Q1 2022 Vitru Ltd Earnings Call
Okay.
Good evening, ladies and gentlemen, and welcome to <unk> first quarter 2022 earnings Conference call. All participants are in a listen only mode now.
Later, we will conduct a question and answer session and instructions will follow at that time.
As a reminder, this call is being recorded and will be available on the IR website.
Now, but introduce the host for today's conference call Mr. Carlos Freitas CFO .
CFO you may begin.
Okay.
Thank you Ware.
Good evening, everyone. Thanks for joining us today.
The pleasure to be here with you all or do you believe about fourth quarter 2022 number.
Here with me are Peter Gassner CEO .
Yeah, I can handle that.
Our IR Department.
But I can't exactly tell you Peter.
Adequate junior.
It's one of our best recruiting.
A slide presentation will be part of today.
Which are available at our investor mix and strike. If these answers about the vitriol, that's coming up here.
And before we begin I'd like to make more debt.
Page three.
Two of our presentation.
<unk> is in effect for this call.
So now I invite you to go to page five of our politicians I Trust you all haven't thought of it.
So now.
On page five.
The main highlight of this quarter.
Number one.
There are dark Kathy.
Kathy.
If approved.
Uhm went into the market that we announced in August of last year.
We are seeing with <unk>.
Indeed, additional leading beauty forward.
Yeah.
To close which is.
Thank you.
<unk> finished tomorrow.
Two big beer Tomorrow.
Tomorrow.
And after that.
So would.
Good morning, Thank you.
Can you with the date in which we're going to invite you for a new conference call and to define the date of the closing.
Oh I see on page five.
We reached almost 200 and 382008.
David.
<unk> was a important landmark our intake in the fourth quarter of this year.
36% in our core business.
Which is a decent education on the Gregory.
This was all I'd say is there.
Very important will prefer.
The calendar quarter.
We don't expect this number to be the same level for the full intake cycle.
You may.
Last year the whole purpose was much more back ended.
And then go back to this but and we still expect.
The intake for beef clerk intake cycle to be around mid twenties higher than what we had last year.
On page six.
We grew a lot, but also increased average ticket.
So the patient segment.
Eight 5% on average comparing the first quarter of this year to first quarter of last year.
Which reached more than 300.
Good morning.
Which shows and confirms.
Of our model and how.
We are actively doing differently than the other competitors.
With that the net revenue in our core business.
Around 30% this quarter compared to the first quarter of last year, while the overall consolidated revenue.
18% higher than what it had last year.
Regarding margins our margins stable.
So it keeps telling on 7%.
This quarter.
Would you need that I'll get to the gate.
Again, 18% compared to what we had last year and finally regarding our adjusted cash flow from operations.
We had increased.
All right.
Good morning would you 47 million Reais in the fourth quarter I'll give you.
Would you need the cash conversion of 115% again higher than 100%.
I left here.
So now before we jump into the numbers of the fourth quarter left and just remind me what we have been doing it doesn't have the deliveries over time.
Page eight.
So just quickly as you know we.
Our IPO September of 2020.
<unk> been we have been expanding and ramping up our current hubs.
Last 12 months, we've learned from.
52% of students.
So now suddenly perfect.
We reached around 988.
Increase of 240 heads.
Cellphone.
A big chunk of them in the southeast.
We have now 258.
And should they already our second biggest state.
In terms of hub.
So Paulo, but we are delivering on what we said which was that we were.
We're going to go in the southeast.
Alcohol <unk> coffee offering.
Again Murphy well count.
<unk> this quarter.
Good luck in the fourth quarter of last year, and we are eagerly waiting for to make a prediction.
Often psychology and leave their own law.
And finally.
Welcome to the one which is.
Is a major transformation.
For the whole sector.
Hey, Mike.
More detail on the ramp up of our hubs.
Hey, Jim.
We are still majority most of our hubs my more than 90% of our hubs RFP are maturing.
That will open in the last 234 years.
And the pure maturation index.
Is.
He is around 37%.
With me.
But not to open any more hub.
Fourth we still going to grow in the pit.
More than 100 people.
Almost 20%.
Great.
Is it keeping.
The most important driver.
Going forward for each of them is the maturation of the hopefully we'd have so far.
