Afya Limited (NASDAQ:AFYA) Q2 2020 Earnings Conference Call August 28, 2020 11:00 AM ET
Renata Couto – Head-Investor Relations
Virgilio Gibbon – Chief Executive Officer
Luis André Blanco – Chief Financial Officer
Julio Eduardo – Vice President of Innovation and Continuing Medical Education
Conference Call Participants
Marcelo Santos – Banco JPMorgan
Mauricio Cepeda – Credit Suisse
Irma Sgarz – Goldman Sachs
Susana Salaru – Itau
Vinicius Ribeiro – UBS
Good morning, ladies and gentlemen. And welcome to Afya’s Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this call will be recorded.
I would now like to introduce your host for today’s conference, Renata Couto, Afya’s, Head of IR. You may begin.
Thank you, and good morning, everyone. Thank you for joining us for Afya’s second quarter 2020 conference call.
With me on the call today is Afya’s CEO, Virgilio Gibbon; and Luis André Blanco, our CFO.
During today’s presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements.
Forward-looking statements in this presentation include, but are not limited to, the statements related to our business and financial performance, expectations and guidance for future periods regarding our strategic product initiatives, and the related benefits and our expectations regarding the market as well as the potential impact for COVID-19. These risks include those more fully described on our filings with the Securities and Exchange Commission.
The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligations to update any forward-looking statements, except as required by law.
In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in the isolation or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS measures to the most directly comparable IFRS financial measures in this presentation.
Let me now turn the call over to the Virgilio Gibbon, Afya’s CEO and starting with Slide 4.
Thank you, Renata. And thanks everyone for joining us today. As the COVID-19 crisis continues to have effects all over the world, we remain committed to the health and safety of our employees, students, teachers and communities we operate.
Before I get into a discussion of our second quarter and first half results, I want to take this opportunity to reflect on our first year as a public company. We were able to build and deliver some results. While we are currently dealing with the pandemic and resulted economic challenges, we are confident in the strength of our company as we continue to enhance and grow our business. We have achieved or position as the leading medical education company in Brazil, partially through acquisitions. Over the past year, we have completed six acquisitions and created a successful track record of integration of acquired companies, delivered cost efficiency and synergies.
Last month, we acquired our first digital health tech company, PEBMED, adding digital assets to our service offering. With respect to medical seats, we have added more than 700 in less than one year, 70% of our goal for adding 1000 medical seats over a three-year period post IPO.
Taking into account the two most recent acquisitions our medical seats now stand at 2,143 seats. On top of that, we still have more than 800 seats be analyzed under under MoU contracts. As you can see over the past year and also during the COVID-19 crisis our financial results, have been great, consistently exceeded our guidance, delivered strong top line growth, improving profitability, generating free cash flow and maintaining a healthy financial position that creates a virtual cycle of capital allocation opportunities and cash generation.
Now Page 5, I will show our financial highlights. We delivered another solid quarter with broad base organic revenue growth. Contributions from acquisitions, margin expansions and cash flow improvements, reflecting our excellent execution even during COVID-19. This executional excellence has enabled us to exceed our financial expectations for the second quarter and surpass our first half 2020 guidance, position us for another great semester.
During the first half occupancy was at a hundred percent during the quarter and given this strong demand from medical seats allowed us to maintain the same price strategy. As a result revenue increase 54% year-over-year. It’s important to note that as we moved all classes for online platform in March, were not able to offer some of the practical classes during the semester. This deferral has impacted our first half net revenues in R$14 million, but we will be fully recognized in the second half.
Our team executed well in key areas of our business, particularly with great acquisitions, extracting synergies and scaling Afya’s operation. In turn, we generate a significant top line growth and margin expansion in the quarter and six-month period.
We still have synergies to capture as we move ahead with an integration of Uni Novafapi, Medcel, UniRedentor and Uni São Lucas. We completed the first two integration immediately after the second quarter. And for the last two is expected by the first Q of 2021.
Lastly, our balance sheet is strong with over R$1 billion in cash and cash flow generation with an 83% EBITDA to cash rate. Our financial strength and cash flow generation capabilities afford us flexibility to execute our expansion strategy and remain opportunistic, nurturing our M&A pipeline.
