Good morning, ladies and gentlemen, and welcome to the Afya’s Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [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. I am pleased to welcome you to Afya’s fourth quarter 2019 conference call. With me on the call today is Afya’s CEO, Virgilio Gibbon; Luciano Campos, CFO; and Luis André Blanco, as recently announced, will become our new CFO in April. 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 risk, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by the forward-looking statements.

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

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 refer to non-IFRS financial measures on this call.

The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of the non-IFRS financial measures to the most directly comparable IFRS financial measures in this presentation. Let me now turn the call over to Virgilio Gibbon, Afya's CEO..

Thank you, Renata, and thanks everyone, for joining us today for Afya fourth quarter and full-year 2019 earnings conference call. I'll begin with a discussion of the highlights of the year, followed by an overview of the key short and medium-term perspectives for the company. Luciano will then discuss our financial results and our 2020 guidance.

To begin, we could not be more proud and pleased with Afya’s performance throughout its first year as a public company. In 2019, we delivered strong topline growth, profitability and cash generation towards the higher end of second half 2019 guidance range.

We have made significant progress on our strategic objectives, creating the foundations for Afya's highly predictable and sustainable growth. Moreover, synergies from our first round of acquisitions are starting to materialize; support an attractive first half 2020 as we'll be indicating our new guidance.

We have executed meaningful M&A transactions after IPO, including the acquisition of IPEC and UniRedentor in 2019, and the recent agreement to acquire UniSL and São Lucas, which combined contributed 414 additional seats to our network. Important to mention that with these two acquisitions, we have strengthened our presence in both business units.

And in less than one year, we have reached more than 40% of our target to acquire at least 1,000 medical school seats up to three years after IPO. Our strong operational performance was also driven by organic growth and our ability to successfully integrate recent acquisitions, extracting synergies and cost efficiencies.

Out of the 11 companies acquired over the last two years, six of them have already been fully integrated in terms of process, systems, and curriculum, showing our strong capacity to grow inorganically and extract synergies fastly. As can be seen on the Slide number 4, in 2019, we had a strong operational performance across all key metrics.

We have more than tripled our medical students base since 2017, through a combination of organic and M&A. And as a result, we have delivered strong top and bottom-line growth coming above the midpoint of the second half 2019 guidance.

Our reported net revenue for the full year was up 125% year-on-year, reflecting our medical school maturation, the consolidation of our acquisition completed since 2018, and strong growth in the Business Unit 2.

The strong topline growth, combined with the cost efficiency and synergies from acquisitions was reflected in our adjusted EBITDA increasing 145% with 320 percentage points of margin improvement in 2019. Our pro forma adjusted EBITDA totaled BRL 322 million in 2019, with a margin of 38.8%.

Improving profitability is also coming with a strong cash conversion, which showed a ratio of 97% much above from the level in 2018, but [indiscernible] excess capacity to deliver strong topline growth with high margin and cash generation.

On February 11, we raised approximately $87 million from a follow-on public offering before the unexpected coronavirus pandemic impacted the global markets.

During this period of crisis, having a strong balance sheet and cash position are a competitive advantage to maintain our costs, leverage our operations, and enabling us to continue execute our growth strategy. On Page 5, I would like to highlight our acquisition track record. We have already concluded 11 acquisitions since 2018.

These acquisitions reinforce our strategy to increase our medical education seats as well as to enter into new markets.

Additionally, and equally important, as we continue to spread our ecosystem and our presence throughout through additional seats, new geographic regions and new products, we are building strong brand recognition and a long-term relationship with our students and alumni.

In February of this year, we announced the acquisition of Centro Universitário São Lucas, entering another Brazilian state in North region. This operation, when approved by the undistressed agency, we will add 182 medical school seats and potentially 100 additional seats.

Out of the 11 companies acquired, six of them have already been fully integrated in terms of process, product, and systems, with a very positive student feedback about the new environment and the curriculum already implemented.

These results are the requirements for a sustainable growth that enable us to extract synergies in a short time after an acquisition. Now let's take a look on the Slide number 6, where we show the track record of our three first acquisitions concluded in 2018.

First, FMit in Minas Gerais state, where we were able to increase revenues by 32% year-over-year, with an [indiscernible] impact on EBITDA that was up by 65%, a similar trend was noted at the other two companies. ISEP and FADEP located in Parana state, revenues grew 23%, while EBITDA jumped 75%.

