Q3 2021 Vitru Ltd Earnings Call

[music].

Good evening, ladies and gentlemen, and welcome to the Vitreous third quarter 2021 earnings conference call. All participants are in a listen only mode. Now later on we will conduct a question and answer session and instructions will follow at that time.

This call is being recorded and will be available on vitreous IR website now I would like to introduce your host for today's conference call Mr. Carlos Brito.

He was CFO you may begin.

Yeah.

Thank you Peter.

Good evening, everyone and thanks for joining us it's a real pleasure to be here with you all before the release of our third quarter 'twenty one numbers.

The mobile for the first nine months of.

As you.

I hope all of you are doing well and healthy and here with me I have the CEO of it through my record harvest the head of our purchasing department as well.

All from our IR team.

A slide presentation will be part of todays webcast, which is available and know exactly what it's like.

Thus the true dot com.

B R.

So I Trust you all have different patient point of view, but as usual before we begin.

I'd like to make more depth attitude in phase two and three other presentation Safe Harbor is in effect for this call.

So now I invite you to go to the page five the first page of our presentation.

The highlights for the quarter.

So the first part I think it's not new.

The announcement of our agreement with <unk>.

Part of this combination with them that went off three months ago, but we are never tired of reinforcing the beauty of this deal.

They are the leading institution in Brazil in terms of quality indicators for decent learning in there.

The building segment.

Besides having a sizable and growing business of a mezzanine and other health related courses.

And later on I'm going to go back to this information I'm going to show you more about the print because of it.

We also had this quarter.

It affected.

And in the past we launch new courses.

The course Murphy was starting to be offered in August of this year.

And you.

A couple of months two months, Oh that became the number one course and our current E taking cycle more portfolio.

On the West Coast.

A huge success.

Reinforces our our speech and our belief that the diesel it gives them a second metric used to going to increase even further throughout the country.

We have reached almost a 360000.

Got it.

27% increase you take.

And the current thinking cycle compared to the same cycle I think period of last year.

A relevant growth in the southeastern region.

As you know our new growth frontier.

The net revenue.

Do you still get them on the Grad segment.

And greeted by around 20%.

This quarter.

The consolidated net revenue growth of around 17%.

The EBITDA.

And increase it.

26% in the first nine months of this year.

Always better to show.

The EBITDA number on a year to date basis because of seasonality we had in our business. So the nine months EBITDA growth is 26% with a J.

EBITDA margin of 29% growing as well at one point compared to the same period of last year.

And finally last but not least the cash flow from operation.

130 million Reais in nine months.

Yeah, just a cash flow conversion from operations off of minus 2%. So we not only grew our revenues and the D. But also a.

A lot of cash from our operations.

So now before we.

Move forward to show, what our what the war.

The main figures of this quarter let.

Let me show to you on page six.

A brief reminder, a refresh of what we have been delivering over the last 12 months.

We have now the first we had the first anniversary of our IPO in September of <unk>.

How often easier.

At that time, one year ago, when we were going through the IPO discussions.

With you guys.

We said that we would grow in for growth avenues.

Three of which are organic inorganic and we have been delivering what we promised.

Laughing.

The first one was the ramp up of a current book, we said that it was going to be.

Organic growth driver.

Revenue.

It's been a.

We have now more than two thirds of all students.

A new pizza hut. They hope that were opened in the last four years.

One year ago. This number was 10, 9% did they will have more than 90% of the hubs.

In ramp up phase still maturing overtime.

We increased our.

Also by around 25%.

In distress amongst we opened more than 240 hubs all of which are harder to hubs in the southeast.

Oh, which has 58 from Poland.

So we are growing in the southeast as we announced before.

And also we expanded our course offerings. So as I said first of all.

A new a big course was nursing nursing already again the number one course currently taking cycle. It is a premium in the quarter with a ticket.

Higher than our normal ticket.

And.

Hopefully we will have.

Offerings also in La and psychology.

And for example in <unk>, we have already the revision.

They're great valuation, Florida fundamental application with a great five the highest grade bustle and deposit Mr offer 22.

All of them are fixed for you.

And maybe give them nursing and psychology is 11000 seats per year.

So this will be important growth avenues going forward as well and an important lever to sustained tickets as well.

And finally Inorganically speaking.

We announced that it had to deal with the muck, which which is the best we could.

Ever.

Peter.

So we always consider them to be the reference benchmark company in Brazil, when we speak about quality indicators.

And you said location of the country.

With this.

Transactional one thing is it allows it to be completely closed by sports.

Sports Authority Baidu, we will become the number two the second Laurence.

In Brazil are.

With the best indicators.

So now on page seven some more.

Formation about the funding for them.

Before I will come back to it.

Sure.

So this combination will create disruptive player I reference player when you think about.

High growth business in the higher education segment in Brazil.

Uh huh.

Had a fight.

Close to ours, so Germany easier Fortunately they had.

Because that's an 800 hubs today they have about 900 hubs.

Such as.

So combined we will have their own.

Today 1800.

100 hubs more than 700000 students combined with it.

They had.

Last year.

They had the last four years, a CAGR of 49%.

And last year and net revenue of 600, and then meet them with a 40% adjusted EBITDA margin.

So it is.

Higher than our margin was around 30%.

The main driver for that.

For that is the business of medicine.

Here on the bottom left of the slide you can see some information about their medical business they are to be met.

Medical course.

Brazil, among our product execution.

Which is a high demand Corp. As you all know 11 to one ratio of applicants.

The average ticket of more than 9000 per.

Per month.

So I'm told that they are here on the right.

I show some quantity indicators are thrown picking them up.

They have.

IBD of $3 75, which is 43% above the average of the mall.

And even above our our IGD is three three times or less.

Michael which is the highest IGD in decent alerting among all the players in Brazil.

We have when you have so it has the highest IDB E learning among all.

I'll leave it to players in Brazil, and so tomorrow.

It has even higher duration, but secondly, this contribution value added.

You bring to the students.

When you compare and then great with the inadequate.

And they are as ranked by the Ministry application.

When we see the IGT.

Of course with a rig they are.

Among the 2% that educational institutions in Brazil.

You referenced player.

And together, we're going to keep to be I believe a reference player.

On page eight.

Yeah.

We have more information about the.

The profile of students and.

Why do we believe that we're going to keep growing.

And in the hand once the deal either cruise so here in black.

You'll see that the student profile is slightly different that's why we intend to maintain to keep both rent.

Because they test different markets.

The students that they usually go to Julien.

It has a lower income.

And someone who appreciates.

The local tutor the human touch and meet the local presence of a person with COVID-19, the grinches, which provide the handholding for local support on a tutor.

It's very important for the project.

Uh huh.

Onto the water.

On the other hand, it is they have a higher average you can see that slightly higher.

And also a more tech oriented in.

Students because they are they have a lot of much more.

<unk> oriented.

The experience.

And then it disappears.

It is a different a predict to attract different people.

We have a huge potential for commercial synergies today, you would have more than 600 cities today are for you in June.

Has either a hub of own yourself, but not for the mark or vice versa.

So if you had the huge patient true too quickly.

The boy and all for both brands throughout the country and on the right.

Part of the slide.

The whole bunch of them growing at around 19% in the last year. These are.

Thanks.

Permission coming from the centers made by the neck.

And together.

The what.

Gained eight point in market share between 16 and 1919 as a reminder, at the left available latest available information we have but we went from 10.5 combined with them to $18 five.

Index on May 19.

And why was that on page nine.

Because we have increasingly competitive advantages.

On page nine we compare and models that we have in Brazil.

Do you foresee with alerting when you have four player will focus on the hybrid model.

A local tutor so super.

Centered hybrid model with a weekly meeting its electric by the local through the month will provide the handholding for months.

So being a role model for the glass and you have this.

Central belonging with our model.

Our competitive advantage it is.

The model, which is capex to create but we know how to play it.

According to the model.

On their hand.

I'll offer a 100% aligned product, but they are as I mentioned before they are they're referenced there in terms of quantity that they have.

Much more tech based methodology.

Might have as well as we have so that's why they are the reference Leo Wednesday can both get to learn about it.

Both companies.

This critical competitive advantages are growing faster than the competition.

Yeah.

I have here some.

Our public information.