Moving now to Page Number 6, we will discuss about PEBMED. Although PEBMED a 3Q event and we had a conference call to discuss the acquisition, I want to take some time today to reinforce the importance of this acquisition. As a reminder, PEBMED provides tools and content for health care professionals through the WhiteBook and Nursebook apps and through the PEBMED news portal. It’s also the market leader in clinical decision software, and has an extremely popular app ranking the top 10 Brazilian apps by consumer spend.
The business lot of consists of both paid subscription and free content. This was an important acquisition for us as it progresses our digital effort to improve the user experience and efficiency of both healthcare students and other healthcare professionals. Our strategy is to combine quality medical education with intensive use of technology, and PEBMED is a key component of it. With this acquisition, we enter into the digital health services segment and strengthen our BU2 product offering, which is also a relevant component of our growth strategy.
On Slide number 7, we will discuss a little bit more of our digital strategy. The pandemic proved that both individuals and healthcare professions were willing and able to adapt to a more digital world and caused us to accelerate the expansion of our digital business. We are committed to provide innovative technology solutions that assist our students as they spend more time online to work and study.
Additionally, we see the opportunity to maintain a relationship with our postgrad students and through their entire careers. Our increased product offerings is driving more uses to our digital assets. During the quarter, our monthly active users increased 27.6% compared to the first quarter of this year.
Stepping back and looking at the long-term opportunity, there was already a seasonal shift happened in the digital healthcare world even before COVID-19. We believe that this shift has been accelerating in the last several months and will continue post-pandemic. Additionally, we believe that the shift combined with our strong brand and the deep connection we have built with our students and alumni, position us to capitalize on the opportunities ahead.
On next slide, we’ll start to discuss about our recent acquisitions. As you all know, M&A is a key pillar of our growth strategy, and we are taking a disciplined approach to grow our portfolio. During this time of significant business disruption uncertainty, we are taking steps to strengthen our leading position.
Now where we see the opportunity, we accelerate our strategic plans. To that end, during the past week, we announced two strategic and accretive acquisitions. The first one was Faculdade de Ciências Médicas da Paraíba, a post-secondary education institution offering under red medical programs in the state of Paraíba. It’s our first school in this state.
The second was Faculdade de Ensino Superior da Amazônia Reunida, or FESAR, a post-secondary education institution authorization to offer on-campus undergrad course in medicine in state of Pará, our second school in this state. Seeing these measures of Paraíba adds 157 seats and is the second largest acquisition for us in terms of approved medical seats. We see the opportunity to increase our organic growth rate, primarily as we increased the number of seats at maturity at Ciências Médicas da Paraíba to 1,130, up from 850 currently. FESAR brings another 120 medical seats and currently has 227 medical students and a potential of 864 medical students at full maturity. Combined, these two acquisitions take our medical seats up to 2,143 seats.
Now on Page 9, we will see our integration track record. As I just mentioned, we have completed six acquisitions the past year. And as indicated on both charts, we have a successful track record of integrated these acquisitions and capturing synergies. In January, the margin expansion has been over 1,000 basis points in slightly less than a two-year period after acquisition.
The current operating environment has not slowed our integration process with recent acquisitions, and we are moving ahead with the group you see listed in the box on the right-hand side of this slide. As integrate acquired companies and gain further scale, we are able to see value creation and margin improvements, reflecting cost efficiencies and synergies.
Now on Page 10, we will talk about our future perspectives. We are coming off of a very successful year as a public company, and 2020 is also a great start. We have a successful business model with highly-predictable growth. We will continue to focus on five key areas: first, strategic M&A.; second, pushing further into our digital initiative; third, successfully integrate acquisitions; fourth, delivering sustainable and predictable growth; and five, maintaining a health balance sheet.
Beginning with M&A, which has been and will continue to be a key component of our strategy, we have completed six acquisitions after IPO, both medical schools and digital. Importantly, we have a solid pipeline that has been growing during this challenge period. As I mentioned earlier, we are working diligently to further enhance our digital capabilities. We will continue to invest in our strategy to add more digital assets and solution to support our medical students and other health professionals.
While BU2 represents a small part of our overall sales to date, we see significant opportunity to grow this business. Our solid balance sheet, coupled with strong cash flow generation, create a virtual cycle, providing the financial flexibility and competitive advantage to continue executing on our M&A strategy. And given the high predictability of our business model, I’m confident in our ability to generate meaningful cash flow, further strengthening our financial position.
