC officially announced the launch of the National Medical Education Assessment Exam (Exame Nacional de Avaliação da Formação Médica - Enamed), an annual examination that will be administered to students completing medical school programs in Brazil. The initiative is intended to evaluate the quality of medical education and will be conducted based on a reference framework and theoretical assessment instruments developed by INEP, in accordance with the national curriculum guidelines for medical programs. We believe this initiative will reinforce the importance of consistent academic standards across medical programs in Brazil. The establishment of annual oversight mechanisms, coupled with the exam’s anticipated role as a criterion for admission into medical residency programs, is expected to enhance student engagement and strengthen institutional accountability. 51 Table of Contents Our Recent Acquisitions The entry point to a medical career begins in undergraduate institutions, so part of our mission is to consolidate this market. Accordingly, expanding our operations through acquisitions has been a key component of our growth strategy. We have been able to apply our operating business model to our acquisitions, allowing us to add quality, value and increase profitability. In addition, we have equipped ourselves through key initiatives for strategic and relevant acquisitions to our portfolio, including: the creation of a Shared Services Center dedicated to serving our business units and running our integration processes, the centralization of content creation and the creation of a dedicated sales team for each market we operate in. Our recent acquisitions, which were all made through Afya Brazil, include: Além da Medicina On March 4, 2022, we acquired 100% of the total share capital of Além da Medicina. The aggregate purchase price of R$26.8 million is comprised of: (i) R$14.9 million paid in cash on the transaction closing date; (ii) an earn-out (“contingent consideration”) of up of R$19.2 million is payable in connection with revenue target achievements for 2023 and 2024; and (iii) a price adjustment related to net debt of R$0.8 million in favor of selling shareholders. As of December 31, 2024, the contingent consideration of R$9.6 million was based on the estimated payment considering the facts and circumstances at that date. CardioPapers On April 5, 2022, we acquired 100% of the total share capital of CardioPapers. The aggregate purchase price of R$42 million is comprised of: (i) R$34.9 million paid in cash on the transaction closing date; (ii) an earn-out (“contingent consideration”) of up of R$15 million is payable in connection with revenue target achievements for 2023 and 2024 and other goals relating to market credentials for 2023 and 2024; and (iii) price adjustment related to net debt of R$0.3 million in favor of Afya Brazil. As of December 31, 2024, the contingent consideration of R$10.0 million was based on the estimated payment considering the facts and circumstances at that date. Glic On May 23, 2022, we acquired 100% of the share capital of Glic. Glic is a free diabetes care and management app solution for physicians and patients that uses technology to improve diabetes education and daily routine practices, connecting users, devices and healthcare providers. The aggregate purchase price of R$30.6 million is comprised of: (i) R$21.6 million paid in cash on the transaction closing date; and (ii) an earn-out (“contingent consideration”) of up of R$12.0 million payable in connection with revenue target achievements for 2023 and 2024 and product development goals. We paid R$3.0 million as contingent consideration in 2023 and the remaining balance is no long due and payable given the earn-out targets have not been met. DelRey On January 2, 2023, we acquired 100% of the total share capital of DelRey, which acquisition encompasses the operations of Centro Universitário Tiradentes Alagoas, or UNIMA, and Faculdade Tiradentes Jaboatão dos Guararapes, or FCM Jaboatão. The transaction does not include the “UNIMA” and “FCM Jaboatão” trademarks, which were licensed to Afya during the first year of operation. The aggregate purchase price of R$816.2 million is comprised of: (i) R$575.0 million paid in cash on the transaction’s closing date; and (ii) R$234.0 million to be paid in three annual installments of R$134.0 million in January 2024, R$50.0 million in January 2025 and R$50.0 million in January 2026, as adjusted by the SELIC rate, of which only the last installment remains outstanding. The aggregate purchase also includes R$7.2 million estimated at fair value as of the date of acquisition relating to an offer of our digital solutions free of charge until December 31, 2030 for medical students of universities owned by the sellers but which were not a part of this transaction. On July 12, 2024, MEC authorized the increase of 80 medical school seats of UNIMA, which resulted in an additional payment of R$107.6 million to the former shareholders of UNIMA. 52 Table of Contents Unidom On July 1, 2024, we acquired 100% of the total share capital of Unidom Participações S.A., which acquisition encompasses the operations of Unidompedro and Faculdade Dom Luiz, or “Unidom,” Instituição Baiana de Ensino Superior Ltda., or “IBES,” and SESSA — Sociedade de Educação Superior do Semi-Árido Ltda., or “Sessa.” The aggregate purchase price of R$620.8 million is comprised of: (i) R$340.8 million paid in cash on the transaction’s closing date; and (ii) R$280.0 million to be paid in ten annual installments, adjusted by the CDI (Interbank Certificate of Deposit) rate, and it is conditioned upon the maintenance of the authorization of the 175 medical school seats in each year immediately before payment. The remaining balance will be accelerated if a final and non-appealable ruling of certain court proceedings confirms the authorization for all 175 medical school seats. In turn, if a final ruling does not confirm the authorization for such 175 medical school seats, the outstanding balance will no longer be due. FUNIC On December 19, 2024, we signed a definitive contract for the acquisition 100% of the total share capital of Faculdade Masterclass Ltda., or “FUNIC,” which will add 60 medical school seats to Afya in Contagem, a city in the metropolitan area of Belo Horizonte, the capital of the state of Minas Gerais. The aggregate purchase price is R$100 million, and the Net Debt will be deducted at closing. The purchase consideration of R$60 million will be paid in cash at the closing date, and R$40 million will be paid in three annual installments adjusted by the Brazilian interbank interest rates (“CDI”). Additionally, the acquisition includes a contingent consideration provision for up to 60 additional medical school seats. If approved by MEC within 36 months of the closing date, we will be required to make an additional payment of R$1 million per approved seat, up to a maximum of 60 medical school seats. The closing of the transaction is subject to customary conditions precedent and is expected to be completed in May 2025. Our Competitive Strengths Continuous focus on disrupting traditional medical education · We have an in-depth understanding of medical education and the related issues faced by students in Brazil. As the largest medical education group in Brazil on a per-seat basis, according to MEC, we are able to identify trends and adapt our services accordingly; · We have developed a methodological approach to learning that incorporates individualization and technology in both digital and physical format; · We currently produce content that is centralized, continuously updated and available to all our institutions and students; · We have the largest operating infrastructure in medical education in Brazil on a per-seat basis, according to MEC, with more than 614 partner teaching hospitals and clinics and 313,119 users in Afya's ecosystem; · We believe we have developed the first instructional medical web series created globally, and we have completed the first two seasons and have already begun working on the third season; · We believe we are the first education group in Brazil to offer a fully digital and customized service for medical residency exam preparation; · We believe we are the first player to offer supplemental medical education content to third-party institutions through a business-to-business model; and · We started offering content and clinical tools for healthcare professionals, including mobile and web apps. High-quality standards Quality is a cornerstone of our value proposition. Our operating infrastructure and innovative methodological approach have achieved high levels of satisfaction across our medical schools. Through our digital platforms, we monitor our students’ learning experience using several criteria and variables. Our NPS, a widely known survey methodology that measures the willingness of customers to recommend a company’s products and services, showed a consistent improvement across all groups of medical students in 2024 compared to 2023. Among students from the 1st to the 4th semester, the NPS rose from 40 in 2023 to 46 in 2024. For those in the 5th to the 10th semester, it increased from 25 to 29. Finally, among students in the last two semesters of the program, the score went up from 26 to 31. This gradual improvement in our NPS score shows our continuing commitment to high-quality education and the medical careers of our students. Additionally, according to the latest results released by the Brazilian government on April 2, 2024, our average General Course Index, which is measured and published by MEC, and is based on certain institutional planning and development, academic and management criteria, was 2.62 on a scale of 1 to 5, in line with the Brazilian average of 2.62. See “Item 4. Information on the Company—Business Overview—Regulatory Overview—Regulatory Processes of Post-secondary Education Institutions—Accreditation of Post-secondary Education Institutions and Authorization and Recognition of Courses” for further information on the General Course Index. 53 Table of Contents In addition, through our online medical education platform that offers distance learning residency preparatory courses, we are able to monitor our students’ learning experience using several criteria and variables, including the educational materials they access and use, frequently asked questions, their study hours and schedule, and their attendance record. Furthermore, as a result of the quality of the content and methodology and the differentiated services offered by Medcel, third-party medical schools proactively contact it seeking to adopt Medcel’s medical education content to improve their medical students’ learning experience and academic scores. As of December 31, 2024, 17 third-party schools had adopted Medcel’s medical education content compared to 17 as of December 31, 2023. The nature of our business model Attractive financial model: We have a strong combination of significantly low customer acquisition costs, calculated as the sum of sales and marketing and personnel expenses divided by student additions, which were approximately R$1,576, R$1,415 and R$1,882 per student as of December 31, 2024, 2023 and 2022, respectively, high occupancy rates of approximately 100% of medical school seats in our medical schools as of December 31, 2024, 2023 and 2022, strong net cash flows from operating activities which was R$1,433 million, R$1,044 million and R$844 million for the years ended December 31, 2024, 2023 and 2022, respectively, and operating cash conversion ratio which was 102.2%, 97.1% and 94.4% as of December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, our Life Time Value (LTV) was R$447,647, calculated as the gross profit per student of R$74,602 divided by 17% (to account for one-sixth of the student base graduating every year). As of December 31, 2023, our LTV was R$423,308, calculated as the gross profit per student of R$70,551 divided by 17%. As of December 31, 2022, our LTV was R$425,658, calculated as the gross profit per student of R$70,943 divided by 17%. Contracted growth: We have contracted growth visibility into medical schools that are in the initial six years of operations as a result of the six-year maturation cycle of our medical school seats. This cycle begins when a medical school becomes operational, with a first year medical school class that progresses through the required six years as the next classes begin behind it, and ends when the medical school has six school years of medical students and has therefore reached capacity at maturation (i.e., the maximum number of approved seats). Since the maximum number of medical seats per medical school is set by regulation, the only way to grow our medical school seats, and thus our numbers of enrollments, is through acquisitions or starting new medical schools. As of December 31, 2024, we had 3,593 approved medical school seats, including 175 seats from Unidom which are subject to a final conclusion of the court proceedings, out of an expected total capacity of 25,870 medical school enrollments by 2031, which gives us visibility as to the growth potential of our revenues over the period. See “Item 5. Operating and Financial Review and Prospects—Medical School Regulatory Capacity and Capacity at Maturation.” End-to-end ecosystem: Successfully integrating the businesses we invest in or acquire, allows us to offer an end-to-end physician-centric ecosystem. The point of entry of one business unit is the point of exit from another, which increases cross-selling and upselling opportunities. Difficult to replicate: We believe the combination of regulatory barriers, demand and supply imbalance and our end-to-end physician-centric ecosystem are difficult to replicate and that it would take a significant amount of time for competitors to reach the scale of our operation. Self-reinforcing network effects of our education cycle: As we aim to be the trusted content and knowledge partner for lifelong medical learners in Brazil, we have created and have been nurturing an education cycle that entails differentiation, talented stakeholders and recognition. Our continuous focus on implementing all stages of our cycle has allowed us to continuously expand our footprint. 54 Table of Contents Extensive M&A track record We have extensive capabilities in, and a strong track record of, identifying, negotiating and successfully integrating acquisitions. We have developed an integration model, operated by a dedicated team responsible for analyzing, mapping and integrating the systems of our acquired businesses, that we believe enables us to fully integrate the businesses we acquire in an efficient manner and usually within 12 months of their acquisition. Our integration model is composed of four stages: · Stage 1 (Preliminary Analysis): Preliminary analysis of the available infrastructure, organizational structure and teaching model of the acquired business to identify potential integration issues. · Stage 2 (Detailed Mapping): Detailed migration diagnosis and mapping of the systems, processes and teaching model of the acquired business to be integrated into our centralized shared-services center and academic model. · Stage 3 (Integration/Migration): Centralization and migration of the systems and processes into our shared services center and standardization of the teaching model of the acquired business. · Stage 4 (Ongoing Support): Post migration/integration remote and on-site support and monitoring to stabilize the integrated operations of the acquired business. Our consolidated operating history and our recent acquisitions entail a number of challenges, such as effectively integrating the operations of any acquired company with our existing business and managing a growing number of campuses. See “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—We may face challenges in identifying and acquiring new medical higher education institutions, which could hinder our strategic and financial goals. Additionally, difficulties in effectively integrating and managing an increasing number of acquisitions may adversely affect our strategic objectives.” 