Which already represents 70% of all our people.
And then you have to be.
On page 10.
Overall expansion of our hubs and student base throughout the country.
As you can see in the last 12 months, we have been growing throughout the country.
Not only in our.
And tell them that region, which is false.
The zoo in which we grew 16%.
In the last 12 months, but also.
In the center.
Almost 40% on our part to put themselves in the southeast.
25, 44% from the north of the country, but we aren't going to overdo it.
The last year, and we increased as well by 32%.
Hum.
In the last 12 months and again the most important.
In terms of mobile.
Now the southeast with 258 hubs.
And on page 11.
To wrap up again new courses.
Often working eagerly waiting for law and in fact, all of which are going to be another very important revenue for us for the future going forward.
And I think Joe just another reminder of what's in the Montney.
They reached 1000 pubs.
In December of last year.
Uh huh.
100 medical students.
And steel went peanuts.
Once you reach around 2500 students in next indications.
And then for Kevin.
Are they.
I had.
No.
We take the 40% EBITDA margin, which I think 21.
And in my opinion the right.
And a 32% CAGR.
So this is a major component, but we are combined with <unk>.
As I said, we're going to do this.
Our breakthrough once the 15 day period expired and we.
Right.
Gone through improved supply situation.
For the integration.
And once we.
We finished two databases.
We are going to buy fuel for a new conference call.
It is about the integration of both the demand.
And of course, the synergies that we expect.
You have Colombia combination.
Yeah.
And on page 13.
No we are going to maintain both brands because they do.
In two different markets different people.
And here on the right part of the slide we have updated the chart with the latest figure from there.
Mexico.
We have been growing again more of them actually have been gaining market share.
The whole market has been growing at around 21%.
But we.
And it wont segment.
We have been gaining market share on a yearly basis, but now when you have that would be.
We had around 20% of our markets.
And David let her.
On our upstate.
And technology and reputation on page 14, you can see when you see the validation from our client the students are win when they evaluate all X for example.
Once you go from up to five as you know either in place or are equal for the grade.
Average week of the month it's.
$4 seven why are the wrong.
It's $4 six.
Which are the highest.
Going to the whole universe of Gdansk in Brazil.
And also when he got Nicki.
You see the distribution of our brands.
And how we are.
Hum about arguing about by our customers.
Both in the first and second half.
Higher grades are more of a a bit you can see that's been done.
So now on page 16, we start to talk more on the numbers for this quarter.
We do.
Jan Kees, perhaps our diesel education under graduate students.
342003.
And overall growth to 382000 students in these two indications.
Great Recourses.
When you see our core business.
It can take as I said, we grew 6%, reaching 179000 students in the fourth quarter and it's just kind of a quarter all the busier.
The intake is still going on.
Multiple weeks.
You can take for this year.
So what we do expect.
<unk> is a slightly.
Slightly smaller.
These nurse.
And if you remember last year, the hole and then pull that well.
Delete fold.
So the whole intake process for Smiths more back ended than what we had.
So we're completing the curbs the profile.
But anyway.
Second you have.
Mid <unk> growth in <unk>.
In the current cycle D here.
Yeah.
On page 16.
Just to illustrate that both have been spread throughout our cohort.
As you know lead to find cohorts and the group of hubs that were opened.
So we all cohorts that we have been doing.
Sure.
And with the maturation of the hubs is important.
Fees in our growth engine and in fact, the most important driver for our growth going forward.
So now we have extended for 272000 people to 342000 students enrolled as of March will be here.
I'll tell you something obtained will start with financial.
Right.
Yes.
18%.
Reaching 178 million reais in the quarter.
The slight decrease in the gross profit margin and I'm going to say.
Did you read it to you.
With a stable margin at 27%.
In this quarter.
When he bought both formats offer much revenue or segment on page six I think 18.
And as I said, a 30% increase more goodness.
Digital integration undergraduate, which now represent eight 8% of our.
Our overall net revenue.
And we had a decrease in continuing education and on campus under graduate business. We tend to do the same thing a bit later.
Yeah.
So still on our coffee yesterday was 19.
A 30% increase in net revenue and 895, 9%.
Greece and average ticket.
Uh huh.
More than 300.
This quarter so be there.
