Q3 2023 Vasta Platform Ltd Earnings Call
[music].
Speaker 1: Ladies and gentlemen, thank you for standing by. My name is Bhavesh, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Vasta Platform Third Quarter 2023 Financial Results Conference Call.
They just didn't sense, then think its standing by my name is bullish and I'll be your conference operator today at this time I would like to welcome everyone to the vast apart from third quarter 2023 financial results Conference call.
Speaker 1: At this time, all lines have been placed on mute to prevent any background noise. Often the speakers remarks, there will be a question.
At this time all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and session.
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If you'd like to ask a question. During this time simply press the star followed by the number one on your telephone keypad.
Speaker 1: If you would like to withdraw your question, please press the star followed by the one once again. Before we do this, I would like to welcome you to another Insect Kimball 1.0 review.
If you would like to withdraw your question. Please press the star followed by the one once again.
Before we begin I would like to read the forward looking statements.
Speaker 1: During today's presentation, our executives will make forward-looking statements
During today's presentation, our executives will make forward looking statements.
Speaker 1: Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements.
Forward looking statements generally relate to future events or future financial performance and involve known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward looking statements.
Forward looking statements. In this presentation include but are not limited to statements related to our business and financial performance expectations for future periods, our expectations regarding our strategic product initiatives and their related benefits and our expectations regarding the market.
Speaker 1: Board-lit-in statements in this presentation include, but are not limited to statements related to our business and financial performance, expectations for future periods, our expectations regarding our strategic product initiatives, and their related benefit and our expectations regarding the market.
Forward looking statements are based on management's beliefs and assumptions and on information currently available to our management team.
Speaker 1: proven licking statements are based on our management's beliefs and assumptions and on information commonly available to our management.
Speaker 1: These risks include those set forth in the press release that we are issuing today, as well as those more fully described in our filings with the Securities and Exchange Commission.
These risks include those set forth in the press release that we are issuing today, that's what it says more fully described in our filings with the Securities and Exchange Commission.
Speaker 1: The forward looking statements in this presentation are based on the information available to us as of today.
The forward looking statements in this presentation are based on information available to us as of today.
Speaker 1: He should not rely on them as predictions of the future events, and we disclaim any obligation to update any four-licensed payments except as required by law.
You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward looking statements, except as required by law.
Speaker 1: In addition, management may reference non-IFRS financial measures on this call.
In addition management may reference non <unk> financial measures all of the school.
Speaker 1: The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS.
The non <unk> financial measures.
Intended to be considered in isolation or as a substitute for results.
In accordance with <unk>.
Speaker 1: Thank you so much. I will now hand the call over to Marcelo Wernic of the Investor Relations. He may begin your call.
Thank you so much I will now hand, the call over to Marcelo one that holds the Investor Relations you may begin your conference.
Okay.
Speaker 2: Good evening everyone, thank you for joining us in the conference call to discuss VASTA platform third quarter 23 results. I am Marcel Overnick, VASTA's investor relations and today we have the presence of Glea Mimelega, VASTA CEO and he says a few VASTA CFO who will be joining me on the call.
Good evening, everyone. Thank you for joining the conference call to discuss the vast the platform third quarter 'twenty three results I am Marcelo Bastos Investor Relations and today, we have the presence of boxes.
See you.
<unk> CFO, who will be joining me on the call.
During the gold hoop over key highlights financially sites and strategic developments that have shaped our performance you can get 2023 commercial cycle.
Speaker 2: During the call, we'll cover key highlights, financial insights, and strategic developments that have shaped our performance in the 2023 commercial cycle.
Speaker 2: Let me now hand over the floor to Guilherme Melliga, our CEO , to make his opening statement.
Let me now hand over the floor to our CEO to make his opening statements.
Speaker 3: Thank you, my gentlemen. Thank you all for participating in our earliest speech call. I'd like to cover slide number three with some highlights of our 2023 commercialci.
Thank you all for participating in our earnings release call.
I would like to go over to slide number three we had some highlights of our 2023 commercial cycle.
Speaker 3: In this quarter, we concluded the 2023 commercial cycle, and we believe that the commercial cycle is the best way to understand our business.
And this quarter, we concluded the 2023 commercial cycle and we believe that the commercial cycle is the best way to understand our business.
Speaker 3: Our net revenue increased 24% to $1,437,000.