55 Table of Contents Purpose driven culture Medical education requires a core human value: compassion. As we endeavor to revolutionize medical education in Brazil, we believe that by training and educating better physicians we are helping people and their communities across Brazil. This mission has united families and entrepreneurs, executives and sponsors with over 20 years of know-how and expertise in the education sector. Our internal satisfaction survey conducted in 2024 showed employee satisfaction levels of 86 out of a possible 100, based on several criteria, such as trust in, and a commitment to, our values, leadership satisfaction, work satisfaction, learning and development, and active participation in our activities, reinforcing our strong commitment to our mission and purpose. Our Growth Strategies We aim to continue to grow organically and through acquisitions and to generate greater shareholder value by implementing the following strategic initiatives: Maturation of current number of authorized medical school seats We benefit from contracted growth visibility in our medical schools that are in the initial six years of operations, which we derive from two main sources: (1) the six-year maturation cycle of our medical school seats, which begins when a medical school becomes operational, with a first year medical school class which progresses through the required six years as the next classes begin behind it, and which ends when the medical school has six school years of medical students and has therefore reached capacity at maturation (i.e., the maximum number of approved seats), and (2) new enrollments from our seven awarded campuses in connection with the “Mais Médicos” program. Since the maximum number of medical seats per medical school is set by applicable regulations, the only way to grow our medical school seats, and thus our number of enrollments, is through acquisitions or starting new medical schools. As of the date of this annual report, assuming full compliance with applicable regulations and that our seven new “Mais Médicos II” campuses mature as expected with 50 medical school seats for each campus, we estimate reaching a total medical student base of 26,302 students by 2031. See “Item 5. Operating and Financial Review and Prospects—Medical School Regulatory Capacity and Capacity at Maturation” and “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—The post-secondary education sector is highly regulated, and our failure to comply with existing or future laws and regulations could significantly impact our business.” Open new campuses in connection with the “Mais Médicos II” program In 2018, we were also awarded seven new undergraduate campuses in connection with the “Mais Médicos II” program, the largest number awarded to any education group, with a total of 350 new medical school seats. The operation of such campuses was subject to the verification by MEC of the satisfactory implementation by Afya Brazil of all regulatory requirements. As of December 31, 2024, MEC had inspected six of the campuses, and the final verification was published in: (i) October 2020 for ITPAC Santa Inês; (ii) December 2020 for ITPAC Cruzeiro do Sul; (iii) February 2022 for ITPAC Abaetetuba; (iv) February 2022 for ITPAC Itacoatiara; (v) March 2022 for ITPAC Bragança; (vi) March 2022 for ITPAC Manacapuru. We expect an additional campus to start operations in 2025. Expand our medical residency preparation enrollments base We expect that competition for medical residencies will increase as the number of graduating physicians grows and the number of available residency seats remains static. We plan to continue to grow our medical residency exam preparation student enrollments, leveraging the academic outcome, scalability and learning experience of our digital platform. Expand our graduate programs enrollments base Due to the shortage of medical residency seats and the growing demand for medical undergraduate courses, we believe we will be able to expand our current offering in the Undergrad segment. 56 Table of Contents We intend to continue developing our business-to-business strategy by increasing the number of partners and student enrollments through increased marketing and sales efforts. Cross-sell across our existing medical student base Because our solutions target the lifelong education journey of medical students, we have identified an opportunity to increase student enrollments at a low marginal cost driven by cross-selling opportunities, such as increasing the number of former undergraduate students subscribing to our medical residency exam solutions and the number of former undergraduate and/or medical residency students applying to our graduate and/or other continuing medical education offerings, such as hard and soft skills courses. Expand our B2B capabilities B2B contracts are effective customer entry points to our products and services. Students are familiar with our platforms, increasing our brand equity and helping us attract more physicians to enroll in preparatory courses, graduate programs, hard and soft skills courses. Expand our distribution channels We plan to continuously expand our distribution network by increasing our presence in direct and third-party channels, launching graduate courses or CME for third-party continuing medical education hubs (including, but not limited to, hospitals, clinics and other medical schools) to grow our graduate medical footprint, through partnerships with such third-party continuing medical education hubs. Leverage infrastructure and extract synergies from acquisitions We believe we have been able to successfully integrate our acquisitions into our ecosystem. We plan to implement several measures to improve the profitability of recent acquisitions, including but not limited to: · Streamlining fee discounts and scholarship policies; · Integrating operations with our shared-services center; · Streamlining faculty training in line with our career plan; and · Integrating teaching models into our academic model. Continue to selectively pursue M&A opportunities We plan to selectively pursue acquisitions that will complement our current medical education services offering and/or enhance our product portfolio, such as digital content platforms, continuing medical education institutions and other medical certification companies, among others. We are currently evaluating possible acquisition opportunities and submit non-binding proposals from time to time. We believe that we have developed a strong capability and track record of acquisitions. In 2024, we acquired Unidom, which increased our number of approved medical school seats by 300 seats authorized, of which 125 are final and 175 are subject to a final conclusion of the court proceedings. In 2023, we acquired or invested in two companies. In 2022, we acquired or invested in three companies. In 2021, we acquired or invested in nine companies, which increased our medical school seats by more than 27.4% over the year. Our acquisition of Medcel enabled us to access the medical residency preparation market, and the acquisition of IPEMED, enabled us to enter the graduate courses market. Our acquisition strategy is mainly focused on expanding our medical school footprint by adding new institutions to our existing portfolio. On December 19, 2024, we signed a definitive contract for the acquisition 100% of the total share capital of FUNIC, which may increase our approved medical school seats from 3,593 to 3,653. The closing of the transaction is subject to customary conditions precedent and is expected to be completed in May 2025. Enter into new markets We believe our end-to-end physician-centric ecosystem is equipped to serve medical students in complementary segments where our innovative, methodological, data-driven approach can continue to disrupt traditional vendors and legacy business models. We believe opportunities exist in new sectors and regions of Brazil. In the future, we intend to focus on expanding further into continuing medical education. We may also seek to grow our business by selectively expanding into international markets with similar fundamentals. 57 Table of Contents Develop new products We plan to continuously evolve our platform and offer solutions that keep up with the growing demands of our students. We have a planned pipeline of new products, including new medical web-series seasons, corporate medical training, new extension health programs, a tutoring suite, a peer-to-peer suite and a virtual reality product. Our Geographic Presence Our headquarters and most of our shared services operations are located in Nova Lima and Belo Horizonte, respectively, in the State of Minas Gerais. Our content creation and dedicated sales team is located in São Paulo, in the State of São Paulo. As of December 31, 2024, our network consisted of a total of 57 undergraduate and graduate campuses: (i) 37 undergraduate campuses, out of which 36 are operating units (units that have been approved by MEC and that have commenced operations), 32 offer a medical course, and one has been approved by MEC but has not yet commenced operations, and (ii) 20 graduate campuses that offer medicine- and health-related courses. We plan to expand our network by opening one approved undergraduate medical school campus we were awarded in connection with the “Mais Médicos” program by 2025. The chart and table below illustrate our current footprint of undergraduate medical schools, as of the date of this annual report. Campus State Brand Year of Acquisition Approved Medical School Seats(1) Semester(2) Porto TO ITPAC Before 2018 120 02.04 Pato Branco PR FADEP 2018 50 02.17 Pato Branco PR FADEP 2018 60 02.19 Itajubá MG CCSI 2018 87 01.68 Parnaíba PI IESVAP 2018 80 02.15 Palmas TO ITPAC 2018 120 02.17 Teresina PI IESP 2018 110 02.04 Teresina PI IESP 2018 61 02.17 São João Del Rei MG IPTAN 2018 38 02.15 São João Del Rei MG IPTAN 2018 11 02.16 Araguaína TO UNITPAC 2018 80 02.06 Ipatinga MG UNIVAÇO 2018 100 01.99 Marabá PA FACIMPA 2019 120 02.19 Vitória da Conquista BA FASA 2019 100 01.15 Itabuna BA FASA 2019 85 02.18 Itabuna BA FASA 2019 64 01.23 Cametá PA ITPAC - Mais Médicos 2019 50 Pre-operational Cruzeiro do Sul AC ITPAC - Mais Médicos 2019 50 01.21 Santa Inês MA ITPAC - Mais Médicos 2019 50 02.20 Manacapuru AM ITPAC - Mais Médicos 2019 50 02.22 Itacoatiara AM ITPAC - Mais Médicos 2019 50 02.22 Abaetetuba PA ITPAC - Mais Médicos 2019 50 02.22 Bragança PA ITPAC - Mais Médicos 2019 50 02.22 Itaperuna RJ UniRedentor 2019 112 02.15 João Pessoa PB FCMPB 2020 24 02.17 João Pessoa PB FCMPB 2020 33 02.18 João Pessoa PB FCMPB 2020 80 02.16 João Pessoa PB FCMPB 2020 20 02.18 Redenção PA FESAR 2020 120 02.18 Porto Velho RO UniSL 2020 52 02.19 Porto Velho RO UniSL 2020 130 02.05 Ji-Paraná RO UniSL 2020 28 02.21 Guanambi BA FIP Guanambi 2021 60 02.18 Guanambi BA FIP Guanambi 2021 40 01.24 Garanhuns PE ITPAC 2021 120 02.21 Montes Claros MG UNIFIPMOC 2021 100 02.07 Duque de Caxias RJ UNIGRANRIO 2021 110 01.97 Duque de Caxias RJ UNIGRANRIO 2021 88 02.17 Rio de Janeiro RJ UNIGRANRIO 2021 110 02.04 Rio de Janeiro RJ UNIGRANRIO 2021 10 02.24 Alagoas AL UNIMA 2023 100 02.14 Alagoas AL UNIMA 2023 40 02.16 Alagoas AL UNIMA 2023 80 02.24 Jaboatão PE FCM Jaboatão 2023 100 01.18 Jaboatão PE FCM Jaboatão 2023 100 01.19 Unidompedro (3) BA UNIDOM 2024 300 01.21 (1) Number of medical school seats presented are estimated. (2) Schools with six or more years of operations are considered fully matured. (3) 300 seats authorized, of which 125 are final and 175 are subject to a final conclusion of court proceedings. 58 Table of Contents Industry Overview Introduction to Brazil’s education environment Brazil’s education environment has become increasingly open to private capital. At the same time, the government has continued to play an important role through the municipalities, states, and federal government. Post-secondary education Higher education in Brazil differs significantly from pre-secondary education. The majority of higher education schools are under private management and account for approximately 88% (both for profit and nonprofit) of all higher education institutions, according to Sinopse Estatística da Educação Superior. Higher education institutions are divided into three categories depending on the number of courses they offer, seniority of the teaching staff, and amount of research they conduct: they can be classified as colleges, university centers or universities. Typical post-secondary programs take between four to six years to complete. While some courses in these programs only occur during a certain period of the day (i.e., morning, afternoon, or evening), others are offered as full day courses. Tuition is paid on a monthly basis, primarily out of pocket by students and their families. Government financing is available, but not easily accessible. The main programs are FIES and PROUNI, which together accounted, in Brazil, for 20.3% of total financing in 2023 prior to more regulated policies in recent years, according to Sinopse Estatística da Educação Superior. Introduction to Brazil’s medical education industry In Brazil, aspiring physicians apply to medical school following graduation from secondary education. Medical school in Brazil is a six-year undergraduate program. Upon graduation, medical students gain a license and can start working as a generalist physician. At this point, they usually consider alternatives to gain a certification for one or more medical specialties. The first and most common path to obtaining a medical specialty certification is through a medical residency program. If a candidate chooses the medical residency path, the student must pass an entrance examination, referred to as R1 exam administered by each institution offering a residency program. After getting approved by a residency institution, the student then starts the first year of residency with the support of a government study grant throughout the specialization period. If the physician wants to pursue a subspecialty, he or she will need additional years of study, which may or may not require incremental entrance tests. 59 Table of Contents Medical professionals that do not choose or fail to be admitted into a residency program can still pursue a medical specialty certification through other alternatives. For instance, a generalist can take the specialist certification exam to become a specialist after meeting a variety of eligibility criteria. Those criteria can include internships, hours of work under the supervision of a medical specialist, or hours of study in a certified graduate program, among other methods. Depending on the desired level of medical specialty, it can take four to 10 years for a generalist to meet the criteria and, in this context, graduate courses can be a shorter path to reach eligibility sooner. As medical science continues to evolve very rapidly, medical professionals must seek ways to stay up to date on those developments. For that purpose, physicians and other medical professionals tend to use numerous sources of continuing medical education, or CME, including short term programs, scientific paper digests, and medical congresses, among others. 