Overall, our consistent momentum is continuing, and we are pleased with our results in the first year as a public company. For the second half, we have already fulfilled 100% of the medical seats, and we are confident to achieve our second half guidance, confirming the resiliency and the right predictability of Afya’s business model.
I will now turn this call over to Luis for more color on our financial results and second half 2020 guidance. Thank you.
Luis André Blanco
Thank you, Virgilio, and good morning, everyone. I would like to stress what Virgilio just said, I’m particularly proud what we delivered a successful quarter and the first half results that exceed our guidance. As already discussed, at the end of the first quarter, we were able to quickly move all of the classes online, which in turn enable us to report a good first half.
Moving to Page 12. My discussion will focus on the main and most significant P&L items. There is additional inflow in the earnings press release that we – you can refer for further – more information. Our second quarter earnings represent a solid result in view of the current global environment and as you will hear over the course of my presentation, we had a very good quarter across all key metrics.
Let me highlight a few. Both medical seats and students saw significant increases during the quarter. With respect to the number of medical school seats, we added 414 seats year-over-year, for a total of 1,516 by the quarter end, a 38% increase over second quarter 2019. Reflecting the seating maturation process, the total number of students in the second quarter 2020 was 9,097, an increase of 64% over the same period of the prior year.
And as you heard from Virgilio, subsequent quarter end, we added another 277 seats with the acquisitions of FCMPB and FESAR. Taking into account the acquisitions we have already made, our full potential as of today is 2,143 seats and more than 15,000 students. which lead us to a 13% organic CAGR in the student base, considered the period between 2019 and 2026.
Net revenue for the quarter was up 48.8% year-over-year to R$274 million. Excluding the acquisition of UniRedentor and UniSaoLucas, pro forma net revenue grew by 18.8% year-over-year, reaching R$219 million. The increase was primarily driven by organic revenue growth, mainly due to the maturation of medical school seats and an increase in average ticket.
The strong top line growth, combined with cost efficiency and resulting synergies from acquisition was reflected in adjusted EBITDA, increasing 73% to R$180 million and a margin expanding 780 basis points, excluding the consolidation of UniRedentor and UniSaoLucas, pro forma adjusted EBITDA increased 44% year-over-year to R$98 million, and the margin increased 780 basis points to 44.8%.
Adjusted net income was up 163%, reflecting the revenue contribution, synergies captured and margin expansion from the consolidation of acquisitions. Earnings per share increased 183% from R$0.23 in the second quarter 2019 to R$0.65 in the second quarter of 2020.
Moving on to Page 13 for a discussions of key operating metrics by business unit. We delivered a solid growth across both business units, continuing performance very well. Growth is a key operating metrics, as shown on this slide, is being driven by combinations of organic growth and acquisitions.
Starting with BU1 our average monthly medical tuition fees at the semester end were R$8,157, which was 14% above the same period in 2019. This reflects a combination of new students enrolling with higher tuition rates combined with the students graduating with the lower tuition.
As shown in the middle chart, 76% of our combined tuition fees are derived from medical schools. The combination of a 32% increase in the number of students and 14% increase in average ticket results combined tuition fees up 50% when compared with the first half 2019.
With respect to BU2, we had almost 16,000 active paying students at the quarter end, an increase of 47% over the same period last year. We can see an increase of 26% and 22% in the number of students of prep course and CME for B2B and B2C, respectively. Regarding Medical Specialization & Others with UniRedentor, we saw an increase of 161% in the number of students.
Moving on to a deeper analysis of revenue and EBITDA on Slide 14. We are fortunate to have an experienced team that’s proving once again that they can continue to successively execute the complex work of integration acquisitions and capturing synergies. As shown on this page, we have provided net revenue and adjusted EBITDA bridges from our historical second quarter 2019 revenue to the reported second quarter 2020.
For the first half, net revenue increased 69% to R$547 million. Excluding the consolidation of UniRedentor and São Lucas, net revenue grew 47% in the first half to R$476 million, with a contribution of R$93 million coming from acquisitions and R$60 million coming from organic growth, which is comprised of the maturation of medical school seats and an increase in average ticket. UniRedentor contributed revenue of R$14 million in the first half, while Uni São Lucas contribution was R$31 million.