Illustration confirmation.
Off.
How often your opinion and different battery.
We are.
Provision.
The way the market.
And we have been offering a hybrid.
<unk>, which is different from most of the peers and we are I'd say, we're seeing.
Overall, the market is much more let's say irrational.
Our commercial groups.
All of the peers.
And even.
And apart from that we.
We are.
We grew by around eight type of thing.
Remembering that last year in the second quarter of last year, we can keep it.
In the second quarter of 'twenty, we grew four.
4%.
So again, we are expanding and we can get.
Below inflation.
Our formula there shouldn't be important to highlight that most of the increase.
It's not.
Through a mix of it and I mean, we all know that there can be perfect.
Our increasing the weight of optimum courses, leading health and engineering.
Which has an average ticket of a bit more than 400 after four months.
Both boxes.
With a 21%.
Often in the first quarter of last year and now the events around 5%.
And all of this $8 five microcap and growth in average ticket.
Two points.
At this point.
Is accountable to the mix effect.
So which means a six 5%.
Due to a apple to Apple comparison.
Anyway, we expect the rest of the weight of prudent course to keep improving over time.
Not only because of a higher conviction overall in our current core but also as I said before in the near future with technology and law.
So hopefully Friday.
We have a decrease in revenue of.
Computer to catch them and on cancer indications.
Okay.
Peter.
In the last quarter.
This has been negatively impacted.
By the reduction in the air.
Average duration every length.
Our graduate courses.
So this is a market strength, which.
Picking up on digital.
Our players Ludwig.
It is important to highlight most of it.
It's over.
The reduction in Perth taken.
Taking place.
Left here.
So we do a trade the movement in our net revenue this quarter was already higher than what we achieved in the fourth quarter of last year and we do expect that the net.
In the second quarter of this year.
They'll be higher than what we achieved now in the fourth quarter of this year.
Looking with a more medium term view, besides what important to in the settlement.
Our continuing education business includes technical courses.
And professional qualification portals.
We believe this has the potential to be.
It's quite important in the future with important additional source of revenue for us.
And it is part of our overall strategy to expand complementary offering to our cause.
Thank you Jordan.
Regarding our own corporate segment, our intake Ah in 2000 22.1.
Cycle was probably about 11% higher than what you had last year.
But that's not enough.
To avoid the overall reduction in base and much revenue.
We believe that both of them on.
On campus business.
The decline in claims all the time.
Although that's part of the business, but we will be here, but coming from quite a low comparison base.
Now jumping to page 22.
Going to debate about that.
The components of our BD.
Cost of service.
It's certainly higher than what we had last year.
2%.
Ultimately revenue part of it and what they have left here.
Basically our chorizo FERC, one while the lower slightly lower.
Additional of pumping in the kitchen, which have a higher margin business.
Once you have among the treatment after we've had.
But also we had left ear attribute them.
Cost recovery.
Which represent around 2% of our revenue so what if not for this one off effect our.
Our gross margin would have been quite similar to what you had last year.
When you look at the G&A.
Generally.
More of a stable to what we had last year, which means that we decreased the DNA at the peak of much revenue from $8 six to seven 1%.
Keeping with digital I believe a puzzle.
And to remain.
As possible as a company.
On page 23.
Selling expenses M P.
So it's that expenses was up slightly.
Higher than what we had last year.
Including one four points compared to what they had last year.
But the fact the cost to acquire customer decreased 9% than what we had left here. So yeah, we increased focus on the cost of.
Perfect.
But the intake of much higher than that.
Oh the tax.
Was slightly lower than what we had last year.
And four P D.
The decrease.
And two points from 16, 6% for people.
We bought.
Its function.
Slight improvement in collection.
Our average collection time, a number of things like lower than what would have luckier.
So with that we were able to.
Would you go to 2%.
And we do believe that going forward this year.
For the whole year shall be.
Okay.
Operator shall be slightly lower than what they had last year.
So now on page 24.
Our next.
<unk> net income.
A 6% increase in net income.
Just want to thank them.
2015, even though we added this.
This quarter.
I wanted to go higher.
But also because of higher financial income this quarter.
Finally regarding our cash flow from operations.
We reached 47.
This quarter increase of 3%.