And last, at UNINOVAFAPI in Piauí state,revenues went up by 18%, with EBITDA going up 42%. So not only we were able to increase revenues by improving occupancy and average ticket, but we also increased the efficiency of these operations, integrating to our Afya's shared services and academic model.

As a result, we saw margin improvements of these companies in 2019. Now moving on Page 7. You can see our initiatives to drive sustainable long-term growth and product differentiate. First, number of students.

Driven by maturation of the seats, we expect 11% CAGR until 2026, a highly predictable volume growth as we fill all seats available every semester. Second, along with the acquisitions, we also received authorization under the Mais Médicos Federal Program, which we were awarded 350 seats, which translates into seven new campuses.

We expect to begin operations of the first two units in the first half of 2020. We plan a total of four for the current year, but the situation of coronavirus might impact our timeline. The additional three are expected to open in 2021.

Third, in terms of products and services, we have also developed new improvements such as tutoring, mentoring platform, and the second season for our medical residents to web series. The main objective is to help students with their study plans and their goals.

Using the data we collected from each student, the tutoring institution is built to motivate and help students to engage and have the best learning experience, depending on the stage they are on their career. Number four, acquisitions. Acquisitions are a key component of our growth strategy.

This is an ongoing process, and to date, we currently have approximately 500 seats covered under MoU contracts. We will keep the same discipline in terms of pricing, analyzing the market conditions and our capacity to continue to integrate new companies in order to move into new acquisitions.

Fifth, margin improvement, as we still have maturation of medical seats by 2026 and synergies to capture in our operation, we will see long-term value creation through margin improvement as a result of scale, cost efficiency and synergies. Now let me spend some time discussing on more immediate issue the COVID-19 global crisis.

Like everyone else, our first and main concern is the health and well-being of our employees, professors and students. We are closely monitoring the situation and have formed a special executive committee to ensure that Afya complies the guidelines for both Ministry of Health and Ministry of Education.

And this is working very hard to minimizing back to our students and to our business. At this point, we have successfully concluded most of our admission cycle of first half 2020 until halted all on-campus activities on March 17.

We are currently operating our education activities through our all aspects, for all students and reorganized the schedule of practicalities in order to avoid any significant impact on the academic calendar for the first semester of this year.

If this situation continues for a longer period, we have some flexibility as we may anticipate the mid-year vacation in order to replace practical classes when on-campus classes restriction is over.

In addition, mindful of all medical students in Brazil, we allow access to Afya digital platform, free of charge for medical education institutions over the next few months, extendable for the duration of the pandemic.

We already have more than 40 medical institutions interested and have already 18 medical schools using our platform and helping their students to maintain their learning process and minimizing the impact of this crisis. Before turning the call over to Luciano to present our financial results, as you know, Luciano has decided to move on.

I want to thank him for all his work during this past year, and wish him good luck on the next steps. At the same time, I'm pleased to welcome Luis André Blanco as our new CFO. Luis brings over 20 years of financial management expertise to the role. He has already started at the company.

In fact, he's here with us today, and he will officially assume the CFO position on April 20. Now I'll turn this presentation to Luciano..

one, maturation of medical seats. This would be organic growth and consolidation of acquisitions. Adjusting the year of 2018, as all the acquisitions made in that year were concluded in January 1.

Our revenues for 2019 increased 55% to approximately BRL 751 million, with a contribution of BRL 157 million from acquisitions as from the date they were acquired and BRL 109 million from organic growth, which is comprised of the maturation of medical school seats and increase of average ticket.

These figures also include the consolidation of IPEC, which is a greenfield that started operations in September 2019. Considering pro forma figures as Medcel, IPEMED and FASA acquisitions were already consolidated in the results since January 1, 2019, and revenue for the full-year would have increased to BRL 830 million.

On the right side of the page, we see that in 2019, we our Business Unit 1 contributed with 86% of our net revenues, while Business Unit 2 contributed with 14%. Now moving on to profitability on Slide 12.

Adjusting in 2018, as if all acquisitions made in that year were acquired in January 1 of that year, our adjusted EBITDA for 2019 increased 70% year-on-year to approximately BRL 294 million, with adjusted EBITDA margin expanded 330 basis points to 39.6%.

Note that on a pro forma basis, which includes the pro forma results of Medcel, IPEMED and FASA adjusted EBITDA for 2019 reached BRL 322 million in 2019. Maturation of our medical schools, combined with synergies from acquisitions, are the main drivers of margin expansion.