On the right side of the page, we show the first half 2020 adjusted EBITDA. During the period adjusted EBITDA increased 82.7% year-over-year to R$259 million with 360 basis points, expansion in margin and R$23 million contribution from UniRedentor and São Lucas. Excluding the consolidation of UniRedentor and São Lucas adjusted EBITDA advanced 66.5% with R$48 million contributed from prior acquisitions and R$46 million coming from organic growth. The adjusted EBITDA margin, excluding these two companies expanded 580 basis points.
Moving next to a discussion of cash flow on Slide 15. Cash and cash equivalent of R$1.1 billion at the quarter end was up from R$960 million at year-end 2019. The significant increase in cash compared to year-end 2019 reflects strong cash flow generations and the proceeds from the July 2019 IPO and the February 2020 follow-on offerings. The majority of these funds is invested in low risk Brazilian reals-denominated instruments. The total debt was R$535 million at the quarter end 2020, up from R$361 million at year-end 2019, related to acquisition payables.
Cash flow generation remained strong in the first half of 2020, increasing 81% to R$202 million, which results in a cash conversion ratio of 82.6% compared to 85.4% in the first half 2019. This was a slightly lower cash conversion ratio year-over-year and it’s mainly due to the consolidation of Medcel business and our students’ renegotiations overdue monthly installments due COVID-19 crisis.
Turning next for a discussion about guidance on Slide 16. We are pleased with our second quarter and first half results and our guidance for the first half of this year demonstrates that we are still in early stage of growth. As a reminder, the world is still in the middle of a pandemic. Economics are slowly opening up and our guidance takes into account the best information available at this point of time. Two key metrics for second half 2020 guidance are the follow: second half 2020 adjusted EBITDA margin ranging between 45.5% and 47%; our guidance includes the impact of the adoption of IFRS 16 and includes UniRedentor starting February 2020, São Lucas from May, PEBMED from late July, and excludes any other acquisitions that may be concludes after the issuance of this guidance.
And as we look ahead, we have a complete intake process for the upcoming semester and even the strong demand we saw for seats, we have filled 100% of our medical seats, maintaining our revenue growth resilience and high predictably, even under these uncertain times. Additionally, included in the revenue outlook is the revenue recognition for some practical classes that could not be held during the first half and were pushed out to the second half of 2020 upon the reception of the classes. This amounts to R$14 million.
To sum up, we are pleased with the strong quarter and first half results and the continued momentum in our business. We’re confident the strategic investments we are making to advance our growth strategy will enable us to continue to deliver consistent revenue and profitability growth as we remain on track to achieve or exceed our fiscal 2020 financial targets. Afya is in the strong financial positions with a high liquidity. We have a history of robust cash generation that clearly defines margin growth strategy and this team with a proven track record of delivering results and handling difficult times. And COVID-19 has not changed any of these factors.
This ends our prepared remarks. We are now ready to take your questions. Operator, please open the lines for questions.
[Operator Instructions] And today’s first question comes from Marcelo Santos of Banco JPMorgan. Please go ahead.
Hi. Good morning. Thanks for taking my questions. I have two. The first question is regarding BU2. Could you please provide a roadmap of your plans for the next two years? How do you plan to monetize and integrate these assets? Whatever you could – whatever light you could share that would be very interesting for us? And the second question is regarding M&A. We have limited information, but with our information it seems that the recent acquisitions have been a bit more expensive than the previous one. Maybe that’s just by the quality, but they look more expensive. So the question is, are we seeing the good assets are like – we’re getting to the end of the good assets or is competition hitting up. We have been seeing other players also becoming more vocal on med schools in the past they were not. So any comment there would also be very helpful. Thank you.
Hi, Marcelo. This is Julio here. Hi, everyone. Thank you for participating in the call here. So answering your first question in regards to the roadmap for BU2. So more and more BU2 is an extension of course, of what we’ve been doing with our undergrad business, right? So we’ve been focusing a lot first on the digital part of integrating more and more our digital platforms. So this is the first thing. So we were investing in the development of the integrated solution where we offer one single platform for all of our students. So just as an example, we are now launching still this year the app that integrates the digital experiencing the graduate business adding more services to our students on the graduate business. So first thing is that we are providing this digital platform and now actually with Whitebook the app from PEBMED the idea again 90,000 users – paying users for that particular app.
