Q1 2020 Earnings Call
And instructions will follow at that time.
As a reminder, this call will be recorded.
I'd now like to introduce your host for today's conference Renata coastal I see us head of IR you may begin.
Thank you.
We want to.
Yeah. So his first quarters when she wanted conference call with me on the call today, Dod he'll be equal.
We have excellent.
Oh yeah.
The nomination in competing on medical education.
Year to date participation.
That is only smaller companies take.
Finally say January one relates to teach anything or future price you Oh, sorry from Cowen enable no and Oh no great.
Sorry to see another factor that may cause our actual results could differ materially so until the contemplated by these forward looking statement.
Forward looking statement.
Patient equally well that no limits to these statements related to our business and financial performance.
Thanks, Asia and guide for future Peter right. They stations, we sorry, I was just be drawn you should see.
In different later I see no I appreciate your pretty darn good market as well as if let's say Shelly hi, Rob could be Nike.
Exactly.
No more fluid right on our filings with Securities and exchange completion.
Before I, let me say he's presentation.
Thanks to all the information available to us.
[laughter] disease yeah.
You should not rely on their expertise comes off treason, and we disclaim any obligations, let's say you talked a movie I sat as required by law.
Yeah.
They might be for no I find diesel measuring all these call you know I thought last Friday. So majors are not intended to be coffee dirt guineas duration or I could be two parties, though because they're not hard hit by a frac.
We have provided I recall suddenly come off the shelf price right size or did the most directly software I try to find useful accuracy for stage right now turn call over to the GE people asking you.
Thank you Amanda and thanks, everyone for joining us today I suppose farm income if anything useful for school.
Yes, let me see that I hope everyone is in good health and safety was doing this game plan.
Before I start as lifelong knowledge in big old felt like workers, who are facing this little bit Brian you. Unfortunately debt as a business that had been able to helped by providing sleepwalked at this time, let's see hospital medical schools physicians nurses to deal with the rapid span difficulties nice.
I also want to think how employees and professors who made it possible within one week to move 100, plus that's up on Science class War on that.
The feedback from the students for faster than physicians, who would not be that they are all their started five distinct keeping that so far on integration why the environment continues to be repaid our teams are managing our priority can be that's very well.
Moving now to page number class.
I'm very pleased to report this strong first quarter 2020 results generally positive trend of 2018.
And also reflecting the successful execution of our strategic initiatives.
We are seeing the benefits from the synergies captured phone integration of their condition is completed over the past two years, including changes to Delever. The company nation always shown as predictable growth with high profitability and handle sketching nourish our balance sheet physicians very strong more than 1.2 billion here I guess.
Well the student strong they take process for second half 2020 have already captured candidates to fuel all seats suddenly you shooting, 100% took occupancy for the told me to Matt.
22% growth in our medical student base over the first walkie talkie chain, reaching 9.7 thousand students already feel de de when he told me because acquisition completed this month.
In addition, we've seen a better collection and compare to the same period last year show an excellent products for the second how can we knew a rate in cash generation holding all in costs you didn't external scenario, a very positive dynamic for the rest of the year.
I also do lack of my life is considering all completions will have completed our total medical seats Brickey reached 1806 six feet.
I mean, there to keep one five in Calvin students at maturation, and 11% Giga Internet to student base due to tough intensive.
Moving to slide number six we can see our unique positioning in the medical community, our social responsibility and therefore, we have made an important role in sharing knowledge, we have institutions physician students and patients to be initiatives.
I Love, we check right Axess all forward do you still platform XL, yeah, red accepted by more than nine solvent messy student at 32 public and private medical schools, which would be a great opportunity to expand our market share bookings as well.
Well, what we call them through online courses and waving army, which has been a success attract a large number for keeps us on swapped platform.
The nation off my goals and all their personal protection equipment to help walking on to hospitals in 13, CD variability medical schools.
No. We respect to actions we have undertaken for students employees into Texas, Yeah clinical upgrading our theoretical classes online for all students and we're about 90 schedule. That's cool activities modest top line anything any spending background I didn't get signed there for the first semester.
Consultancy.
It's important to highlight that you know hostile internships Brooks teeth in six years students have already read you knocking fact itself.
Most of our cap corporate staff socket to work from all these are keeping all of you typically it's up and running well.
We are also provide enough food package of social in the health a few cents warnaco even families to help them doing different then you building each item you should keep such as online psychological care yoga classes cooperate training platform, we Lexus and support for family professions replacement and many others.
Moving off is likely to happen use this growth our revenue and it takes troughs.
