Afya Ltd (AFYA) 2021 Q2 法說會逐字稿

Thank you for joining us for Afya's Second Quarter 2021 Conference Call. With me on the call today is Afya's CEO; Virgilio Gibbon; and Luis Andre Blanco, our CFO.

During today's presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements.

Forward-looking statements in this presentation include, but are not limited to, the statements related to our business and financial performance, expectations and guidance for future periods, or expectations regarding our strategic product initiatives and the related benefits and our expectations regarding the market as well as the potential impact from COVID-19.

These risks include those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law.

In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute of the results prepared in accordance to 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 Virgilio Gibbon, Afya's CEO, starting with Slide 3.

Thank you, Renata, and thanks, everyone, for joining us today. I'm pleased to report another great quarter for Afya. Today, I will present 4 main topics during the call. First, the strong results across financial and operating metrics that allowed us to reach the top of the first semester of 2021 guidance. Second, for our successful business strategy of acquiring and integrating medical schools and digital platforms, extracting synergies to create a unique ecosystem for physicians in Brazil. Third, our deliveries and exciting opportunities ahead on the digital business. And fourth, our great accomplishments on the ESG side.

Moving to Slide #4. Starting with our topline growth, adjusted net revenue increased 39% year-over-year, reaching BRL 382 million. Adjusted EBITDA increased 36% year-over-year, reaching BRL 161 million, with an adjusted EBITDA margin of 42%. We also reported a cash position of BRL 1.4 billion, reflecting the BRL 822 million transaction from SoftBank and our strong cash generation.

Cash conversion reached 104%, 21 percentage points higher than last year due to the reduction in trade receivables that was mainly affected by the end of the grace period that was given to some students during the renewal process in 2020 in the middle of the pandemic. And second, the improvement of our collection process.

Moving to the operational highlights. Our undergrad medical students reached 13,400 represent a 47% growth compared to the same period last year. The average net school seats also increased more than 5%, leveraging our organic growth. On the digital business, our ecosystem reached 232,000 monthly active users. This represents almost 40% of the Brazilian market of physicians, and our clinical decision software presented a strong growth since the end of 2020, adding 18,000 users in the period.

Now moving on the next page, let's discuss our business strategy. M&A is a main growth driver in our strategy. And on the left side of the page, I would like to discuss our success integration. For the acquisitions made in 2018 and 2019, we have a great track record on margin expansion. The 5 acquisitions made in this period presented an average margin growth of 16 percentage points in just 2 years, reflecting our synergy extractions and the integration process. For the 2 acquisitions made in 2020, UniRedentor and UniSaoLucas, we already saw significant margin expansion comparing the full year of 2020 with the first semester of 2021.

On average, those acquisitions presented an 11 percentage points growth on adjusted EBITDA margin. On the appendix of this presentation on Slide #18, you can check the margin expansion of each acquisition separately. We are also excited to expand our offering in the undergrad business with the closing of acquisition of UNIFipMoc and UNIGRANRIO in August 2021. UNIGRANRIO is our largest acquisition, adding more than 300 seats to our operation and represents our interest in Rio de Janeiro city with the best quality of private university in the state. This acquisition, combined, contributed 468 authorized medical seats to Afya, reaching 2,611 seats. This translates into 19,000 students at maturity, representing a CAGR of 19.3% from 2020 to 2026. And we still have great opportunities ahead. Our pipeline for acquisitions is fertile, and we plan to acquire at least 200 seats per year starting in 2022.

Moving to Slide #6 to the digital business. As discussed on us as investors in ESG Day, we have many growth avenues to pursue on the digital business. The first one is to keep adding new products and services to fulfill the 6-pillars strategy of our business. We have already robust and market-leading products in the 3 of 6 pillars. Medcel, our residency preparatory course, completed the content and technology for medical education pillar, supported by PEBMED Portal and Medical Harbour solutions. WhiteBook, our market-leading clinical decision software integrated with MedPhone, completed our second pillar. iClinic the largest clinic management solution integrated with Medicinae and Shosp, also completed our Practice Management Tools & Electronic Medical Records pillar.

For the last 3 pillars, Telemedicine, Digital Prescription, Doctor-Patient relationship, we still don't have an anchor solution, but we can anticipate that we expect to have great deals on the second semester. Our strategy here is to develop or acquire a market-leading solution to fulfill these pillars and create a unique digital offering to serve physicians throughout their careers among these 6 pillars. To accomplish this goal, we are already scaling stand-alone digital products through coordinated commercial efforts. We started consolidating our customer database into a single data lake, launching the first MVPs from the integration of Medcel, PEBMED and iClinic, tested MVP solutions with the pharmaceutical industry and initiated Afya's digital brand awareness strategy.