<unk> confirmed its reputation for ethical form our hour I'll say competitive elements here.

Here on the left.

Did it come from information coming from the Apple store and play for you.

If you go and I'll, let you do it.

At the Apple store for example, you will see that the.

Oh, okay.

Has the highest ranking highest rate among all players in Brazil.

Fortunately auto flight.

Secondly, the highest rent it.

With four countries either five little player.

But you took 1718.

This is the perfect information to show to reinforce our tech oriented approach.

Our culture.

Our mindset much more.

Oriented much more concerning and much more.

The new frame a much better technological experience for our customer cartoon on the right.

Columbia key.

Also public information.

If you go now so we're trying to keep them safe when yourself that youll see that we have is seven six.

Ratings.

Which is.

The highest score among all whereas they didnt disappear.

Period.

We went to the market.

Eight two ranking even higher than ours.

That's in Brazil.

So this is booked information.

Fisher information from them to claim Mckee from.

Google and Apple store, but this is why we are.

Upon which we are leveraging our reputation to build it.

The business to create value for shareholders integral set there isn't competition.

So on page 11.

It's not the best you can get through and when you are selling.

Again, we're offering new premium courses to expand the market.

The proof Covid, so nursing already was 11000 and seek a cohort in three.

Three months.

Which represented 8% of our current thinking cycle.

Our EBITDA type of 138000 students.

11000 in nursing.

Hopefully we will allow.

Allow to offer students law and cyclone both three courses as a reminder represents around one third of the public the private on campus market.

A huge opportunity for a bigger.

Okay.

Which have a hybrid model.

This wasn't a page 11, sorry on page 12.

The growth in our base was led by digital Education segment.

So we grew.

80% year on year it shouldn't be.

And this does grow.

<unk> was also corporates you highlight that.

Yes.

Coming from a very high comparable base. So we grew last year.

Cycle of intake we grew 40%.

And now all of this is Dave.

27%, So that's important group of franchisees.

Year over year, even though the compare.

Beef is higher and $138.

Six new students in the second semester of this year.

Which almost 113 tells us only in the third quarter of this year.

On page 13 and growth was spread throughout Brazil.

So even if you're in our.

Original base or even the reason, we just felt all over the country. We grew 13% year on year again, even knowing that the comparison base.

My nephew.

Yeah.

The southeast 50% here.

On the right depicts our hubs.

And 42, new hubs in the last 12 months.

On page 14, the photos on the southeast.

Our regional review.

We opened there almost 100 Hooper in the last 12 months and the team.

The base by 6%.

We opened recently a lot of new hubs.

I'd say three months.

But we are preparing for the debate.

Adjusted rates, even further the growth there and distribution.

Present.

40% of the total marketing are there.

On page 16.

The maturation of our hub again, the most important.

Organic driver.

For growth, which is a growth with limited execution risk would keep.

Landing our maturation of hubs.

If you see all the new hub that we opened last four years, we are still around 31% of the potential of those ships.

And also important to highlight on the bottom left part of the flight.

The.

The share of.

Newcomers and the share of intake.

And the overarching on base.

I may tolerate a few times in the past.

Now we're showing here the number.

You can see that.

We reached now the FERC tackled easier what we believe to be the peak ratio between intake and orally.

But why isn't why is that.

Important first because.

Yeah.

The slight decrease overtime this ratio as we mature more hubs as more and more hook get fill up and we increase faster.

Pace of seniors compare to the percentage of newcomers we are going to increase margins.

We're going to do to decrease drug cost ratios.

Went to decrease DDA ratios why because as you know newcomers.

Freshmen.

It dilutes margin most of our selling expenses.

That's a trucking even sooner.

Newcomers.

It dropped more than seniors.

Enhanced our PD ratios.

Among a few newcomers.

A newcomer so.

Over the last four years have been crazy deterioration, but now of course our forecast.

And from the first half already off next year.

We're going to slowly, but steadily increase more the productivity of seniors compared to newcomers.

The important driver of margin going forward.

So on page 16.

Fortunately about Martin that's revenue growing at around 20, 25%, 30% in the quarter kind of hypothetically then 90 months.

Sure.

Driven by the patient base.

Before 20% year on year, plus eight 2% increase in ticket.

It is also something that.

<expletive>.

Appreciate beachfront competition, because we offer a different product.

Because we differentiate ourselves from the competition, we have been able.

Two more last month <unk> secret overtime.

So.

There was an increase last year there was a degree decreased in the.

The first half of this year and greet again for more of that we are maintaining our tickets.

And in fact increased 2% year on year on year and you can see the third quarter number and this is confirming the resilience of our model.

Now on page 17.

Something some more financial for the consolidated revenue growing at around 22% on a nine months Europe EBITDA growing.

26% and gross margin growing 31% I'm going to show each of them now in detail.

So page 18.

You can see that the number.

Number four to nine months for example.

Growth of 22%.

Driven by the digital education business.

Regulation and graduation, mainly casino indications.

Both segments are growing quite a lot in the last over.

Over the last year.

What's the case over the last year.

And Al Campbell segment decreasing overtime, 17%.

We sit here on page 19.

19, you have more to say it was about.

The computer application segments and on campus segment.

Thornton continue indication.

Growth was driven by it.

Our.

Our digital graduation.

Of course it would.

Would you expand it a lot easier with more offerings.

Also levered on based on what marketing.

On the other hand on campus segment is declining over time.

In line with our view for the sector.

All of our studies.

The decline in the interest of all communications and a correspondent.

Increase in the interest of these indications.

Which we don't believe we will reverse.

Once the pandemic.

It's over.

We have a little question about it.

Or whether there will be a decline in interest in this obligation once the pandemic hit.

Hopefully next year, we don't believe that.

We do believe that there was a shift.

The mindset document about.

Bayou from home and working from home and also studying from home.

Nobody believes that e-commerce will go down.

But that's the easy mover because people now have experiments.

Step up.

If they experience.

And the mindset.

Interest piece of application has also.

<unk> and <unk>.

Continuing to grow.

You can see that in future.

So margin EBITDA on page 20.

Again, that's booked here on the nine month period.

An increase of 21% to 28% to three 9% op margin one point.

That's what this increase was mostly driven by.

The reduction in the cost of services.

As a percentage of revenue.

I'm going to show in the following slides.

Page 21.

Cost of service.

There was an important increase.

Specialty overtime.

Pour point increase so it's 35% to 31% decrease in cost of service at a percentage of revenue.

This was driven.

Most of these but the overall optimization.

In personnel costs.

So we optimize.

The ratio between a tutor.

I think that it's probably split into perpetuity.

And overall growth of the business as we go for it is.

Use your photos to optimize also the ratio of students support ratio.

Besides the documentation of the flex corporate debt.

That we mentioned at the beginning of this year the.

We created this also with no conflict afflict corpus.

We we will get it.

Non optimized classes.

Yeah.

We're offering in small cities for example.

We have been much more optimized ratio now with students for tutor.

Anthony This is driven driving Israel this expansion in market growth market.

On the right.

You see G&A.

Also an increase efficiency.

Reflecting our focus even thinking it might seem to be in the company.

A digital oriented company.

We have now less than 8% of them that's referenced in G&A.

This is a reflection of how we operate.

As a consequence of how we drive the business.

We're much more obviously, a giant and lead a dent competition.

We react faster to changes in the market and that's why we have been growing Stephanie demko personally as well.

Page 22.

Some expenses and BD eight so net impairment losses on for Tycho.

The what we call here the PD.

Selling expenses increased.

Again, the nine month period, there was an increase of 36%.

These here and a gain of two points from 68 to 88, Mr. Edmonds.

This was caused by first as we've said before the overall throughout this year.

The increase in online media.

So last year, a big chunk of our intake in the first semester of last year was what made before dependent for when our hubs were opened.

And the hubs are an important piece in our selling machine.

Because we have this hybrid model students sometimes.

Sometimes it usually goes to the hub to understand how would be the Hornet script and then there.

You know he or she decides to relate you to enroll so now a closer so we had to.

To invest more in online media.

The secondary to us.

Peak cycle.

Metro and also commercial efforts in <unk>.

Corporate such a learning.

It's still a ramp up the mountain shoot the curve for new quarters, such as nursing.

So that was it.

But you can see the capex.