To give more color on the synergies, out of the 11 companies acquired over the last two years, six companies have already been fully integrated and three will be integrated by the end of this semester. While the two most recent acquisitions of Universitário in São Lucas should be integrated during the second semester of 2020.

Moving down to Slide 13 to talk about the P&L. Adjusted net income totaled BRL 72 million in the fourth quarter of 2019, up 152% year-over-year. For the 12-month period, adjusted net income totaled BRL 237 million, 137% year-over-year increase. Moving next to the discussion of balance sheet and cash flow on Slide 14.

We have a very strong and healthy balance sheet that was strengthen even further by the follow-on offering we completed early this year. It is the strength of our balance sheet that will enable us to continue to grow the business and support future acquisitions.

Cash and cash equivalents of BRL 980 million in the end of 2019 compared to BRL 81 million in the end of 2019. The increase in cash compared with the year-end of 2018 reflects the IPO proceeds and a strong cash generation. The majority of this fund is invested in low risk, Brazilian real denominated instruments.

Our total debt in the end of 2019 was BRL 361 million compared with BRL 256 million at the end of 2018. Cash flow generation was also strong in 2019, which resulted in a cash conversion ratio of 97% compared to 72% in 2018.

This performance was due to a higher base of students, improved collections of receivables and synergies from M&A contributing to our operating leverage. Now moving on to Slide 15. We have included this page as a visual reminder of the seasonality of our business in a pro forma basis for 2019.

Business Unit 1 revenues generally do not experience significant fluctuations during the year. However, the maturation process does generally result in a strong second half of the year compared with the first half.

Business Unit 2 revenues are typically recognized in the first and the last quarter of the year when printed books and ebooks are delivered to our students. As a result, in a typical year, the first quarter is normally the strongest. The fourth quarter is normally the second strongest, followed by the third and second quarters, respectively.

Finally, the second half of the year is normally stronger than the first half. Moving to Slide 16 to conclude our discussion around 2019 results. Here, we provide accountability to the guidance that we gave for the second half of 2019.

To have a full reconciliation between reported results and the results comparable with the guidance, please refer to our press release. Our net revenue guidance range was BRL 415 million to BRL 430 million, and we reached BRL 424 million in the second half of 2019, which is at the middle of the guidance range.

Our adjusted EBITDA margin guidance range was 38% to 40% and we reached 39.5%, which is above the middle point of the guidance range. We are satisfied with our performance relative to the guidance and continue to work hard to improve both our performance as well as the accuracy of the guidance when the conditions allow that accuracy.

Moving to Slide 17 and shifting the focus forward to 2020. We now issue our guidance for the first half of 2020, taking into consideration the high predictability of our business and the unpredictability created by COVID-19 pandemic.

In the balance of these two forces, the company concluded that it would do better service to shareholders by providing a wider guidance range for the first half of 2020, quantifying in a best effort basis the observed potential impacts of COVID-19 that could impact results in the first half of 2020.

With this caveat, our guidance range for the first half of 2020 is net revenues between BRL 475 million to BRL 510 million. Adjusted EBITDA margin in between 45% and 46.5%.

Our guidance includes the impact of the adoption of IFRS 16, includes [indiscernible] starting in February 1, 2020, and excludes any acquisition that maybe concluded after the issuance of the guidance. Therefore, this guidance excludes UniSL and Lucas, which had a gross revenue of BRL 227.5 million in 2019.

On the next two slides, we will provide context for this guidance considering the impact of IFRS 16 and excluding the impact of IFRS 16. So moving to Slide 18.

We see that our net revenue guidance for the first half of 2020 compared with our pro forma net revenues of the first half of 2019 represents a potential growth of 18% in the lower end of the guidance and 27% in the top end.

Our EBITDA margin range including the impact of IFRS 16 in both 2020 and 2019 periods represents a potential margin expansion of 4 percentage points in the lower end of the guidance and 5.5 percentage points in the top end.

Finally, moving to Slide 19, where we compare our guidance with pro forma numbers of 2019, excluding the impact of IFRS 16, our EBITDA margin range excluding the impact of IFRS 16 in both 2020 and 2019 periods represents a potential margin expansion of 4 percentage points in the lower end of the guidance and 6 percentage points in the top end of the guidance.

To conclude my remarks, I would like to reinforce that we will continue our efforts to position our company for long-term success. We are working really hard to protect our students and employees from the threats of COVID-19 and are working really hard as well to ensure business continuity.

