Q4 2020 Vitru Ltd Earnings Call

Joseph Smith

Ladies and gentlemen, thank you for standing by and welcome to the V true limited fourth quarter 2020 earnings conference call at this time. All participants are in a listen-only mode after the speaker's presentation. There will be a question-and-answer session to ask the question during this session. You will need to press * then 1 on your telephone.

If you require any further assistance, please press * 1000 hour now like to hand the conference over to your speaker for today. Carlos Fuentes. You may begin.

Thank you for thanks for joining us a real pleasure to be here with you all for our first release the company capture the full Year. Hope all are doing well and healthy and the same time. It's like presentation has been made available for us for today's webcast available as you age, you know, if that's a relationship which is is that that feature. Com. B. Are you all have this presentation in front of you? And of course before we begin I'd like to look at everything on page two of the condition Safe Harbor is in effect for this call. So now I've got you all to go to page for office location.

Can I please speak to someone? What's what and what's going 21?

Will be first last year which despite all the changes that we all have reached and offers in today revealed. This was a tremendous. For up here at the kitchen food all content including of course six months ago. We continued our journey home phone for business first growth in the number of students sales be a net profit and Marvin second-row quality, for example with the new versions of our content platform and our ads which is available to students as well confirmed by the latest results of the I'm in the theatre and release the mute application in October of last year. This is again the highest amount all we need two players in Brasil. This is actually a birth

Certification of our quality standards here at Richmond and third group in the satisfaction of employees as measured by the both of which one that we connected here last year in which we reach our highest grade error all of this. You should be discussed in more detail throughout my transition for you today and looking forward to be here. We are very excited about 2021 four-wheel deliver again important organic group, you know number if you know the strong growth we have delivered so far have the purely organic Baton Rouge we can again this year from the maturation off the opening of new ones that we have done so far throughout the country and also our constant focus on operational efficiency and Leverage.

What do we have two different things that we can also create value for shareholders through Emily and deployment of our digital expertise and we have the balance sheets off the teachers. I'll be discussing with you yesterday now will be to page five leaves.

Let me report at some of the highlights from Twitter and for the full year. We launched this new brand version of our gioconda platform am also and you have what's called Lou improving even more the user experience. We started to new business both feel for its first off a partnership with both feet and both of them with a lot of attention. We reached last year is very important Milestone. We have no more than three hundred thousand students in this location. That's a huge achievement. And of course financial performance was also very strong that's regular office during the experiment increased by 26%

Talking twenty and thirty 3% in the fourth quarter of last year compared to the fourth quarter of stuff in nineteen.

The car for the day it grew by 25% last year with the margin which is 28.2% off. That's your include a 2.5 points worth of 2019 and above our guidance that we provided in November of last year income down 70% last year compared to 2019. Now, let me explain better about each of these points for you starting on Page Six.

That's very poor very poor of our digital delivery for our clients. We are always looking to improve academic experience with digital Solutions, which became even more important with academic. So we are very very proud of the new versions last last year of our gioconda digital platform. For example, the gioconda on the left part of the right now has a definite learning to to reach the student has a much more customer student experience was much more of a a personalized experience for him or her

Blue here on the right provides mobile and user-friendly access to our team which is more and more important in a mobile oriented countries took all the kadena contact. He's available there at our mobile app. It has well integrated support through what that and we change. Well, that's somehow the internet access is paid by us. So the field has no options for the full capacity of the new app.

Open 7 to go deeper about this partnership with the market those Partnerships. They are also very instrumental in the growth that deliver education of offerings. So just the first partnership with the marks it and that we signed and released to you in January of this year. It's just a very good partner for us for those reading abroad and who don't know each marksheet is the largest company of Jim standards in Latin America. They have around 865. Keep my playlist of which slightly more than 550 with Rent Em both just like

We're now offering a graduate course if you can't forget and besides we launched a new course model with them open for the general public in which we provide life. And of course Wicked experience for students and provides the gym facilities standard for the pretzel close. Again. This is off work and you have nothing to report but the potential here is clear particularly because health and wellness is assumed that it's increasingly more important to Consumers off, especially after the payment. So more Partnerships will come and we hope we can announce more of them finally information on a technical courses, which are also part of our strategy to expand the offerings and we will come back to that later on the rear as we have more numbers to show you.