Our cash flow conversion was 16%.
Which means that we have been again get away from cash we've been only are growing our revenue.
With all of our cash flow generation.
This number here is.
Before capex.
After capex and good luck.
Interestingly this quarter it would have been around 36 meters annually.
Cash flow generation in the quarter in line with what we have been doing for the last quarter.
So that's what we focus on my side.
Uh huh.
<unk> delivered a very nice quarter.
I'm going to open for questions.
Yeah.
If you would like to ask a question. Please press Star then one if your question has been answered and he likes to lose yourself in the queue press the pound key.
Our first question comes from bitter to meet up with Goldman Sachs. Your line is open.
Yeah.
Hello, Good evening, all and quite frankly can all classroom.
Two questions from our side.
Therefore, you should expect that an expansive clogging.
Sure.
I can follow up.
Yeah, you can say cycle, well knock off the prices in the fourth quarter and our second flagship.
If you are considering that smaller M&A deals.
It could be a potential off shelf are increasing in our portfolio.
Do you mean education. Thank you.
Okay.
The second one.
So yes, you're absolutely right. Thank for your question by the way.
Looking forward.
We are going to look.
You could even before the deal with it the more we work with.
At this time.
But what they should do.
To complement our portfolio.
Either with graduated corporate either.
Electrical Freeport it either.
For the for example.
So the idea is that.
We have.
Longer literature with the same customer.
One for example doing for years for undergraduate also after the poor from the high school and engaged workforce to get for jobs and then having a undergrad course, and then Greg Clark and then let alone.
Overall for the for the person.
Yep.
The medium term, we are going to look for more M&A, including to reinforce our brokerage business.
For the fourth question I couldn't quite hear you I think that you were mentioning about the there is a pick up in the second quarter right.
Actually the question of what's a ball.
In the second quarter or if we should see an equally.
Argued that could change, even though they'd be France.
Hi.
Okay.
Yes.
Most of our foreign expenses.
Later she.
Shoot.
The impact of it.
So, especially especially regarding our anda.
Business, which is all part of them so.
So when in the second quarter.
We will have.
Uh huh.
At the high end growth, even in pig actually having the first quarter the 10th.
Last year, the whole look more back ended.
When you when you see the overall EBIT improvement.
So has.
The reduction in CAC.
Exactly.
When you look at the first and the second quarter for California.
Okay.
Hum.
And in the second quarter, we must grow 30% compared to what it was in the third quarter of last year.
Yeah.
Very clear thank you very much.
Thank you Peter.
Our next question comes from Luca market, Jamie with the Chao Your line is open.
Hi, good evening, everyone and thank you Bridget Washington.
The company reported.
P D as a percentage of net revenue, which is different from what we saw in most of the companies in the sector.
Once one of the reasons for it as well.
We'll be able to have a little contribution from continuing education segment, what should we expect sort of for the rest of the year should we see an additional dilution should we consider this as a new normal level.
We're just expense line. Thank you.
Hello.
And the lines of what.
Well, let me answer what I think you were asking.
They are life threatening it correctly, but the launch of PD one.
<unk> went through the whole year for example.
We still expect a.
Slight reduction in PD one.
These are compared to what we had last year for a number of reasons.
The FERC one in that.
Part of the overall experience.
I'll have a few of them.
To meet colleagues.
For those classes.
Our physical comfort in a hub.
Both died.
They started to meet again.
Sounds good to me for the first time.
B deal in April .
So by the way all of them both in the first quarter of this year.
Before the start of the.
Typical in.
In the hope that his project.
So this is an important engagement sector for the class.
So in.
Our model.
Life on a number of regions.
FERC one.
Peter.
The second one.
The meeting and hurtful.
Nope.
So those guys.
Have a physical meeting.
Again, all for the first time for the New Congress.
Meet their commitment and their engagement.
With the classmates is important she pulled the overall focus at least.
Ah represents a higher retention rate and as a result, lower PD images.
So far this year, we do believe that the overall LTV, which will be small for these reasons. The second reason.
I E.
That's.
Last year.
We grew a lot.
You have a 40% growth in the second quarter of second half upstream.
No problem.
As you know in Turkey.
Dropoff in P. J E T.