The customer acquisition cost.

Increased only three 6%.

And a month of the year.

Compared to the first nine months of next year.

P D on the right.

The decrease this quarter.

If you compared to the third quarter of last year.

Nine point.

Despite the mix of students despite the trunk Brennan.

Freshman newcomer to as I said before.

Again, we have reached the peak.

Attrition in the first half with you.

And also despite the current crisis in Brazil, which is the thought to help at all.

The delinquency ratios.

Now on page 23, you just.

Finished net income.

We have.

<unk> increased I wouldn't see the quarterly numbers and a decrease when you see the.

The nine months.

Numbers.

So it did work.

Due to two things.

The first one was a number a couple of non recurring items, we had last.

So the FERC one was in the fourth quarter of last year.

We had we were recognized for the first time before fixed assets.

So this was an amount of around 18 million.

Well the first time, we're going to have two left here.

Which improves our net results net.

<unk> here.

And also in the third quarter of last year, we have as well FX gain related to the IPO. So we raised.

In dollars.

Last year.

And we brought dollars to Brazil's laboratory is at the higher rates. So.

So we gained 13 right.

And that's here.

This too shall we bet represent 31 right.

And together with the increase in expenses.

These expenses due to the increase of the CDI in IPG.

D C. We have a reduction on a yearly basis of our network.

So to finish on page 24.

Cash flow Kessler.

Cash flow here also a bit let's say.

The bike extraordinary events of last year. So first of all again, there's 13 million Reais FX gain.

But for accounting reasons.

The game is counted as part of all of course of our mezzanine book and.

And as well as part of our cash flow from operations.

Don't ask me why but it is the way.

It.

The rules are so we have.

We recognized last year a 13.

<unk>.

FX gain.

As part of our cash flow from operations.

And on top of that we had as well in the third quarter of last year.

Hey, Rick rectification of some prepaid expenses 60 million that we had.

Alright.

And in preparation for our IPO, that's when we gave.

The IPO in September.

Reclassified June transaction cost of the IPO.

So when you see the cash flow from operations.

The increase relative to the cancer patients.

And stick to meet them again well.

Here on the right, we put a table trying to reconcile this number so when the original side when you normalized.

Just cash flow from operation.

You'll see that we have witnessed for example in the third quarter number eight increase of 28%.

Cash flow from operations and 31% increase in cash flow from operations in the nine months, we can see the cash flow from our conversion.

We went from 98% last year to 112.

In the quarter and from 66% to 92%.

Much of this year, so a very important okay.

Well from a cash flow generation perspective.

So that was it.

Also on page 35 with wrap up we are the leading pure play in the store.

The kitchen in Brazil.

Uh huh.

Before the war.

We're going to consolidate.

The retro clear certification in the country.

Delivering what we had permits indigo, which was special markets continue organic growth.

And now with the best in any deal with ever three months, which is the transaction with cinema.

So thank you very much and all electric for questions.

As a reminder to ask a question you will need to press star one on your telephone.

Great question Chris.

Please standby, while we compile the Q&A roster.

Again.

The story that the number one on your telephone.

Your first question is from.

Goldman Sachs. Your line is open.

Hello, Good evening and thanks for taking my questions two questions from our side.

Uh huh.

Update on how you see our strategies for a magical in health care programs.

Following.

Just thinking about combination.

And following the approval of the digital marketing program.

<unk> strategy could include potentially slug of acquisitions on the multiple problems.

Question from our side.

Give us more detail on how you saw the drop off in non renewal rates evolve in the third quarter and on how you expect both metrics to trend going forward. Thank you very much.

Hi, Peter Thanks for your question.

The first one is about <unk>.

It doesn't have the money.

You bet.

Got it.

Wait for the closing of the transaction.

We can.

Roger has.

Have vertical efficiently with them about.

How to deploy this business in the future because it right now as you can imagine we cannot have this type of conversation with them.

What we know now that they have this.

I'd say, a very healthy and growing and high margin business, which as mentioned.

And we did you will not be a player to be medically indication, but they are.

They know quite well how to play. This this segment that's why they are the best.

And that's in school.

In Brazil, among the practices condition.

So do they still open for discussion we're going to have this.

Distributions together with them.

But only after the deal was closed.

On the art and the second question about drop out.

We had a slight increase in drop off this quarter.

When compared to our expected numbers and the reason.

Exactly.

Julian for that effect.

The first one was the they take profile of the first half of it easier.

So because the intake in the first half of this year.

It was much more back ended.

A big part.

Big part of our joined Us in the.

Second quarter of this year instead of the fourth quarter of this year.

And that's why by the way that.

Our dropbox the dropout rate in the second quarter of this year was much better than the dropout rate in the second.

Second quarter of last year.

So because most of them arrived late in the evening.

The peak cycle.

Those guys that drove up instead of dropping out.

Doreen just a message during the second quarter for example.

Some of them.

Now only in the third quarter.

So they take for fiber.

The drop out ratio in the second quarter, but deteriorated pulse rate in the EBITDA.

Third quarter.

First.

Okay.

And the second one was as I mentioned before the ratio between intake and seniors.

Can take in students as a whole so.

And that shows before now.

The presentation. We have reached we believe that we have reached the peak integration between intake and beef.

So we have a lot of new commerce, a lot of students that are joining us for the first time. This first half of this year.

Currently each of US large higher also drop out because I don't know.

Freshman newcomers.

Drop.

More than seniors.

But it can be a pennsylvania going forward.

So going forward with her.

We expect a normalization of this ratio.

First because we expect to have a more normal intake.

Kurt.

Next year.

Yes.

Second one also just important to bear in mind that a bulk of our user experience is built around the breadth.

So because we have today.

We are still not in a full capacity he was excuse me.

Okay.

Once we are allowed to have again.

Live classes in our hubs, we believe we have a bunch of also to improve the retention rate because that would.

It will be fulfilled.

Maybe put off the floor.

Sure.

Thank you.

Once again to ask a question. Please press Star then the number one on your telephone.

Your next question is from movies you stagger it.

With credit Suisse. Your line is open.

Hello, Hello, guys. Thank you for the space.

So two questions.

I have just one question, it's motivated by one of the statements in the release.

That says the cost has improved because the the penetration of the flex courses.

And.

And it calls attention to the point that it's.

<unk> not.

If you consider these as a way going forward exactly two two to let's say optimize costs right. So if you consider this as a way to do so and if the flex scores itself was evil apart from the cost.

To also increase the demand so inquiries the student base for just more that it's specifically thank you.

Okay.

Tyson.

So both fixed horses.

Just as a reminder, I invite you to go to page 31.

Got you.

But just as a reminder, the flex Corp.

It was.

What's top.

After the pandemic the idea of the fifth floor.

Appear to us after the pandemic, because we realized that.

We.

We had the opportunity to optimize them.

The ratio of answer all four new orders for new cars.

And why was that before I mean until let's say until last year.

In fact, we.

We had a group of students and number of student debt.

We're not the.

Optimized in terms of students per tutor because.

Either you know.

Tomorrow, we can see D. In a course that you didn't have enough demand.

So instead of having up to say 40 people for Twitter you had the training program.

And now once a week started to choose to have the.

Weekly meeting in a virtual way.

Condemning.

We had the idea of why not offer instead of offering this.

Flex courses that are not optimized.

Sometimes even not even not with the tutor that is specialized.

It's a life in your own a few because sometimes we didn't have enough uptake Q2 had a tutor for example, that's there.

Peter you are accounting for and talking to them I have a tutor.

Teaching people or different corporate.

Not ideal.

The idea of a fixed cost.

Once you optimize it so both classes that were not optimized with a tutor for hemp with whatnot somewhat specialized in your view.

Instead.

Offering.

Ah.

Optic ratio why not offering in our flex Corp, with a tutor that was giving a class 240 people but online.

But it's still a online class with a light led from someone from your region.

Instead of being front, you'll see plenty of reason for example.

It was not sufficient that we made in the first quarter of this year.

Which has two effects the FERC immediate.

What.

Improvements in efficiency, which which which.

It's here to stay so the fact that we re organized dose optimized classes around some flex courses.

Is it simply that it's here to stay so.

It's going to change after the pandemic. So once the pandemic is over.

The normal when you have still.