Movie to page 8 which provides a gift of the Rose?

Fort Walton Beach

we have all the three hundred and ten thousand students enrolled in distance education courses, and we focus on the six days off which again is our maybe before you can see that we had a table a thirty percent in the last five years since 2016 and we have I think this level of rules and this year

As we have also disclosed in the relief of 3rd quarter of last year our intake in the second semester of last year was 40% higher than the intake in Thursday at 3. The rest of you in the first semester of last year was 30% so Improvement and growth here as well in the intake side this number for the effectiveness and the comparative advantage of our model. So how do you say I'm trying to to highlight we do offer a different product and the mark that was also very interesting last year as well on one hand the current one credit, of course affect the willingness of some of our through on the other hand with our hybrid model we do offer a dead.

And high-quality or 24 those people for those portraits who need the support and the sense of belonging offer in on campus, but they cut off and the transmission and we do offer, you know have it tomorrow demanding hand holding for computers and this experience of going to University. So I'm back together with the cultural changes brought about and NX about working from home by four home twenty-four home. Of course these represent a huge Market opportunity for it going forward.

Oh, please not we show up increase in our location today throughout the deal with standard substantially and whole country well above off the market growth rate that's important to highlight and and they did the market that has been expanding a lot in the last four or five years and we know we'll spend even further now and so we think this growing and a few markets we have been growing faster than the competition our growth was last year, especially with the Southeast region of the country where we had been historically Shi but we're happy spending a lot in the last two years. This is a huge a very competitive market of course, but we're our hybrid and filter bit different than tomorrow can attract a lot of students wage.

Including self I have the best learning often. So once we enter a new region war will enter and usually we quickly uh wrote and we can

new student to our hybrid and total Center model

here on the right part of light we can see what location in the number of the last five years.

Opening on average slightly more than $1,550 per year both with pockets, which is our business model 88% were open Monday after the change in regulations that the creating Seventeen so they are still not mature. What he called the expansion help.

Andrew Shulman thing Extension Road Independence location segment than 630,000 overtime, which is better for you traded on the exchange them.

So here is a chart that I like about because it shows the upside the strength of our model and the consistent growth of the course of my life lately. You said that far the most important driver for our organic growth and maturation of our expansion plans, which which vehicle off the track on the right. It's very very consistent over time. They are maturing of the time they show reach maturity off after seven or eight years of operation. So none of them are matured and obviously they are not mature.

This growth potential we created this theoretical maturation index which is basically the number of students currently enrolled in this has decided upon the future number of students in looking house. Once they reach maturity. So the thing is currently at around 30% which means that is a huge potential and and don't help the the capacity increased threefold in the next years. Of course just a reminder important to highlight that takes into account page so you can in fact from month to month as you have on your website, if we take only eighteen Court just to compare apples to apples. A demonstration index of difference in this cohort increased from 6% in December of nineteen fifty per cent in the club.

Of twenty I have reached the went from 44000 to 55000 people over the left here.

And finally just to to this is gross with Lincoln education because all these are already open. We had already found the pack em and and hired and comforting the business partner the tutors. The the only access is granted is already there working out favor. So there's already a workers cycle working. Oh, so this is Rose with Lincoln education group.

Ellen Page

You can see more details on the condition and much resonance for our location on there was a substantial growth in both annual and especially the corporate office for the fourth quarter of last year. This was due to a combination of information already and the maturation of her home.