Net revenue increased 24% to $1 billion 437.
Speaker 3: mostly due to the conversion of 2023 ACV into revenue and also due to the performance of the non-subiscription products and
Mostly due to the conversion of 2023 HCV into revenue and also due to the performance of the non subscription products and B to G.
Speaker 3: Voptra subscription revenue has reached $1,207,018 increase over the 2022 sales cycle, for 22% excluding textbooks and description products.
But the subscription revenue is Richard $1.207 billion eight.
The 18% increase over the 2022 sales cycle or.
22%, excluding textbooks for prescription products.
Speaker 3: Our complementary solution segment continues to stand out, showing the highest growth rate among our business segments, with a 42% increase in the current size.
Our complementary solutions segment continues to stand out showing the highest growth rate among our business segments with a 42% increase in the current cycle. Moreover, as mentioned in the last quarter and 2023 vastly started tool for its products and services to the Brazilian public sector.
Speaker 3: Moreover, as mentioned in the last quarter, in 2023 Vasti started to offer its products in service to the Brazilian public sector.
We told you.
Speaker 3: In the third quarter of 2023, we generated 40.7 million reais in revenues with the B2G sector. And in 2023, sales cycle, we generated 81.2 million reais in revenues with the B2G sector.
In the third quarter of 2023, we generated $40 7 million Reais in revenues with the BTG sector and in 2023 sales cycle, we generated $81 2 million reais in revenues with <unk>.
Speaker 3: Moving to the company's profitability in the 2023 commercial cycle, our adjusted ABTBA experienced a growth of 23 percent reaching 411 million r.
Moving to the company's profitability.
The 2023 commercial cycle, our adjusted EBITDA experienced a growth of 23%, reaching 411 million widened.
Speaker 3: Why maintain an adjusted EBITDA margin close to 29?
Why do you maintain an adjusted EBITDA margin close to 29%.
Speaker 3: Finally, this was another year of significant improvement in our cash flow. In the 2023 sales cycle, pre-cash flow total 145 million reais, 167% increase from 55 million reais in 2022 cycle.
Finally.
This was another year of significant improvement in our cash flow in.
In the 2023 sales cycle free cash flow totaled 145 million reais.
167% increase from 55 million Reais in 2022 cycles.
The last several months.
Speaker 3: Precache flow to adjust the EBTDA conversion rate, improved from 16% to 35%.
Free cash flow to adjusted EBITDA conversion rate improvement from 16% to 35%.
I will now turn it back to Marcelo.
Speaker 3: I will now turn back to Marcelo to talk about the financial results of the quarter and the 2023 commercial.
Talk about the financial results of the quarter ended 2023 commercials.
Okay.
[laughter].
Speaker 2: Thank you, Málaga. In this slide, we present the composition of VASTA's net revenue. On the left side, you can observe the significant event year-on-year growth in total net revenue for the third quarter, which increased by 37%, reaching 258 million RIA.
Thank you Malika.
This is likely present, the composition of <unk> net revenue.
On the left side you can observe the significant organic year on year growth in total net revenue for the third quarter, which increased by 37%, reaching 258 million Reais.
Speaker 2: On the right side, let's detail the key components of this revenue growth.
On the right side, let me take the key components of this revenue growth.
Speaker 2: The description revenue had an increase of 15%. Our subscription revenue experienced a growth of 20% year on year.
Subscription revenue had an increase of 15% excluding par our subscription revenue experienced a growth of 20% year on year.
Speaker 2: during the third quarter of 23, we successfully generated another 41 million realizing revenue from the B2G sector. And finally, the non-sub-description revenue increased by 17% reaching 22 million.
During the third quarter of 'twenty three we successfully generated another 41, neither the rise in revenue from the <unk> sector and finally, the non subscription revenue increased by 17% reaching $22 million.
Moving to slide number five we analyze the net revenue for the 23 commercial cycle.
Speaker 2: Move into light number five. We analyze the net revenue for the 23 commercial cycles.
Speaker 2: In 23, we achieved an organic net revenue growth of 24% amounting to 1.437 million reais.
'twenty three we achieved an organic net revenue growth of 24% amounting to 1 billion <unk> hundred 37 million Reais.
Speaker 2: As you can see on the right, our total subscription revenue increased by 18% on an organic basis to 1 billion, 207 billion reais.
As you can see on the right.