Plus we will return to two weekly live media hub, but the flex floor will continue to be provided.

In virtual meetings, but with a tutor funds a reason.

That was the first immediate consequence.

Our efficiency.

Through good optimization in this ratio between students and sort of the second.

Opex Corp, and if its more we don't there is a possibility to answer each of the smaller cities.

The city.

It did not it did not have the scale for a full fledged normal when you have several a few hub.

But you can have smaller hook basically for used vehicles. They ought to have your yard must make them for them.

So it is a possibility that you choose.

To accelerate penetration.

Well in Brazil.

Smaller studios.

So that was the cost cut off that horse fourth one immediate consequences in terms of.

Of course it.

And.

Of course, our corporate for it and that was it.

Without any impact.

The impact in our satisfaction because before that you had a tutor whatnot phone yard.

Area for example.

So if you are studying accounting you could have someone that was.

Someone from frequent.

For example.

Providing our glasses to people that didn't work.

From from behind that decision.

Now with the next quarter you have someone with your phone you a few of them. So it is somewhat.

Have made researches and certainly not all of that should see whether the student.

Is happier with the Flex force and Dr. Hedrick I would of course.

But what he is unfortunate to increase efficiency to penetrate further well, Brazil and to improve the overall user experience.

I see so so.

So.

It was something that was designed for different dynamics with but part of it will continue right part of it will continue and this is allowing you to address the cities that are let's.

Let's say subscale right for the tutor model right. So it's a both a cost and revenue combination defenders is correctly.

Exactly.

Cost and revenue combination so after the pandemic.

The the normal stuff.

The product.

It's a hybrid center.

Right.

In a in a hub we will.

They're not gonna be livelihood so.

Physical counteracting the hub.

Without any let's say any.

In fact, it turned on.

Of course, because now we already have the same tourists aligned now.

They would be again meeting students basically the thing will be will be with our fifth core. So today they are.

First of all immediately next year continuously.

Continues to be for communities, we just seem to her.

Is there a is there a risk that the cost increases when you get back to the physical one.

Colorado the tutoring motive.

No.

Not in our case, though.

In additional locations.

<unk> segment.

You won't see the diesel because today, we don't have specific temporary savings when you think about tutor.

We already have today the tourists that are meeting.

He's a horsemen it.

The online instead of a.

Physically, but if the ratio would have seen what we will have next year, but it has a minor effect in our own campus segment.

And if anybody else wants.

Clepsydra return there would be a spec that increasing cost out there, but in our case because of the U S.

A smaller piece of our overall results.

It won't be a major amount.

No very clear particular quarters. Thank you.

Thank you.

Once again to ask a question. Please press the Star then the number one on your telephone.

Your next question is from Chris.

BBVA Your line is open.

Good evening, everyone. Thanks for taking our questions. So I have two questions from my side.

As with our average ticket.

He gets increased 2%.

Education Undergrad segment could you. Please comment on how the breakdown was for freshmen and veterans.

And then the second question would be are there.

EBITDA increased in the nine month period due to the change in the mix of students could you. Please comment on how that should evolve going forward. Thank you.

Yeah.

Okay.

I had to look.

And your first question first.

So we've got a ticket we had this 2% increase in the overall.

Overall.

Tickets.

When you see the the intake tickets I think the pieces that we are now.

We are getting with newcomers did it more or less in line with what we had last year.

So so on average the same number that we had last year.

When we see the.

The ethics that comparison.

When you're nursing for example, and then at least do you get the greatest so when you see the overall intake.

In the current cycle, we had a slight increase in ticket when you compare to the left.

And that was driven by new courses, which we.

We expect in the future.

So in the future we expect to increase over time, the percentage of premium courses such as nursing again.

<unk>.

Uh huh.

Only 11000 students.

Enrolled in nursing.

And with you today, 80% of the intake, but when you see that we had 300000 students used application.

It has nothing at 3%.

4%.

So.

It is natural that they put a page of premium courses.

Such as nursing and.

And in the future hopefully law and cycles for example, and others that we are all for today.

Perfect.

Okay nutrition by medicine, they're starting to be offered more retreat those are going to be important drivers overtime to sustain the tickets.

Overtime.

I'm sorry, what was your second question I didn't get it.

So the second question is regarding <unk>.

The increase was due to that.

Change in mix of cheating could you. Please comment on how this should evolve going forward.

An increase in EBITDA level.

Okay great.

Yeah the PPA.

Is impacted by a number of things centrally.

Uh huh.

Certainly change.

Hopefully that changes next year.

Some went up so the first thing that's P D.

It's a mix of the flex off a mix of students.

So again, because we had in the first.

Higher pulp easier when we see the overall intake we had in the first it takes back up this year and you compare it to two.

The overall pace with having the FERC type of easier.

It reached its peak integration. So we had we had in the first half.

How you didn't ever present age of newcomers in our booth.

So that's all.

They both are newcomers D.

They have a higher dropout rate enhanced higher PD.

They are contributing to higher PD.

On a constant debate the biggest overtime as well.

We mature dose.

As we fill up the hubs.

As we increase.

Further and faster the personal page of senior compare to choose two newcomers.

The average the weighted average PPA with vantage should go down.

That's the first thing.

The second.

Think about that about a P. D is the fact that we are still not in our user experience mode.

Which is the fact that we have the hubs closed.

So part of the user experience is the fact that you meet your colleagues.

Uh huh.

And so the fact that we have a.

I have closed and enhancing we are still not in full potential to exploit our model into benefits incidents with our full use experience.

It's not helping at the P. D. So hopefully next year once were allowed to open again.

We show a have a decrease in P D because the overall engagement.

Tend to increase because its a sectional level and overall engagement with gains increase.

And this has a high correlation with dropout enhance B G.

And the third reason and that's a I.

I mean, we are all.

Let's see here it has occurred because I'm, Craig which does not help at all about the delinquency rate hopefully.

Hopefully it will improve next year.

But what do you see throughout Europe.

And that's.

It was a clear impact of delinquency and driven by the current crisis.

Very clear Carlos Thank you.

Thank you Luca.

Okay.

No questions at this time I would like to turn the call back to Carlos.

Thank you Brendan I want you to read now a couple of questions that came from.

First one from for the liver from BTG.

Hello, everyone. Just two quick questions here future posted.

Average ticketing digital application undergrad cordless this quarter should we expect this trend to continue over the next year, that's where the first question that we just.

Just answered.

We expect to see a positive contribution of premium horses.

So so we expect to see.

Say a stable tickets have been living in the last years second question from Pedro was the new policy should continue to provide improvements as seen this quarter. What you would expect F&I D. O P. D level, when we relate to and that's why they didn't succeed.

For the quarter.

And I mean, the phase IV.

Ideal.

That is a complicated werner.

What we see that 60%, it's not a view that that's clear because we're not in a ideal context.

What we see going forward.

We shouldnt expect improvement in P D with the mix of students with the improvement.

Good experience and they are.

Great.

The second one.

Question now from Javier <unk> from Morgan Stanley.

Uh huh.

Quite precipitous price growth one more time average beauty undergrads ticket up 2% since last year I guess, that's part of that.

Has to do with the mix in part with your model, but on the other side put maturation here reduced so it may in fact mis mix was not a positive driver.

No no I think.

There's a computer to hear about the maturation of index. The maturation of index is basically the ratio between the.

The total number of students we have in the new hope.

Despite the.

Potentially the number of citizens.

In maturity.

So and.

And this is for the overall portfolio of hubs.

For example, if we open tomorrow, let's say 1000 clips.

The metrics around hubs will drop off basically because we have a lot of new hubs and because we opened 240 hubs over the last four months.

And a big chunk of them in the last three or six months.

A robust fixed index, it's more FSP it was 32% 3%.

A few months ago, I was 31%, but not not because we're not growing because we are opening a lot of new hubs are that way.

And the final question Javier I forget how much have you increased net practice in intake and bring your own instant.

Uh huh.

I just answered so that they can take your price.

There was a slight increase as well.

This quarter compared to two this quarter.

When you see the overall intake, including nursing for them.

And before we get rolling.

We applied a week.

What we applied.

Minor increase this quarter, but nothing nothing.

Meaningful.

The the Rerolling increasing price.

In January of each year.

So those are all the questions we had from the web I. Thank you all for your interest.