We control dropped out and a slight increase in average ticket on the next page Pedro off course, we had like that the decrease the intake and expansion now since babe did not come at the expense of everything else. I think it was this quarter or half of the Year affecting increased by 3.5% versus the the second half of them in nineteen, which meant including reservations for less than four minutes. And this despite the sizeable number of students. I mean as you remember, I don't know we have a model academic off switch he or she can join us throughout the semester for the first matter of so, most of them did not provide a full semester off.

Of the Readiness, so please confirm that the strength of our brand and what have been sent to you. We have a different Market positioning and we offer a different product is the part number here as well but substantial in the Dynamics of everything throughout the year, so, please only compare year-on-year numbers never compare a quarter or the Ford type of happened here with my name is throughout the year. It's different.

No on the on the Centre part of this like to see here the contribution of Health Care and in green Cuisine. So the increase in ticket was also supported by a mix of Fortune. And now we have a higher participation of healthcare courses such as nutrition Pharmacy and buy medicine, for example, like it was growing as well. So this provides a nice. For finally you can see on the right part of life get our retention rate was even slightly better than what we saw last year or this side effects. Of course, it may affect the reservations for tables here. Things is important to highlight that we improve our retention rate slightly even growing and lots of our intake theaters.

And is it the drop-off and PGA by the way is much higher amount. So we're not only grew a lot.

Also includes flights and the retention and the 13th as you remember how long you with our guidance for the party of last year it was exceptional because we had we were in the first released. So we provide them and adjust the green margin for the full year. As you can see our final four thousand trained was the very high end of the range which is $519 a month regarding the identities. Margin we exceeded as I mentioned before by hundred points the the range and and reached 28.2% left here.

So we are delivering and we'll keep delivering the expansion right now and margins that you are now fourteen months. You can see the growth in our business in every Financial perspectives first-growth net revenue Again by extension in this country and we have just discussed second. Unfortunately in margin,

English perfect

And this led by David came by a constant focus on personal cost efficiency and increased victimization and third expansion. In fact, I'm working with shops things better in a few minutes.

First let's talk about on page fifteen. We provide the switch with a mini version. That's regular between 19 and 20 and a quarter of my team and fourth quarter also, so if you focus now on the even numbers, you can see that growth, uh much reading what you've been proven by the extension 103 and this growth was diluted. If I if I maybe Call It Off by religion in both continued patience and on-campus segments. I have to see you all next stage. So June 4th on the communication. We have 11% growth in the Red Room the gross revenue of graduate courses last year for the last it's like 11%

A business that suffered more than the undergraduate segment instead of the content especially because the health were closed and open used to be an important piece in the same scene of our credit portion, but we recently did some changes in the marketing and in taking process here. So now we present a package today able to growing so you should expect in my group already in the number of the fourth quarter of the Year. There was another factor that explains the the degrees in the performance of the consumer the hope the yellow part of the charts. We have a very high bar, especially the first couple of my team we benefit from some troubleshooting conference, which is called a mixture forms, which basically disappeared last year with the modem. So now they have time to come back so that was dead.

Email of my team and now we expect to deliver more numbers on that one because the legacy on campus wage it has been declined.

At what time? I don't know you have been same line without you for the whole sector. It's more concentrated on court not offer to offer such as law military technology for example, and we do believe that it's relevant for it. We will do overtime and to leave that off the weight of average growth the Consolidated growth going forward tense increased as the business tend to be less and less relevant over time.

on page seven people

We provide the the breach with the main reasons for both the corner and the finger number here. We have three main highlights off the The Continuous increase in our operational leverage and education of our gross margin in in networking. As you can see the cost of services off the Jimmy at all or virtually flat both flat over of the year and they reduced roughly 44% off. It's redness and joined me at 34.7 for the first brought my 2004 Journey send another highlight it increased slightly to 60% of net revenue as a reminder. Most of the expenses are related to the intake process, especially and basically four different education undergraduate segment.

Which means that they re code to attract students. So the stronger they take the higher the Senate and here is the cut-off time because students and the situation of the country on All of the Lights Off by operational leverage as reported in population reduced slightly on an Innovative 480 to 208. The second game of schedule optimization for you know, and the increase television throughout the segment.