60 Table of Contents Regulatory overview and “Mais Médicos” program Medical education in Brazil is subject to regulatory terms that aim to define the supply of medical seats across the country. Since 2013, the Brazilian government put initiatives in place to increase the number of annual medical school and residency vacancies. In 2013, the “Mais Médicos” Law defined the rules for the creation of new medical courses in Brazil to address issues such as the unequal distribution of doctors across Brazilian states. Among the criteria that support the creation of medical school seats, two relevant aspects are (i) the importance of these new openings in a specified region and (ii) the sufficiency of the current medical infrastructure in both public regional hospitals and in the applicant medical institution in order to obtain government authorization. To reduce the shortage of doctors and mitigate the perceived healthcare inequality, the Brazilian federal government implemented a strategic initiative called “Mais Médicos.” The program’s main objectives included addressing the provision of doctors for primary care in municipalities, strengthening health care infrastructure, and allocating medical workforce to underserved areas. Regarding academics, “Mais Médicos” implemented short- and long-term measures to improve the Brazilian medical training system in both quantitative and qualitative ways. Among these measures was the opening of new medical school slots, in both undergraduate courses and residency programs. From its creation in 2013 until the date of this annual report, MEC, through SERES, announced three public calls for the selection of proposals for the authorization of medical courses on a national scale, the “Mais Médicos I” program in 2013, the “Mais Médicos II” program in 2018, and the “Mais Médicos III” program in 2023. “Mais Médicos I” and “Mais Médicos II” jointly authorized the opening of 58 new medicine courses and, initially, 4,971 new seats in medical schools, which may be increased by up to 100 seats, each in accordance with the “Mais Médicos” regulation. With the increase in annual offerings through “Mais Médicos,” on April 5, 2018 MEC announced that the government had decided to freeze the new offering of medical school seats for a period of five years, pursuant to Ordinance No. 328/2018. The decision was based on a need to evaluate the impact of opening new medicine courses in Brazil. However, on April 5, 2023, MEC issued Ordinance No. 650/2023, which revoked the suspension under Ordinance No. 328/2018 and set new rules for the opening of new medicine courses. Following the issuance of Ordinance No. 650/23, on October 4, 2023, MEC, through SERES, exercising its legal powers and based on Article 3 of the “Mais Médicos” Law announced the public call for the selection of proposals for the authorization of medical courses on a national scale. The rules for the new “Mais Médicos III” program set forth the criteria for new undergraduate medical school seats. This new program will allow the opening of up to 5,700 new undergraduate seats, to be distributed across 95 cities with a limit of 60 seats per institution. Although the “Mais Médicos” program requires a public call prior to the authorization of a new medicine course, some educational institutions have been judicially challenging this restriction before Brazilian courts to compel MEC to receive and review requests for new medicine courses outside the “Mais Médicos” program rules by alleging that these rules are an undue restriction on freedom of competition. Certain courts may ultimately compel the MEC to receive and review these requests. For more information, see “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—We face significant competition in each program we offer. If our competition increases or if we fail to compete efficiently, we may lose market share and our profitability may be adversely affected.” 61 Table of Contents In addition, the increase in medical school seats in existing undergraduate courses is regulated by Ordinance No. 1,771, dated September 1, 2023, which allowed educational institutions to request an increase in medical school seats by submitting a request to MEC. As of the date of this annual report, those requests are still under MEC’s analysis. Brazilian medical education quantitative assessment Given the national regulatory framework, expanding medical school seats depends mostly on quality attributes and the need for additional doctors in the given geography. The number of medical school seats remained approximately unchanged between 2005 and 2012, but increased at a faster pace from 2012 to 2014 to mitigate the shortage of physicians in the country. “Mais Médicos I” and “Mais Médicos II” jointly authorized the opening of 58 new medicine courses and, initially, 4,971 new seats in medical schools, which may be subject to an increase of up to 100 seats, each in accordance with the “Mais Médicos” regulation. Furthermore, the new “Mais Médicos III” program will authorize the opening of up to 5,700 new undergraduate seats. From 2012 to 2022, first-year enrollments in private medical schools have increased by 20,386, representing a 10.6% CAGR, compared to an additional 2,901 public medical first-year enrollments during that period. According to the Demografia Médica do Brasil report—which is co-produced by the Brazilian Medical Association (Associação Médica Brasileira) and the University of São Paulo, Brazil, or Demografia Médica—the number of physicians in Brazil increased from 310,800 to 562,200 from 2010 to January 2023, representing an 80.8% increase. With that demand in place, a supply of new healthcare professionals is expected to keep growing to keep up with the increased demand for public and private health services. By January 2023, the total number of physicians in Brazil increased to 562,229 professionals, implying 2.60 doctors per 1,000 inhabitants. Projection of the number of physicians in Brazil (2019 to 2028) Source: Demografia Médica, 2022. 2023-2028 figures are projections 62 Table of Contents Fundamentals of medical education in Brazil The medical education market in Brazil is supported mainly by the higher demand for medical courses than the actual seats offering, the low and uneven medical density when compared to the Organization of Economic Cooperation and Development, or OECD average, Brazil’s fast aging population, and compelling financial rewards for those seeking to pursue a medical career. Brazil’s aging population Brazil’s aging population is expected to drive an increase in demand for physicians and other healthcare service providers. Brazil’s aging ratio is twice that of the United Kingdom and three times that of the United States. Compared to 1995, life expectancy at birth is up from 66 years to 76 years, driven primarily by medical and health improvements. By 2030, 13.5% of the Brazilian population is expected to be older than 65 years, compared to 7.3% in 2010. Furthermore, in 2060, the percentage of the population of 60 years and older is expected to exceed the number of people 19 years and under, according to the Instituto Brasileiro de Geografia e Estatística, or IBGE. Population distribution by age group—Brazil Source: IBGE. Increase in medical services demand The long-suppressed demand for health services in Brazil is expected to continue to increase given demographic changes in Brazil as well as a larger portion of the population being able to access private healthcare services. As of December 31, 2022, Private Health Insurance penetration in Brazil reached 24.7%, according to data from ANS. This is lower than countries such as Germany, Australia and the United States, which according to the OECD have 33.9%, 54.9% and 63.0% penetration, respectively. Even with the expected increase in medical graduation, the demand for healthcare services is expected to surpass the current supply of physicians by medical schools creating a continued demand for medical courses and graduate education. According to Demografia Médica, Brazil had 2.6 doctors per 1,000 inhabitants in 2022, which is considerably below the international average and the average of developed countries, which have been through the demographic changes that are expected to happen in Brazil. For example, according to Demografia Médica, Italy had an average of 4.13 doctors per 1,000 inhabitants in 2022. Considering the projections of a total of 564,363 physicians in 2023 versus Brazil’s population growth over the same period, Brazil would still have approximately 2.6 doctors per 1,000 inhabitants, which is still below the OECD average. 63 Table of Contents Doctors per thousand inhabitants, according to selected OECD countries (2022). Source: OECD. Shortage and distribution of medical professionals in Brazil Brazil’s low medical density and inequality in physician distribution is illustrated in the figure below. São Paulo and Rio de Janeiro have 3.6 and 4.2 doctors per 1,000 inhabitants, respectively, while the states of Pará and Acre have 1.3 and 1.7 doctors per inhabitant, respectively. The north and northeast regions are Brazil’s most underserved areas and have been the focus of governmental physician assignment programs. With the new “Mais Médicos III” program and the increase of physicians in the upcoming years, it is expected that Brazil’s medical density will reach 3.3 doctors per 1,000 inhabitants, which would still be below the OECD average of 3.73 in 2022. 64 Table of Contents Distribution of doctors according to Brazilian states—2023 Source: Demografia Médica, 2023. Compelling financial rewards for pursuing a medical career One of the notable arguments for pursuing a medical career in Brazil is the financial outcome for the future physician, with higher salaries and fast payback. The main points of view that support the increasing demand for medical education analysis are: (i) nearly 100% employability of medical school graduates in Brazil; (ii) significantly higher salaries for medical school graduates than those enrolled in engineering courses (by approximately 77%), and (iii) a four-year post-graduation average payback period. 65 Table of Contents Source: (1) Instituto de Pesquisa Econômica Aplicada—IPEA, CAGED, (2) Demografia Médica 2023, (3) Afya’s Research Center, (4) Third-party consulting firm analysis. Even when considering the comparatively high tuition paid during the six-year medical undergraduate program, its above-average income after graduation results in an average payback period of four years, a relatively short period compared to other undergraduate education majors. Expansion in graduate programs and CME The number of public and private medical graduate courses is not measured by any institution, as it is developing and growing as residency slots become increasingly restricted. Typically, educational institutions partner with hospitals to provide an adequate infrastructure for teaching students. Unlike residencies, students pay out-of-pocket monthly tuition of around R$4,000, according to a third-party consulting firm. These are usually one to two-year courses and there is currently no government student financing for this segment. Underlying Trends of Medical Education in Brazil In addition to a large and underpenetrated total addressable market, we have identified other trends that contribute to the strength of the markets we serve: · Increased life expectancy and demand for medical services: The Brazilian population is aging at the fastest rate in its recent history. Average life expectancy is currently 76.2 years, and the number of people over 65 should double from 7% of the total population in 2012 to 14% of the total population in 2033. This has led to, and is expected to continue to drive, increased demand for healthcare professionals. In addition, private healthcare spending and public healthcare spending in Brazil grew at a CAGR of 14.0% and 11.8%, respectively, from 2010 to 2015, primarily due to an increase in demand for medical services as a result of an aging population and an increase in average household income. These trends have continued since 2015 to date. · Shortage of medical professionals in Brazil: There is a shortage of medical professionals in Brazil, primarily due to the uneven socio-economic environment. On average, Brazilian cities with less than 50,000 inhabitants, which corresponds to approximately 90% of all cities in Brazil, have less than one physician per 1,000 residents. Brazil is expected to have an average of 3.07 physicians per 1,000 inhabitants by 2028, below the average of 3.4 for 2018 Organization for Economic Cooperation and Development, or OECD, countries. 66 Table of Contents · Attractive financial incentives: The medical profession is lucrative. Medical professionals are highly employable, with salaries that are on average more than three times higher than the average salary for other professions such as engineering, nursing and law, and 1.9 to 3.8 times higher than the net present value of engineering, nursing or law programs in Brazil. · Supply and demand imbalance for medical education: The number of available medical course seats in Brazil is controlled by MEC, which has limited medical school intakes to current levels until 2023, resulting in a significant imbalance between supply and demand. In the last three years, medical schools have on average received five applications per available medical course seat, and four applications per available residency program vacancy, and the number of applications are expected to increase. We believe that graduate courses will gradually become a more popular, high-demand destination for physicians that are not admitted into residency programs. · CME expansion: The growing number of physicians in Brazil and the demand for ongoing education on new medical procedures, drugs, technologies and developments will continue to drive demand for CME. · Technological innovation is driving medical education: The current generation of medical students and professionals requires instantly accessible digital content. Over 600,000 biomedical articles have been published globally every year since 2005, and it is critical for lifelong learners to be able to access information and learning methodologies regardless of location and physical availability. · Limited scope of existing product offerings: By generally limiting their focus on individual aspects of a student’s education cycle, traditional education providers have struggled to build comprehensive student track records and profile databases. Consequently, there is a general lack of integrated platforms that apply accumulated student information to efficiently tailor experiences to, or produce bespoke materials for, the particular needs of each student. We believe we are well-positioned to take advantage of this market and its trends, bringing a more effective, personal and diversified service to our students, which will enable us to continue to grow our market share. Our Competition We believe we are the only company in Brazil with a focus on the entire learning career of a physician. However, several companies provide solutions that compete in some of the markets in which we operate. We compete directly or indirectly with other post-secondary institutions that offer medical courses or any of the other higher education courses in our portfolio. This market is very fragmented and currently, there are more than 300 other institutions that offer medical courses in Brazil. The following table sets forth our main competitors and the number of approved medical school seats they had as of December 31, 2024: Number of Approved Medical School Seats Company As of December 31, 2024 Afya Brazil 3,593 Player 1 2,060 Player 2 1,892 Player 3 1,019 Player 4 941 The market for graduate medical courses has been growing rapidly and we have recently experienced increasing competition from traditional education institutions that previously had been limited to providing undergraduate courses and have since begun to offer graduate programs. 