Q2 2021 Afya Ltd Earnings Call
Some measures on this call.
Deny Perez financial measures are not intended to be considered in insulation or as a substitute of the results prepared in accordance to ifr.
We have provided a reconciliation of these non <unk> measures to the most directly.
Terrible and it's already financial measures English presentation.
Let me now turn the call over to the English I feel starting with slide three.
Thank you Hannah and thanks, everyone for joining us today.
I'm pleased to report another great quarter for <unk>.
Today I will present four main topics during the call.
Firstly.
With strong results across financial and operating metrics that allowed us to reach the bulk of the first domestic the 'twenty one guidance.
Second our.
Our successful business strategy of acquired and integrated medical schools.
Commercial platform constructed to.
To create a unique ecosystem for physicians in Brazil.
Third our deliveries and exciting opportunity ahead of the digital business.
For a greater accomplishment on the ESG side.
Moving to slide number four.
Starting with our top.
Top line growth adjusted net revenue increased 39% year over year, reaching 382 million.
Adjusted EBITDA increased 36% yogurt.
161 meter has return on adjusted EBITDA margin of 42%.
You also.
Also reported a cash position of $1.4 billion.
Reflecting the 822 million reais transactions from Softbank and by our strong cash generation.
Cash conversion reached 104% 21 percentage points higher than last year due.
The reduction in trade receivables that was was mainly affected by the end of the Grace period that was given to some students during the renewal process in 2020, the mirror of the pandemic.
And second the approval of our collection process.
Moving to the operational highlights our underground.
Undergrad med students reached $13.4000 represents a 47% growth compared to the same period last year.
The average Med school tickets also increased more than 5% leverage on organic growth.
On the digital business, our ecosystem reached 232.
<unk> monthly active users. This represents almost 40% of the Brazilian market proposition and our clinical decision profit pillar presented a strong growth is the end of the Covid Fannie added 18000 users in the period.
Now moving on the next page, let's discuss our business strategy.
M&A is a main growth driver in our strategy and on the left side of the page of like to discuss our success integration.
The acquisitions made in 2018 for COVID-19, we have a great track record on margin expansion.
The five acquisitions made in the spirit presented an average margin growth of 16.
Percentage points in just two years, reflecting our senior distraction in the integration process.
With the two acquisitions made in 2020, when you hit accordingly, So Lucas we already saw significant margin expansion comparing the full years 2020. The first semester of 2021 on average those are positions.
Recently presented and 11 percentage points growth in adjusted EBITDA margin.
On the face of this presentation on slide number 18, you can check the module space of each of position separately.
We are also excited to expand our offering the undergrad business with the closing of acquisition.
Of quantitative market the sponsor and when you're going to hear in August 2021.
Let me go here is our largest acquisition and a more than 300 seats to our operation and represents our answer from a religion at <unk> with the best quality private University in the states. This.
This acquisition combined contributed 468.
<unk> medical seats to us here.
2600 <unk>.
This translates into 19000 students at maturity represents a CAGR of 19, 3% from 2022, 2026, and we still have great opportunity side or a pipeline of.
For our completions for tile and we plan to acquire at least 200 seats per year starting in 2022.
Moving to slide number six to the digital business.
As discussed on us as the vessels and yesterday, we have many growth avenues to pursue in the digital business.
First one is to keep adding new products.
Some services to fulfill the <unk> of our business.
We have already robust and market leading product in the tree of $6.
Mid cell or a residency prep course completed the quarters in technology for medical applications pillar supported by bed Bath portal and medical hardware solutions.
Lifeboat are a market leader clinical decision software integrated with Medafor completed our second pillar.
Again at the largest clinic management solution integrated with Mirth Tonight and shops also completed a practice management tool and electronic medical record spieler.
The last.
Lastly, pillars telemedicine digital prescription doctor patient relationship, we still don't have an anchor solution, but you can anticipate that we expect will have great deals on the second semester.
Our strategy here is to develop or acquire a market leading solution to fulfill the spills and create a unique digital offering to serve physician through all.
Their careers, a modest 60 months.
To accomplish this goal we are already scaling standalone digital products through coordinated commercial efforts.
Perfect consolidated our customer database into a single data Lake.
It allows us the first mvp's from the integration of mid cell.
That math in my clinic.