Imagine the potential that we have to distribute and to market other courses that we have for continue medical education, with more micro learning. So ideally we want – the roadmap is based on having our students and students and medical students using our platform so we can provide and sell and cross sell products – educational products, and now moving also to digital services. So this is – for the next two years is to integrate the digital platform so that we can serve all of our students having one single experience on the digital platform. So, hopefully I’m answering your questions, but I’ll hand over to Luis for the second one.
Thank you, Julio.
Luis André Blanco
Hi, Marcelo. This is Luis to take your second question here about the M&A. Of course, that the pipeline M&A and the competition is getting high, it’s getting more vocal. That’s one of the costs to be a public company for sure. But in our view here they’re more mature transactions when we are acquiring more mature institutions will be completely related to EBITDA multiples. And we are doing very accretive transactions considering that we are investing our capital, our cash that you can extract synergies in a very short-term, four to five years jumping revenue, jumping margins, and also it’s not only a six year duration program that we are taking into consideration here. We’ll have a very long relationship. As a goal, we are aiming at least a 20% of IRR for all of this opportunity. And in terms of multiples after synergies, both synergies will be around 4x to 5x most of them. So that’s the way we are looking and keep looking there’s more traditional acquisitions.
And Marcelo just adding some points, what Luis just said, of course, we analyze each one of these acquisitions. Virgilio in his speech told that we have a pipeline with more 800 seats that we are analyzing case by case, always referring to its – evaluating it with IRR and EBITDA multiples in maturation. Each process is different. Each process, each acquisition is different. One of them that we announced in these last 10 days, one of them was a competitive process. Of course, in this one, we face a little bit more pressure in price. There are other – the other acquisition was a direct negotiation. So what you can expect from us is to keep our financial discipline in these acquisitions, always try to give the best return on our capital allocation.
And our next question today comes from Mauricio Cepeda with Credit Suisse. Please go ahead.
Yes. Good morning, everyone. Thank you. Thank you for this time to answering the question. In fact, I just had one and it will be a follow one of my colleagues insisting a little bit on M&A. As the other groups are now much more vocal and possibly are really in more need of this kind of medical seat acquisition as the other higher education business are not doing well. And so far, we saw that you are paying progressively more for these targets. And you are right, they are accretive so far in terms of low cost. In a feedback methodology, it’s a very simple one, we see that it takes some years to get investment back anyhow. But in a case where the competition gets tougher and your competitors start to overpay for the targets, what are your plans? Are you more willing to do a defensive move, not to let them win or do you privilege a little bit more the financial rationale of the transaction? Thank you.
Hi, Mauricio, this is Virgilio here. First, the type of assets that we are targeting, they have to be very concentrated in medical and health programs, above 60%, 70% of the revenues coming from this program. So I truly believe that we are 100% focused on these offerings, had some kind of differentials not only because of the quality of our program, but we are also licensing our platform for the institution. So there is a component of reputation here that we are getting close, on most of the other institution focus on medical school.
Of course, if the price comes up, it’s like a competition grows even stronger and become a war, in our side, our strategy is we already have an ecosystem distribution channel, very, very large. So it makes a lot of sense to start partnership [indiscernible] licensing our platform, capturing these students at the beginning of the career as a third-party students using our platform and tracking [indiscernible] years offering our portfolio. We continue to serve and also now with health and digital services using platforms such as PEBMED. So that’s made a lot of sense and a better use of allocation instead of getting our war. I’d like to see all of the other players as a potential partner that can use our platform, our system, [indiscernible].
So having said that, we still see an opportunity to have good great transaction in medical school and also now we are complete aligned and focused for additional services in our PEBMED platform. So that’s how we’re thinking.
Very clear, thank you.
And our next question today comes from Irma Sgarz with Goldman Sachs. Please go ahead.
Yes, hi, good morning. I hope you all are doing well. And congratulations on the very strong results. And thanks for taking our question. The first one that we have here is related to the margins.
Hello, can you hear me? Hello.
Hello this is the operator. The speaker locations, can you hear me speaking?
Yes Irma go ahead.