Moving to my last slide on this presentation, I will discuss our main accomplishment in the ESG strategy. Earlier this year, we released our annual sustainability report incorporating the global report initiative, GRI methodology. The structural element as determined by The International Integrated Reporting Council or IIRC and accomplishing transparency to the way in which we allocate capital to generate value over the long term. I invite you all to download our sustainability report in our IR website to check more details.

Also in this semester, we created a new designation for the Compensation Committee, which was renamed Compensation and ESG Committee, and now has the responsibility to report and discuss ESG metrics and keep up with all the new projects involving environmental, social and governance issues. Lastly, I'm also very proud to announce that we are the first Brazilian company to publicly committed to generate quality.

In 2021, we signed the UN Global Compact. And last week, we assumed a voluntary commitment to have at least 50% of women in our management positions by 2030. We were also certificated by women on board, initiatives that ensures that we have at least 2 women in our Board of Directors, positions already magnificently occupied by Vanessa Lopes and Shobhna Mohn.

Now I will turn the call over to Luis Blanco, our CFO, to discuss the financial metrics. Thank you.

Thank you, Virgilio, and good evening, everyone. Moving to Slide 9 to discuss the financial highlights of the second quarter 2021. I'm pleased to present strong results once more. Since 2019, we saw a strong trend in all key metrics. Adjusted net revenue for the quarter was up 39% year-over-year to BRL 382 million, reflecting acquisitions and organic growth. Excluding the acquisitions, adjusted net revenue grew 9% year-over-year, reaching BRL 299 million. Such increase was primarily driven by the maturation of medical school seats and an increase in the average tickets.

Adjusted EBITDA for the quarter was up 36% year-over-year to BRL 161 million. Adjusted EBITDA margin was slightly below the reported margin of last year, mainly due to: One, the consolidations of PEBMED, iClinic, MedPhone, Medicinae, Medical Harbour, Cliquefarma, Shosp, UNIFIPMoc and that present lower margins than the integrated companies; two, lower performance from the Continuing Education segment, of which, I will give more color in the next slides; three, partially offset by recently acquisitions that were consolidated with higher EBITDA margin FCMPB and FESAR. Adjusted net income for the quarter was BRL 65 million, a decrease of 27% over the same period of the prior year, mainly affected by: a, BRL 1.5 billion increase in year-over-year gross debt, excluding the impact of IFRS 16 due to new debt contracts, acquisitions and the SoftBank transaction; b, the depreciation of Brazilian real against U.S. dollar in the period that affect our cash positions in U.S. dollars; and c, the FX rate difference between the signing of SoftBank transactions and the internalization of the proceeds, that with the point, B resulted in BRL 29 million foreign exchange loss.

Cash flow generation remained strong in the 6-month period, increasing 70% to BRL 343 million, which resulted in a cash conversion ratio of 104% compared to 83% in the same period of 2020.

Moving to Slide 10 for a discussion of key metrics by business units, starting with the undergrad programs. Operating medical seats increased 35% year-over-year to 2,053 operating seats. Medical students were up 47%, reaching the base of 13,390 students, reflecting medical from seats operations and acquisitions. Our average monthly medical tuition fees were up 5% compared to the second quarter 2020, reaching BRL 8,598 excluding acquisitions. This reflects a combination of new students enrolling with a higher tuition rates, combined with students graduating with a lower tuition rate. Talking about revenue mix, 80% of our combined tuition fees are delivered from medical school, up from 73% in the same period of the prior year. In terms of tuition fees for the first semester, we've reached BRL 831 million, up from BRL 556 million, an increase of 50% year-over-year.

On the next page, I will present the Continuing Education metrics. We saw a 33% decrease in Continuing Education net revenues. This decrease was driven by 27% lower student base in the first semester of 2021. One, practical programs that are not being offered since the first semester of August 2020 due to the pandemic; and two, physicians' decisions to postpone admissions to specialization courses due to the COVID-19 pandemic.

We expect to pick up demand on the next intake period that will happen on October. Moving to Slide #12. I will discuss the digital service operation metrics. On the first graph in the slide, you can see our active paying students per pillar. Those are the active payers that generate revenues. Active paying users reached 148,000, excluding acquisitions, Medcel active paying students, alone, grew 64% year-over-year, reaching 19,000 students, mainly due to our successful marketing campaign in the end of 2020. Clinical management tools reported 14,000 payers and clinical decision software base has more than 115,000 payers. These results reflected a strong increase of 89% in digital service net revenues.