Our total subscription revenue increased by 18% on an organic basis to 1 billion 207 billion Reais.
Speaker 2: Subscription revenue, excluding par, had an increase of 22%, reaching 1 billion and 95 million reais. However, par, our textbook subscription products declined by 11% amounting to 112 million.
Subscription revenue excuse me Barr had an increase of 22%, reaching 1.095 billion Reais. However, our textbook subscription products declined by 11% amounting to 112 medium.
Subscription revenue continues the major contributor to our total.
Speaker 2: Subscription revenue continues the major contributor to our total net revenue, representing 84% of the revenue share.
Net revenue representing 84% of the revenue share.
Speaker 2: Also, our successful expansion into the Brazilian public sector, the D2G has yielded promising results, contributing to 10% of our overall revenue in the 23 cycle and generated 81 million revenues.
Also our successful expansion into the Brazilian public sector metrology has yielded promising results contributing to 10% of our.
Revenue in the 2003 cycle and generated $8 1 million in revenues.
Speaker 2: No subscription revenue, no comprise only 10% of the total revenue and increased by 12%. Primarily, driven by the introduction of the new revenue streamlines from our flagships school, start on global.
<unk> subscription revenue now comprises only 10% of the total revenue and increased by 12% primarily driven by the introduction of the new revenue stream lining our flagship school start envelope.
Moving to slide number six in this quarter, our adjusted EBITDA amounted to 39 million with a margin of 15%.
Speaker 2: Moving to slide number six, in the squarters, our adjusted EBITDA amounted to 39 million with a margin of 15%.
Speaker 2: Dispositive deformers is attributed to several factors including strength sales results, cost dilution and operational proficiency.
This positive performance is attributed to several factors, including strong sales results cost dilution and operational efficiencies.
Speaker 2: On the right side, the adjusted EBDA for the 23 cycle increased by 23% to reach 411 million with a margin of 28.6%.
The right side, the adjusted EBITDA for the 23 cycle increased by 23% to reach 411 million, we felt margin of 28, 6%.
And the next slide you see the breakdown of the adjusted EBITDA margin.
Speaker 2: In the next slide, you'll see the breakdown of the adjusted AVIDTA margin.
Speaker 2: In slide 7, the evident margin shows a slight decrease of 40 basis points compared to the last cycle, from 29% to 28.6%.
In slide seven.
Margins showed was likely to decrease of 40 basis points compared to the last cycle from 2009% Duane to eight 6%.
Speaker 2: Firstly, our gross margin declined 30 basis points. S23 was a year that the industry faced a higher inventory cost caused by rising inflation on paper and production costs.
Firstly, our gross margin declined 30 basis points as 23 was a year that the industry faces a higher inventory cause costs caused by rising inflation.
Paper and production costs.
Speaker 2: Moreover, our provision for DAB
Moreover, our provision for doubtful accounts 88.
Speaker 2: grew 150 basis points compared between the commercial sites.
Grew 150 basis points.
Baird.
Between the commercial cycles. This increasing PD is impacted due to the provision of 100% of accounts receivable from a large Brazilian retail company undergoing bankruptcy procedures and the amount of 90 million and <unk> 23.
Speaker 2: This increase in PDA is impacted due to the provision of 100% of accounts receivable from a large Brazilian retail company undergoing bankruptcy procedures in the amount of $9 million in the 23 commercials.
Commercial cycle, which contributed 80 basis points in our EBITDA margins.
Speaker 2: which contributes to 80 basis points in our EBITDA margin.
Speaker 2: We also experienced 70 base points in our generic PDA, which will be explored further ahead in our presentation.
We also experienced 70 basis points in our generic PDA, which will be explored further ahead in our presentation.
Despite these challenges there are several positive aspects to highlight as we managed to offset these negative impacts drove significant.
Speaker 2: Despite this challenge, there are several positive aspects to highlight as we manage to offset these negative impacts through significant operational efficiency gains and cost-saving measures.
Operational efficiency gain and cost saving measures.
Speaker 2: and it proves product unique, skewed by growth of our subscription products, has played a crucial role.
An improving product mix fueled by the growth of our subscription products has played a crucial role.
Speaker 2: As a percentage of the net revenue, our commercial expense had an improvement of 40 basis points indicating greater cost effectiveness in our sales and marketing efforts. And our just as GNA expenses improved by 100 basis points.