Okay, thank you.
You can hear me. Okay, perfect. So back to – I wanted to ask about margins. You had obviously very strong underlying margins in this last quarter, and they evolved very well. If we think and obviously, we see the guidance for the back half of the year, but when we think a little bit beyond sort of for the next couple of years, again, understanding that your guidance is restricted to the second half of the year, but could you just help us understand the average maturity of your legacy medical campuses and also the average maturity of the recent acquisitions that you’re integrating, please, because it will be helpful to just think through how your margin can still progress from here?
And then second question we have is regarding the mice medical projects. If you have any update that you could share there, please. Thank you.
Hi, Irma thanks for the question. In terms of margins, as we have many institutions that were recently acquired, we still have a lot of room for improvements, still have low-hanging fruits, I said in my speech, that we still have large institutions to have full integration and capturing more synergies and efficiency, such as on Uni Novafapi, Uni San Lucas and UniRedentor, they are very large institutions, and we are not extracting – not even the 50% of the synergies that we are looking for these assets.
So we are aiming to have at least five percentage points for gross margins where we are operating this Business Unit 1, considering IFRS 16. So there’s still opportunity and room for improvement in our efficiency on this side.
On your second question about the mice medicals program, we still are waiting for the final conclusion, at least for two institutions. We are very close to have two, I expect this year to have the final authorization. And the other five, I think, it’s more reasonable to expect for 2021. So two of them very close to have the final approval, the final signature for the Minister of Education. We are seeing some of series in the 28 series from the last mile medical process being already authorized, and I think we are very close to have the first ones starting.
And Irma just adding some points in the first – to your first question, let me just give you an example that is São Lucas and UniRedentor as you can see now in our press release, the consolidation of these two units that we bought on the first merger has reduced our consolidated margin. So, of course, we have different institutions, different percentage in these institutions between medicine, health and other programs. We have different maturation stage, so it’s very difficult to put an average on that.
But what you can see in our presentation that when we acquire the institution and use our playbook, doing the cost reductions in the first half, migrating these institutions to our chart set of center, implementing our people plan and after it’s implementing our full national curriculum, what we can see that we captured this efficiency along of this process. So we are very confident in our playbook, and then very confident that we can track the synergies in each one of these acquisitions.
That’s great. Thank you very much.
And our next question today comes from Susana Salaru with Itau. Please go ahead.
Hi, good morning, guys. We have two questions here. First, I just wanted to clarify the answer related to the partnerships that Afya – that Virgilio mentioned that Afya had with several other potential projects. I’m sorry, we couldn’t understand properly the answer. You guys have a – you aim to have partnerships with the next targets or the potential targets in term of acquisition or you have already some kind of MOU or some kind of non-binding offer with some of the target of product that you aim to much realize in the future? We didn’t understand what was – what is the kind of contract that you have with these potential targets that will facilitate your acquisitions relative to the other players in the market. That would be our first question.
And then our second question is related to PEBMED. We discussed a lot about PEBMED potential upside and cross-sell with the medical seats by school students, sorry. We know that PEBMED also used for other healthcare careers. So we were wondering if – when we should also take into consideration the percentage of students that you have in health care and if you’re going to leverage PEBMED cross-selling for those students as well or you’re going to focus exclusively in certainly medical of students and in nursing? Thank you.
Okay. Susana, I’ll take your first question here, then Julio help me on the second here. But just to separate, at this point, we have around 40 medical institutions using our personal platform to help them during the COVID-19 to keep running their learning process and all the semester for these students. Some of them, we have a B2B contract as a licensed learning, traditional learning system products to help them for more than one, two years, just it’s not for free problem.
For an institution using today, you have six of them paying SaaS module per user our platform. Of course, that this relationship can be an opportunity for us to leverage M&A acquisition. And also when I said about 800 seats of this pipeline, it’s under MOU contracts. We are doing our diligence, so the pipeline is getting bigger and it’s very fertile. So it has something to do with this relationship that we have, but we have a road map all the medical institution that makes sense for us in terms of target for M&A area.
Okay. Susana, Julio here. In regards to the strategy with PEBMED, if you see the numbers, of course, the number – the revenues, they come from the doctors and medical students that are using specifically WhiteBook. Nursebook, if you consider the number of nurses and the number of technicians on nursing as well, I mean, it’s a significant number, it’s about 2 million people in the country. The penetration so far is about 60,000 users.