The last graph on the page shows the monthly active users that reached 233,000 students and physicians all over Brazil, 32% higher than 2020. This number represents more than 30% of all medical students and physicians in Brazil. Moving to the next page, I will discuss, in more details, the net revenue and EBITDA growth. We saw a 44% increase in adjusted net revenues year-over-year, of which 77% are coming from the consolidations of acquired companies. On the right side of the page, we show adjusted EBITDA growth for the first semester of 2021. During this period, adjusted EBITDA increased 42% year-over-year to BRL 368 million with a margin of 47%.

Of this increase, 81% is coming from acquisitions and the other 19% is organic. Moving next to discuss cash and net debt position. Cash and cash equivalents in the end of the second quarter were BRL 1.4 billion, representing a 36% when compared to December 2020 position, mainly due to the closing of the SoftBank transaction, totaling BRL 822 million. At quarter end net debt totaling BRL 583 million compared with a net debt of BRL 167 million in the end of 2020. This increase was mainly due to M&A transaction. Considering only the acquisition of UNIGRANRIO that was closed in August this year. Our pro forma net debt would reach almost BRL 1.3 billion.

Moving to my last slide, I will discuss our guidance for 2021. For the first half of 2021, we surpassed the middle point of the adjusted net revenue guidance by 2%, with an adjusted EBITDA margin of 47%, right in the middle range of the guidance. I'm also glad to issue a new guidance for the second semester of 2021. This guidance will not include any acquisitions that may be concluded after the issuance of this guidance. 2021 adjusted net revenue between BRL 1.720 billion and BRL 1.760 billion, representing a 44% growth year-over-year if considered the mid-range of the guidance. Adjusted EBITDA margin of 42% and 44%. This percentage includes the synergies that will be extracted from acquisitions and the negative impact caused by the consolidation of UNIFIPMoc, FIPGuanambi, UNIGRANRIO the digital companies that will be not integrated this year and come with a lower EBITDA margin. This end our prepared remarks, I will now open the conference for Q&A session. Thank you.

(Operator Instructions)

The first question is from Marcelo Santos from JPMorgan.

My first question is regarding the acquisition you incorporated this quarter, UNIFipMoc. If you could please give us some idea on what's the profitability of this company so that we could get a better understanding of how Afya performed without it? That's the first question.

And the second question is around the MVP on pharma. If you could provide a little bit more details on how that's going, what stage are you in now? And what are the lessons learned so far?

Marcelo, it's Luis talking. About UNIFipMoc, just remember, all we just have 1 month in the consolidation. We closed acquisitions in the beginning of June. And the performance of these combinations is aligned with our initial expectations that build our business plan on the acquisition. So it's -- we don't have a major impact because it's just one more consolidation of UNIFipMoc on this quarter. And just adding that, Marcelo, UNIFipMoc, together, with UNIGRANRIO, for the second half, they operate around 20%, 25% of EBITDA margin. So considering that, the reason that we are guiding, the range on the guidance that we released this quarter. Excluding these 2 acquisitions and also the digital platforms that we plug into our operation in the first half, our guidance would be around 3 percentage points above what we just released.

Marcelo, this is Julio here. To your question in regards to the MVP with the pharma industry, we've mentioned at the Afya Day that we are working on solutions. So for the industry, testing the B2B projects here. There are 4 actually main drivers or solutions. One is media, which is basically what these companies, they, in some way, want to speak to doctors that are in our platform. The other one is a research center, which we provide actually research team composed with people that work on these specific projects for the companies. These are very specific projects for the industry. There's also education solutions. And then those are for other institutions, education institutions, and this is what we've been doing for the past 3 to 4 years, and recruiting services. So the MVP is now -- we have actually a couple of projects on the media and research actually with some of the pharmaceutical industries here in Brazil.

So they're small, as we said, those are MVPs and basically, at this point, we're initiating and building the B2B solutions. So small projects, but one on the media side, which is basically, again, exploring the inventory that we have with these 230,000 doctors in the ecosystem and also one company doing research where we help them on the project here and we establish a relationship with them in that way. So those are the 2 that we have now.

In a continuation to Marcelo's question, I received the following question. Can you address where margins for UNIFipMoc and UNIGRANRIO can get you and how long?