Fortunately, our first wanted to talk and planning financial results were not impacted by could be nice.
Given the timing we had successfully conclude they haven't Fig office cycle first half 2000 planning before different then conveys a shift on the country.
We had already completed the rolling process is 100% occupancy as expected.
As we look ahead, we're currently seeing a strong demand for new applications for falling to method that we allow it to from 400% a follow on equity.
My opinion, our revenue growth resilience in the hybrid Dixon stability either under these uncertain.
We have kept our complete the netsol professors, maintaining all seller is doing to convey nothing else supply falter and also offering a high quality the patient flow student or platform in fact like fees its four defeat and six year.
We are tee up off the back all the cash collection doing dispute the linked integration by April 2000 plant is 400 bps below the same geared last year, reflecting our process improvements implemented last semester.
Lastly regarding revenue recognition take into consideration difference or what kind of a home canpotex either that or could you need come forth more rectification aktiv beans temporary offered to companies online platform. We expect conduct some practical classes, we will have to be to replace is doing the second.
We'll find their ragnar recognition of proportionately.
Those effects were already considered in our first how 2020 guidance you indicated by the net travel guidance range.
Which already contemplated that certain I'm off Brad spoken that wouldn't be delayed deliberate in the second half.
Next turning to page number eight.
After a solid balance sheet and strong cash position theaters in the health position with a competitive advantage to navigate and some certain does.
As you can see we ended the quarter with 1.2 billion in cash position, we've essentially from the IPO and follow on transactions and Wi Fi leave it to that.
Cash flow is run, but it's an 81% conversion rate no lowered the leaks and rate when compared to the same beautiful issue.
Last but not leave our cash flow keeps being strengthened by the synergy raise so M&A integration, we have been efficiency NOL integrations leverage operational modest considerably.
Given the high predictability of our business model I'm confident in our ability to generate meaningful cash flow, which combined if the strength of our balance sheet, we sustained financial stability, regardless of economic its ran and enabling us to continue as it could divergence.
Moving next to our discussion and I need you know integration from ones like nine.
Yes, she our position as the leading medical education company, Brazil, partially through acquisitions.
We have completed acquisitions over the past two years and added over 400 seats less than one do you.
Well proximately, 40% of our three year topic of Glentel.
Additionally, we currently have more than 500 seats over there and where you Patrick.
And then hey remains a key pillar of our growth strategy and we continue to evaluate opportunities to deploy capital need to strategically positions across Mexico was conceived as well as digital platforms that can add services and very close students.
Our financial strength and cash flow generation couple of beauty afforded us flexibility and we intend to remain opportunistic.
Stepping back for a moment, we have outlined to stages that acquire companies go through before we start to see the synergies in March.
Immediately we guarantee 100 percentof the coupons feel for all sorts of the.
Yeah, we begin to streamline style into increased deletion, after leaving them and Theyll phone you could weaken.
After maybe Greek all transactions and administrative activities slackers shots or.
We struck ginnie efficiency.
Lastly, we implement appias careers plan to full integration reaping the benefits from the acquired.
Importantly, the property operating environment has not been slow our integration process if recent acquisition.
We just finished integrated Ethernet and we are moving we wouldn't have pop in the mid sale you can do independent.
No Big Center, you can see our successful acquisitions track record in how we have been able to extract seanergy faster.
Your EBITDA expansion the margin gains have been significant across all acquired pumping.
As an integrated and being further scale, we have been able to see value creation, mark influenced higher incentive vendor expected Mohawk by institution.
You can consider the more reset the physicians concluded in 2019, such as he back inside that we can do you see a strong grow and operational leverage in less than one year.
These solid track record shows our contracted to deploy capital into set piece requisitions sweet great return to our shareholders.
Now I'll turn the call over confusion that we've shown how the digital transformation accelerated by the Cobiz, making Friday is changing deprecation for office and opening many opportunities for us.
Thank you very general moving next to our discussion of innovation and technology and how this is changing.
The kitchen process in the next two slides so starting on slide 11.
All of Us RC of rapid shift in digital transformation strategies, and then environmental like this the need for a sensible solutions no markets has become greater than ever and we are proud that we're leading the way the medical education segment.
The current environment is leveraging our core visit a competency with an efficient process to create large and scalable medical education materials utilizing different formats. Once you go easy to use and sticky platform are cutting edge platform can deliver a personalized learning experience for you.
Student, including communication learning tutoring and assessment tools as an additional features we have just now launched our purpose Aries synchronous class capability to the experience we provide werent professors, we'll be able tweets direct on a live environment with our students.