As a percentage of net revenue our commercial expenses had an improvement of 40 basis points.
Indicating greater cost effectiveness in our sales and marketing efforts and our adjusted G&A expenses.
<unk> expenses improved by 100 basis points.
Yes.
Speaker 2: Moving to slide number 8, get just net laws in the third quarter of 23.
Moving to slide number eight the adjusted net loss in the third quarter of 2003.
Speaker 2: amount to 30 million reais compared to a net loss of 42 million in the comparable quarter of 22
Our March 30 million compared to a net loss of 42 million in the comparable quarter of 'twenty two.
Speaker 2: As you can see on the right side, our adjusted net profits in the 23 commercial cycle have actual improvements increasing by 83% compared to the 22 cycle reaching 36 million REI.
As you can see on the right side, our adjusted net profit in the 'twenty three commercial cycle textualism improvements increasing by 83% comparing to the 'twenty two cycles.
Reaching 36 million Reais.
Speaker 2: Finance costs in the finery of the spike interest rate continue to impact our bottom line. However, we have remained committed to the leveraging as you see further in this presentation.
Finance costs in the scenario of a spike in interest rates continues to impact our bottom line. However, we have remained committed to deleveraging as you see further in this presentation.
Yes.
Yeah.
Speaker 2: Moving to slide number 9 we saw the free cash flow evolution.
Moving to slide number nine we show the free cash flow evolution.
We continue to observe the normalization of the Companys cash flow generation in the third quarter of 'twenty three.
Speaker 2: We continue to observe the normalization of the company's cash flow generation. In the third quarter of 23, the free cash flow totals 58 million, representing a solid increase compared to 17 million in the third quarter of 22.
Free cash flow totaled 58 million, representing a solid increase compared to $17 million in the third quarter of 'twenty two.
Moreover to the right sites in the 'twenty through cycle, our free cash flow reached 145 million.
Speaker 2: more over to the right sides. In the 23 cycle, our free cash flow reached the 145 million, a 167% increase from the 15 million in 22.
100% to 167% increase from the 50 million in 'twenty two.
And another important metric our last 12 months free cash flow to adjusted EBITDA conversion rates, improving from 60% to 35%.
Speaker 2: On another important metric, our last 12 months, pre-cash flow to adjusted EBITDA conversion rates improved from 16% to 35%.
Speaker 2: reinforcing the message that cash generation continues to be a key focus area of our business.
Before the message that cash generation could can distribute a key focus area of our business.
Speaker 2: Move to slide number 10. Let me give you more details on the provision for that full account.
Moving to slide number 10, let me give you more details on the provision for doubtful accounts.
Speaker 2: Total expenses with BDA in the third quarter of 23, total 15 million, representing 6% of the net revenue compared to the expenses of 5 million in the comparable quarter.
Total expenses with EBITDA in the third quarter of 'twenty, three totaled 15 million, representing 6% of net revenue compared to the expenses of $5 million.
In the comparable quarter.
Speaker 2: Moving to the right side of the slide, we can observe that PDA for the 23 commercial cycle.
Moving to the right side of the slide we can observe that PPA for the 23 commercial cycle.
Yeah.
Speaker 2: We are a watch provision for the bill for accounts grew 150 basis points between the comparable cycles from 2.4% to 3.9% of the net revenue.
We are of what provision for doubtful accounts grew 150 basis points between the comparable cycles from two 4% to three 9% of net revenue.
This increase in EBITDA is impacted due to the provisioning of 100% of accounts receivable from a large retail.
Speaker 2: This increase in PDA is impacted due to the provisioning of 100% of accounts received or for a large retail, Brazilian retail company undergoing bank emergency procedures in the amount of 9 million in the 23-stays cycle, combining with the revised Credits Landscape.
Brazilian retail company undergoing bankruptcy procedures in the amount of $90 million and between sales cycle.
Finally, with the revised credit landscape.
Speaker 2: This has necessitated a prudent approach to risk management and credit provision with the prevailing market conditions.
This has necessitated a prudent approach to risk management and credit provision with the prevailing market conditions.
Speaker 2: All factors consider it the participation of PDA in relation to vast net revenue increased to 3.9% in the 23 commercial cycle compared to 2.4%.
All factors considered the participation of PD in relation to losses net revenue increased three 9% in the 'twenty three commercial cycle compared to 4%.