But anyway.

Myself CRO Anadarko, we are fully available for any further questions. Thank you and good night.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

Good evening, ladies and gentlemen, and welcome to the vigorous third quarter 2021 earnings conference call. All participants are in a listen only mode. Now later on we will conduct a question and answer session and instructions will follow at that time.

A reminder, this call is being recorded and will be available on vitreous IR website now I would like to introduce your host for today's conference call. Mr. Carter Stratus. This virtual CFO you may begin.

Thank you Peter.

Good evening, everyone and thanks for joining us it's a real pleasure to be here with you all before the release of our third quarter 'twenty one numbers.

The mobile for the first nine months of <unk>.

How about what you are doing well and healthy and here with me I have.

The C O b through media coverage.

The head of our purchasing department as well.

So backing off from our IR team.

The slide presentation, we part of todays webcast, which is available now.

One five.

Is that the vitriol dot com.

<unk>.

So I Trust you all have this presentation in front of you, but as usual before we begin I'd like to make more depth as detailed in phase two and three other presentation Safe Harbor is in effect for this call.

So now I invite you to go to the.

Page five of the first page of our presentation.

The highlights for the quarter.

For the first time.

Nothing new there.

The announcement of our agreement with <unk>.

Part of this combination with them that we're now three months ago.

But we are never tired of reinforcing the beauty up until Oh, they are leaving our institution in Brazil in terms of quality indicators for deep learning.

In this segment.

Besides having a sizable and growing business.

Yes.

Mezzanine and other health related of course.

And later on I'm going to go back to the information that you showed you more figures about 20 cars a month.

We also had this quarter.

Perfect.

And in the past we launch new courses.

The core northeast while starts will be offered.

Almost all of this year and in a couple of months two months.

Oh, that's became the number one course and now are currently taking cycle more portfolio.

On the West Coast.

A huge success and it reinforces our our speech and our belief that the diesel educate you on our second half is going to increase even further throughout the country.

We have reached almost 260000 fit it.

27% increase in intake.

In the current cycle compared to the things cycle I think period of last year.

A relevant growth in the southeast region.

As you know our new growth frontier.

The net revenue in our core undergrads.

On the Grad segment.

And greeted by around 20%.

This quarter with a consolidated net revenue growth of around 17%.

The EBITDA gain.

And in Greece.

26% in the first nine months of this year, it's always better to show it.

The numbers on a year.

Year to date basis because.

We have no business. So the nine months EBITDA growth is 26%.

Adjusted EBITDA margin of 29% growing as well at one point compared to the same period of last year.

And finally last but not least the cash flow from operations.

130 million Reais in nine months.

Yeah, just a cash flow conversion from operations of 92%. So we not only grew our revenue and the D. But also didn't raise a lot of cash from our operations.

So now before we.

Move forward to show, what our what the war.

The main figures of this quarter.

Let me show you on page six.

A brief reminder, a refresh of what had been delivering over the last 12 months.

We have now the first we had the first anniversary of our IPO in September of <unk>.

How often easier.

At that time, one year ago, when we were going through the IPO discussion.

With you guys.

We said that we would grow in for growth avenues.

Three of which are organic and inorganic and we have been delivering what we promised.

Over the last year, but first one it was the ramp up of a curve. We said that it was going to be the main organic growth driver.

Our revenues, which is being.

And then you've heard we have now more than two thirds of all students. They are in a new hub next based.

Pizza hut.

We're all done in the last four years.

One year ago. This number was picked in nighthawk that did they will have more than 90% of the hubs.

In ramp up phase still maturing overtime.

<unk> increased our.

Also by around 25%.

In distress amongst we opened more than 240 hubs all of.

Which are hungry to hubs in the southeast.

Oh, which has 50 in Sao Paulo.

So we are growing in the southeast as weak or are announcing before.

And also we expanded our course offerings. So as I said first of all.

A new a big score was nursing.

Alright again, the number one of course currently taking cycle. It is a premium coffee in the quarter with a ticket.

As a percent higher than our normal ticket.

And.

Hopefully we will have offerings also in la and psychology.

And for example in La we have already the authorization.

They're great validation, Florida.

The kitchen, where the greatest five the highest grade Buffalo and deposit Mr offer 22000.

Thank you.

Yeah.

And in the nursing and psychology is 11000 feet per year.

So this will be important growth avenues going forward as well an important lever to sustain tickets as well.

And finally inorganically.

We announced that it has to deal with which is the best view, we could ever.

Consider we are.

So we always consider them to be the restaurant the benchmark company in Brazil, when we speak about quality indicators in this learning and dislocation of the country. So we're just a transactional one is it allows it to be completed and close by but it's worth authority in Brazil are weak.

Will become the number two the second Laurence.

One player in Brazil.

With the best indicators.

So now on page seven some more information about the point to them.

Before I will come back to June to be true.

So this combination will create disruptive player I restaurants player when you think about.

High growth business in the higher education segment in Brazil.

Uh huh.

I had a fight.

Close to ours, so journey easier Fortunately.

A bit less than 800 hubs today, they have about 900 hubs.

Such as.

Combined we will have their own.

Today 1800.

100 hubs more than 700000 students combined with it.

They had.

Last year.

I thought they had left for years, a CAGR of 49%.

And last year and net revenue of 600, and then meet them with a 40% adjusted EBITDA margin.

So it is higher than our margin was around 30%.

And the main driver for that.

If the business of medicine.

Here on the bottom left part of the slide you can see some information about their medical business they are to be met.

Medical course in Brazil, among private institution.

Which is a high demand Corp. As you all know that it's a 11 to one ratio of applicants perfect with the average ticket of more than 9000.

Mark.

So that they are here on the right.

I show, some quality indicators confirm pick them up.

They have a <unk> of $3 75, which is 43% above the average.

Of the market.

Our our IGD three three in the last cycle, which is the highest IGD in decent alerting among all listed players in Brazil.

We have when you sell it has the highest IBD learning among all the players in Brazil and for Tomorrow.

It has even higher IGD ratio.

Secondly, this contribution due to the value added that.

You bring to the students.

When you compare the great with the inadequate.

And they are as ranked by the immediate application.

When you see the IGT.

Of course with a rig they are among the 2% that educational institutions in Brazil doesn't really the reference player.

And together, we're going to be I believe a reference player.

So on page eight.

We have more information about that.

Profile students and why we believe that we're going to keep growing our hand in hand.

Once the deal is approved so here in black.

You'll see that the student profile is slightly different that's why we intend to maintain to keep both brands because they that different markets.

Yeah.

You should go to Julien.

It has a lower.

And someone who appreciates that.

The local tutor the human pitch and meet the local presence of a burden in the country, which will provide the handholding for definitive. So this local support on a tutor is also very very important for these projects.

Yeah.

And onto the water on the other hand it is they have a higher average you can do that slightly higher.

And also a more tech oriented and <unk> students because they are they have a lot of much more tech.

Oriented.

Learning experience.

Uh huh.

And it appears so what are the different ah predict to attract different people.

We have.

A huge potential for commercial synergies.

You will have more than 600 cities today or sorry in June that's.

<unk> has either a hub of only ourselves, but not to the mark or vice versa.

So if you have a huge potential for sure.

Too quickly.

The boy and all for both brands throughout the country and on the right.

Part of the slide.

We're growing at around 90% in the last year. These are are they.

Information coming from the center.

By the neck.

And together, we have stepped into the muck.

Gained eight points in market share between 16 and 1919 as a reminder, at the left available latest available information. We have we went from a standpoint, five combined with them to $18 five.

Index 19.

And why was that on page nine.

We have intrinsic competitive advantages.

On page nine we compare the models that we have in Brazil for alerting.

When you yourselves are the sole player will focus on the hybrid model.

With a local tutor.

Centered hybrid model with a weekly meeting is elected by the local tour of the month will provide the handholding for months.

So being a role model for the glass and you have this.

Central belonging with our volume.

With our competitive advantage is the motto, which is capex to create but we know how to play it.

According to the market on their hand.

I'll offer 100% aligned product, but they are as I mentioned before they are they referenced there in terms of quality that they have a much more tech based methodology.

Knight hubs as well as we head so thats why they are the reference player Wednesday about it alone.

Both companies.