As an integrated piece of a methodology.
On the content delivery side, we are proud to launch the second season over instructional medical residency web series with 12, new websites. We added another 50 clinical cases, where 15 of our professors are acting and performing as well as 100 new video lessons.
Cory. This cases this is another important step of or change in strategy delivering constant informants. There are connected already on the new generation of students and innovating and cities needed in our industry.
The proprietary softer aircrafts in development and adaptive learning technology allows us to offer a personalized learning experience for the student no matter, where they are in their learning curve or career. This is critical for our solutions, where we use the power of our data collection to help student.
To be more effective.
Moving now to.
Slide 12.
I see us core strategy is to combine quality medical education with intensity use of technology. We are committed to providing innovative technology solutions that assists our students as they spend more time all lines to work and study in this environment and later on.
Even prior to the rise up coupled with my team we have been very intentional on strategic planning for enhancing our digital offerings. The pandemic prove the efficiency of our digital platform has more than 90% of our undergrad medical students engaged online with a positive tea.
Back and acceptance over 93% Robert graduate students mentioned they would recommend they are aligned classes emcores to a friend.
With respect to other students that's shown on these charts. These out of digital products continent teachers consistently delivered increasing customer count growth during the quarter. Our monthly active users increased 17.5% from January to March to more than 16000.
And.
At the bottom of the first chart you can see the current construction of our content with over 2.4 million learning objects use bar students during the quarter.
Due to that we see the monthly constant construction.
Freezing more than 26% as we scale, our two marine system engaging more students to our platform risky to future conversion to our other products and services Raphael will be offering.
The strategy is to build and nurture the relationship generating loyalty with students and other medical professionals with a proven effectiveness of our digital platform and services, we have strengthened our position as the leading innovation and Tech company and that there was the only medical education.
Segment.
This shift in teaching and learning behavior is also given as an opportunity to take further look at our long term digital strategy, while no one knows how long the print business environment will persist what is our expectation, but some of the programs and ore processing is put in place because of Cobiz 19 will.
Continue overtime as a result, we are actively assessing our current product offerings as well as expanding our view to potential acquisitions. Our strategy is to further build our share and drive long term profitable growth now I'll turn the call over two weeks to discuss our financial results.
[music].
Thank you Julie and good morning, everyone before getting into this unusual results I'd like to ads. That's the plan for to be hosting my first call as our CFO Vince.
Thank you Pat.
Was certainly a very unique time, that's yeah, all leading food.
I'm, particularly proud that we delivered a successful Arthur debt is tracking in line, we filed our first half guidance.
We're particularly pleased with the execution in the first Walker to quickly move older classes online, which in turn enable was to report the good start off the year.
Moving to slide 14.
My discussion we're focused on the main in the most significant PML items.
There is additional neutral the earnings press release that you can refer for more information.
As shown on the space, we've had very good quarter across all key metrics.
We also reported high watermark Mark.
Let me highlight a few.
Starting with the medical fees and students.
Bill off we saw a significant increase during the part.
With respect to the number of medical school seats, we added 470 seats.
The year for our total all the thousand 600 and maybe for.
By quarter, and a 32, 9% increase over first quarter 2019.
Reflecting the peak month recent process the number of students in the first quarter 2020 Watt 7956.
An increase off.
58, docs, 8% over the same here.
Oh.
The prior year.
Subsequent to the quarter end 2040, we added on August.
The 182 seats, we yeah decent off when you sold Lucas and with the potential upsides.
For the 100 seats.
As a reminder, considering the condition of supporting from Chris we have already needs.
Our COO basin hats off to be used 1000.
860 seats fees.
And.
13.
Thousand and 400.
Students, which leads to 11% Cagar you student base considering bit veered off 2019 until 2000.
And what he sees.
Pro forma net revenue for the quarter, what the let me seven Bucks, 2% Europe year over year, Q2 272 million reacts.
Moving the acquisition off University, which closed at the end often like 2020 pro forma net revenues grew by 20 duck, 1% year over year, reaching 287 million reacts.
The increase was primarily driven by organic revenue growth, mainly due to my estimation lost medical schools.
The strong.
Topline growth combined with cost decisions and result, seemingly off from a contingent was reflected in our pro forma just maybe dot increasing 30 seats were saying Q.
Yeah, 141 return reacts and their margin.
Next season were up 233 basis points.
Excluding the consolidation off.