However, excluding these one off effect of the larger with the provisioning the normalized PVH will be three one of the net revenues. We just one line with the typical course of our business.
Speaker 2: However, excluding these one-off effects of the larger retail provisioning, the normalized EDA should be 3.1 of the net revenues, which is one line with the typical course of our business.
Speaker 2: Moving to the next slide, we observed that the average payment turns of vast of accounts receivable for to follow was 118 days in the third quarter of 23, which is 31 days lower than the second quarter of the disease.
Moving to the next slide we observed that the average payment terms of Masters accounts receivable portfolio was 118 days in the third quarter of 2000, <unk> III, which is 31 days lower than the second quarter of this year.
Speaker 2: I will not conclude my part of this presentation with slide number 12.
I will now conclude my part of this presentation with slide number 12.
Speaker 2: At the end of the third quarter of 2023, Vasta achieved a reduction at that which amount to 998 million reais.
At the end of the third quarter of 'twenty, three vast achieved a reduction of net debt, which amounts to 998 million Reais and.
Speaker 2: an improvement of 60 million compared to the net position in the second quarter of 23.
An improvement of 16 million compared to net position.
Second quarter of 2003.
This achievement is due to the positive cash flow generated during the period and the amount of $58 million, which surpasses the impact of interest accrual of 36 million and this share buyback program in the amount of $6 million in cash outflows.
Speaker 2: This achievement is due to the positive cash flow generated during the period in the amount of 50 million, which surpasses the impact of inter-stacklew of 36 million, and the share-by-backed program in the amount of 6 million in cash outflow.
On the right side of the slide we can observe that in third quarter 2003, the net debt. The last 12 months adjusted EBITDA Rager ratio stands at 248 times, which marks an improvement of <unk> 14 times compared to the second quarter.
Speaker 2: On the right side of this slide, we can observe that in 34 to 23, the net that the last of months adjusted the evidarager, ratio extends at 2.48 times.
Speaker 2: which marks an improvement of 0.14 times compared to the second quarter of 23 and an improvement of 0.5 times when compared to the third quarter of 22.
After 'twenty three and an improvement of 0.5 times when compared to the third quarter. After 20 June.
Speaker 2: toothbrush that we said a Lalip Chen file at RCO, Gurani Malaga
With that being said I'll pass the word to <unk>.
<unk> Delaney malaga.
Okay.
Thank you Marcello.
Speaker 3: Thank you Marcelo, moving to his light 14.
Moving to slide 14.
Speaker 3: In this quarter, we released our sustainability report for the year of 2020.
In this quarter, we released our sustainability report for the year of 2022. This report, which is company's second report was preparing in accordance with international standards for reports of this category and showcases the implementation of our corporate strategy challenges and achievements while also.
Speaker 3: This report, which is the company's second report, was prepared in accordance with international standards for reports of this category and showcases the implementation of our corporate strategy, challenges, and achievements, while also reaffirming our commitment to transparency and sustainability.
We are affirming our commitment to transparency and sustainability.
Speaker 3: The report complies with the global reporting initiative and also considers other standards recognized in Brazil and abroad, such as the sustainability accounting standards board guidelines for education.
The report compliance with the global reporting initiative and also considers other extended standards recognizing in Brazil and abroad, such as the sustainability accounting standards Board guidelines for relocation sector. We.
Speaker 3: We are proud to say that we made strides and increased the visibility of our ESG strategy in all three pillars.
We are proud to say that we made strides in increasing the visibility of our ESG strategy.
Speaker 3: the environmental pillar, we publish it our first greenhouse gas inventory. We increase it renewable energy consumption.
In the environmental pillar, we published our first Green House gas inventory.
We increased renewable energy consumption.
We're reducing our water intake we have been F. F 35 for sustainable paper sourcing ensuring exclusive partnership with similarly certified suppliers, we have developed and distributed content related to sustainability amongst several other achievements.
Speaker 3: We have been FFC certified for sustainable paper sourcing, ensuring exclusive partnership with similarly certified suppliers. We developed and distributed content related to sustainability among several auditors.
Speaker 3: In the social pillar, we launched our first affirmative internship program.
And the social pillar, we launched our first affirmative internship program almost hospital.
We're enhancing regulatory tools with clear goal driven policies. We continued our efforts with this almost institutes for every one real invested by the Somos Institute 11, Reais were return it to society.