67 Table of Contents Our Products and Services We offer the following educational products and services to lifelong medical learners enrolled across our evolving distribution network, as well as to third-party medical schools. Medical Schools · A fully integrated core curriculum is offered to our medical school students across all our campuses. · All our medical students have access to our supplemental instructional platforms as part of the internship module of their medical course, which we implemented for all incoming medical students of the fifth and sixth academic year. · As of December 31, 2024, we had 24,255 students enrolled in medical school programs which represented 31.5% of the total number of students in our Undergrad segment, contributing to a revenue of R$2,487.1 million for the year ended December 31, 2024, which represented 85.9% of our total revenue for our Undergrad segment. As of December 31, 2023, we had 21,446 students enrolled in medical school programs which represented 32.5% of the total number of students in our Undergrad segment, contributing to a revenue of R$2,147.4 million for the year ended December 31, 2023, which represented 85.5% of our total revenue for our Undergrad segment. As of December 31, 2022, we had 17,968 students enrolled in medical school programs which represented 30.9% of the total number of students in our Undergrad segment, contributing to a revenue of R$1,699.2 million for the year ended December 31, 2022, which represented 83.4% of our total revenue for our Undergrad segment. Residency Journey · Instructional content in digital format is offered to medical students and newly graduated physicians to prepare them for medical residency exams. · Supplementary instructional content in digital format is offered to third-party medical schools that adopt our services. · As of December 31, 2024, 2023 and 2022, we had 16,381, 12,170 and 19,986, respectively, enrolled students in our medical residency preparatory courses. Graduate Journey · We offer a wide array of options for doctors pursuing specialization, whether through graduate medical courses or preparatory programs for specialist title exams. These students also have access to some of our supplemental instructional platforms. · Supplemental instructional content for different medical specializations is offered to individual lifelong medical learners in our graduate courses. · As of December 31, 2024, we had 8,527 enrolled students in our graduate courses. As of December 31, 2023, we had 7,722 enrolled students in our graduate courses. As of December 31, 2022, we had 6,058 enrolled students in our graduate courses. Other Courses — B2P and Business to Business Offerings · We provide courses that extend beyond medical practice, focusing on lifelong learning and the development of both technical and interpersonal skills essential for well-rounded medical professionals. · These programs cater to physicians seeking to stay current throughout their careers while enhancing their technical expertise. · As of December 31, 2024, we had 25,613 enrolled students in our other courses. As of December 31, 2023, we had 27,188 enrolled students in our other courses. As of December 31, 2022, we had 17,475 enrolled students in our other courses. 68 Table of Contents Other Programs · Other national core curriculum is offered to all students across all of our undergraduate campuses: healthcare degrees and a subset of non-healthcare degrees, including business and engineering degrees offered by the companies we invested in or acquired. · As of December 31, 2024, we had 52,733 students enrolled in other programs which represented 68.5% of the total number of students in our Undergrad segment, contributing to a revenue of R$408.6 million for the year ended December 31, 2024, which represented 14.1% of our total revenue for our Undergrad segment. As of December 31, 2023, we had 44,588 students enrolled in other programs which represented 67.5% of the total number of students in our Undergrad segment, contributing to a revenue of R$363.6 million for the year ended December 31, 2024, which represented 14.5% of our total revenue for our Undergrad segment. As of December 31, 2022, we had 40,232 students enrolled in other programs which represented 69.1% of the total number of students in our Undergrad segment, contributing to a revenue of R$338.7 million for the year ended December 31, 2022, which represented 16.6% of our total revenue for our Undergrad segment. Medical Practice Solutions · Subscription-based mobile app and website portal focused on assisting health professionals and students with clinical decision-making for 30 medical specializations through tools such as medical calculators, charts and updated content, including prescriptions, clinical scores, medical procedures and laboratory exams, among others. · Free instructional content we offer to physicians, healthcare professionals and students. · As of December 31, 2024, we had approximately 195,018 active paying users, consisting of approximately 161,283 in Clinical Decision and 33,735 in Clinical Management. As of December 31, 2023, we had approximately 183,602 active paying users, consisting of approximately 153,541 in Clinical Decision and 30,061 in Clinical Management. As of December 31, 2022, we had approximately 163,446 active paying users, consisting of approximately 137,767 in Clinical Decision and 25,679 in Clinical Management. Our acquisition of PEBMED represented our initial expansion into the digital health services sector, which we believe adds value to our platform. In particular, our acquisition of PEBMED included the Whitebook product, which added approximately 125,300 active users to our platform and increased our penetration in the segments in which we already operate through digital health services. The following chart sets forth our market share by career aging cohort as of December 31, 2024: 69 Table of Contents Our Lifelong Medical Learner Clients As of December 31, 2024, we had a total of 127,508 students across all our segments, including 24,255 enrolled in our undergraduate medical programs, 16,381 enrolled students in our medical residency preparatory courses, 8,527 enrolled students in our medical graduate courses, and 25,613 enrolled students using our other B2B and B2P offerings. In addition to health sciences courses, which comprise medicine, dentistry, nursing, radiology, psychology, pharmacy, physical education, physiotherapy, nutrition and biomedicine, we also offer degree programs and courses in other non-health sciences subjects and disciplines across several of our campuses, including undergraduate and graduate courses in business administration, accounting, law, civil engineering, industrial engineering and pedagogy. These non-health sciences courses are not part of our core business—the number we offer has increased as a consequence of our strategic acquisitions in recent years of multi-disciplinary schools with strong health sciences programs, which are our principal focus. Although non-health courses are not part of our growth strategy, we expect to continue to offer them to the extent they generate local demand. These non-health sciences programs represented 6.2%, 6.5% and 6.3% of the total revenues of our Undergrad segment in 2024, 2023 and 2022, respectively. The attractive dynamics for medical education in Brazil, including high demand for medical services and low medical density, combined with the exceptional rewards a physician receives (e.g., high wages, fast payback), create the perfect environment for us, with high demand for health sciences programs throughout the entire medical career. This scenario enables us to target a unique student profile during our selection process, capturing the most capable individuals in Brazil. In addition, as of December 31, 2024, we had 16 contracts with other partner companies, which represents our B2B business. These partnerships allow us to increase our distribution outreach to other institutions around the country and help us achieve our mission. Student Financing and Incentive Programs Student financing program—Fundo de Financiamento Estudantil (“FIES”) FIES is a MEC program created by Law No. 10,260/2001 to provide financing to undergraduate students who are unable to finance their own education. After going through several reforms from 2015 onwards, as of the date of this annual report, the FIES program is provided in the following categories: · Public FIES (2018)—Extended to persons with a per capita income of up to three minimum wages, with zero interest rate, with the credit risk being divided between the government and the private Higher Education Institutions, or HEIs; 70 Table of Contents · Private FIES (2018)—Extended to persons with a per capital income of up to five minimum wages, with low interest rates. Regional funds and private financial institutions, provide the financing; and · Social FIES (2024)—Reserves at least 50% of FIES vacancies in each selection process for students with a per capita family income of up to half a minimum wage, with zero interest rate. In the Public FIES and the Social FIES, the financing is provided by federal government funds and contributions from HEIs through the FG-FIES fund. With respect to this fund, on November 1, 2023, Law No. 14,719 was enacted and set a maximum contribution limit to the FG-FIES at 27.5%. This limit applies to contributions made by maintaining entities voluntarily joining the program after the fifth year of their participation. In addition, as part of the conditions and rules of the FIES program, private higher education institutions that apply for the program can immediately increase up to 10% of their authorized vacancies annually. For more information, see “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—Changes to the rules or delays or suspension of tuition payments made through FIES may adversely affect our cash flows and our business” for further information. Incentive program—Programa Universidade Para Todos Programa Universidade Para Todos, or PROUNI, was established in 2005 through Law No. 10,096/2005, which offers full and partial scholarships (50%), in private HEIs for undergraduate and subsequent courses of specific training, to Brazilian students without a higher education diploma. Additionally, the Government offers federal tax exemptions to higher education institutions adhering to PROUNI. Private higher education institutions, whether for profit or not, may join PROUNI by signing a term of adhesion (valid for 10 years), and at least (i) offer a full scholarship for every 10.7 students who pay a regular monthly fee and are regularly enrolled at the end of the previous school year; or (ii) an integral scholarship for every 22 students who pay the regular monthly tuition fees in specific undergraduate and subsequent courses, provided they also offer scholarships of 50%, in amounts necessary so that the sum of the benefits granted is equivalent to 8.5% of its annual revenue. The tax exemptions (in whole or in part) for HEIs that participate in this program are the following: · IRPJ (income tax) and CSLL (social contribution), with respect to the portion of net income in proportion to revenues from traditional and technology undergraduate programs; and · COFINS (Contribution for the Financing of Social Security) and PIS (Program of Social Integration), concerning revenues from traditional and technology undergraduate programs. In addition, as part of the conditions and rules of the PROUNI program, private higher education institutions that apply for the program can immediately increase up to 10% of their authorized vacancies annually, except for law and medicine courses, which are subject to annual approvals by MEC. As of December 31, 2024, our exposure to PROUNI was 9.2% of our student base. Although we fulfilled all required scholarships to receive 100% of tax exemption, PROUNI does not cover our operation outside of our undergraduate programs. Other private financing program In addition to PROUNI and FIES, Afya participates in private financing programs through external partners (Bradesco, BNB, Sicoob, CashMe and Alume) for undergraduate students. Moreover, in 2024 we launched our own financing program for some of its units to support medical students who were not eligible for other types of financing. Key Benefits for our Lifelong Medical Learners We believe the end-to-end physician-centric ecosystem we have been developing for our students sets us apart from our peers, as we deliver content and learning activities that are tailored to each student’s needs. This contributes to a more interactive and enjoyable learning process for our students, breaking away from a teaching system that we perceive as presenting students with an overwhelming amount of content, unengaging classes and scattered information. We achieve this based on three main pillars: innovative data-oriented methodology, a cutting-edge platform and state-of-the-art operating environment. 