Pro forma adjusted EBITDA increased 33, 3% year over year 257 Bucks in medium wise and the margin decrease of 500 in food.
Base points.
Adjusted net income.
131 by 7%, reflecting the revenue contribution synergy capture and the margin expansion from consolidation market conditions, our diluted earnings per share increases, 54%, achieving one reside in nine cents for sure.
I'd like to remind you all bets are two parts of southern 90 effect Ikea business.
As the deal in our earnings release.
And as a result in a typical year the first quarter snowbirds the strongest the third soft revenues, but not in terms of cash from operations since may so rapidly record the interim mostly happens on the first in the fourth quarters.
Moving now to page 15.
Our discussions all key operating metrics by business unit.
We delivered strong results through the first quarter as both business units continues performing very well.
Growth in key operating metrics as shown on this slide is being driven by a combination of organic growth and that conditions.
Our average monthly medical regency's at after quarter end work.
Okay, 8235 reacts, which it was 8% Triple C pure in 2019.
This reflects a combination mop new students.
Enrolling we for higher commission rates combined that students graduated with but nowhere we should.
That's true in the beautiful sharp, 77% off our combined Richard.
I've been reading from medical schools.
The combination off of 47% increase the number of students and 9% increase my average ticket resulted in a copy of uncle Bobs depletion fees.
59% when compared with first quarter 2019.
With respect to you to we've had almost.
12000 active the students after quarter end increase up 22% over the same pure last year.
We can see increase of 29% and 22% in the number of students I'll wrap course, and see Fourk TV and features Steve perspective.
Moving not in a deeper analysis, our power revenue and maybe back on slide 16.
Our recent model enable let's begin the rate the highly predictable revenue growth.
However, as mutual prepping for it.
Conditions are a key part off our growth strategy and as show on the speech. We've had provided to the net revenue and adjusted be factory just grown our historical first quadrant 19 revenue to the reported first quarter 2000 planning.
Fourth quarter net revenues decreased 88% Q2 hundred seven student read and react.
Excluding the consolidation of our limited pool net revenue grew 17% in the quarter Reefer contribution lost 84 meter, yes from a conditions and creating new then readouts from organic growth.
Which is full price optimization off the medical school seats.
And increase our ever cheek it.
Well the right size up the speech, we show the first quarter 2000, and plenty adjusted EBITDA.
During the period adjusted be back degrees of 88% year over year Q1 hundred 41, you didn't react.
It's flipping the consolidation of off Univision dual adjusted EBITDA grew 80 for about 4% with 47 million reacts contribution from acquisitions and 60 meter, yes, firmer ground growth.
Aside from strong revenue growth. Our results are also benefiting for synergies that are being realized from acquisitions as you've already heard up you see too.
Moving on Q discussion of the cash flow on this slide 17.
Cash it's crucial in the current environment.
And would have a very strong and help balance sheet.
That strength, even further by follow on offering we completed earlier this year.
The strength of our.
Balance sheet Beth will enable us to continue to grow to EBIT in support of future acquisitions.
Cash cash equivalents are well got three.
At the quarter and was 960 million resides at the end of 2019, a 35% increase.
The significant increase in cash compared to the as 2019 reflects strong generation fast flow and the proceeds from February 2020 follow on offerings.
The majority off the funds is embedded in no risk Brazilian Riyadh denominate instruments.
So that was.
487, even at quarter end 2000 and plenty.
From 361 meeting at the end of 2000 and managing.
Increase related to the account payables to selling shareholders.
Slaughtered that east.
7% correct.
Cash flow generation remain strong the first quarter 2020, which results in the cash flow versus break off.
18 got 7%.
Sure to 82 duct, 7% the first quarter 2019.
These was slightly lower cash conversion rate versus first quarter 2019, mainly due to seasonality in the Bu Q associated with men so pieces.
As I said in the beginning revenues from our prep courses are recognized maybe the first in the fourth quarter of each years, but receivables are most mostly stable during the years.
Defense Metso results negatively affect guest count versus the first in the four quarters.
Turning next fourth discussions about guidance on slide 18.
As mentioned already in the presentation. Our first quarter results were trending in line, we filed our first half 2020 guidance.
As a result, we are affirming our guidance provided during our year end conference call.
As a reminder.
The work, we can skew a bankruptcy.
I think economics are slowly opening up and our guidance takes into account the best information available.
For the last time.
Two key metrics from the first half 2002 money are a toll.
The first half 2020 net revenues between 475 immediately ice and.
510 million reacts.
The first half adjusted EBITDA margin.