While we do not need to explain how unprecedented the situation is for our time, we remain focused and positive in our future. Finally, as this is my last conference call of results as Afya's CFO, I would like to say thank you for all the shareholders and sell-side analysts for the time that we work together.

Thanks, Afya Management and Board of Directors for their continued support and wish the best of luck for our Afya's next CFO, Luis André Blanco, from whom I turn the word to make a few remarks. Luis, please go ahead..

Thank you, Luciano. Hello, all. It's a pleasure to be participating in this first earnings call and having the opportunity to connect with all of you. After 10 years being the CFO of OdontoPrev, I'm very excited to be joining Afya at this time, a company that has a solid and attractive growth path ahead.

I have been here for only one week, and I'm early in the process of getting to know everyone, all information and importantly, the financial team. All of this in a remote way as we are all in home office due to COVID-19 for the safety of everybody.

My main focus for this year is to contribute with my background to improve the financial process, supporting the growth through M&A and the SOx implementation project.

Through the next two weeks until the April 20 when officially take office as the CFO, I'm looking forward to the opportunity to start connecting to our shareholders, sell-side analysis and meet you all as soon as possible..

[Operator Instructions] Our first question comes from the line of Marcelo Santos with JPMorgan. Your line is now open..

Hi. Thanks for the question, and good morning Virgilio, Luciano, Renata, and Luis. The first question will be about COVID-19 and if you relatively made efforts to incorporate some effects of stating your guidance.

Could you please expand a little bit more on maybe conceptually, what kind of – how you incorporate the diverse revenue lines you have and how do you incorporate the cost? That would be the first question. The second question is more about Medcel. So, you showed an impressive sequential evolution of students.

But when we compare to last year, [indiscernible] which was also like 12,000. So can this 12,000 now be considered as a basis for 2020 revenues or is this more like the normal seasonality that you would expect in Medcel? Thank you..

Good morning, Marcelo. This is Luciano speaking. I'll start with the first question. The points that COVID can bring in the first half of 2020 is our ability to deliver service and then recognize revenues, okay.

As we have been communicating, we have already implemented online solutions for continuation of the activities of the non-practical education activities that are required in our curriculum. And we are reorganizing the practical activities for when our campuses and hostel partners are allowed to receive and hold those activities again, okay.

The balance of things here is if we will be able to deliver all the service or have visibility for when the full-service of the first half of the year will be deliverable. If we have visibility on that, we could be in a situation of recognizing 100% of the revenues that we would normally recognize in the first semester.

If the situation changed in a way that lockdown lasts very, very long and not all of these activities can be delivered or have visibility of when they will be fully delivered. At some point, some revenues can then be transferred to part of the second half of the year.

One of the things that is important to mention here is that as long as we deliver the service, and as long as we have the students, those revenues would just be recognized in another time, probably still within 2020, that's not been a change or than the cutoff of a time period the service and the revenues would be there, okay.

That's the main point affecting what can happen in the first half of 2020..

Okay. Luciano, let me help you here with the second question. We have, on the Medcel operation, Marcelo, top 1,000 students, we grew almost 24% when you compare the student base that we had in the same period last year. So that was a very strong intake coming on the fourth quarter. This is not just because of the seasonality.

We have a strong intake and also we recognize the net revenues during the fourth quarter. Of course, we still have intake process moving forward during the first quarter. That's a good trend that will have a healthy student base during 2020..

Perfect. Thank you. Just a follow-up on Luciano's answer.

So, you might not be able to recognize everything, but on a cash flow basis, are the students paying for everything and this becomes liability, like revenue through prepaid -- revenue for something like this or the students also don't pay during the semester in the situation where you mentioned that the recognition might come in the second half?.

Hi. Marcelo, we are not changing anything in the schedule of the student payment that means you're not changing the time, the tuitions are due, okay. And we are not changing prices, anything of that nature.

We are communicating with our student community that continuation is the best scenario for everyone, which means that we are also paying our professors, we are paying our partners in a way that we continue and to be always in a position to continue or to resume normality as soon as possible. So we are collecting all the tuitions that are due.

And we've made them – if that happens, is that we cannot recognize revenues at a certain period, you're right, our balance sheet would show a prepayment of tuitions as we have like advancements from clients that we already have in a normal situation in our balance sheet..

Very clear. Thank you..