Speaker 3: who enhanced the regulatory tools with clear, goal-driven policies.
Speaker 3: We continue our efforts with the summer season.
Speaker 3: For every R$1 invested by the Somos Institute, R$11 were returned to society.
Speaker 3: And the governance pillar, I can highlight that we have committed to the U.N. Global Compact 10 principles in human rights, labor, the environment, and antitrust. And we have the woman on board certification due to the presence of women on the Board of Directors.
And the governance pillar.
Highlight that we have committed to the UN global compact <unk> principal and human rights labor, the environment and antitrust and we have the.
Women Award certification due to the presence of women on the board of directors.
Speaker 3: I encourage you to visit our website and access our full sustainability report, which is available both in Portuguese and English.
I encourage you to visit our website and access our four sustainability report which is available.
In Portuguese and English.
Finalize my presentation with slide 15.
Speaker 3: To mark the closure of the 2023 business cycle, I would like to highlight six key elements that I believe have shaped this cycle.
To Mark the closure of 2023 business cycle I would like to highlight six key elements that I believe have shaped that this cycle.
Our brands.
Speaker 3: Our journey of evolution was marked by the continuous evolution of our core and complementary brands. For example, our Pythagoras brand, which is celebrating 57 years of excellence, has rejuvenated its brand, modernized itself, and brings transformation in the pedagogical structure.
Our journey of evolution was market by the continuous evolution of our core and complementary brands. For example, our <unk> brand, which is celebrating 57 years of excellence has <unk> its brand modernize itself and brings transformation in the pedagogical structure. We also.
Speaker 3: We also redefined the educational experience with the migration from the 11 brands to our new identity, Amplier.
The final relocation of experience with the migration from the 11 brands.
To our new identity and full year.
Speaker 3: And in complementary segment, the launch of Edwell in the partnership with Macmillan Education and NIO marked a significant milestone for the 2023 site.
And in complementary segment, the launch of <unk> and the partnership with Mcmillan indication in Io market, a significant milestone for the 2023 cycle.
Speaker 3: exceptional academic results. Our dedication to educational quality was reflected in outstanding academic achievements. Anglou continued to lead the university acceptance across the county.
Exceptional academic results our dedication to educational quality was reflected in outstanding academic achievements and will continue to lead we reversed acceptance across the country.
Speaker 3: engage experience the remarkable 85% growth in with insight
<unk> experienced a remarkable 34, 35% growth in acceptances.
Speaker 3: amplia and fibonacci also one of their place of stop performers in the nane
Clear and Fibonacci also earn their place as top performers in the NAA eliminations.
Speaker 3: Revenue growth in new avenues. The launch of Start-Ungroup franchise, combined by linguism with academic excellence, represents a strategic expansion in our pursuit of new revenue stream. The first units are sapsuoperating to 2024, marking the beginning of an exciting journey.
Revenue growth.
And new avenues. The launch of Stark earned grew franchise, combining billing wisdom with academic excellence represents a strategic expansion in our pursuit of new revenue stream.
First units are set to operate in 2024, marking the beginning of an exciting Jordan.
The initiative technology.
Speaker 3: Sorry, innovative technology. PowerProtau platform proved it to be a valuable ally for parents, student and teachers, leaving the K-12 web traffic with 32% traffic shared in Brazil. We surpassed the milestone of two million enrolled students.
So our innovative technology, our crude oil platform proven to be a valuable ally for foreign students and features leading the K 12 web traffic with 32% traffic share in Brazil.
Surpassing the milestone of 2 million enrolled students.
Speaker 3: Also, our adaptive learning and artificial intelligence solutions, such as PluralAdapter and Redação Nata Mil, demonstrate our commitment to driving educational innovation.
Also our adaptive learning.
Artificial intelligence solutions, such as fluid our adoption and had a soma <unk> demonstrate our commitment to driving educational innovation.
Speaker 3: FOLLOWED FINANCIAL RESULTS. Our financial indicator speaks for the...
Solid financial results, our financial indicators speaks for themselves, we achieved 24% growth in revenue, 22% in EBITDA and an increase of 167% and free cash flow.
Speaker 3: We achieved 24% growth in revenue, 22% in ABTDA, and an increase of 167% in free cash.
Speaker 3: numbers reflect our commitment to financial stability and evaluations.