Ranging between 25 and four to six plus 5%.
Our guidance includes big bets off the adoption mall I F. R. F 16.
Includes uniqueness tools expanding global fit one for 2020.
And exclude any water cuts missions that may be concluded after the true each loose off this guidance does guidance.
I would point out the possibility that revenue recognition for some practical glasses could be push it to the second half of two public comment one a phone the resumption off the classes.
Summing up please turn to the next please slide 19.
Youre clearly in the three.
Extraordinary times.
Time, so great challenges, but also times each we can see many key opportunity perhaps.
We are very confident he bids frames the resilience in the overall, how all our company.
We are not to be cruelty them certainly well.
Our leadership position, it's creating even more demand for our medical students.
And as nation or.
We are currently.
Demand for appealable, steves, ensuring we maintain our 100%.
The use of our diesel profitable BT sprinting our brands in position.
And we see opportunity to spend to sponsor for both organically and through acquisitions.
Given the nature of our business, coupled with the high demand or suits Repatha model that presented us with a highly predictable organic growth given the muscle we should mark the seats with an expected cagar up 11% in other student base from.
2019, Q2 thousand and 26.
We are maintaining our long terms stop the strategic focus off lease entity the key component.
Yes.
Have a solid pipeline and we are on track and generating synergies from acquisitions completed over the past two years.
Integration is progressing progressing even in the current environment.
Third we anticipate further merchant expansions.
Lastly, as you have heard through this burden patients would have some balance sheet and generated significant cash flow.
You start to boot coupled with the actions we are taking now enable us to manage through the situation today, while funding target started strategic investments that will benefit but going forward.
This ends our prepared remarks, we're now ready to date for your questions. Operator, Please open the lines for questions.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question. Please press the pound key.
Please standby, while we've compiled acuity roster.
I show. Our first question comes from the line of Marcelo Santos from JP Morgan. Please go ahead.
Hi, good morning, Thanks for taking the question.
I have to actually the first would be about the candidates that you already have forging take Oh. The next season could you please explain a bit more.
How does this work I mean, what kind of commitment to they already have or do there's two candidates or are some of that already road and because you might have candidate that cannot be and then so how how how could that you are that you'll get a 100% occupancies just could explore a little bit more on this.
The second.
If you could discuss a bit the schedule for refute opening so you had to refuse that we're supposed to be open in the first half, but given the coffee situation does with the visit the didn't happen as first understood. So.
Could we used to expected to open in the second half of the year or we're prudent to expect ever team for 2021. These are the two questions.
I must tell this industry norm.
Thank you. Your first question here about the candidates that do have adding I understand there's enough to come to a 100% of the seats.
The ratio that we are seeing a number of candidates applying for all feeds in Brazil.
When we have the comparison tool.
Same CMS or does that I left some asset that we have it's much more than we need to fulfill all new seats that we have to enroll for the fall into that so lots of you're doing we actually right now have almost 80% of enrollment already confirmed.
We are just calling the student support feel all the seats, we anticipate a lot the process because of that you'll be in them great results from previous years.
So that's the way that we are doing.
Hello, My life in duration comparison last years.
And also anticipated enrollment for the following semester.
Well just second question Oh, we opened the Greenfields.
We have chill dessert, the very high hopes that.
The the seamless or from the municipal application best the left that that is required.
And we think that the thinking that you can happen.
Okay. We expect to have this by the end of this semester, but the truth is that the minutes applications everything starts with right now because of the pedantic.
And even if we have a at the beginning of two is the delta realization to start the operation.
We are just expect to have the beginning of this operation the second semester or.
Maybe the beginning of 2020 watt, that's a physical under the downside for other than the pandemic all to start this new bad news sites Okay.
Okay. That's just a follow up on the first so when I say, 80% has already be cool from that that we did have already been something or some kind of initial feet, what what does confirmation entail.
The service called probably enrollment they have to be the first mile station.
We still have some some fits to fulfill but we have candidate the basket.
Covered down and have as a percent of occupancies and the second semester remembering that the second semester volume off new student is lower than the first semester. So the ratio.
Hi, there the volume of candidates that we have Stifel fuel all the seats.
It's better than before.
Great very clear thanks, a lot.
Yes.
Thank you.
Our next question comes from the line of Susanna summary from a town. Please go ahead.
Hi, good morning, all they do well take our crashed.
Our first question isn't related to the margin expansion of supplier. If you could elaborate a bit more watch wanting to make bivens behind the cost savings and it would also talk about automotive synergies that will unlock it.
Conducted nation.