This intrinsic competitor advantages are growing faster than the competition.

Now on page 10, I have here some.

Public information.

<unk> confirmed its reputation and to perform our hour okay competitive editor.

Here on the left.

Is coming from the commission coming from the Apple store and place for if you go on our <unk>.

Cell phone Apple store for example, you'll see that the ex us.

Okay.

As the highest ranking highest rate among all players in Brazil.

For auto finance.

Secondly, the highest rent it.

With four countries either five little player.

If you took one seven and one eight.

This is a state program.

Polk information to show to reinforce our tech oriented approach.

Our culture.

Our mindset much more.

Oriented much more update concerning and much more.

Delivering a much better technological experience for our customer cartoon on the right you see.

Rick Columbia key.

Also public information.

If you go now so we're trying to keep your CFO and yourself that Youll see that we had a seven six.

Ratings.

Which is the highest score among all Brazilian disappeared.

Okay.

Moving to the right.

Eight two rig ranking even higher than ours, they have the best in Brazil.

So this is public information.

Fisher information foreign claim Mckee upfront.

Google and Apple store. So this is why we are less on which we are leveraging our reputation to build it for the business to create value for shareholders integral faster than competition.

So on page 11.

Now back to <unk> and <unk>.

Again.

We're offering new premium courses to expand the market and improved ticket. So nursing already was 11000 feet.

Cohort.

In three months.

Which represented 8% of the current <unk> cycle.

Our EBITDA Ciber was 138000 students of which 11000 in nursing.

And hopefully we will be.

Allow to offer to law and cycle. Both three courses as a reminder represents around one third of the public or.

Private on campus market in Brazil.

Fortunately for our player.

Okay.

Which have a hybrid model.

Welcome Page 11, sorry on page 12.

The growth in our base.

By digital Education segment.

So we grew.

20% year on year.

Keith.

And this growth was.

Also important to highlight that.

It was.

Coming from a very high comparable base. So we grew last year and the second cycle of intake we grew 40%.

And now we grew on top of this 27% so that important growth in France and in the intake.

Over a year, even though the comparison base is higher.

$138 six.

Six new students in the second semester of this year.

Which almost 113 tells us only in the third quarter.

This year.

On page 13 and growth was spread throughout Brazil.

And even if you're in our.

Original base or even read them in default of the country. We grew 13% year on year again, even knowing that the comparison base was higher last year.

Yeah.

And in the southeast 50%.

On the right.

As I said 242, new hubs in the law.

Yes, Joe Montana.

On page 14, the focus on the southeast.

Our regional review.

We opened there almost 100 hosted in the last 12 months an increase there.

The base by 6%.

We opened very recently a lot of new hubs.

I'd say in three months.

But we are preparing the debate.

To adjusted rates, even further the growth there and distribution which represent.

40% of the total marketing are there.

On page 16.

The maturation of our hub again, the most important.

Organic and driver.

For growth, which is a growth with limited execution risk would keep.

Pending our maturation of hubs.

It will see all the new hubs that were opened last four years, we are still around 31% of the potential of those ships.

And also important to highlight here on the bottom left part of the slide.

Sure.

Newcomers and the share of intake.

In the overall single days.

This is something that I mentioned already to two times and the bad.

But now we're showing here the number.

If you see this.

We reached now the FERC half of easier what we believe to be the peak ratio between intake and overall rate.

At <unk> one.

It is important first because.

Yes.

The slight decrease overtime this ratio as we mature more hubs as more and more hope get fill up and we increase factor the present base of seniors compare to the percentage of new commerce, we're going to increase margins.

Then we're going to do to decreased dropout ratios.

We're going to do a decrease DDA ratios why because as you know newcomers.

Freshmen.

Dilutes margin most of our selling expenses.

Aimed at attracting new tenants.

Newcomers.

It dropped more Dan seniors.

<unk> enhanced our PD ratio was also higher among newcomers.

A new commerce so.

Over the last four years have been greatly deterioration, but now are core to our forecast.

Through the first half already off next year, and we are going to slowly but steadily increase more the product page of seniors compared to newcomers.

It is important driver of margin going forward.

So on page 16.

Before talking about Martin net revenue growing at around 20, 25%, 30% in the quarter, turning hypothetically that nine month period of this year.

Driven by the expansion of our base.

So before 20% year on year, plus eight 2% increase in ticket.

It is also something that's different.

Differentiate vitra front accomplished because we offer a different product.

Because we differentiate ourselves from the competition, we have been able to.

Two more or less maintain secret overtime.

So.

There was an increase last year.

<unk> decreased in the first half of this year and greet again for more of that we are maintaining our tickets.

And in fact increased 2% year on year on year and you can see the third quarter number and this is confirming the resilience of our model.

Now on page 17.

Something some more financial for the consolidated net revenue growing at around 22% on nine months Europe EBITDA growing.

26% and gross margin growing 31% I'm going to show each of them now in detail.

So page 18.

You can see that.

The.

Number four to nine months for example.

Growth of 22%.

Driven by the digital education business.

Graduation, and graduation, mainly continue indications.

Both segments growing quite a lot in the last Ah.

Over the last year.

What's the case over the last year.

And on chemicals segment, Decretive overtime, 17%, which is.

Here on page 19, while 2019, you'll have more details about.

The continuing education segment and on campus segment.

In consumer applications the growth was driven by.

Our.

Our digital graduation.

Of course.

We've expanded a lot easier with more offerings and also levered on based on what marketing.

On the other hand on campus segment.

Climbing over time.

In line with our view for the sector because of the slow but steady.

The decline in the interest of all communications and a correspondent.

Increase in the interest of these indications.

Which we don't believe we will revert.

Once the pandemic is over.

We have another question about it.

Whether there will be a decline in interest in this obligation once the pandemic is over hopefully next year, we don't believe that.

In that we do believe that there was a shift in mindset bancomer about.

Bayou from home working from home and also studying from home Nobody believes that E Commerce will go down.

Once pedantic Uber because people now have experiment.

It fell off.

And I'll stay experience.

And and.

The mindset the interest of dislocation has also.

<unk> and <unk>.

Continuing to grow you can see.

In the future.

So margins EBITDA on page 20.

Again, that's booked here on the nine month period.

An increase of $21 38 to three 9% op margin at one point.

That was the.

This increase was mostly driven by a reduction.

A reduction in the cost of services.

As a percentage of revenue.

Which I'm going to show in the following slides.

So page 21.

Cost of service.

There was an important increase in efficiency over time.

Poor.

Increased 35% to 31% decrease.

<unk> as a percentage of net revenue.

This was driven.

Most of these but were the two reasons first the overall optimization.

In personnel costs.

We optimized.

The ratio between tuner.

But I think that.

Turning to <unk>.

And the overall growth of the business as we go forward it is easy.

Easier for us to optimize also the ratio of students peripheral ratio.

And besides documentation of the flex corporates that we mentioned in the beginning of this year.

This also with new concept a flat quarter.

We we gathered.

Non optimized classes.

We're offering in small cities for example.

We have been much more optimized.

Ratio now with two tenants for tutor enhanced driven driving Israel. This expansion in margin and gross margin.

On the right.

G&A also and increase efficiency.

Reflecting our focus on safety and maintained to be elite company.

A digital oriented company.

We have now less than 8% of revenue and G&A.

This is a reflection of how we operate.

Consequence of how we drive the business.

We're much more agile and lean and then competition that's the way we react faster to changes in the market and Thats why we had been growing Stefano and culture as well.

Basically traded June selling expenses and BB eight so net impairment loss on fixed assets.

The what we call here the PD.

Selling expenses increased.

Again, the nine month period, there was an increase of 36%.

These year and a gain of two points from 816, 8% to 88 of net revenue.

This was caused by FERC as we said before overall throughout this year.

An increase in online media.

As a result of the pandemic.

Last year, a big chunk of our intake in the first semester of last year was what made before dependent for when our hubs were opened.

And the hubs are an important piece in our selling machine.

Because we have this hybrid model student sometimes.

Sometimes it usually goes to the the hub to understand how would be the horror equipped and then there.

He or she decides to relate you to enroll so now have a closer to.

To invest more in online media.

Good to us.

Strong peak cycle, which is natural.

Also commercial efforts in European quarter, such a learning.