Senses MVP solution with the pharmaceutical industry.
And initiated after digital brand awareness strategy.
Moving to my last slide of this presentation I will discuss our amendment accomplishment in the ESG strategy.
Early.
This year, we released our annual sustainability report incorporating the global reporting initiative.
I missed that knowledge.
The structural element as determined by the international integrated reporting coffee or IRC.
<unk> accomplished transparency to the way in which we allocate capital.
To generate value over the long term.
I invite you all to download our sustainability report in our IR website to check more disease.
All for the semester, we create a new designation for the compensation Committee, which was renamed compensation and ESG for meeting.
And now has the responsibility to report and discuss ESG metrics and keep up with all the new projects involve environmental social and governance issues.
Lastly, I am also very proud to announce that we are in one of the first Brazilian company publicly committed to gender equality.
Well go to any one we signed the UN global compact and last week, we assumed a voluntary commitment to have at least 50% of human in our management positions by 2030.
We were also certificated by women awards and initiatives that ensures that we have.
At least two Wheeler and our board of directors.
<unk> already magnificently occupied by Vanessa law and shoved them all.
Now I will turn the call over to Luis our.
Our CFO to discuss the financial metrics. Thank you.
Thank you and good.
<unk> been in everyone.
Moving to slide nine to discuss the financial highlights of the second quarter 2021.
I am pleased to present strong results once more.
<unk> 2019, we saw a strong trends in our key metrics.
Adjusted net.
Revenue for the quarter was 39% year over year to 382 million reais, reflecting acquisitions and organic growth. Excluding the acquisition adjusted net revenue grew 9% year over year, reaching 299 meter reais.
The increase was primarily driving by the maturation of medical school seats and an increase in the average ticket.
Adjusted EBITDA for the quarter was up 36% year over year to 161 meter them react.
Adjusted EBITDA margin.
Washington, REIT to live below the reported margin of last year, mainly due to.
One <unk>.
The consolidations of urban edge I clinic, merch phone midst Tonight Medical hospital Big pharma crushed when you're 50, Mark and see if you're going to beat that persistent lower margins then.
The integrated companies.
Ooh.
Our performance from the continuing education segments of week I will give more color in the next slides.
Great.
Partially offset by recently acquisitions that were consolidated with higher EBITDA margin.
Hey, Bill.
Okay.
Adjusted net income for the quarter was 65 million Reais, a decrease of 26% over the same periods of the prior year mailing effect bite.
A $1.5 billion reais increase in year over year growth.
<unk>, excluding the impact of Ifr 16, due to new debt contracts.
Physicians and the Softbank transaction.
Pete the depreciation soft Brazilian reais against U S dollar in the periods that affect our cash position in.
And.
N C.
The FX rate difference between the signing of Softbank transactions and data monetization off the proceeds that we've this point b resulted in a 29 million Reais foreign exchange loss.
Cash flow generation.
U S remains strong in the six month period increased 70% to 343 meet every ice which resulted in a cash conversion ratio of 104% compared to 83% in the same periods of 2020.
Moving to.
Slide 10 for a discussion of key metrics by business unit.
Starting with the undergrad programs.
Operator, matic medical seats increased 35% year over year to 2053 operating fleets.
Medical students were up 47%.
And our rate, reaching the base of 13390 students, reflecting medical seats in operations and acquisitions.
Our average monthly medical tuition fees were up 5% compared to the second quarter, two 2020 ratio.
<unk> eight.
<unk> 8590, <unk> excluding acquisition.
This reflects a combination of new students enrolling we are for higher tuition rates combined with students, graduating with lower tuition rates.
Broken about revenue mix.
<unk>, 80% of our combined it receives fees other rebates from medical schools.
Up from 73% in the same periods of the prior year.
In terms of tuition fees for the first semester, we reached 831 billion reais.
From 556 million Reais and increase of 50% year over year.
On the next page I will present, the continuing education metrics.
We saw a 33% decrease in continuing education net revenues.
This decrease was driven by 27% lower at student base in the first semester of 2021.
One practical programs that are not being offered since the first semester of August two.
2020 due to the pandemic.
Two physicians decision to postpone admissions towards facilitation courses due to the COVID-19 pandemic.
We expect to pick up demand over the next gene take beards that will happen on October.