It's important page of net revenue. You can figure there was important reduction from 39.5 to 34.7% of my GM a extended home. Again. It's reporting, you know, get the vehicle addition increased by only 11% last year. It means that at a certain stage of net revenue you experience or slightly smaller than I am ambitious overtime end of this fiscal.

This update is Sports Illustrated our content.

Adam instructure off

No on the last part of that increase the next Thursday will be 1% How much revenue from forty to ninety 60% cure for that for that year and we have Tuesday at the beach of this issue between take a few seconds the health play an important role in the same process. So they are closed. So we have to rely more and more on based on media. I'm asking you to be the case as well this year. However, if you look at the cut the mentioned before there was an increase in efficiency bulb. So what would you think of the Scandal some expenses by the date of this experiment? You can see and that is now release that the duration.

What it's like to be smaller increments raining then with you regarding PDA on the right page in the fourth quarter of 1954. We had a more strict policy in 19 f4000 19 have this Francophile, but at the end there's more here is a page of net revenue which runs from 6% to 14.8% last year. There were three reasons for the first one the higher percentage of newcomer know be a FX been for which sprang is included in Phoenix per second and the average Aging in accounting ma'am.

Four people is now washing the table slightly older than in the freezer, which means that we started twenty. We already recognize a bit more of the Los. Nope. You have then what we have done in nineteen. Would you did a lower ignition switch 1030 economic crisis that we are also and at least of payment of our clients. So I I do believe that the flight including today was just fiber now, what would you pay twenty? You can see that there was a substantial wage or just messing them in stock the training which increased by 70% the main driver for it was the extension of the business as a whole and the extension of 25% off.

DJ number Matthew

Don't have the part in the sex of a higher recognition of which you have a positive cash flow. In fact this year in 2/21. And in fact can also have some effects Wings just after the IPO on the right. We have the cash flow from operations, which improve substantially last year in college at 44% 242. Meaning that's here. Once again 300 by the same performance of Education undergrad business, but of course backed by our content and receivable management with that our just cash flow conversion from operation 8% off that's coming from 2019. So this financial which enables us to to support our growth plans which are in the next two lights.

So if it's working again so far has been fully against it has been accomplished only be accomplished next year. I'm already but you have a reminder we have the capacity regulatory capacity Jordan $500 per year. We all experience by providing new courses FDR allowed in this location and especially law one day off. But also if I told him everything gets all come from em before by going to order the continued education and got the quarter month, which you produced last name brand new or 14s emotional cap cost.

Harmony to close on page twenty-two. Let's talk a little bit about immigrant Group. Which means if you remember the net proceeds 4100 we will be basically for a minute. So we have today several discussions several accidents questions potential Targets in the fact that we defined before the g o x to create new features for our filters can handle portfolio and of course when you mix it off and and when we can provide you compensation

We do hope and we will announce to you soon, so that this end with parts of the city, and we are now ready to pick your preference so over here, please open lines of dressing.

Thank you. Ladies and gentlemen, as a reminder to ask the question you would need to press * then 1 on your telephone to withdraw your question. Press the pound key again, that's star one to ask question. Please stand by while we compiled the Q&A roster.

Our first question comes from the line of Fargo border Lucci the Goldman Sachs salon is open.

Yes. Hi Carlton teen thanks for taking our question moving to the forward. One question that we require zero coverage is the financial health of the month in this sense. I would like to hear from you guys an update on the accelerated rebate curve, especially if you have been able to apply the higher fee for regional plan and it's so far you saw anything in terms of turn regarding the owners of the that's the question takes you very much.

Thank you know there was no no change in concern changing the bulb. It's around 3% per year every year. It did not change in the last month. So the program is delete one over there. That's very important. I always try to shoot to move and make money and that's why we we create this this Alex a declining record for that the device as well and every day I need to look forward to the industry. So that's what they've been doing. And and we have been opening again more than hundred people have most of them. In fact in our most recent open herbs that we are doing in the beginning of this year more than 90% of them are important wage.