71 Table of Contents Innovative, Data-oriented Methodology Our proprietary methodology to support our students’ lifelong medical education is based on the following concepts: Standardized medical curricula: The organization of our medical curricula around interdisciplinary macro-medical topics to guide the development of in-person teaching plans and online learning tools, offering a scalable solution for schools through weekly synchronized content; Active learning: Educational strategy to foster independent, critical and creative student thinking, as well as encourage effective teamwork through case-based problem-solving exercises, debates and small-group discussions; Blended learning: Balanced in-person teaching with technology-assisted activities to improve student and teacher efficiency and results; and Adaptive learning: A personalized instruction and assessment tool that provides training and content tailor-made to each student’s individual profile. Students can access real-time feedback on areas in which they can improve, effective learning methods and teaching/study plans that are most suitable for them. Cutting-Edge Digital Platform We deliver modern, bespoke verbal and practical teaching. We continuously invest in creating innovative, technology-enabled activities and features to enhance our platform. We offer our medical school students doing internships or studying for residency exams the following features through our digital platform: Web portal and in-app communication: Online platform combining supplementary instructional content and a personalized communication tool for students, through which they can also access our content offline; 72 Table of Contents Assessment tool: Broad database suite composed of quizzes and problem-solving activities, through which students can choose the subjects they would like to focus on, with additional teacher-led instructional content; Tutoring/mentoring platform: An online monitoring and support platform for both undergraduate and graduate medical students. The platform allows tutors to interact with students through emails, video calls, voice calls and push notifications, and keeps records of such interactions. It also allows students to ask the tutors questions and schedule appointments. The platform also tracks individual student performance and progress; and Digital health services platform: A combination of mobile and web applications focused on helping physicians, nurses, healthcare professionals and medical students in their clinical decision-making and providing medical references and updates for the medical community. State-of-the-Art Operating Environment For us, individualized learning should be used not just when offering content or technology-supported activities, but also during in-person encounters. Our professors can use our resources to approach lessons more objectively, focusing on each student’s needs: Modern teaching facilities: We have designed our classrooms to engage students in active learning. We rely on cutting-edge didactical equipment and simulation labs and state-of-the-art realistic simulation technologies; Medical specializations centers: Our campuses offer simulation centers and clinics where students can practice primary and secondary care, leveraging the learning process and providing medical assistance to the local population; and Practical learning network: Throughout the internship cycle, our students can access over 614 partner teaching hospitals and clinics, the largest network of any education group in Brazil. Evolving Distribution Network We believe that an effective end-to-end physician-centric ecosystem goes beyond offering the largest and most complete operating infrastructure to the students enrolled at our campuses and with access to our digital platforms. Through our evolving distribution model, we also expect to empower lifelong medical learners across our growing network of diversified partner teaching hospitals, clinics and third-party medical schools by increasing our products and services offerings as we continue to expand our business-to-business, or B2B capabilities. Our partnerships include renowned institutions such as the Brazilian Cancer Foundation, which joined our network in January 2020. Seasonality of Operations Undergrad segment revenues are related to the intake process and monthly tuition fees charged to students, and do not significantly fluctuate from quarter to quarter. Continuing Education revenues are mostly related to: (i) monthly intakes and tuition fees on medical education, which generally do not experience significant fluctuations resulting from seasonality and (ii) Medcel’s revenue, derived from the sales of e-books which are recognized at the point in time when control is transferred to the customer, which is generally concentrated in the first and last quarter of the year due to the period of enrollments. Consequently, the Continuing Education segment generally has higher revenues and results of operations in the first and last quarters of the fiscal year than in the second and third quarters of the fiscal year. Medical Practice Solutions revenues derive mainly from Whitebook and iClinic, which do not experience significant fluctuations resulting from seasonality. Marketing and Sales Our marketing strategy is focused on identifying, qualifying and converting potential students into enrollments. We execute our marketing strategy as follows: · Identification: We use online and offline media channels to distribute relevant content for all decision-making phases of current and future physicians, so that they interact with our solutions throughout their learning careers. 73 Table of Contents · Qualification: After we obtain data on a potential student, we identify his/her needs by offering content that matches his/her academic phase. In addition, through our score models, we can identify potential students that are more likely to enroll with us. · Conversion: From that point on, we contact our sales department (online and inside sales) to convert potential students into enrolled students through structured sales campaigns and continuous monitoring of conversion indices. As our business model is end-to-end and physician-centric, we aim to accompany our lifelong learners at each stage of their careers. Therefore, our sales funnels are calibrated according to the segment’s supply-demand curve (graduation, preparatory, etc.), level of competition and other strategic variables. For example, in medical schools, the most challenging task is to identify potential students interested in attending medical school in a given cycle, since conversion typically occurs organically due to the high demand for these courses. Our challenge is to attract and enroll the best ENEM students in our medical schools. With respect to the medical residency preparatory phase and graduate programs, our main focus is to show potential students the benefits of our methodology in terms of results and cost-benefit in order to guide them toward adopting our solutions. Our marketing and sales efforts are supported by Insider, Braze and Active Campaign, as well as other online analytical tools such as Hubspot and Salesforce products (Sales Cloud, Marketing Cloud and Einstein). Our business model, combined with the use of CRM tools gives us a unique competitive advantage: The ability to identify, market and offer products to virtually all medical students and physicians in Brazil. Technology and Intellectual Property Technology In recent years, we have implemented several initiatives to improve operational efficiency and to integrate processes across several campuses and operations. We plan to continue this process in the future to fully consolidate Afya Brazil’s integrated systems with those of our recent acquisitions. Shared Services Center We have invested in a modern Shared Services Center, or SSC, to process back-office and non-student facing transactions that has idle capacity and is expected to enable student-base growth with low marginal costs. Integrated Systems We have adopted third-party systems to handle our internal systems in a fully integrated manner: · Enterprise Resource Planning, or ERP: TOTVS ERP RM is the leading solution in the Education Industry in Brazil and delivers a flexible systemic solution that fits our companies’ processes to improve management and organization. At the same time, it allows high governance of the processes, with complete control of all back-office activities, preventing operational errors and allowing efficient tax-related calculations and control of government obligations. Salesforce optimizes our sales and customer relationship management processes, facilitating streamlined lead management, sales forecasting, and customer engagement. Its robust analytics capabilities offer valuable insights into sales performance and customer behavior, enabling data-driven decision-making and strategic planning. Additionally, ServiceNow enhances internal workflows and IT service management, empowering teams to efficiently handle incidents, changes, and service requests. Its intuitive interface and automation bolster productivity and customer satisfaction. Moreover, ServiceNow’s robust reporting and analytics offer valuable insights, facilitating data-driven decision-making and continuous improvement. · Academic System: TOTVS RM Educacional is a mature platform that allows the configuration of the student payment plan attached to the disciplines enrolled and processes preventing manual financial transactions and making the process more flexible and efficient. This system includes both Student and Faculty Portals, with features that allow mobile frequency monitoring and provide payment solutions to students and also manages the faculties’ timesheet and payroll. 74 Table of Contents · Learning Management System, or LMS: Canvas LMS is a cloud-native, highly scalable system that connects all digital learning tools and evaluation resources accessed nationally by our faculties and students. As of the date of this annual report, iClinic, Medical Harbour, Cliquefarma, Shosp, RX Pro and Glic independently operate their own ERP systems. We are working to migrate the systems from the companies described above in order to fully incorporate them into our integrated systems. Intellectual Property We rely on a combination of copyright, trademark and trade secret laws, as well as employee and third-party non-disclosure, confidentiality and other types of contractual arrangements to establish, maintain and enforce our intellectual property rights, including with respect to our proprietary rights related to our products and services. In addition, we license technology from third parties. As of the date of this annual report, we had no issued patents and one patent application pending in Brazil. As of December 31, 2024, we owned 285 trademark registrations in Brazil and 5 abroad, and we have also sought to register other trademarks in the United States, in the European Union, Portugal, Mexico, China and Colombia. As of the date of this annual report, we have 119 pending trademark applications in Brazil and unregistered trademarks that we use to promote our brand, and also own 364 registered domain names in Brazil and 53 registered international domain names, and have registered three software in Brazil. Insurance We have insurance policies with reputable insurers in amounts considered sufficient by our management to cover potential losses arising from indemnities that we may have to pay to third parties as a result of our operations. The policies for our operating units have an aggregate coverage limit of up to approximately R$382.8 million. The Company and its subsidiaries have a risk management program with the purpose of delimiting the risks, seeking coverage compatible with its size and operations in the market. We seek coverage against risks that are compatible with our scale and type of operations, considering the nature of our activities, the risks we are exposed to, market practices in our industry, and the advice of our insurance consultants. While we believe our insurance contracts reflect standard market practices, there are certain types of risks that may not be covered by the policies (such as war, terrorism, acts of God and force majeure, liability for certain harm or interruption of certain activities). Therefore, if any of these uncovered events occur, we may be obliged to incur additional costs to remedy the situation, reconstitute our assets and/or indemnify our customers, which may adversely affect us. Furthermore, even in the event that we incur a loss that is covered by our policies, we cannot assure that damages awarded by our insurers will be sufficient to cover the losses arising from the insured event. See “Item 3. Key Information—D. Risk Factors—Certain Risks Relating to Our Business and Industry—We may be held liable for extraordinary events that may occur at our campuses, which may have an adverse effect on our image and, consequently, our results of operations.” Regulatory Overview The Brazilian Constitution establishes education as a right for all citizens and a duty of the State and the family. Accordingly, the government is required to provide all Brazilian citizens with access to free primary education with compulsory attendance. Private investment in education is permitted as long as entities providing education services comply with the applicable rules and regulations. The Brazilian education system is organized under a cooperative management among federal, state and municipal governments. The federal branch is required to organize and coordinate the federal educational system in order to guarantee equal opportunity and quality of education throughout Brazil. The states and the Federal District are required to focus on secondary education, while municipalities are responsible for providing pre-primary school and primary education. 75 Table of Contents Private Higher Education Institutions are part of the federal educational system and their activities are regulated by the federal government, and universities have didactic, scientific and administrative autonomy as provided by the Brazilian Constitution. Additionally, Law No. 9,394 of December 20, 1996, named by National Education Guidelines Law (Lei de Diretrizes e Bases da Educação, or LDB) provides the guidelines for the provision of educational services in Brazil and sets forth the federal government’s duty to, among others: (i) coordinate the national education system; (ii) prepare the National Education Plan; (iii) provide technical and financial assistance to the states, the Federal District and municipalities; and (iv) define, in cooperation with other federal entities, the responsibilities and guidelines for primary and secondary education, with the federal government’s priority in post-secondary education, issuing rules and regulations regarding undergraduate and graduate programs, and carrying out the activities relating to the accreditation of institutions, authorization and recognition of courses and monitoring and evaluation of the educational system as a whole. In addition, the federal government, through Law No. 10,172 of January 9, 2001, implemented the first National Education Plan (Plano Nacional de Educação, or PNE), with a duration of 10 years from the date of its publication. The PNE established objectives for post-secondary education to be met by all branches of government. The primary goal was to offer post-secondary education to at least 30% of the population aged 18 to 24 by 2010. After the expiration of the first PNE, a new plan was enacted and the objectives were revised for the period of 2014 to 2024, consolidated by Law No. 13,005 of June 25, 2014. The new goals consist of: (1) increasing post-secondary education enrollment rates to 50% of the population aged 18 to 24; (2) increasing the quality of post-secondary education by raising the proportion of academic staff with master’s degrees and doctorate degrees to 75%, of which at least 35% shall be doctorates; and (3) increasing progressively stricto sensu graduate programs. Such goals apply to each federation territory, and provide orientation for the private education sector. Finally, each of the federal, state and municipal governments are required to prepare a 10-year education plan and to establish policies, guidelines and objectives applicable to the segment of the Brazilian education system over which it has responsibility. Post-secondary Education The post-secondary education sector is subject to comprehensive government regulation. Its purpose is to ensure the quality of educational services, through evaluations of the ability of educational institutions to meet minimum standards established by CNE and approved by MEC. This evaluation includes the analysis of pedagogical projects, the infrastructure of Higher Educational Institutions, or HEIs, and their academic staff, and the results of such evaluations are considered in the proceedings for opening new units and new courses. Therefore, activities and courses offered by HEIs in Brazil depend on authorizations and are subject to ongoing regulation, guided by the results of quality assessments. The federal responsibility to regulate, monitor and evaluate post-secondary education institutions and programs is exercised by MEC, CNE, INEP and CONAES. Ministry of Education The Ministry of Education, or MEC, is the highest authority for post-secondary education within the Brazilian national education system, whose competence consists, among other prerogatives, of the following: (1) confirming CNE’s accreditation decisions for post-secondary education institutions; (2) confirming evaluation systems and criteria adopted by the INEP; (3) confirming opinions and regulation proposals from CNE; (4) issuing rules and instructions for compliance with laws, decrees and regulations pertaining to education issues; and (5) regulating and monitoring the post-secondary education system through its secretariats. National Education Council The National Education Council, or CNE, is a consulting and decision-making body monitored by MEC, collectively comprised of the Chamber of Primary and Secondary Education, or CEB, and the Chamber of Post-secondary Education, or CES, each composed of 12 members appointed by the President of Brazil. 