There is still a ramp up at Mt and the shift the curve for new quarters, such as nursing.

So there was an increase of 15%.

The capex.

The customer acquisition cost.

Increased only three 6% in nine months.

Compared to the first nine months of next year.

PV on the right there was a degree of EBITDA this quarter.

If you compared to the third quarter of last year.

Nine point.

Despite the meet consumers despite the strong presence of <unk>.

Michigan, a newcomer to I said before.

Again, we have reached the peak in this rationale in the first half of this year.

And also despite the current crisis in Brazil, which is the thought to help at all.

The delinquency ratios.

Now on page 23.

Finished net income.

We have a.

<unk> increased I wouldn't see the quarterly numbers and a decrease when see the.

The nine months.

Our numbers so it did work.

Due to two things.

The first one was the number on a couple of nonrecurring items, we had.

Last year for the FERC, one was in the fourth quarter of last year.

We had we were recognized for the first time deferred tax asset.

So this was an amount of around 18 million right that was the first time, we're going to have deferred tax assets left here.

<unk> improved our net results net.

<unk> here.

And also in the third quarter of last year, we had as well FX gain related to the IPO. So we raised funds in dollars.

Last year.

And we brought dollars to Brazil, so what rate at a higher rate. So we gained 13 million reais.

And last year.

So.

<unk> represented 31 right.

And together with the increase in expenses and financial expenses. This year due to the increase of the PVA and IPC will have a reduction on a yearly basis of our net results.

So to finish on page 24.

Cash flow cash flow here.

Okay.

Impacted by extraordinary events of last year. So first of all it was again this 13 billion Reais FX gain.

But for accounting reasons. These FX gain is accounted as part of our network and as well as part of our cash flow from operations.

<unk> waiver, but it is the way.

The ruler, but we have.

We recognized last year.

<unk>.

FX gain.

Part of our cash flow from operations.

And on top of that we have.

In the third quarter of last year.

Eric the rectification of some prepaid expenses 6 million that we had prepaid.

<unk>.

In preparation for our IPO debt when we execute at.

The IPO in September this work reclassified June transaction cost of the IPO.

So when you see the cash flow from operations.

The increase includes the cancer patients and fixed minimum rent well here on the right. We put a table trying to reconcile this number.

When the original side when you normalized.

This is just cash flow from operations, you will see that we had when.

Wednesday for example in the third quarter number eight increase of 28%.

Cash flow from operations and 31% increase in cash flow from operations in the nine months when you see the cash flow from our conversion.

Went from 98% last year to 112.

<unk> and from 66% to 92%.

<unk> of this year so.

Very important okay.

Refills as well from a cash flow generation perspective.

So that was it.

Also on page 35 with wrap up we are the leading pure play E certification review.

Before and have them work with them.

We're going to consolidate.

The retro clear initial application in the country.

Delivering what we had permits indigo, which was expansion of market.

Organic growth.

And now with the best M&A deal with ever three months, which is the transaction with cinema.

So thank you very much and all electric for questions.

As a reminder to ask a question you will need to be.

Crestar one telephone to withdraw your question Christa.

Please standby, while we compile the Q&A roster once again, please press <unk>.

Sorry, then the number one on your telephone.

Your first question is from detour.

Goldman Sachs. Your line is open.

Hello, Good evening and thanks for taking a class two questions from our side.

But if you could give.

Some update on how you see our strategy for a magical on health care programs following.

Just thinking about combination.

And following the approval of the digital margin program.

<unk> strategy could include potentially slug of acquisitions on the multiple problems.

One question from our side, we can see.

Walmart detail on how you saw drop off in the non renewal rates evolve in the third quarter and on how you expect both metrics to trend going forward. Thank you very much.

Hi, Peter Thanks for your question.

The first one is about our medicine.

It doesn't have the money.

We're going to wait for the closing of the transaction.

We can Florida has had.

Vertical efficiently with them about.

How to deploy this business in the future because it right now as you can imagine we cannot have this type of conversation.

You bet.

What we know now that they have this.

I'd say, a very healthy and growing and high margin business, which as mentioned.

And we did you.

We're not simply a player to be medically indication, but they are.

They know quite well how to play this segment that's why they are the best.

Medicine School.

In Brazil, among the practices institutions. So so it is still open for discussion we're going to have this.

Distributions together with them.

But only after the deal was closed.

But on the art and the second question about drop out.

Second we had a slight increase in drop off this quarter.

Compared to our expected numbers and there isn't.

For.

Two reasons for that effect.

First one was the they take profile of the first half of this year.

So because the intake in the first half of this year.

It's much more back ended.

And a big big part of our incident.

In the second quarter of this year instead of the fourth quarter of this year. So that's why by the way that our dropbox the dropout rate in the second quarter of this year was much better than the dropout rate in the second half second quarter of last year.

So because most of them arrived late in the evening.

Indeed the cycle.

Those guys that drove up instead of dropping out.

During the semester during the second quarter for example, some of them.

Drop now only in the third quarter.

So they take profile.

Bruce the dropout rate ratio in the second quarter, but deteriorated propulsion in the EBITDA.

Third quarter.

The first.

No reason.

And the second one was as I mentioned before the ratio between intake.

And seniors.

We can take in students as a whole so.

And that shows before now.

The presentation. We have reached we believe we have reached the peak in the region between intake and base.

So we have a lot of new commerce, a lot of students that are joining us for first time. This first half of this year. So this translates to each of US large higher also drop out because I don't know.

Freshmen are newcomers.

Drop.

More than seniors.

Very community going forward.

So going forward with.

We expect a normalization of this ratio.

First because we expect to have a more normal intake.

Kurt.

Next year.

Yes.

Second one.

Also just important to do to bear in mind that.

Part of our youth experience is built around the breadth.

So because we have today.

We are still not in a full capacity just argue with excuse me.

Okay.

Once we are allowed to have again.

<unk> Plaza in our hubs, we believe we're going to also to improve the retention rate because that will.

It will be fulfilled.

Maybe put up a plant.

Sure.

Thank you.

Once again to ask a question. Please press Star then the number one on your telephone.

Your next question is from <unk> <unk> of Credit Suisse. Your line is open.

Hello, Hello, guys. Thank you for the space.

Two questions I have I have just one question, it's motivated by one of the statements in the release.

That says the cost has improved because the the penetration of the flex courses.

And.

And it calls attention to the point that it's not.

If you consider these as a way going forward.

Secondly to two to let's say optimize costs right. So if you consider this as a way to do so and if the flex scores itself was evil apart from the costs too.

To also increase the demands so increase the student base for just more that it's specifically thank you.

Type of business.

So about <unk>.

Just as a reminder, I invite you to go to page 31 of our presentation.

So just as a reminder, <unk> Corp.

<unk>.

It was top.

After the pandemic the idea of the fifth floor.

Appear to us after the pandemic, because we realized that.

We had the opportunity to optimize.

Dave.

The ratio and to offer new orders for new <unk>.

And why was that before I mean until let's say until last year.

At June <unk>.

We had a group of students or number of students.

<unk>.

We're not.

Optimized in terms of students tutor because.

Either in a day.

We can see and of course that you didn't have enough demand.

So instead of having lets say 40 people per quarter, you had the training program.

And now once we started Q2 to have that.

Weekly meeting in a virtual way.

Cover pandemic.

We had the idea of why not offer instead of offering this.

Flex courses that are not optimized and sometimes even not even not with the tutor that specialize in your own.

Because sometimes we didn't have enough.

Q2 had a tutor for example.

The accounting for <unk>.

It's Stuart that was.

For people who are different corporate.

It was not ideal for the idea of a fixed cost.

To optimize it for both classes that were not optimized with a tutor for example, with whatnot somewhat specialized in your field.

Instead of <unk>.

Offering this.

Configuration, while not offering in our flex Corp, with a tutor that was giving a class 240 people but online.

But it's still a online class with a light lift from someone from your region.

Instead of being for your city for no reason for example, but it was an observation that we've made in the first quarter of this year.

Which has two effects.

The FERC immediate.

What.

Improvements in efficiency, which which which is.

It is here to stay so the fact that we reorganized those non optimized classes.

Around some flex courses.

Is it simply that is here to stay so is it going to change after different ink. So once the pandemic is over the normal when you have <unk>.