Our next question comes from the line of Susana Salaru with Itaú. Your line is now open..

Hi. Thank you for taking our question. Our first question is related to the increased flexibility that the CME business [indiscernible] allows for most of the problems in terms of replacing cancelled classes for the [indiscernible]. How does it apply for med school seats or medical students? That would be our first question.

And the second question is related to the pipeline of acquisitions or actually the environment of M&A, and if you guys are following the difference between beginning of the year and now in terms of negotiation and bargaining [ph] power with the acquired company. Thank you..

Hi, Susana. Thanks for the question. About the medical curriculum and the directions that we received under the new certification, what we are doing is starting 100% telepresence [ph] classes for all non-practical content or non-practical classes. This should be something that we can do around 60% to 70% for the first and fourth year students.

We still have internship students at the fifth and six-years, most of them are 100% practical inside the hospitals that we need to return on-campus activities to continue the curriculum, and all the requirements that we have to fulfill their semesters.

So, what we think is that even consider that we have 30, 40 days completed without any on-campus activity. We still have the conditions to complete and replace this class by the end of June and also use in July that was the vacation period to replace all these classes.

On the M&A pipeline, you must have seen that we have already 500 seats under MoU contract. So the pipeline is huge. And what we are doing is being more conservative in terms of timing, of course, that to conclude the transaction right now, considering all these lock down issues being more difficult.

So we are getting more conservative in terms of timing to give additional step and moving forward to conclude all these acquisitions. But nothing changes, at least in the short-term in terms of the pipeline and the opportunities that we have in front of us.

What can be – what can happen, imagine small players, they can struggle in the short-term and maybe can change some negotiation, but that is not something that we didn't see yet..

Perfect. Thank you, Virgilio. Very clear..

Our next question comes from Vinicius Ribeiro with UBS. Your line is now open..

Hi guys. Good morning. Thanks for taking our question, and I hope everyone is safe. Two questions from our side here.

First of all, I would like to get – if you guys could share us the level of seat occupancy that you had in this first half of 2020, intake and the tuition dynamics for new enrollments? Or what's the price? And what should we expect for administration? And my second is more related – is more long-term question.

We are seeing several changes in the healthcare sector dynamics with increasing technology, telehealth and everything else.

So do you guys see an opportunity here for the Business Unit 2 to like increase or expand the presence a little bit aside from the current formal education that you had? And if yes, what kind of capabilities have you been developing to tackle these opportunities? Thanks..

Hi Vinicius. This is Luciano. I'll take the first question. As we have observed until March to now, we continue to have 100% occupancy of our medical school seats. We don't have any change on that. And the pricing dynamic remains exactly as we have been doing in early 2019.

We have passed inflation to our medical schools tuition for new and existing students. And as you see, the average ticket goes considerably above the inflation just because of price increases taken back 2017 when we introduced our new curriculum and repriced for new students at that moment.

So far, no change at all, and that's a decision of the company to not change price in this environment, okay..

On the second question, Vinicius, this is Virgilio. I think it's a huge opportunity that can change the dynamics in the industry and will change in the mid and the long-term. You can see that the telemedicine that it's being allowed to treat all the strides here in Brazil.

And the telepresence that we are almost having 100% of our operation right now running our classes, our 30,000 students. This is something that we are much ahead than the other players.

Today, as we have a fully integrated curriculum in all of our institutions from north to south, we are offering what we are talking the Afya talk using the telepresence to discuss case, clinical case, using our best professors in all students involved in the national classes.

So in terms of digitalization of the content, the learning process, I think we are much ahead and have a strong opportunity here to differentiate ourselves. I'd like to – if you can add something what we are doing in terms of hologram in all technology that we put in our platform, I think it to be worth..

Hey guys. Júlio here. Thank you, Virgilio. Yes, as we mentioned in other calls, we've now put together a team for – as a corporate division, to offer our solutions. The platform is built not only for the students, but also for other people and doctors that could, of course, get the content that we developed with our professors on the healthcare sector.

So the team is now working not only with conversations with other institutions, education institutions, but also with players in the healthcare industry so that we can offer solutions for them.

So this is on the way, and we see a lot of potential, especially in a moment like this, as Virgilio said, I just wanted to reinforce, we have a couple of activities on the way to help actually companies that they need, for example, training in the situation that we have today.

And we'll announce very soon some of these efforts that we're putting together. Not only, and I would like to add here, for example, that we opened a platform for other institutions to help them with the interruption of classes, but also, we will add to that offer courses that we can help healthcare professionals in this tough times..