76 Table of Contents CNE is required, among other responsibilities, to: (i) issue regulations to implement MEC’s guidelines, as well as advise and support MEC in its activities and decisions; (ii) decide on accreditation applications and renewals from post-secondary education institutions engaged in distance learning, based on the opinion of the relevant secretariats; (iii) propose guidelines and deliberate on the preparation of the evaluation instruments for accreditation and re-accreditation of institutions to be elaborated by INEP; (iv) issue guidelines to be observed by SERES for accreditation and re-accreditation of universities, university centers and colleges; (v) determine, through CES, the inclusion and exclusion of course designation from the catalog of advanced technology courses; (vi) rule on appeals of decisions issued by SERES, CEB or CES; and (vii) analyze and propose questions regarding the application of post-secondary education legislation to MEC. Anísio Teixeira National Institute for Educational Research The Anísio Teixeira National Institute for Educational Research, or INEP, is a federal body linked to MEC whose main responsibilities are, among others, to: (i) design, plan, coordinate and operationalize actions for the evaluation of HEIs, undergraduate courses and government schools, as well as the National Student Performance Examination, or ENADE, the examinations and assessments of undergraduate students; (ii) design, plan, coordinate, operationalize and evaluate indicators related to post-secondary education resulting from examinations and inputs from official databases, the establishment and maintenance of databases of specialized evaluators and collaborators, including the appointment of evaluation committees; (iii) prepare and submit to MEC the instruments for external evaluation (in loco), in accordance with the guidelines proposed by the SERES and by other competent bodies; (iv) design, plan, evaluate and update the indicators for the external evaluation instruments in place, in accordance with the guidelines proposed by CONAES; (v) chair the Technical Committee for Evaluation Monitoring; and (vi) plan, coordinate, operationalize and evaluate the actions necessary to achieve its objectives. National Higher Education Evaluation Commission The National Higher Education Evaluation Commission, or CONAES, is a coordination and monitoring body of the National Higher Education Evaluation System, or SINAES, monitored by MEC, composed of a President and 13 members, including one representative of the INEP, one representative of the Fundação de Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (Foundation for the Coordination of Improvement of Post-secondary Education Personnel, or CAPES), three representatives of MEC (one of which must come from the body responsible for the regulation and monitoring of post-secondary education), one representative of the student body of post-secondary education institutions, one representative of the academic staff of post-secondary education institutions, one representative of the administrative body of post-secondary education institutions, and five members appointed by the Minister of Education, with distinguished scientific, philosophic and artistic knowledge and proven expertise in post-secondary evaluation or management. Among other activities CONAES is required to: (i) propose and evaluate the dynamics, procedures and mechanisms for institutional evaluation, courses and student performance; (ii) establish guidelines for the organization of evaluation committees, analyze reports, prepare opinions and submit recommendations to the competent bodies; (iii) formulate proposals for the development of HEIs, based on the analysis and recommendations produced in the evaluation processes; (iv) communicate with the state educational systems, with the aim to establish common actions and criteria for the evaluation and supervision of post-secondary education; and (v) annually submit for approval by the Minister of Education the list of courses for which students will apply for the ENADE. Organization of Post-secondary Education Institutions In order to allow post-secondary education institutions to fulfill their objectives, the LDB also provides that post-secondary education includes the following programs: · Undergraduate courses, including traditional and technological undergraduate courses, offering specific training and diplomas to students, open to candidates who have completed high school or equivalent and who have been approved in the respective selection or entrance examinations; · Graduate courses, including master’s and doctoral degrees, specialization courses, further training courses and others, open to candidates who hold a diploma in an undergraduate course and who meet the requirements laid down by educational institutions; and 77 Table of Contents · Extension courses, understood as any academic, technical or cultural activity that is not included as an integral and compulsory part of the undergraduate and graduate curriculum, in which the students receive certificates. Such courses are open to candidates who meet the requirements established in each case by educational institutions. According to the LDB, post-secondary education can be provided by public or private institutions. A private post-secondary education institution must be controlled, managed and supported by an individual or a legal entity with responsibility for financing its supported entities. Post-secondary education institutions may be supported by for-profit or not-for-profit private institutions, or supporting entities, as follows: · Private in the strict sense: private for-profit institutions created and maintained by one or more private individuals or legal entities; · Community: incorporated by groups of individuals or by one or more legal entities and that include representatives of the community in their organizational structure; · Confessional: incorporated by groups of individuals or by one or more legal entities that meet the specific confessional and ideological orientation and that include representatives of the community in their organizational structure; or · Philanthropic, in the form of the applicable regulations. According to their organization and academic prerogatives, post-secondary education institutions can be: · Colleges: colleges are public or private HEIs offering post-secondary programs in one or more areas, maintained by a single supporting entity and with isolated management and direction. Colleges are allowed to offer programs along several levels, namely bachelor’s, associate’s, specialization and graduate programs (master’s and doctorate degrees). Colleges have minimum requirements with regard to the qualification of faculty members and their labor practices, and cannot establish new campuses, courses, or spots without prior authorization from MEC; · University Centers: university centers are public or private education institutions offering several bachelor’s, associate’s and graduate programs, and are expected to provide appropriate work conditions, education and qualification opportunities for their professors. To be considered a university center, the institution shall comply with such requirements: (i) at least one-fifth of the faculty members of a university center must hold a master’s or doctorate degree; (ii) at least 20% of the faculty members must work on a full-time basis; (iii) at least eight undergraduate courses shall be recognized and have obtained a satisfactory concept in the on-site external evaluation carried out by INEP; (iv) have an institutionalized extension program in the areas of knowledge covered by their undergraduate courses; (v) have a scientific initiation program with a project supervised by doctoral or masters professors, which may include programs of professional or technological initiation and initiation to teaching; (vi) have obtained an Institutional Concept, or CI, greater than or equal to four in the on-site external evaluation performed by INEP; and (vii) have not been penalized as a result of an administrative supervision process in the last two years; or · Universities: universities are public or private education institutions offering several post-secondary programs, continuing education and research development. Like University Centers, certain requirements for university re-accreditation must be observed, namely: (i) one-third of the academic staff is hired on a full-time basis; (ii) one-third of the faculty members must have a master’s or doctoral degree; (iii) at least 60.0% of the undergraduate courses shall be recognized and have a satisfactory concept obtained in the evaluation proceedings carried out by INEP; (iv) have an institutionalized extension program in the areas of knowledge covered by their undergraduate courses; (v) have a scientific initiation program with a project supervised by master’s or doctoral professors, which may include programs of professional or technological initiation and initiation to teaching; (vi) have obtained CI greater than or equal to four in the external evaluation carried out by INEP; (vii) regularly offer four master’s degree courses and two PhD courses recognized by MEC; and (viii) have not been penalized as a result of an administrative supervision process in the last two years. 78 Table of Contents The LDB provides that the following powers are granted to universities and university centers in the exercise of their autonomy, amongst others: (i) to create, organize and discontinue post-secondary education programs on their premises, subject to the applicable regulation; (ii) to establish the curricula for programs, subject to the applicable general guidelines; (iii) to establish plans, programs and projects in connection with scientific research, artistic production and extra-curricular activities; (iv) to establish the number of student offerings available; and (v) to create and change their bylaws in accordance with the applicable general rules, as well as to award degrees, diplomas and other certificates. Distance Learning Distance learning in Brazil is regulated by article 80 of the LDB, by Decrees 9,057 and 9,235, both of 2017, by Ordinances No. 11 and 23, both of 2017, and CNE’s Resolution No. 1, of 2016. Distance learning is defined as the educational method in which didactic and pedagogic processes are conducted through information and communication media and technologies, with students and teachers interacting in educational activities while located in different locations or at different times. Pursuant to the applicable regulations, distance learning is subject to different factors compared to traditional methods, including: (i) reduced transmission costs in commercial channels of sound and audiovisual broadcasting; (ii) concession of channels with exclusive educational purposes; and (iii) minimal time reservation, with no onus on the public authorities, by the concessionaries of commercial channels. Distance learning can be offered at the following levels and as part of the following educational methods: (i) primary and secondary education, as long as it is used only to supplement learning processes or in emergency situations; (ii) education for young people and adults, according to specific legal criteria; (iii) special education, according to specific legal criteria; (iv) professional education, covering technical programs at the secondary level and technological programs at the post-secondary level; and (v) post-secondary education, covering graduate, master’s programs, specializations, and doctorate studies. Undergraduate courses (bachelor’s, licentiate and technological) may be offered using distance learning methods whenever a post-secondary institution is regularly accredited by MEC for this purpose. Pursuant to Decree No. 9,057, 2017, institutional accreditation and reaccreditation, as well as the authorization and recognition of courses and their renewal will be subject to on-site evaluation, with the aim to verify the existence and suitability of the method, infrastructure, technology and personnel that may enable the execution of the activities provided in the Institutional Development Plan or PDI and the Pedagogical Project of the Course, or PPC. HEIs accredited for the offering of post-secondary education in the distance modality that hold autonomy prerogatives (universities and university centers) do not require authorization for operation of the post-secondary course in the distance modality, but shall inform MEC about the offering of the course within 60 days of the date of creation of such course, for the purposes of supervision, evaluation and recognition. Also, accredited HEIs must inform MEC about the creation of distance learning supporting units and the alteration of their addresses. Although distance learning is defined by the absence of direct contact between students and teachers, there are activities that must be conducted on-site, such as tutorials, evaluations, internships, professional practice, laboratory and dissertation defense, which are to be provided in the educational and development projects of the institution and the course. Accordingly, distance learning institutions must provide the necessary infrastructure for the students to conduct those activities, using the headquarters of the education institution or smaller supporting units throughout the country. Distance learning supporting units are no longer subject to on-site evaluation or required to obtain prior authorization from MEC in order to be set up or operated. Pursuant to Ordinance No. 11/2017, such units can be created by a unilateral decision of the institution itself. Distance courses and programs must be projected with the same defined duration for the respective on-site courses. The evaluation of the performance of students for the purposes of promotion, conclusion of the course and obtainment of diplomas and certificates must be conducted through the conclusion of the programmed activities and on-site exams by the accredited HEIs, following procedures and criteria defined in respective PPC. 79 Table of Contents The evaluation of the distance learning courses is performed in a very similar manner as the evaluation of on-site courses. In the event of any irregularity or non-compliance to any of the previously established conditions set by MEC, the competent body may initiate an administrative proceeding that may result in one or more penalties, such as: (i) forfeiture of accreditation or reaccreditation to operate as a distance learning institution; (ii) intervention; (iii) temporary suspension of autonomy prerogatives; (iv) initiate reaccreditation proceedings; (v) reduction of available vacancies within courses; (vi) temporary suspension of new students admissions; and (vii) temporary suspension of courses offered. Diplomas and certificates for distance learning courses and programs from accredited institutions are valid throughout the national territory and institutions are not entitled to set different criteria for diplomas issued for distance learning courses and those issued for on-site courses. Distance learning courses may be offered only by HEIs that hold specific accreditations