Yes. What we see that we can increase these margins to something about 45% after -- including rents and -- with IFRS 16, we are talking about 50% margin on when we have the complete maturation of the medical seats and capture the synergy. The time framework of that is something about 2 years. So we can get these margins up to 50%, okay?

So our next question is from Vitor Tomita from Goldman Sachs.

So first question on our side would be if you could give us some more color on the perspectives for growth in digital services and Continuing Education going into the second half of the year?

And our second question would be if you could give us also some more color on receivables dynamics, now that the grace period for overdue payments is over. And on whether we should expect more improvement in receivables metrics in the second half of the year?

Vitor, I'll get your first question here about the growth for the second half. For the digital business, our objective now we are aiming to complete the pillars, the 6 pillars that we have, focusing on Telemedicine and also doctor and patient relationship, and we're expecting to have growth on the pillars for the clinical decision and also on the prep digital content pillar. So we keep seeing the same topline growth as we saw on the first half -- on the second half for the digital BU.

On the continuing medical education, we will see the same dynamics for the second quarter on the third quarter, and for the fourth quarter, we will resume growth as we will have the enrollment completed for this less intake that is not very strong rhythm when you compare to the same period last year. The intake for the continuing medical education started on June and goes to October when the classes started. So the growth on continuing education is resuming the same dynamics that we had last year and also reinforce operation after the COVID impact, we will see after October.

And Victor, it's Luis. I'm taking your second question. Regarding the receivables, I just want all to remember what was our strategy on the intake of the second half 2020.

At that time, we were at the beginning of the COVID crisis. And we have this intake, the second half intake. And we decided at that time to provide the great spirit for our students on when they do negotiations. This risk period had ended on January this year and started to receive those amounts.

Having said that, we are very proud of this strategy because this has proved a very successful strategy. We have the support to our students when they were most needed at that time, and we start receiving these amounts. Because of that, we got generation cash flow in the first half being more than 100%. What we're going to see on the second half, it will be more normalized generation cash flow. It's not. I don't expect anything above 100% as we have seen in the first semester because this effect of this risk period, but we continue to see a very good trend on the collection on the undergrad segment.

So our next question is from Javier from Morgan Stanley.

Okay. So I wanted to ask you 2 questions also. The first one on the digital strategy. And you mentioned that you have started already the brand awareness initiatives. And I think that you mentioned that you have done a marketing campaign around that. And I was wondering if you can share with us a little bit how did it work? Who did you target? And the campaign was local campaign, was regional, was national, was about the all Afya students, so people who have been already in your school, so new targets or people who were not really related with you? And if you can give us some measure on the impact of the traction of the campaign. I am trying to understand how successful or how difficult it is to impact those potential targets? And probably also what is the plan in the future? Are you going to continue? Are you going to do something different? That would be my first question.

Javier, Julio here. So in terms of the brand campaign that we mentioned that we've been -- that we are starting actually -- so we did a campaign actually last year that impacted all the digital services this year basically on the test prep business that impacted that number that we showed, almost 20,000 students on the test prep business. What we've been doing now in terms of brand awareness for Afya, we're starting now the brand campaign for the B2B business, which is a little bit a bit different.

We have all of these brands like WhiteBook, like iClinic, Medcel, all of them, they have their own -- of course, their own position. And for B2B, we're starting to position our services as Afya services. So that what we're starting now. So we are very soon launching our website with our corporate solutions, including all of those 4 solutions that I mentioned to you. And the campaigns, they are basically focused in Brazil. So we're not doing anything outside. And the 2 main targets of the campaigns. One is basically the B2C campaigns, which -- what we are doing more now this year that we've seen traction, and we've seen a lot of synergies is that we're incorporating the offers, as we mentioned, it's commercial efforts that they've been impacting the growth of the digital services. We tie offers that are bundled offers that we've been offering, and the campaigns, especially now that we initiate the cycle with Medcel, for example, that starts now the new cycle for the 2022 campaign.

We are going to incorporate more of the digital services, especially WhiteBook in all of our B2C campaigns for the test prep. So that's one of the focus. And -- so those are the 2 main ideas and the 2 main drivers now of the brand awareness campaigns that we've been doing.

And Julio, the traction of those campaigns is working as expected?

Yes. Yes, we see a -- that's where we see the synergies, Javier. It is working as expected. The businesses, they've been growing as we expected. We see more of -- as an example, WhiteBook is being used for more than 75% of the students in Brazil last year. medical students that graduated last year that they use WhiteBook. Now of course, we are offering a specific target for Medcel for test prep. So that's -- the reputation of that business is helping the other one, and it is growing as expected.