Moving to slide number 12.
I will discuss the digital service operation metrics.
So the first graph.
In this slide you can see our active students for pillar.
Those are the active payers that generate revenues.
Active paying users reaches.
100.
Address and 48.
Excluding acquisitions mid sell active students alone grew 64% year over year, reaching 19000 students, meaning due to our successful marketing campaign in the end of 2020.
Clinical measurements stools reported 14, thousands payors and clinical decision software base has more than 115000 base.
These results reflected a strong increase of 89% in diesel <unk> net revenues.
The last graph on the page <unk>. The monthly active users reached 233000 students and physicians all over Brazil, 32% higher than 2020.
This number represents more than 30% of all medical.
Students and physicians in Brazil.
Moving to the next page I will discuss in more details the net revenue and EBITDA growth.
We saw a 44% increase in adjusted net revenue year over year over year. After week, 77% are coming from the consolidation.
Comcast acquired companies.
On the right side of the page.
Adjusted EBITDA growth for the first semester of 2021.
We're in this spirit adjusted EBITDA increased 42% year over year to 368 million Reais wafer margin.
Holiday is 47%.
These increased 81% is coming from acquisitions and the other 19 is organic.
Moving next to discuss cash and net debt position.
Cash and cash equivalents in the end of the second quarter were one.
One 4 billion Reais representing.
36% when compared to December 2020 position, mainly due to the closing of the Softbank transaction totaling 822 liter react.
At quarter end net debt totally 580.
3 million Reais compared with a net debt of 167 million reais in the air.
End of 2020, this increase was mainly due to M&A transaction.
We will see the ring only deposition of when you're going to hear that was closed in August this year our performance.
<unk>.
Which reached almost $1.3 billion reais.
Moving to my last slide I will discuss our guidance for 2021.
For the first half of 2021 were surpassed the middle point of the adjusted net revenue guidance by 2%.
With.
<unk> EBITDA margin of 47% right in the middle range of the guidance.
Im also glad to issue a new guidance for the second semester of 2021.
This guidance will not include any acquisitions that may be concluded after.
The issuance of this guidance.
2021, adjusted net revenue between $1 billion 700, <unk> me to react and a bead on 760 <unk>.
44% growth year over year is considered the mid range of the guidance.
Adjusted EBITDA margin of 42% and 44%.
This presentation includes the synergies that will be extracted.
From acquisitions and the negative impact caused by the consolidations of when if you want to keep it going to be when you're going to have in a digital company.
That will be not integrated this year and come with a lower EBITDA margin.
This ends our prepared remarks I will now open the conference for our Q&A session. Thank you.
Yes.
If you want to ask a question. Please raise your hawk.
Our first question from Mark Palmer from Jpmorgan.
Ross Sandler you May talk.
Hi, good afternoon.
Okay.
My first question is regarding the acquisition this.
This quarter.
Sure.
Give us some idea on what's the profitability of this company so that we.
Could get.
But our understanding of how often performed.
The first question.
Second question.
<unk>.
Pharma.
If you could provide a little bit more details on how that's going.
What stage are you in now and what are the lessons learned so far.
Yeah.
Hamas salaries, who is talking.
Talking about 20 feet remark just remember all we just.
One Marc in the consolidation.
We closed our concessions.
The beginning of June.
The pro forma.
These these this business combination is a line where you saw a nice show our expectation that builds all our hour.
Half hour.
Our business plan Oh.
On the acquisition so.
We don't have a major impact because it's just one more consolidation.
When you think the mark on this quarter.
And just adding that Marcello.
When a few bemock together.
When you get out here for the second half.
They operate around 20% to 25% of EBITDA margin, so considering that.
The reason that we are guiding.
The range of the guidance that we released.
Excluding.
These two acquisition and also the digital platforms that we plug in flow operation in the first half.
Our guidance would be around three percentage points of ball Watson, we just released.
Yeah.
Squamous cell.
Yeah.
I felt that this is.
Lulu here and.
And good evening, everyone as well.
To your question in regards to the MVP in the pharma industry.
We've mentioned.
At the IPO data.
Okay.
Working on solutions for the industry, you know testing the beta b.
Projects here.
Therefore actual remain drivers of solutions one is media.
Which is basically what.
These companies they in some way want to.