for this purpose. It is MEC’s responsibility to promote the accreditation acts of post-secondary institutions. To act outside the institution’s local geographic reach, the institution shall require an extraterritorial accreditation to MEC. Distance learning courses or programs require periodic renewal. Also, the accredited institution must initiate the authorized coursework within 24 months from the accreditation, and if the institution does not implement the authorized activities in such time frame, it will be subject to an administrative proceeding that may result in the canceling of the given authorization. Pursuant to Decree No. 9,057/2017, post-secondary courses may be offered in the distance learning modality through a partnership between an accredited distance HEI and another company. In this case, applicable regulations establish that educational activities must be conducted in the facilities of the accredited HEI, which will be responsible before MEC for the regularity of the teaching and learning processes. Accordingly, the HEI must inform MEC of its partnerships, describing their purpose and most relevant aspects, in order for MEC to be able to assess eventual irregularities. In any case, distance learning courses and programs are subject to the evaluation rules of the SINAES in the same manner that on-site courses are. Regulatory Processes of Post-secondary Education Institutions Accreditation of Post-secondary Education Institutions and Authorization and Recognition of Courses A post-secondary education institution is initially accredited as a college. The accreditation as a university or university center is only granted after the institution has operated as a college and met satisfactory quality standards, including positive assessments in the SINAES. In addition, the HEI must fulfill other legal requirements that could vary according to the respective category, such as the requirement that a certain percentage of faculty members meet minimum graduation standards (i.e., a doctorate or master’s degree), and specific types of labor regimes. The application for qualification of a post-secondary education institution must be supported by various documents, including: · Supporting entity: (i) incorporation documents, duly registered with the competent body, evidencing its existence and legal capacity, in accordance with civil legislation; (ii) proof of registration in the National Taxpayer’s Registry or, CNPJ; (iii) certificates of tax and social security compliance; (iv) proof of ownership of assets capable of supporting the education institution; (v) financial statements; and (vi) consent form executed by the supporting entity’s legal representative, vouching for the veracity and regularity of the provided information and the financial capability of the supporting entity; and · Post-secondary education institution: (i) proof of payment of the on-site evaluation fee related to the external evaluation to be performed by INEP; (ii) PDI; (iii) bylaws and internal regulations; (iv) identification and qualification of managers, with a description of their academic and administrative experience; (v) receipt of regularity and availability of the teaching facilities; (vi) plan of accessibility assurance, pursuant to the regulation and followed by a technical report by a competent professional or public body; and (vii) compliance with the legal requirements related to the safety of the building, including having an escape route in case of fire, proved by a specific report issued by the competent public body. 80 Table of Contents In relation to the accreditation process of a new post-secondary educational institution and linked course authorizations, MEC may issue a temporary accreditation act to expedite the operation, pursuant to article 24 of Decree No. 9,235/2017, as long as the supporting entity complies with all the following requirements: · all self-supporting post-secondary education institutions have been reaccredited in the last five years obtaining an average Institutional Score (Conceito Institucional) greater or equal to “4”; · none of its post-secondary education institutions have been subject to administrative penalties by MEC in the last two years; and · the courses to be offered by the new post-secondary institution, which are limited to a maximum of five courses, must already be offered by other institutions supported by the same supporting entity and duly recognized by MEC in the last five years with a Program Score (Conceito de Curso) greater or equal to “4.” Following the initial accreditation as a post-secondary education institution, colleges depend on an authorization issued by MEC to offer post-secondary education courses. Within their autonomy, universities and university centers do not depend on authorization by MEC to create the majority of post-secondary education courses and campuses in the same city as its headquarters, except for medicine, dentistry, psychology, nursery and law courses, which necessarily must be previously authorized by MEC. In any other cases, institutions are required to inform MEC about the programs they offer for purposes of monitoring, evaluation and further recognition. In the authorization for post-secondary on-site courses of the federal education system, the external in loco evaluation can be waived after documentary analysis if the following requirements are met: (i) having an Institutional Score (Conceito Institucional) greater than or equal to “3”; (ii) absence of a supervision process; and (iii) the institution offers other courses in the same area of knowledge which meet the minimum evaluation standards. Requesting authorization for a course must be supported by the following documents, among others: (i) proof of payment of the on-site evaluation fee; (ii) the PPC, outlining the number of students, classes, description of the program and other relevant academic elements, and describing the facilities, technology and staff for the distance learning support units, if applicable; (iii) list of faculty members, together with the relevant agreements entered into with the education institution, together with their respective titles, working hours and work regime; and (iv) proof of availability of the teaching facilities. Universities and university centers may also apply for the accreditation of a campus not located in the same city as its headquarters, provided that it is located in the same state. Such campuses and programs must integrate the same set of universities or university centers and will only enjoy autonomous prerogatives if there is compliance with the same headquarters requirements and if a high quality degree is shown, through an average Institutional Score (Conceito Institucional) greater or equal to “4.” Therefore, even in the case of universities or university centers, prior authorization from MEC is necessary to create any courses on campuses not located in the same city as the university’s headquarters. Once authorization for a given program has been issued, post-secondary education institutions, including university centers and universities, must also file a request for the recognition of the program as a condition for the national validation of the respective diploma. The requirement must be filed with MEC after the midway point of the term established for the completion of the corresponding program and three-quarters completion of such term, and must include the following documents, among others: (i) PPC, including the number of students, schedules and other pertinent academic information, (ii) list of faculty members, listed in the national registry of instructors, and (iii) proof of availability of the teaching facilities. Authorization and recognition of courses, as well as accreditation of post-secondary education institutions must have a limited term and be renewed periodically following the regular evaluation process, currently established according to the evaluation cycles of the SINAES. Our post-secondary education institutions are accredited by MEC and their courses are duly authorized. We also make every effort to comply with all applicable regulations to maintain our institutions and courses compliant with MEC regulations. 81 Table of Contents Modification of Supporting Entity Pursuant to Decree No. 9,235/2017 and Ordinance No. 23/2017, modification of a supporting entity occurs whenever there is a change in the supporting entity or its controlling shareholder, affecting the decision-making process. Although it no longer depends on the approval of MEC, MEC must be informed within 60 days of the consummation of the event for the purposes of updating the registration with MEC. Such notice must be followed by all the legal documents related to the alteration, duly registered and the term of commitment executed by the legal representatives of both the current and new supporting entities. The new supporting entity or controlling shareholder must meet the requirements necessary for the accreditation of a post-secondary education institution, which will be assessed by MEC in the context of the institution’s reaccreditation proceedings. Additionally, the LDB also provides that educational institutions must inform MEC of any change in their bylaws, which must be registered with the competent bodies. The transfer of programs or courses between HEIs is strictly prohibited and may subject the involved entities to penalties such as: (i) suspension of new students’ admission; (ii) suspension of the offering of undergraduate or graduate lato sensu courses; (iii) suspension of the institution’s autonomy to, among others, create new post-secondary courses and establish course curricula, if applicable; (iv) suspension of the license to establish new distance-learning programs; (v) override any ongoing regulatory requests filed by the institution and prohibit the filing of any new regulatory requests; (vi) suspension of the participation in the FIES; (vii) suspension of the participation in PROUNI; and (viii) suspension or restriction to participate in other federal educational programs. Financing Alternatives for Students: Incentive Programs Programs providing public funding to students enrolled in private higher education institutions have been a major public policy to expand access to post-secondary education in Brazil, especially for the low-income segment of the population. The most important programs are the following. University for All Program The University for All Program, or PROUNI is a tax incentive program created through the Provisional Measure No. 213, of September 10, 2004, later converted into Law No. 11,096, of January 13, 2005, that addresses the exemption of certain federal taxes imposed to post-secondary institutions that grant scholarships to low-income students enrolled in undergraduate courses and technology graduate courses. By granting tax incentives to IES, PROUNI has played an important role in inciting the growth and private investment in the post-secondary education sector. Private post-secondary institutions may adhere to PROUNI by the execution of a specific agreement with MEC, valid for 10 years and renewable for the same period. Such agreement must be emended every semester with an additional term establishing the number of scholarships to be offered in each course, unit and class, and what percentage of scholarships shall be granted to indigenous and afro-Brazilians. In order to participate in PROUNI, an educational institution must: · be up to date with its tax obligations; and · comply with the following requirements: (1) offer at least one full-time scholarship to every 10.7 regularly paying students enrolled at the end of the past school year, excluding the full-time scholarships granted through PROUNI or by the institution; or (2) offer one full-time scholarship to every 22 regularly paying students enrolled in traditional and technological graduation courses, provided that it also offers scholarships (50% of the tuition) with a value equal to 8.5% of the paying students’ annual revenue, available to students enrolled in traditional and technological graduation courses at the school year. The ratio between the number of scholarships and the number of regularly paying students must be complied with annually. If the entity does not comply with the ratio during a school year because of the withdrawal of students, the institution must adjust the number of scholarships in a proportionate matter for the subsequent school year. 82 Table of Contents Pursuant to Normative Ruling No. 1,394, of September 12, 2013, issued by the Brazilian Federal Revenue Office, a post-secondary education institution that has adhered to the PROUNI is exempt, totally or partly, from the following taxes for the duration of the adherence period: · Income Tax (“IRPJ”) and Social Contribution on Net Income (“CSLL”), with respect to the net income proportionate to the revenue derived from the Undergraduate Degree Programs and Extension courses; and · Contribution for Social Security Financing (“Cofins”) and Contribution to the Social Integration Plan (“PIS”), with respect to the revenue derived from the traditional and technological graduation courses. In case a post-secondary education institution requires its exclusion from the PROUNI, its tax incentives will be suspended from the date of the solicitation and will not be applicable for the entire period of the basis of calculation. Normative Ruling No. 1,394, of September 12, 2013, introduced new provisions regarding the tax exemptions granted by PROUNI, in particular the form to calculate the extension of the benefits. According to this Normative Ruling, in addition to the tax exemptions obtained by HEI signatories to PROUNI, tax exemptions are calculated based on the Proportion of Effective Occupation of the Scholarships, or POEB, and the exemption related to IRPJ would be calculated without taking into account the additional 10%. According to Article 7, II, amended by Normative Ruling No. 1,417, dated September 6, 2013, the calculation of the exemption also includes the additional 10% of IRPJ, in addition to the CSLL rate. The amount calculated is the amount of the IRPJ and CSLL exemption, respectively, which may be deducted from the IRPJ and CSLL in relation to the totality of our activities. Accordingly, with the issuance of Normative Ruling No. 1,417, of September 6, 2013, the IRPJ and CSLL exemption on our operating income proportionate to the POEB will also include the additional 10% of IRPJ. Moreover, considering that Normative Ruling No. 1,417, dated September 6, 2013, creates a potential limit to the amount of the tax exemption, the application of these new provisions will result in a reduction in value of the tax exemption obtained. Nevertheless, the legality of the provisions introduced by Normative Ruling No. 1,417, of September 6, 2013, is being discussed before the judiciary, with several motions still pending. Other modifications of the fiscal incentive granted by PROUNI were established by Normative Ruling No. 1,476, of July 1, 2014, which also amends the aforementioned Normative Ruling No. 1,417, of September 6, 2013, in order to (i) exclude several amounts from the concept of profit of the holding, which impacts the enjoyment of the exemption related to CSLL and IRPJ; and (ii) exclude the POEB from the applicable calculation, specifically for HEI with terms of adherence to PROUNI signed up to June 26, 2011, which also affects the calculation of the exemption specifically enjoyed for the terms of adhesion celebrated in the period prior to that date. Student Financing Program The Programa de Financiamento Estudantil (Student Financing Program, or FIES), created by Law No. 10,260, of July 12, 2001, is a MEC program to finance students that cannot bear the total costs of their education. FIES has been the most important program for the expansion of access to higher education in Brazil during the last decade, and it is currently responsible for a significant part of the revenues of the majority of private higher education institutions. FIES consists of funding granted by the National Fund for Educational Development, or FNDE to students regularly enrolled in an on-site course of a post-secondary private HEI registered in the FIES that has been positively evaluated by MEC. After a specific selection proceeding, students may be partially or wholly funded by FIES and, in that case, FNDE will be responsible for crediting the corresponding amount due by the student to the private higher education institution. Payments are made with government bonds whose primary purpose is to compensate tax debts from the private higher education institution. In case there are no debts to be compensated, the institution can resell the bonds to the government by means of a specific proceeding that currently occurs on a monthly basis. The frequency of these proceedings could vary according to public financial constraints and the discretion of FNDE. FIES has been substantially reshaped by Law No 13,530, dated December 7, 2017, and currently the program is not as broad as it used to be. According to applicable regulations, in order to enroll students that have been selected by FIES, private higher education institutions are required to contribute to the fund 13% of the amount due by the student to the institution as consideration for the educational services rendered in the first year of studies. This amount is subject to change in the following years and could vary between 10% and 25% of the consideration due, depending on specific circumstances. 