Remember that historically our number was around 84% with Partners now already did here and hope that we are opening in the first quarter of this year more than 90% off our appointments from 7 to 1. So just to show to prove that they are happy with them.

That's your kind of thing cover image.

Thank you. Thank you.

Next question comes from Martinez with Morgan Stanley Airline is open. Thank you. Thank you. Hi, Carlos wage one of the kids debate. We have within vegetables during the radio after that deal was about prices know the capacity to keep the good historical performance of prices. It was quite impressive. Once again, you you are increasing prices know and above our expectation may be impressive know given that the weight of newcomers is increasing know. So maybe you mention that part of that is makes no but if you call him a little bit more color how much of that is makes how much of that is life like prices and it's those Dynamics if you expect those Dynamics to continue going forward.

It's a it's a mixture of several things. I thought was a mix-up when the student or the new color join us in extreme for the month a a matter of what is the wrong way ticket that did in the beginning of the second. For example, is it also a matter of need support em in a matter of the annual adjustment that we we make on fingers on a daily basis. So so so far, we have been able to do this afternoon to have a match performance the the next contribution here last year was not that important because it is still really I mean there a way the the engineering and Healthcare are you so they're still growing so yep.

They will be more important the computer but that's something twenty the there was not that much contributions from that. And so the 29th the contribution was first the the big thing is the ticket for you, and we are practicing on that. And and this is I think important thing that we do try to change my bank balance between growth and the second part is think that especially important last year off and give you the difference if the profile of the blinking the profile of this border is different from what we have seen and does not use for the way the for formatting here. We have a very dead.

Little bit a bit more delay. We are we have now so far. We have grown up in heightened month. I do not see it today and all that before I could help us but in fact in because when people are looking to so so we have seen already in the last two days very important to include the interest and so, uh select the the curve was very very normal of the year for example, which which helped them and finally the it's also very important throughout the course. We increase the price for application we do this month.

If you have the last year.

You are very very important. Uh, the uh, the thing because the price of the fears are very very important. So going forward. I think the only thing that would change of the Kingdom which is what year or month. This is big cycle. It's there is a profile of of Yukons which is more back end. So just as regular recognition this course, we all she dismissed change, but the numbers are with automation already. We are already Heidi increase all of you so far as if you take the way up to Thirty fourth of March and remember that last year the dog

What so we are confident that we'll see deliver a micros. I have four digits.

Hello, see if I may follow with with another one. So obviously they was and proof at this point is probably a little bit but maybe I'm not talking about the sinuous know you mentioned about the seniors. You already have some information on the on the re-enrollment. So, how is that moving is that next year is 2021 going to be another good game, please.

Yeah so far it is expected which means is slightly smaller than what we have left here off being the difference between the three programs and reality. It is a good number so far, but if it's like more than what you had last year.

Thank you very much.

Thank you as a reminder ladies and gentlemen, that's star one to ask the question.

I'm showing no further questions in the queue. I'll turn the call back over to you Carlos.

Thank you over here. So I'd like to twenty-three, please.

With the the key takeaways have a follow-up call. You have a very far in a year, which position is quite well for future as long as you know, we are based on the disruptive Student Center tomorrow, however, tomorrow which emphasizes flexibility to the flexibility on the affordability with a dead before the ship belonging and and holding on the support for a tutor. So this is proving to be efficient and convenient way to go over 10,000. This goes with you during that appointment and we remain focused on the long-term shareholder value creation by keep expanding top-line Chamberlain in in Martinsville Force our equipment as I mentioned before and you believe that we can further build on the momentum to keep expanding foam.

During the hubs which is a important way to do to go with the number.

Okay. Oh that's together with an extension of that I mentioned to you and we hope to announce to you soon. So we are very excited about the temperature and we believe you have the right person for October. So with that thank you very much for the interest about our company for Thank You song ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect dead dead dead.

Jeff