That to be Ali's question.
The second question would you later today tickets are we found that the medical ticket went up significantly. If you just comment how was the trends outside the <unk> health care X medical as medical school trying to take it and also from the other cost to maybe.
Thank you.
Hi, fulfilling.
This is a jeter above those are the margin expansion.
I think it's a tree main drivers.
That is driving all this efficiency that we are getting collaborations.
First is the scale.
We are seeing all this maturation and all.
Corporate activities are holding expenses, we are diluting time overtime and that a strong.
Trend.
As you still have been maturation till 2022.
Second as we're seeing on these acquired institutions, we are having a lot of synergies and faculty costs, we start implementing our curriculum maximizing the number of students debt.
Study in groups Upper professor so we minimize our rate per student and also improving the quality of all is practical classes. So this is a 50% of the development costs.
So when we have some change on that I think lamented the nuclear April it's something that's very strong in Denver synergy in language operation and third.
After integration the whole integration report all that into sloshing around services, we have older JV efficiency, we have a very well implemented process an hour macassa here. So when we push all the transactional activity. This is academic and back office at each operator will supply chain IP activity, we didnt.
Change any SD full time equivalent on our back office operations. So.
As a train came and drives remembering that topline.
The first initiative as we clean for all institution that we acquired forgiven C. 100% occupancy most of these institutions that we are.
Let me go operation after closing condition.
Using 100 capacity and maximizing.
The students as they have some drop off from the middle of the problem. They are not replacement in the student I in the beginning so but it was the main drivers for all this 500 beep.
Expansion that we have seen Quater overpopulate.
So help me.
To extend the second crush from above the average ticket.
Types have done a fluid speaking about the tickets that we saw increase.
From this quarter or was that in.
The quarter and domestic wealthier the ticket.
Dynamic is really related to the maturation off the.
Our other our business we had in 2017.
A ticket increase.
For the first you're only.
Since then.
We have.
He is off the key could support. These these are the students begins with a higher ticket and the lower ticket.
The students are being Bradley so.
Maturation, but you could increase by itself. So thats why were having the increase in average ticket.
Yes.
So I'll just add one point it is important.
Besides all the fluctuation when we change our political in back in 2007 PNM value. We have this recurring positive effect on the mix of our tuition.
We also have this positive effect when real club a new acquisition just to remind us when you hit import that we started operating and back in February.
This asset to have zone, the highest accretion.
You know if you have.
Around 10000 AG. So also you have this positive effect.
When you have more.
And also maturing when you hit MBR operation, So give us what we're doing as on a strategy to method over some after we had just changing prices related to inflation.
The exception is when we have a new acquisition or we changed the curriculum, we have something above inflation. So as a guidance when you're still expecting one to two percentage points. The long term view onto the two maturations apologies.
Institutions.
Could you just just to clarify.
You are referring to the Med school tickets right or are you are referring to the consolidated or overall chicken when you say did.
Justin.
Yeah.
We have refreshing the medical school to issue.
Yes.
Perfect.
Thank you.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone to withdraw your question press the pound key.
I sure next question comes from the line of Shargel booked Alessi from Goldman Sachs. Please go ahead.
If you have your phone on mute please UN mute your line.
Okay. Next question comes from the line of vicious barrel from you'd be yes. Please go ahead.
Hey, guys. Good afternoon hope hope everyone in spine. So two questions on on our side or the first on the metal but from that you guys I'll mention a anjuna gave us a little bit more detail just.
A question here.
Given that you guys are the problems being pretty well received what would you guys need for this platform to become a new revenue stream.
Have any idea or what would be economics for that we're offering for other medical schools the wants to do that.
And the second question is also lives we Didnt unit to just to confirm here. If you were some some different stinson love to demand dynamics for the business units through both elements, so anything that that thinks it.
Hi can you update engine.
Yes.
Oh, Yeah sure.
Both.
[noise] athlete a lot of lives.
Yeah I'm sorry. So are the first question is on the med southwest for a if you guys could elaborate little bit on what would you need for this platform to become a new products and new revenue streams by offering it to new two other institutions and if you guys have any idea or what would be economic did you.
Understood.
Yeah. Thanks.
And the next one is just also on the business incentives to just if you're seeing any difference in terms of as far as demand goes or if the demand is so resilient as it is on the business unit one.
Okay, Hey, we this is this is julio.
And.
Hello, everyone hope everyone is safe out there as well.
So for the first question first I mean, we already having leasing team.
Working on the Buda beside the business. So we already have a.