There’s still room to grow, of course, but there’s a – it’s a different audience, right. So we’ll keep investing, but always thinking that the WhiteBook is the one, it’s the application that we want to grow and consolidate because there is where we extract more value, specifically, again, on the journey of the doctor that we’re focused on. But there is room to also invest in other – in multi-professional careers, of course. And since doctors, they don’t work alone, and my point here is that we think about the point of care. That’s where we are thinking.
And if the application and the software, everything that we’re discussing makes sense for the point of care, then we will invest. We have a significant number of other students from different healthcare courses, but still the main focus is WhiteBook so far. Consolidate there, increase the market share that is already high, we have opportunities, if you see on the slide, opportunities to grow specifically for those doctors that are more than five years that they have already graduated to create more specialized and more personalized experience. But then again, Nursebook will keep growing. We’ll invest more to grow the base, and then that could be an opportunity to do without the healthcare careers as well.
Thank you, Julio. Very clear. Virgilio, just one clarification on your answer. You mentioned 800 seats under MOU, this seat is on top of – it includes the four companies that you have already a business relationship through the digital platform or these are the four companies that you have the business relationship will be additional potential targets over – on top of this 800 seats that you have under MOU?
Susana, these 800 seats, they are out of this – the institution that we had, the B2B relationship, but some of them – under MOU, some of them are in our pipeline. We are having conversations in the first stage, okay.
Perfect. Thank you.
[Operator Instructions] Our next question comes from Vinicius Ribeiro with UBS. Please go ahead.
Yes, guys, good afternoon everyone. Thanks for taking my question. So just very quick one, two quick ones. So first will be a color on the pricing on this intake processes. I just wanted to get a sense if you guys change your pricing point in term for entering students? And the second question is similar to one that was already asked about the BU2. Just like to understand how has been your kind of your approach for attracting students during this pandemic? And how should we kind of expect this to behave for the rest of the year? Thanks a lot guys.
Hi, Vinicius. About your first part of your question, price point, we did change our strategy doing this first semester and also in the second semester. We are just changing related to inflation. Remember that we have – including migration on our average ticket because when we acquired institution [Technical Difficulty]
So that change because of the COVID, of course that case by situation with some credit in terms of installment for this to renew of the following semester, but will not impact our good balance sheet and cash flow generation. On the BU2, about what we are doing in terms in the impact that physicians were hurt during…
You’re breaking. Can you guys hear us?
Yes. It’s a little bit…
I’ll repeat here. If you’re don’t hear me well, Vinicius, please give just in terms of pricing, we did change our strategy. We acting the same dynamics that we are adjusting tuition semester over semester, so that’s the way we’re doing. And remember that we have maturation effect on our tuition that we changed our price when we acquire an institution amidst our agreement. Okay. So let’s remember that we have the recurring effect of maturation in our institution because change and come back 2034 situation, and we can move having this positive effect on price for next four, five years.
On BU2, the intake process for graduate students, we have impact the COVID-19 crisis. We were performing due to season, we enrolling graduate program for following semester for second semester. So what we are seeing demand is there, it takes for us go through September and beginning of October to close [indiscernible] graduate program, and we are taking very good [indiscernible] and in terms of volume to start in class in October.
Also in the first semester, we saw 20% to 22% of growth on our BU2 and the second semester of cost, we are having the new the program started in the September. So it was starting before 2020, 2021. Now in September, it goes in due February, March of the next year. So it’s too early so now how would be the dynamics for the following semester.
Okay. Thanks, Virgilio. Thanks a lot for repeating it.
And ladies and gentlemen, this concludes the question-and-answer session. I’d like to turn the conference back over to Mr. Virgilio for any final remarks.
Okay, thank you all. I think we have some interruption in the call. Sorry for that. And this is the first half of 2020 and the first year as a public company has been unique for us here in Afya. We navigate firmly and steadily even under all this uncertainty, and we have – keep optimistic for the following semesters in the following years. So thank you all for the support during this first year as a public company, and I really hope to see you all safe in the next quarters. Thank you, and bye-bye.
Thank you, sir. This concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines, and have a wonderful day.