Okay. So do you see yourself gaining market share in those preparatory examinations?

Yes, yes. We see that we've been growing ahead of the market, yes.

Fantastic. And I have another question, if I may, is I know that the intake is not that relevant for you guys, particularly obviously on the medical students. But on the other stations, if you could share with us how things are moving, given that we are running the third quarter intake now?

Javier, this is Virgilio here. Just adding on the first question, the opportunities of cross-selling is huge. And the penetration on the prep course, as Julio said, increased a lot our market share above -- the growth was above than the market and reached almost 50% of growth on the number of students taking our prep course. So it's a very strong and showing the opportunities on cross-selling, using all the active users that we have on our ecosystem.

And the second question about the intake on other programs here. We are seeing a growth resuming everywhere. So all the goals that we saw and established for the intake on other health programs and also on other programs, we are reaching the goals and enrolling much ahead than we expected. So -- but this is not something important on our results. But we will see a very good intake and also renewal for the second half as on-campus operation is resuming and becoming normal as we are passing through the second half.

So our next question is from Mauricio Cepeda from Credit Suisse.

So getting to the guidance, we see -- we understand that, okay, there will be an impact of these integrations of those new acquisitions, the medical schools acquisitions because they have lower EBITDA margin, but understand also that there is the digital businesses that are being simultaneously incorporated into the results. And therefore, it also is contributing to decreasing EBITDA margin. So my question would be, how much lower is the margin in this digital services versus the medical education operation? And if you foresee that the scale gains going forward will help and how much it could help in leveraging this margin?

And my second question, I will get back to a point that was raised by one of our colleagues. Does the MVP for pharma, you mentioned research, are you specifically referring to a CRO, so clinical research itself, and you're helping the farming in some way?

Cepeda, it's Luis speaking. Thank you for your question. I'll get your first one. That -- the digital margins, first of all, it's very important to highlight that our goal in the short and medium term is not -- in this segment, it's not about profitability, but is to increase the penetration of our service within all the markets, the physicians and the medical students. Having said that, we want to increase these penetrations. And in the short term, as Virgilio mentioned before, we have to fulfill our offer, digital offer, fulfilling the pillars of telemedicine, patients engagement -- and patients engagement.

What we can -- what we have in our actual digital service, we have different profiles of profitability of them. We have a more business as PEBMED. And I link that generates EBITDA margin. And we have a business as iClinic that is burning margins, that's operating in the negative side. So there are different stage of maturations within the -- even the existing business.

Going forward to see how these markets -- how these margins will behave in a more long term, what we see that the digital business as a whole with the 6 pillar fulfilled, we will have margins that are below, that we have on the undergrad business. That's very, very, very important to share this view. These -- those are -- we gain scale, of course, because we don't have bricks and mortar. But the digital business itself, we're going to have a margin that's below the undergrad business. So we have a kind of mix of margins in our digital business as of today. But what our goal in the short and the medium term is to grow the business to increase penetration and gain scale for having the physicians and the students using our digital solutions.

Just to make it clear, Cepeda, when Virgilio said that we can have -- we could have 3 percentage points above our EBITDA margin guidance, we already included the digital company that we acquired in the first semester, okay? And Julio, can you help on the second question?

Sure, sure. Mauricio, thanks for the question. The research projects that we have in place now is related to product. So it's a dermatology -- it's related to dermatology. It's a company that produces drug related to that specific specialty. And they want to understand better what doctors they think about that product. So it's very -- as I mentioned, initial stages of this, but we can -- and this is what we want to earn. We want to start small, trying to connect basically -- the company, they have -- they do have the need of understanding better how these products that they launch they are being offered by the physician and how he sees if the patient is using it well. So it's basically talking to the audience and also creating this relationship with us.

No, I see. So it's much more towards market research rather than clinical research, right?

Yes. Yes, exactly. No, no. We didn't get that point. It's -- again, the industry sometimes they need a quick response from activities that they've been doing. So they see the potential with us because we can -- with the relationship that we have with these doctors, we -- actually, we present them the research as Afya. And then we see that the -- since we have the relationship already, they see that the benefit. We also mentioned that the findings from those projects that we're going to share when -- where it is possible or no. So the response rate is pretty decent on those projects. So the industry, they see a lot of value on this.