We will refer to two weekly live meetings in the hub, but the flex floor will continue to be provided.

In virtual meetings, but with a tutor front our reason.

So that was a FERC immediate consequence.

Our efficiency.

Through good optimization in this ratio between students and to the second.

Opex fourth and if its more medium term is a possibility to answer each of the smaller cities.

The city of Phoenix.

It did.

It did not have the scale for a full fledged normal when you have several can hub.

But you can have a smaller hook basically for a mood surgical there to have your yard must make them for them.

So it is a possibility.

To accelerate penetration.

Throughout Brazil.

Smaller ticket.

So that was the cost cut Opex fourth one immediate consequence in terms of.

Of course it.

Of course, our corporate Florida and that was it.

Without any impact.

The impact in our satisfaction because before that that you had a tutor that was not from your <unk>.

Area for example.

So if you're putting a accounting you can have someone that was.

Someone from infrequent for example.

Glasses to people that we're not a front from because that vision.

Now with the flex call. If you have some warm with your from your field. So it is somewhat.

We have made.

Searches and therapeutic that should see whether the student.

Is happier with their <unk> and they are happier I would of course.

So it is unfortunate to increase efficiency to pekka to penetrate further while Brazil and to improve the overall user experience.

I see so so.

So.

It was something that was designed for the different dynamics worth but part of it will continue right part of it will continue and this is allowing you to address the cities that are.

Let's say subscale right for the tutor model right. So it's a both a cost and revenue combination defenders is correctly.

Both the cost and revenue combination so after the pandemic.

The normal scale.

All of the product.

It's a hybrid centered.

We are using.

In a hub, we will turn to be livelihood, so physical counteracting the hub.

Yes.

Without any update any.

In terms of cost because now we already have the same tools.

Now next year, they will be again meeting students face to face the same will be will be with <unk> Corp. So today they are.

Virtual meetings next year.

To be very committed with the thing.

Is there is there a risk that the cost increases when you get back to the physical one to the physical model the tutoring motive.

Not in our case, both in the in a digital application.

Segment.

Yes.

Don't see these diseases because today, we don't have specific temporary savings.

I would think about tutor.

We already have today the tourists that are meeting.

The horses.

All lines instead of.

Physically but the ratio of thing while we will have next year, but it has a minor effect in our on campus segment.

Okay.

If anybody else wants.

The classic return there will be a spec that increase in cost is there, but in our case because of the U S.

A smaller piece of our overall results.

To be a major amount.

Very clear thank you.

Thank you.

Once again to ask a question. Please press the Star then the number one on your telephone.

Your next question is from looking like Crazy.

BBVA Your line is open.

Good evening, everyone. Thanks for taking our question. So I have two questions from my side is regarding average ticket to the average ticket increased 2% on the digital education in the Grad segment could you. Please comment on how the breakdown was refreshment and veterans.

And then the second question.

EBITDA increased in the nine month period due to the change in the mix of students could you. Please comment on how that should evolve going forward. Thank you.

Yeah.

Okay.

I haven't looked at.

Two.

First question first.

So we've got a ticket.

This 2% increase in the overall.

Overall.

Tickets.

When youll see the intake tickets I think the pieces that we are at.

Now.

Getting with newcomers.

More or less in line with what we had last year.

So so on.

At the same number that we had last year.

When we see the.

The.

For example comparison.

When you include nursing for example, and then at least do you get the Creatives.

When we see the overall intake.

In the current example, we had a slight increase in ticket when you compare to the left.

Here.

And that was driven by new quarters.

Expect in the future.

In the future, we expect to increase over time, the percentage of premium courses such as Mercury again would have.

Only 11.

11000 students.

Enrolled in nursing.

And which are today, 80% of the intake, but when you see that we had 300000 students in this notification.

It has nothing at 3%.

Three 4%.

So it is natural that the percentage of premium courses.

Such as nursing.

And in the future hopefully law and cyclone for example, and others that we already offer today in health office.

Nutrition in biomedicine, that's starting to be offered more recently those are going to be important drivers overtime to sustain the tickets.

Overtime I'm sorry, what was your second question I didn't get it.

So the second question is regarding EBITDA.

The increase was due to the change in mix. It's Peter could you. Please comment on how this should evolve going forward.

An increase in EBITDA level.

Okay great.

Yes, the PPA.

Is impacted by a number of examples.

<unk>.

Certainly change.

Hopefully could change next year.

Samsung will not so the first thing.

<unk> is a mixed up is a function of a mix of students.

Again, because we had in the first.

Half of this year when we see the overarching taken we had in the first intake cycle. This year and you compare it to two.

The overall pace, we had in the first half of this year.

<unk> reached its peak integration. So we had we had in the first half with a higher higher than ever present age of new commerce in our business.

So.

And those new Commerce day.

They have a higher dropout rate enhanced higher PD.

They are contributing to higher PD.

On a consolidated basis overtime.

We mature to host.

As we fill up the hubs enhanced as we increase.

Further and faster the pertinent page of seniors compared to two two newcomers.

The average the weighted average EBITDA tends to go down that's the first thing the second one.

Think about BD is the fact that we are still not in our full user experienced mode.

Which is the fact that we have the host closed.

So part of it.

User experience is the fact that you meet your colleagues.

Hum.

And so the fact that we have.

I have closed.

We are still not in full potential to exploit our model and to benefit incidents with our full year experience.

It's not helping at the BD so.

Hopefully next year once we are allowed to open again.

We show a half.

A decrease in PVA, because the overall engagement will tend to increase because the satisfaction level.

Our engagement with gains increased and this has a high correlation with dropout enhance b G.

And the third reason in that.

We are all.

On the same page here it has occurred economic crisis, which the self-help at all about delinquency rate.

Hopefully it will improve next year.

But.

What you'll see throughout this year.

And last year.

Was it clear impact of delinquency driven by the current crisis.

Very clear Carlos Thank you.

Thank you Luca.

Okay.

No questions at this time I would like to turn the call back to Carlos.

Thank you Brendan I want you to read now a couple of questions that came from.

First one from for delivered CRO from BTG.

Hello, everyone. Just two quick questions here future posted a resilient every ticketing digital application undergrads and of course this quarter should we expect this trend to continue over the next year that was the first question that we are.

Just answered.

We expect to see a positive contribution of premium horses.

So we expect to see AFC.

Stable tickets as we have been delivering in the last years second question from Pedro was the new policy should continue to provide improvements as seen this quarter, what should expect F&I <unk> level, when we relate to net revenue considering the third quarter.

And I mean the ideal.

It is.

These are complicated Werner.

We see that 16%.

To view, that's clear because we're not ideal context.

What we see that going forward.

We show expect.

EBITDA with the mix of students with improvement in the overall user experience and different grades.

The second one.

Questions now from Javier <unk> from Morgan Stanley.

Quite consistent price growth one more time average PD on the red tickets up 2% since last year I guess, that's part of that has to do with the mix in part with your current model, but on the other side Hep maturation here reduced so maybe in fact mis mix was not a positive driver.

So far I.

I think I think there's a computer to hear about the.

The maturation index the maturation of index.

Basically the ratio between.

The total number of students we have in the new hubs.

<unk> five <unk>.

They show the number of centers in maturity.

So and this is for the overall portfolio of hubs.

So for example, if we open tomorrow, let's say 1000 hubs.

The metrics, we will drop a lot basically because we'll have a lot of new hubs and because we opened 200 employee hubs over the last 12 months.

And a big chunk of them in the lab.

Three or six months.

Our market index is more of a thing it was 32% 2%.

Three months ago, I was 31%, but not because we're not growing but because we are opening a lot of new hubs that way.

And the final question Javier.

How much have you increased net practice in intake and a re enrolling.

So I just answered so that they can take your breath.

There was a slight increase as well.

This quarter compared to the quarter.

When you see the overall intake, including nursing fair to them.

And for <unk>.

We applied.

What we applied.

Minor increase this quarter, but nothing nothing.

Meaningful.

The rerolling increasing price.

Executed in January of each year.

So those are or the question we had from the web I. Thank you all for your interest.

But anyway.

Myself CRO Anadarko, we are fully available for any further questions. Thank you and good night.

This concludes today's conference call. Thank you for participating you may now disconnect.