Two doctors that are in.
In our platform. The other one is a research centre, which we provide actually.
Research.
Our team.
Composed without you know.
The people that work.
On these specific projects.
<unk> for the company to do that these are very specific projects for the industry. Theres also education solutions side and then those are for other means.
Institutions education institutions and this is what we've been doing for the past three to four years and recruiting.
Services. So the MVP is now we have actually a couple of projects on the media and research actually with US some of the pharmaceutical industries here in Brazil. So.
There are small as we said those are mvps and basically at this point, we're initiating in building the BW.
So.
Small projects, but one on the media side, which is basically again.
Exploring the inventory that we have with us.
200.
30000 doctors in the ecosystem and also one company doing research, where we help them on.
So move onto projects here, then and we established a relationship with them in that way. So those are the two that we have now.
Thanks, a lot for all the answers.
Welcome to answer my follow up question I received the following questions can you address where margin.
Thank you Mark.
Can you guys, you can get to and how long.
Yes.
What we see that we can.
These margins.
Two.
Something about 45%.
After.
Jim.
Including rents and and ending with.
Considering the beach.
I F. I F 16, we're talking about 50% margin.
On Wan we.
I have the complete maturation left the medical seats and captured.
The scene issue.
Time framework of that teach something about two years. So we can get these margins up to 250% okay.
Great. Thank you let me answer that question is probably little Tomita Goldman.
Goldman Sachs.
Right.
Okay.
Hello.
Good evening, everyone. So first question on our side would be if you could give us some more color on the perspective, our growth in digital services and continuing education.
Going into the second half of the year.
And our second question would be if you could give us also some more color on receivables dynamics now that the grace periods are overdue payments is over and on whether we should expect more improvement in receivables matrix in the second.
Half of the year. Thank you.
Yeah.
Hi, Peter I forgot your first question here about the growth for the second half.
For the digital business.
Our objective Ah.
Now we are aiming to complete.
Pillars.
The six pillars that we have focusing on telemedicine.
Also doctor and patient relationship.
And we're expecting to have growth on the pillars.
For the.
Clinical decision and also.
On the breath digital content pillars, so we keep seeing the same.
Top line growth.
As you saw on the first half on the second half.
Further these though.
Bu the continuing medical education, we will see the same dynamics.
The second quarter on the third quarter.
And for the fourth quarter, we will resume growth as we all have the enrollment completed.
For this last intake that is not very strong read them. When you compare to the same period last year.
The the.
They can take for the Casino Mexico location started on June and goes to October when the classes of Stockton. So.
The growth on casino Medicare patient resuming.
The same dynamics that we had last year and also a RIN cost operation after the copy the back.
We will see after October.
And Victor Luis I'm, taking your second question.
Regarding the receivables.
Once you all to remember what was our stress issue on the intake off the second half 2020.
At the.
We are where we were at the beginning of the Covid crisis and we have these can take the second half and second half thing take and we decided at that time two to two <unk> provides a great spirit for our students own when the when they.
Sign with negotiations these great spirits.
<unk> had ended on general average easier and just started to receive two to receive this.
Those amounts.
Having said that.
We are very proud of this strategy.
The duty because these that these have proved that a very successful strategy we have the support.
Two hours students when they were most needed.
At that time, and we start receiving these amounts.
Because of that.
<unk> got.
<unk> generates the generation of cash flow in the first half being <unk>.
More than 100%.
What's we're going to see on the second.
Uh huh.
Half of it will be more normalized.
A generation of cash flows.
I don't expect anything above 100%, that's what we have seen the first in the first semester because this effect of this risk spirit, but we could see a very good trend on the collections on the undergrad segment.
Very clear thank you will.
Thank you Lisa So our next question is from Javier.
Morgan Stanley.
Javier.
Now.
Oh can you hear now yes, okay, sorry, I'm currently I was on mute.
Okay. Thank you guys. So I wanted to ask you two questions. So the first one on the digital strategy.
And you mentioned that you have started already that the brand awareness.
This initiative and it seemed that you mentioned that you have thrown a marketing campaign or around that.
Mark I was wondering if you can share with us or leave it.
How how did it work now who did you target in the the campaign, which was local campaign with regional was national was about they all assia students.
And so people who have been ordering your school for news.