(Operator Instructions) The next question is from Vinicius Ribeiro from UBS.

So just two from our end here. So number one, considering the steep increase in inflation in Brazil and the high starting point for your attributions, do you guys plan to change anything when it comes to pricing strategy, especially for new students? I guess what I'm trying to understand here is that do you guys foresee any kind of issues when it comes to new students or evasion as a result of high inflation.

And the second point here is that, so we saw a about 5% quarter-over-quarter increase on paying users for iClinic and WhiteBook. So could you guys compare that with your expectations and give us some idea on the premium conversion when it compares to the trend prior to the acquisition? That will be it from us.

Vinicius, good question on inflation. We're expecting to pass at least inflation for the renewal for 2022 first semester. Another thing, we are embedding all of these digital services on our practical and labs to our students, and also including the WhiteBook solutions for our students on the fifth and the sixth year, what adds a lot of value for those students that are aiming the clinical part and also looking for the residency opportunities after concluding their program. So we have an opportunity to change our price above inflation, embedding all these differential, these new functionalities into our learning process. So that's what we expect in terms of the undergrad medical school. Julio, can you and Luis can get the second question?

Sure, let me -- yes, Vinicius. On the -- so the premium business, it's only WhiteBook that has a premium business, right? So since the product has a very decent penetration today, so that we've been converting more of the free to paid students and users recently. So there's a lot of focus on that, rather than acquiring more users in the market. So -- and that conversion is growing, and the business is pretty steady, growing very well.

On iClinic where we have a free trial, that conversion from the free trial to a paid user, that also has been working when we cross-sell a lot with doctors that they are in the same actually profile. So iClinic more for those doctors where they are ahead in their career, already more established. So we've been doing efforts with (inaudible) for example. So -- and in both ways, it's been working quite well, those ideas. We actually -- we are using now iClinic in our -- actually, our own facilities where we have the graduate business. We've been promoting with these doctors, and we see a lot of potential, and that's been -- that typical conversion that works better. So we see better, but business are growing steadily and in a way that we were expecting, as I mentioned before.

Vinicius, if I could add something here on what Julio said. We keep going. We have -- on the WhiteBook, we have a kind of seasonality. It's very strong, the sales of WhiteBook on the fourth quarter. Because of Black Friday, they have these traditions on doing market campaigns, very strong market campaigns on the fourth quarter related to Black Friday in the last 2 or 3 years. But having said that, we still -- we have this expectation to grow more than 30% these 2 business going forward. We see opportunity to increase penetration of these products on the students and the physicians.

So our next question is from [Jan Hesking] from BTG Pactual.

So I just have 1 question on my side on the organic figures. Looking at EBITDA ex acquisitions, we see that it has grown only 3% year-over-year in the second quarter, while margins decreased 240 bps year-over-year. So I understand that when we see the consolidated results, it makes sense to us that acquisitions may boost this margin pressure. But could you give us more color on this specific organic figure? And why it has grown so little? And what is behind this margin pressure in this quarter and what we should expect from now on. That's it on my side.

Jan, it's Luis speaking. The major detractor on EBITDA margins on this quarter, it was the continuing medical educations. We have this pushback on revenues that affect our results as a whole. That's why we have this push back in margins excluding acquisitions. This is the major fact that -- push back the consolidated figures from our EBITDA in this quarter.

If I may add a point here, what we see for continuing education, as Virgilio said, is demand to pick up with the new intake cycle that we will start on October, new classes in October. And we have, I would say, the worst seasonality in the second quarter since we have graduated students from the first to the second quarter, and we couldn't finish and start a new class in the second quarter. So if we could stay with the same level that we were in the first quarter of 2021 in terms of net revenue, you wouldn't see this level of decreasing margins. So it's something that it should be due to the pandemic. We are really hopeful that in the second semester, starting in October, we will initiate these new classes. We will start new students in the new capital that we opened and that you guys don't see any effect like that in expectation figures.

Jan, this is Virgilio, just adding an important point here. If you take a look on our consolidated financial statement, we open our different business units, and we can check how we are leveraging our gross margin on undergrad business in the same period last year -- over the same period last year. And we can check the continuing education is hurting the overall margin because of the COVID, the pandemic impact, where we could not enroll the students in the second half and also in the first half of this year. So that was the impact on top line and also the total base of -- students base, yes.

So if we don't have any other questions, I want to make us available if you guys need to ask anything else or any point of the [charge], the Investor Relations area is available. And I would like to thank you all for participating tonight. Good evening.