So now we have a slightly smaller burkland page.
Of newcomers.
But that we built last year than what we had the one year before.
So the weighted average of the profile of the film.
You have less newcomers than what they had one year before.
Ooh sector.
Show me a slightly lower.
The ratio this year.
Often that's revenue.
Can you repeat the first question please.
Good to hear you.
No that was all it was.
Very clear thank you.
Thank you Luca.
Again, if you'd like to ask a question. Please press Star then one.
Our next question comes from our ratios to Peter with Credit Suisse. Your line is open.
Hi, Carlos.
Hi, everybody there. Thank you for the for the for taking our questions.
So I have two questions, one and I'll go back to the seasonality aspects.
We were talking.
With your are your competitors doing desserts, Susan and we noticed that this.
On the allergy and distance learning in general something that seems to have changed.
For the industry right now.
And I know that you were a little bit more accustomed to that and because of the modular crosses in another value proposition you have.
So how does the seasonality change effective competition.
The first part of the question the second part of the question.
Reaching interferes with.
P D. A R evasion and other parameters that we were much more use it you see.
And kind of alternate to fashion between even and odd quarters.
And my second question is not related to.
I do appreciate aspect, but you were you were close to them to the closing.
We wish the deal we spend when he says Omar and we know that she kept her stricter where were thought about before all this interest rate rises in Brazil.
So how how these new.
Interest rates scenario.
It could change the way you were thinking about.
The catch the structure of the new cool. Thank you.
Okay.
It takes a bit of a follow up two quick ones. The first one regarding to the MLP.
You're absolutely right I mean, we reward already used to this let's see.
What more spread into cycle throughout the year because of our model academic approach.
And so.
We realized our EBIT goes up to and above me 44th a commensurate already from you.
And.
We do see a competition, which you have to finish.
Finished intake.
Around mid April for different real life now.
And a little bit more than a few more weeks.
But as you know.
There's a new product.
We do have a modular approach.
We can.
People are different.
For example, and that's tough.
One of them did.
Not a fan he or she cannot be an ria tends to move around.
And when you see the competition.
Because we do have parts of a five a barrel.
All subjects in a given semester.
Technical limit.
So when you realize.
For US there was no real change no important change overall.
With purpose and thank the beginning I think P J.
He's already with second that's what we had last year was.
The point of the curve, which was much more back ended in peak, we can all be here. It is okay.
Something you could do what we had in 2020 one.
I think it's the new normal what we're seeing this year.
So actually more back ended than wasn't had a few years ago, but not as much as we had last year.
In regard to clothing and kept it separate indeed, we are close to closing.
We have secured.
Ford credit lines for them for something much bank.
So there'll be a five year financing from from both banks.
And of course, we do.
We are.
Looking to accelerate the deleverage of the company, we're going to start with.
Quite highly leveraged.
The company the new would be true with good demand when you still have.
We generate a lot of cash.
We can deleverage overtime, but.
We are not going to simply.
Because real life.
I said before we are going to look for further M&A opportunities.
It is not a surprise.
Currency is higher than what everybody thought.
So for that we have a number of Watson.
The first one.
Two to go to the market and we've kept those follow on lump there must be open with most people today.
Second one we could also have the problem statement.
And we do have a number of parties that are looking for.
Okay.
And the and of course, there's always on the table there.
The potential.
Sale of the medical business.
We're going to vinyl.
Which a lot of people in the market asking them.
Whether we can sell it medicine or not.
No.
So far for whatsoever.
But did the cycle discussion will take.
Take place in the World after rural.
It was not something when it is supposed to do.
Got you.
Our medical education and sell it to other peers.
A lot more focus on depth and whatnot so.
So.
So we had to triple the business they'll have an English for that.
But we do have options.
Accurate deleverage.
Is it people.
The diversity of Carlos Thank you.
Thanksgiving.
If you would like to ask a question. Please press Star then one.
There are no further questions I'd like to turn the call back over to Carlos features for any closing remarks.
Okay.
So thank you all for your interest.
It would be true.
Our two year is more of them available to them.
You're pretty close you have thank you Dominik.
This concludes the conference call you may now disconnect.
Uh huh.
Yeah.
Okay.
[music].
Yeah.
Yeah.
[music].