Very clear, Júlio, Virgilio and Luciano. Thanks for answering my questions..

[Operator Instructions] Our next question comes from the line of Irma Sgarz with Goldman Sachs. Your line is now open..

Yes. Hi. Good morning, Virgilio and Luciano, and thanks for taking my question. So we have two questions. Firstly, I want to applaud your decision to open up the Medcel platform to other schools and their students in this critical moment.

My question is, so when you think about Medcel, I think it's an incredible platform and actually currently utilized by a relatively small basis of students considering the market overall.

Do you think there is an opportunity here to almost change a little bit of sort of the go-to-market approach of Medcel in the centers, we’re opening up that product to a broader set of potential clients. I know you're not charging right now.

But as maybe we look beyond the current time frame to maybe continue some partnerships with schools and to leverage that into the future.

But part of that question is also, how do you think – do you see any potential downside risk to your pricing power of this product to the students that are acquiring that obviously had a relatively high ticket and to some extent, now see it obviously being made available for free. And then the second question, if I may.

Just in relation to Mais Médicos, if you're seeing any signs or any direction from any talks that are going on with the Ministry of Education at this point regarding potentially accelerating or changing something on the time lines here, given the current situation? Thank you..

Okay. Irma, thanks for the question. The first one with Medcel platform, what we designed is to open our platform for the institutions. It's not for the B2C, it's the B2B. So today, we have almost 50 medical schools interested, getting connected in more than 18 already preparing the platform for their students.

So the size of the impact, I think for us, it's very, very important to keep their learning process alive, not only here in Afya, but the entire country during this moment. And yes, I think this can be a mid-term opportunity here as we are having these leads and showing our platform to the entire market.

So we are very confident and it's very important in our strategy to spread our platform. And the price fall for the B2C, I think it's not critical here. Because what we are helping is the internship content. And for the B2C students, they are concerned about the prep, the residence approvals. It's another objective.

So we are not seeing, at least at this moment, any price impression coming from this front, okay. And your second question about the Mais Médicos schedule, we are expecting to open two new campuses during the first semester. We have the visit, we have the report, 100%, okay, and they are moving the process.

The only thing is the formal authorization and the signature coming from the Ministry. So everything now stopped. I don't know how this bureaucratic steps are going to be managed by the Ministry of Education during this time. The other, we still have the visit pending they have to schedule the visit.

So it's difficult to say that we'll be able to open the four new campuses by the end of this year. I think the first two, it's much more likely to happen as we are not waiting any visit any – just the signature and the authorization to start the first intake..

That’s super helpful. Thank you, Virgilio.

Maybe just if I may add, is it then – are the two companies included in your first half guidance? Or did you leave that out to prudence?.

Hi Irma. This is Luciano speaking. It is included in the guidance that we have expenses associated with the preparedness of these units, but no revenues, okay. So the short answer is, yes, they are in the guidance.

We do not contribute with revenues in the first half to contribute with key operational expenses that did not exclude because we do expect them to be recovering as we actually prepare to do the initiation of operations of them as soon as Ministry of Education give the last action of approval, which is just a document, everything else has been done, okay.

Just to follow-up as well in your question in terms of Mais Médicos schedule.

In moments like this, what the Ministry of Health and Ministry and Education are doing is to take care of their short-term related challenges, trying to respond as fast as they can with the challenge of COVID-19, anything about another wave of Mais Médicos, imagine that would take any impact in maybe seven, eight years from now to get new physicians in the market.

So we do not see any change on decisions related to another wave of Mais Médicos or equivalent program in a moment like this as the authorities are dealing with very stringent short-term challenges, okay..

Thank you..

And that will conclude today's question-and-answer session. I'd like to turn the call back to Mr. Gibbon for closing remarks..

Thank you. We are very pleased with our performance last year. Our team is successfully executing our strategic priorities, and we'll continue to focus on medical school growth, creating long-term value for all our stakeholders.

Looking ahead, the short-term challenges, we are very well positioned to pay the COVID-19 crisis with a very strong balance sheet and cash position.

Our business, as deeply discussed, is highly predictable and our medical student base is 100% filled allowing us to release the strong guidance for our first half of 2020, even under this uncertainty coming from the COVID. Thank you again for joining us today, and we look forward to speak with you in the next quarter. Bye-bye..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..