Small, but still I mean, its revenue coming for for beauty.
What what we have today, what we are offering through the screws basically is that solution.
For the last three or four for the for the internship program. So what happened, especially now with a with all this situation is we offered.
The platform for schools that they didn't have anything actually to offer to the students and and we had 32 imagine that are around 340 medical schools in the country out of those 30% to 40% of those are public schools.
So we see the need to.
Due to the situation and the idea in terms of what needs to become a revenue stream as you said I mean, we're charging.
These are actually the current clients now we have.
On a subscription based model.
So the idea is to convert.
The schools, especially those ones that are private into Christmas. So you know we're working with them. This every stickier.
And as well I mean, the other ones the public ones.
Tricky to choose to find a commercial agreement, but you know we can obviously worked on a BDC side with no students remember you know when.
The way we seeded in staff on the thesis of assay.
We want more of these students engaging in a platform and as much in are collecting information.
We can extract revenue from.
From another institution and further on during their career you know the idea is to keep operating other.
Solutions, you know anything and continuing medical education graduate business or this is this is the idea, but ER. The way. It works is you know it's a subscription based model today.
And in terms of the second question's on on on the demand, especially for.
For for a fair bit so I mean still.
Interesting very good demand.
This year it specifically, there's the the VX down the river leader It again, which is the test that students that are sitting medicine in other countries. They will have this test on October 11th this year. So there's a significant amount of students that are they couldn't take that there.
Since 2017. So this is a you know there's a strong demand there and again I mean, you know for sure.
Strep still I mean, its business is growing in terms of market.
You know around 20% a year.
For for the graduate business.
We still see the demand the only thing is that since we are selling goods to doctors. So the sweet situation. How is that these doctors of course their focus on covidiens some of their.
Uh Huh offices, there you are not to working so what we're seeing is that they are postponing a bit the decision.
But that's why it when I said on my part of the.
The presentation you know we are reviewing the portfolio, especially working with a more of the online content for the gradually businesses as well we launched.
A couple of courses.
For free and the last one which is quite interesting is one of our.
It's a therapeutic we'll update.
And with a telematics and so we're offering to scores for our graduate students and we see significant demand there and that will be tied to our product offers.
We have today in the petroleum show you know, we're shifting more to the online on any new from this is a lot of progress on that front or using again our technology.
Very clear here. Thanks.
Thank you I sure on next question comes from the line of M.R. Scott from Goldman Sachs. Please go ahead.
Yes, hi, Thank you for taking my question.
First of all.
Thanks digitally on team for the presentation and congrats for the result, with two quick questions first as a follow up from Susanna and I apologize I missed part of it like a temporary decline disconnected from the coal and but I just wanted to go back to two pricing question for new intakes freshman that are coming in now could you just there.
What I understood your adjusting just by inflation for the medical student.
And then I wanted to confirm.
First wanted to confirm that important non medical students. What he is that also in line with inflation or.
What should we expect there.
Again, it is about the intake stuff in the new classical no not a existing student and and if you've generally in the market. If you've seen poor medicine, we know that the demand dynamics I hope that they absolutely different than from under courses, but have you seen given that people are going through.
Uh-huh through different economic challenges have you just seen and as medical schools are preparing on the private side are preparing for the new intake have you seen more promotions or or discount or would you say that I'm not something that you've seen in the market too far.
Thank you.
Okay.
Thanks, So for the question.
Correct.
The maturation.
Of the average six for medical Susan.
Huh.
Suppose we had changed the prices.
For a new students the big you'd have to you.
Completion, so our average ticket for new fresh wins around 8000.
Hags per month.
As we had this changing we should in the past when we implemented you could we can back in $2017 18 for to do acquisitions, we have dispositive moderation effect because when we acquired the average Commission was 5000 6000 I would change.
7.58 called the high so we have the maturation of the students moving to deposits of assets. So that's why we will have this positive recurring fact till 2000 kind of thing when you have to pull maturation.
All the other progress we have also changing or close to them. So.
As we can expect but.
For modeling proposal.
Assessing other problem crop undergrad.
All right close inflation the over here, what we are seeing that also on this progress we at the on boarding patient and can be feedback because problem that doesn't make sense to offer in some regions.
After acquisition, we are growing this problem.
And we are not going to fight against any other three or do something funny, we operate any folks somehow and honor medical and other health product.
Above.
But even capacity a former student Juan.
Indicating that this much bad debt and we expect because previously used a cash collection.
When you compare a month by month against 2019.
We are three or four percentage points enormous efficient better arvind happening.