83 Table of Contents On March 1, 2024, MEC issued Ordinance No. 167/2024, establishing the Social FIES program. This program reserves at least 50% of FIES vacancies in each selection process for students with a per capita family income of up to half a minimum wage, registered in the Central Registry of Social Programs of the Federal Government (CadÚnico). These eligible students can receive 100% financing for tuition fees at universities, subject to the availability of the FIES budget. National Higher Education Evaluation System The National Higher Education Evaluation System, or SINAES was created by Law No. 10,861 of April 14, 2004, with the purpose of evaluating post-secondary education institutions, undergraduate courses and measuring student academic performance. The main objective of this evaluation system is to assess the quality of education in the country, providing guidelines for MEC to decide upon institutional reaccreditation, recognition and renewal of recognition of courses. Additionally, SINAES is responsible for improving the quality of post-secondary education in Brazil given that MEC can identify deficiencies and establish specific conditions for institutions to remedy their issues and resume their operations. The SINAES is monitored and coordinated by the CONAES and INEP has a very important role in all processes. The results of the evaluation of post-secondary education institutions and their programs are public and represented on a five-level scale as follows: · Level 5 indicates excellent conditions; · Level 4 indicates more than satisfactory conditions; · Levels 3 indicates satisfactory conditions; and · Levels 1 and 2 indicate unsatisfactory conditions. Pursuant to applicable regulations, evaluation processes consist of a preliminary assessment of several conditions relating to the institution and its courses, such as infrastructure, titles of faculty members, work schedule of faculty members and student performance. Every year INEP establishes a method to evaluate those elements and for them to correspond to a number in the five level scale. The preliminary assessment is a complex process based on quality indicators as follows: (a) National Student Performance Examination The National Student Performance Examination, or ENADE, is a test applied to a number of students that are completing courses. It evaluates students’ knowledge regarding the content provided in the curricular guidelines of the respective undergraduate course, their skills and competencies. ENADE’s results are considered in the composition of quality indexes for courses and institutions. (b) Preliminary Course Concept The Preliminary Course Concept, or CPC, is a compound of the ENADE score, the Difference Indicator between Observed and Expected Performance, or IDD, and factors that include teacher titles, the work schedule of faculty staff and infrastructure of the institution. It is an indicator of the state of undergraduate courses in the country. CPC 1 and 2 courses are automatically included in the INEP examiner’s visit schedule for on-site verification of teaching conditions. Courses with a concept equal to or greater than 3 can choose not to receive the visit of the evaluators and, thus, transform the CPC into a permanent concept (the Course Concept). The CPC is released every year for a specific group of courses along with the results of ENADE. 84 Table of Contents (c) General Course Index The General Course Index, or IGC, of the institution summarizes in a single indicator the results of CPC and the evaluation of master’s and doctorate courses of each educational institution. With regard to undergraduate courses, CAPES indexes are used and adapted to the scale according to a methodology provided by INEP, given that they are organized in a different manner. IGC also goes from 1 to 5 and is published by INEP/MEC, after the release of the results of ENADE and CPC. The IGC is a criterion in the accreditation and re-accreditation processes of institutions and also in the authorization process for new courses: institutions with IGCs less than 3, for example, may have their applications for new courses rejected by MEC. Similarly, the indicator is used to guide the expansion of quality education: institutions with good performance are exempted from the authorization of MEC to open courses. (d) Indicator of Difference Between Observed and Expected Performance The Indicator of Difference Between Observed and Expected Performance, or IDD, is aimed at providing a reference of the contribution of the course to the learning of each student. For that purpose, it compares the results of the ENADE with the performance of the same student in the ENEM. The indicator has a scale of 1 to 5. Following preliminary assessments, all institutions are typically subject to an on-site evaluation to confirm the results. However, given the size of the system, MEC gives institutions the option to convert the results of the preliminary assessments into final results and, therefore, forgo on-site evaluations. For institutions that obtain unsatisfactory levels, MEC on-site evaluations are mandatory. Even before the on-site evaluation, MEC is entitled to apply precautionary measures when preliminary assessments of the institution or course are not considered satisfactory, such as: (i) suspension of new enrollments within the respective course or the entire institution; (ii) reduction of vacancies; and (iii) suspension of all regulatory proceedings for institutional reaccreditation, new authorizations, recognitions or renewals of recognitions. Should the level be confirmed as less than three by the on-site evaluation, MEC may propose a term of commitment to the institution, in order for it to correct the unsatisfactory conditions within a specific deadline. Failure to uphold, in full or in part, the conditions established in the term of commitment may result in one or more penalties to be applied by MEC, such as: (i) temporary suspension of the opening of a selection process of graduation courses; (ii) disqualification from the operating authorization of the higher education institution or recognition of courses offered; and (iii) warning, suspension or cancellation of the mandate of the officer responsible for the action not executed, in the case of public HEI. After the on-site evaluations, institutions and courses obtain definitive quality concepts, as follows: (a) Institutional Concept, which is the result of the on-site evaluation of the institution performed by INEP; and (b) Course Concept, which is the result of the on-site evaluation of the course performed by INEP. Accreditation for Graduate programs Lato sensu Post-secondary HEIs accredited for offering undergraduate courses and that have at least one regular undergraduate course or a stricto sensu graduate course can offer lato sensu graduate courses in the subjects in which they are accredited, either on-site or through distance learning. The offering of graduate programs does not require an authorization to operate, even if it is offered by a college. However, it must be notified to MEC, through MEC’s system (e-MEC), within 60 days of the date of creation of such course. The lato sensu graduate courses are aimed at students who hold a diploma in an undergraduate course and satisfy the criteria of the institution that is offering the graduate course. The graduate courses must meet the following requirements: (i) curriculum with a minimum study load of 360 hours; and (ii) a teaching staff composed of at least 50% masters- or doctorate-level graduates of stricto sensu graduate courses. 85 Table of Contents Stricto sensu The authorization and recognition of stricto sensu graduate courses (masters and doctorates) must be evaluated by CAPES, submitted to CNE’s deliberation and approved by MEC. The HEIs can only initiate masters and doctorate courses activities following the publication of the homologation of CNE’s favorable opinion by MEC in the Official Gazette. As part of its analysis, CAPES must consider the general requirements and the specific parameters of the subject area to which each course is linked. The general requirements are: (i) alignment of the proposal with the graduate planning of the institution; (ii) suitability and justification of the proposal for the regional or national development and its economic and social importance; (iii) clarity and consistency of the proposal with detailed information on its objectives, area of concentration, lines of research, curricular structure, discipline and bibliographic references; (iv) clarity of the criteria adopted to select the students, justifications for the profile of the aimed formation and profile of the egress; (v) proof that the teaching staff has academic, didactic, technical and scientific competence and qualifications related to the purpose of the course; (vi) a permanent teaching staff to ensure the regularity and quality of teaching, research and orientation activities; (vii) indication of up to five intellectual productions of each permanent teacher; and (viii) physical and technological infrastructure of teaching and research adequate for the development of the proposed activities. Authorizations of new stricto sensu graduate courses must be requested at specific dates, as defined by CAPES and published in the Official Gazette. The “Mais Médicos” program The “Mais Médicos” Law established the “Mais Médicos” program, an initiative designed to address medical professional shortages in certain municipalities and underserved regions of Brazil and improve healthcare infrastructure and services, implementing short- and long-term measures to improve the Brazilian medical training system in both quantitative and qualitative ways. This law establishes specific regulations for medical courses, including criteria for approving the creation of new courses in Brazil involving the definition of its location, the mandatory contribution to the public health infrastructure according to the specific categories established by Ordinance No. 16/2014 issued by MEC (i.e., training of health professionals, building or reforming of health service structure, purchasing of medical equipment and supplies and study grant to the medical residency program) and also the conditions for public-private partnerships to implement the course. Within the “Mais Médicos” program, supporting entities are no longer able to choose the location of their courses or establish all conditions of supply, which have been transferred to MEC. The proceedings to implement a medical course, therefore, are more bureaucratic and time-consuming. MEC publishes a public auction notice to select municipalities that will receive medical courses. After this selection, it issues another public auction notice with the criteria for private higher institutions to compete for the right to implement courses in the municipalities previously selected. From its creation in 2013 until the date of this annual report, MEC, through SERES, announced three public calls for the selection of proposals for the authorization of medical courses on a national scale, the “Mais Médicos I” program in 2013, the “Mais Médicos II” program in 2018, and the “Mais Médicos III” program in 2023. “Mais Médicos I” and “Mais Médicos II” jointly authorized the opening of 58 new medicine courses and, initially, 4,971 new seats in medical schools, which may be increased by up to 100 seats, each in accordance with the “Mais Médicos” regulation. With the increase in annual offerings through “Mais Médicos,” on April 5, 2018 MEC announced that the government had decided to freeze the new offering of medical school seats for a period of five years, pursuant to Ordinance No. 328/2018. The decision was based on a need to evaluate the impact of opening new medicine courses in Brazil. However, on April 5, 2023, MEC issued Ordinance No. 650/2023, which revoked the suspension under Ordinance No. 328/2018 and set new rules for the opening of new medicine courses. Following the issuance of Ordinance No. 650/23, on October 4, 2023, MEC, through SERES, exercising its legal powers and based on Article 3 of the “Mais Médicos” Law announced the public call for the selection of proposals for the authorization of medical courses on a national scale. The rules for the new “Mais Médicos III” program set forth the criteria for new undergraduate medical school seats. This new program will authorize the opening of up to 5,700 new undergraduate seats, to be distributed across 95 cities with a limit of 60 seats per institution. 86 Table of Contents C. Organizational Structure All of our subsidiaries are incorporated in Brazil. The following is a chart of our current corporate structure as of the date of this annual report: Medcel, IPEMED, PEBMED, Cardiopapers and Além da Medicina were merged into Afya Brazil in 2024 and UNIDOM was merged into Afya Brazil in 2025 and therefore they do not appear in our current corporate structure chart. D. Property, Plant and Equipment As of the date of this annual report, our corporate headquarters are located in Nova Lima, State of Minas Gerais. We also have branches of the headquarters located in Belo Horizonte, State of Minas Gerais, São Paulo, State of São Paulo and Rio de Janeiro, State of Rio de Janeiro. All of the corporate headquarters are under lease agreements. In addition to our corporate headquarters and as of December 31, 2024, we leased almost all of our operational, sales, and administrative facilities. We believe that our facilities are suitable and adequate for our business as presently conducted, however, we periodically review our facility requirements and may acquire new space to meet the needs of our business or consolidate and dispose of facilities that are no longer required.