New targets or people, who were not really ready with you and if you can give us some measure on the back of the traction of the of the campaign and I'm trying to understand how how successful how difficult. It is to two two to impact those potential.
<unk> targets.
I'm probably also what is the plan in the future you're going to continue or do you want to do something different that will be my first question.
Hey, heavier Giulia here.
So in terms of.
The brand campaign that we mentioned.
That would mean that we are.
Start answering it so we did a campaign actually last year that impacted all the digital services. This year basically on on the test prep business that impacted that number that we showed at almost 20000.
Students on the test prep business.
What we've been doing now in terms of brand awareness for four off yet we're starting now.
The brand campaign for the B to B business, which is a.
A little bit of different we have all of these are brands like White book like I clinic.
<unk> had so all of them they have their own.
Of course their own.
Our position and for BP to be.
We're starting to position our services as off your services. So that's what we're starting out so we're very.
Three.
As soon launching our website with our corporate solutions, including all of those four solutions that I mentioned to you.
And.
The campaigns are they are basically focused in Brazil, so we're not doing anything outside.
And.
You know.
The two main targets of of the campaigns one is basically.
The BDC campaigns, which we what we are doing more now this year that we've seen traction and we've seen a lot of synergies is that you know we're incorporating the offer that we mentioned its commercial efforts.
What's that they've been impacting the growth of the digital services you know with Ty.
Offers that are bundled offers that we've been offering and the campaigns, especially now that we initiate the cycle with net sell for example that starts now.
<unk> cycle for the 2022 campaign, we are going.
To incorporate more of the digital center, especially wide book in all of our DTC campaigns for the test prep. So that's one of the focus and so.
So those are the two maintenance main ideas and are the two main drivers now of the of the brand awareness campaigns.
And Judy the traction of those campaigns is working as expected.
Yeah Yeah.
Yeah, we feel that that's where we see the synergies Javier it is working as expected.
The businesses they've been growing as we expected.
We see.
More of a you.
You know as an example, and a wife book is is being used for.
More than 75% of the students in Brazil last year.
Medical student that graduated last year that they use why book now you know where of course, we were offering.
See the specific target for for myself with test prep. So that's.
The reputation of that business is helping the other one and it is it is growing as expected.
Yeah.
Okay.
So do you see yourself gaining market share in the in those preparatory examinations.
Yes, Sir yes, we see.
We see that we've been growing ahead of the market yes. It does thank you Julia.
And I have another question for me and I know that the intake is not that relevant for you guys.
Obviously on the on the medical medical.
And students now but on the other students if you could.
You ask how since I'm moving now even though we are running the third quarter and taken out.
So have you Javier Garrido here.
Just adding on the first question.
The depth.
We sense.
Of cross selling is huge and the penetration.
On the prep course.
<unk> increased a lot our market share.
Above them that the growth was above the market and reach almost 50% of ROE on the number of <unk>.
Sue them, taking our prep course, so it's a very strong and the showing the opportunities on cross Sally using all of them up active users that we have on our ecosystem and the second question about the intake.
On other programs here, we have seen on grill resuming.
Everywhere.
So all the goals that we saw and established a <unk> date on other health problems and also.
On the other programs.
We are reaching the goals.
Enrolling much ahead than we expected so but this is not something <unk>.
Important on our results but.
You will see a very good intake and also renewal for the second half as on campus operation.
As a resume me and <unk>.
Becoming normal.
We are passing through the second half.
Thank you Regina you. Thank you very much.
Okay.
Our next question is from artist to fan if at all from credit Suisse.
They pay their illegal.
Hello can you hear me now.
Yes, now we can.
Thank you. Thank you. Thank you for the time for the questions so getting to the.
So the guidance, we see we understand that okay, there will be.
And impact of these integrations of those new acquisitions, the medical medical schools acquisitions, because they have.
Lower EBITDA margin, but vendors and also their dairies the digital businesses.
There too or are being simultaneously incorporated into the results.
And therefore.
It also is contributing to two degrees.
Decrease in EBITDA margin. So my question would be.
How how much lower is the margin in this in this digital services versus the.
The medical education operation and if if you foresee that the scale gains going forward.
We will help and how much it could help.
In leveraging this does margin.
And my second question I will.
And get back to a point that was raised by one of our colleagues.