We changed a lot the collection process back in 2019 second semester, we implement alarms view procedure and you'll controls.
That helped a lot or renewing all these students for the difference is that something called the planning so dispositive in fact, even consider the difficult economic a difficult chronicled 19.
We are taking a very positive low hanging fruit that we have on just from.
What we are going for the renewal is an opinion Viking situation, we are offering.
I find that show AD for this families.
We have defining a installing.
Six to 12, installing assuming a lot of credit card.
Then I hear that said I called it a different profile all others medical students.
But it's on a case by case situation okay.
And in the market overall sort of from the competitive dynamics within medical schools in the private sector.
[noise], we are now coming off relief, we already have candidates for 100% of our fee.
So it's the ratio ended expertise is very healthy that we can never guarantee hypothetically Cupid, even considered is extend the center.
We have already completed drove 70% of the student base pretty new students already paid the July solution.
Perfect.
Okay.
Perfect. Thank you.
Thank you.
And our last question comes from the line of Scott Piper from Macau. Please go ahead.
Yeah, Hi, apologies if previously asked but I was wondering if you could give us some color.
On the economics of future M&A prior to the covert crisis.
[noise].
The price per per student for acquisitions, we're starting to gravitate higher given increased competition.
And I'm curious, how you see that development, both now and going forward given the crisis and.
What you're out you know the dynamics of accretion for potential future acquisitions, and most importantly, how your appetite has changed.
Because of the crisis for acquisitions going forward intuitively, you would think that.
The environment would be better for acquisitions, I'm, giving your cash situation and probably.
More strain in the economy, but but I was just wondering if you could could elaborate on that.
Oh, Okay scalloped so our.
M&A pipeline or it's it's moving very very fast or as we are.
Bad debt, we have already more than 510 that we analyze the other emel you culture.
We didn't.
Slow or the base that we are analyzing assets are absolutely or other kind of to pull that we have seen much more opportunities coming to the Dave I think it's more players medical schools.
The gang concern or how big can continue to be Molina, keep confirming 100% up their or their enrollment. So is that kind of opportunity that we have to be on alive and try to have a better negotiation jumps off price profit.
So we're not guiding any badger for institution.
All right a lot a went outside the different much operational institution.
Now, let Keith and I like our track record the five fees that we are showing our Alaska.
We have completed defect valuations and all of them then given credible.
Rate of return as an example, having a greenfield would not be back that the number of about double the value per student is completely different from only about hopping that was our EBITDA multiple because they have a very large operation.
Meaningful progress to the portfolio and our policy baby back so the way that we are alive, it's a multiple of EBITDA for more mature.
Complete institution and when they have so much regime and also.
Almost a greenfield license at nearby a that will be much more related to multiple pretty stupid.
And proceed them sorry.
So the just a a above the our appetite.
We have keeping the integration of very fast pace.
Even considering the the insulation that we had some cities we have we not very well process of cost that to conclude into close enough position, we have to be candidates.
All this process.
And also have to goals and have the accounting, but all the accounting procedures Dell extend the albeit a two to report this new acquisition. So we are having some kind of little order and your water. So we can acquire and close.
Sure tree of completion per quarter. So that's something that we are fully in our order are much more concern in our capacity to integrate and have the condition will have all the go to the procedures to have all our balance sheet approved possibly be considering.
That we have to Verizon at least for one or two months right, but we are not it's slowing the pace. That's I think as many message here.
Another thing there yet.
Scott It's fluid speaking right now if I could add something additional point soon to be sure.
That's very interest to two to two to 10 nice best.
He described as we see other opportunities in digital platforms to two two to add more service or is it is in this moment, what we saw a and if I didn't mean indiscretions with nets out. These since we saw very very it's strange on bad.
Digital transformation, so escapes own. These digital platforms, we are even speeding up. These these valuations led the east does.
It's actually these negotiations to choose to put more and more of the beach. So a lot performance in our portfolio.
Okay. Thank you.
Thank you.
I show no further questions in the queue at this time I like to turn the call over two years Julio Gabon CEO for closing remarks. Please go ahead.
So thank you. Thank you all to conclude my remarks, I'd like to reinforce our businesses residents and they'll standard dedication of our team to deliver this great first quarter results.
From our first how 2020 guidance, Eva and there could be thinking price.
We also raising unusual five times of great challenges on uncertainty, but also time to greet you can differentiate ourselves into many key opportunity project.
Thank you for joining us today and they look forward to meet you when all these situations over keepsakes.
Right.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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