He does the MVP for pharma you mention we search or are you specifically referring to two.
To see our also our clinical research itself and you're helping.
The farming some way so.
Thank you.
Hi, Cynthia that it's Luis speaking income for a question Oh get your first one.
That the diesel margins.
First of all it's very important to highlight that our our our our goal.
These are the short to medium term is not a English segment is not about profitability, but east to AR to increase the penetration.
All of our stuff with a with the <unk>.
All the markets.
<unk>.
The physicians and medical students.
Having said that are we once to two.
We increase this penetration.
And in the short term, it's easier to mention before we have to pull few wawa offered digital offer a full feeling the pillars of that.
<unk> seen.
<unk> engagement.
Inpatients engagement.
What we can what.
We have in our in our actual digital service we have a.
Difference Ah profiles of a profitability of them who have a more.
Our visa ASP by damage and I cleaned that generates a bummer.
The margin and we have a business as a clinic that's east burning.
And margins that's operating in the in the net negative side.
So they are different.
Stage of Maturations with themed even that existing visa.
And going forward.
Two two to see how these markets are how these margins will will behave.
On a more long term watch we see that are the diesel business as a whole with the six.
Beautiful field will have a margin stack are below that we have on the underground business.
And that's very very very important to <unk> to share this view.
<unk> R and we gain as we gain scale of course.
Because we don't have bricks and mortar more fix but.
The diesel business itself, we're going to have a margin that's below the undergrad pieces.
So have a kind of mix of margins.
In our diesel business as of today, but a.
What's our our goal in the dish meet these trough in the medium term is to grow the business to increase penetration and gain scale for for having the physicians and the students using our digital solutions.
Just to make it clear.
Uh huh.
When did you get that that somehow we could have two percentage points above the EBITDA margin guidance are we already included the <unk> a company that we acquired in the first semester okay.
And you'll get your help on the second question sure sure Hey, Mauricio Thanks.
Thanks for the question you had the research project.
That we have in place now and so.
It's related to product.
So it's a dermatology.
It's related to dermatology you know, it's a company that produces.
You know.
Drug spend.
And.
Related to that specific specialty and.
They want to understand better.
What doctors do you think about that product so it's very.
As I mentioned in the initial stages of this but we can.
This is one whenever we want to start small.
Trying to connect.
Basically you know the company had they have they do have the need of a understanding battery.
How these products that they launch they are.
Being offered by the physician and how he sees.
If the patient is isn't it well so it's a it's basically talking through the.
The audience and also you know.
Creating this relationship with us.
Mhm noisy so it's much more towards.
Our market research.
It's also rather than clinical research right, yeah, Yeah, exactly I don't know, we didn't get to that point and I would say it's a.
Again, you know the industry.
Sometimes they need a quick response from activities that they've been doing so they see the potential with us here because we can.
With the relationships that we have with these doctors.
We actually we present.
Present them.
Research.
As Austria.
And then you know.
We see that the since.
Since we have the relationship already.
The benefit we also mentioned that.
The.
Findings from those projects that.
We are going to share.
When and where it is possible or no. So the response rate is pretty deep.
Decent on those projects or the industry, they see a lot of value on this.
Okay No that's.
That's very clear thank you.
Yes.
As a reminder, if you want to ask a question Jay.
Laser huh.
Our next question its founding tomato from UBS.
As you May know.
Okay.
Hey, guys. Good afternoon, everyone and thanks for taking our questions.
So it's too far out on our own.
So number one.
Considering the steep increase in inflation in Brazil, and the highest starting part starting point courtyards patients do you guys plan to change anything when it comes to pricing strategy strategy, especially for new students.
I guess, what I'm trying to understand here is that as you guys foresee any kind of issues when it comes to the new students are.
Our our evasion.
As a result of high inflation and the second a point here is that we saw E.
<unk>, 5% quarter over quarter increase in paying users for our iconic and white book.
So you guys called bad debts with your expectations and.
Give us some idea on the freemium conversion when it compares to the trends are prior to the acquisition that'll be it from us.
Have any says look question on inflation.
We are expecting to pass at least inflation.
For the renewal.
For 2022 first semester.
Another thing we aimed betting all of this digital.
The services on our practical and labs to our students and also including the White box solutions for always.
Always students on the fixed under six year, what adds a lot of value for the students that Amy.
The clinical path and also looking for the residency opportunities. After concluded that program. So we have.
<unk>.
To change our price.
Above inflation embedding all of this differential this new from Shanghai.
Into our learning process. So that's what we expect in terms of the on their web medical school.
Giulio can you.
<unk>.
Luis can we get the second question.
So let me.
Yeah.
When he says on the.
The freemium business.
<unk>.
Only white book that has a freemium.
Business right so.
Since our since the product has a very decent penetration today.
So we've been converting more of that.
The free to paid.
Student students end users.
Recently, so theres a lot of focus on that.
Rather than acquiring more.
Users in the market so.
And that that that conversion.
And is growing.
The business is pretty steady growing very well.
I clinically and where we have a free trial.
That conversion from the free trial to paid user that also has been working when we cross sell a lot.
With the with.
Doctors that they are in the same.
Actually no.
Our profile so.
I clinics more for those doctors, where they are ahead into your career already more established so we've been doing.
With.
<unk> for example.
And in both ways, it's been working quite well.
Those items are we.
Actually we are using now.
Cleaning.
In our actually our own.
Facilities, where we have.
The graduate business.
We have been promoting with is with the stock when we see.
A lot of potential and that's been that typical conversion that works better.
So.
We see <unk>.
<unk>, but business are growing steadily and in a way that we were expecting as I mentioned before.
Hi, Vinnie says if I could add something here on what Judy said.
We will keep going we have on the on.
The White book, we have.
A kind of an attitude.
It's very it's very strong.
The.
The sales of white milk on the fourth quarter.
Because of Black Friday.
Have these traditions.
Traditions on doing market campaigns, very strong marketing campaigns on the fourth quarter related to Black Friday.
The last two.
Two or three years.
But having said that we skew.
Have these expectations will grow more than 30% distributions.
Going forwards.
We see opportunity to increase penetration of this product.
On the student.
Students and the physicians.
Great. Thanks, Thanks, a lot guys.
Pretty good.
Yes.
Our next question is Phil yes.
<unk> found that BTG backdrop.
You May go.
Good evening, everyone can you hear me.
Yes.
Alright.
I just have one question on my side on the organic figures.
Looking at EBITDA ex acquisitions, we see that he has grown only 3% year over year.
In the second quarter.
While margins decreased 240 bps year over year, so I understand that when we see the consolidated results.
It makes sense.
To us that acquisitions meet boost these margin pressure, but could you.
And more color on the specific organic junior and why it has grown so little in.
What is behind this margin pressure in this quarter.
What we should expect from now on.
That's it on my side.
Okay.
Hi.
Give us Louie speaking.
Mitra.
Tractor on EBITDA margins on this quarter. It was the continuing medical education I would have this pushback on revenue that's affected our results as a whole that's why we have these push backs the margins.
Yes.
Excluding acquisitions. This is the major projects that pushed back the consolidated figures from our our deep though on this quarter.
If I may add a fine Tien what we see frequently education is what you just said it didn't answer because what's renewing takes.
Well, let me start on October new classes in October and we have I would say the word personality into second quarter.
We have graduated students from the first to second quarter, and we couldn't finish and start a new Clos in the second butter.
So if we could say.
Sorry, it was the same level that the war.
The first quarter of 2021 in terms of net revenue you wouldn't see this level of creating margin.
So it was something that it should read it the pandemic, we are really hopeful that in the second semester.
Starting in October we will initiate this new classes, we will start a new new students in the new campuses that we opened.
And that you guys don't see any facts like that and expectations figures.
Alright perfect.
Hi, this is regina with adding an important.
<unk> points here, if you take a look on our consolidated financial statement, we opened our base of different business units and we can check how we are leveraging our gross margin on undergrad business.
In the same period last year over the same period last year and we can check.
Xena indication is hurting.
Overall margin.
Because of the Covid the condemn it back where we could we could not the role of distributors in the second half and also in the first half of this year. So that was the impact on top line and also the local basal student base.
The contingent.
Pretty clear thank you okay.
So.
We don't have any other questions.
Want to make is available if you guys need to.
As can anything else or any point of Gal de Investor Relations area is available and I would like.
Thank you all for participating Tonight.
Good evening.
Yeah.
Yes.