These numbers reflect our commitment to financial stability.
Stability and value creation BTG.
Speaker 3: we successfully venture into the public sector, generating revenue of $80 million by serving other 300,000 students.
We are successfully venture into the public sector generating revenue of $80 million by serving 300000 instruments.
With all these in mind 2023 was an extraordinary year.
Speaker 3: With all these in mind, 2023 was an extraordinary year, a milestone in our journey. These achievements positioned us favorably to face the challenges that the future holds.
Milestone and our Jordan these achievements position us favorably to face the challenges that the future holds.
Speaker 3: We have the confidence that we are on the right path to continue delivering outstanding results for our shareholders. Solidify strong partnerships and make a significant contribution to our country's education.
We have the confidence that we are on the right path to continue delivering outstanding results for our shareholders solidifies strong partnerships and make a significant contribution to our accounts with litigation.
Speaker 3: Having said that, I finish our presentation and invite you all to the Q&A.
Having said that I finish our presentation and invite you all to the Q&A session.
Thank you at this time I would like to remind our teleconference participants in order to ask a teleconference question. Please press the star followed by the number 110000 key pad.
Speaker 1: Thank you. At this time I would like to remind our teleconference participants in order to ask a teleconference question, please press the star followed by the number 1 on your telephone keypad. We will pause for just a moment to compile the...
I'll pause for just a moment to compile the Q&A roster.
Speaker 1: Our first question comes from the line of Lucas Nagano from Morgan Stanley . Please go ahead with your question.
Our first question comes from the line of Lukas Nagana from Morgan Stanley. Please go ahead with your question.
Hi, good evening, everyone. Thanks for taking our questions we have two questions.
Speaker 4: Good evening everyone. Thanks for taking our questions. We have two questions
Speaker 4: The first one is related to the 2020 4SUV. If you could give us some color on the expectations.
The first one is related to the 2020 for HCV.
If you could give us some color on the on the expectations.
Speaker 4: So for example, Core arrived in you, grew 15%, the cycle. It was a little bit dragged by par, but we were just wondering if this...
So for example core revenue grew 50% this cycle.
It was a little bit dragged by par, but we were just wondering if this does it didn't you expected levels from now that the penetration of any system. This is more mature and in complementary you delivered.
40% growth and we were wondering if this is sustainable for a few more years the.
Speaker 4: sustainable for a few more years. The second question is related to BTG. If you could provide us some details if this was related to one or a few or many contracts and what type of service was provided. We wanted to kind of...
The second question is related to BTG.
If you could provide us some details if this was related to one or a few of our many contract and what type of service was provided we wanted to kind of.
Speaker 4: assess the level of recurrence and the ability to to scale up this type of solution. Thank you.
The SaaS and the level of recurrence and the ability to just queue up this type of solution. Thank you.
Okay.
Speaker 3: Thanks Lucas, let me address your questions. First about 2024 ACV. Let me give you some color about that. First, let's keep in mind that our ACV for the last four commercial cycles. So since the ACV of 2019, until now, we have a compound growth of 20.5.
Thanks, Lucas, let me address your questions.
First of all 2020 for HCV.
Let me give you some color about that.
First let's keep in mind that our HCV for the last four commercial cycles so things.
The <unk> of 2019.
Now we have a compound growth of 25%.
Speaker 3: So we just delivered the last ACV that when you compare the last four cycles we reach So IoT does not run the moment where you want to don't step here So once you finish up and fill in the whole trunk
So we just delivered.
<unk>.
When you compare the last four cycle, we reached more than 20%. That's the trend that we want to keep on our we're now on our on our company and we do not expect.
Speaker 3: That's the trend that we want to keep on our company. And we do not expect any different trends from that.
Different trend from that.
Speaker 3: Since our core is still growing, we have very reputable brands, and they are very important for learning system growth and complementary. Although it's growing fast, we have a very low penetration yet on our base and on the total schools. So we definitely foresee the level of growth for complementary.
Thanks.
Our core business still growing we have a very repeatable.
Brands and.
They are very important for learning system growth.
Complementary although it is growing fast we have a very low penetration yet on our base.
On the total schools so.
We definitely foresee these level of growth for component areas.
Speaker 3: So we definitely expect to keep the trend on Koginal Day on December .
So.
We definitely expect to keep the trend.
On Cogs.
On December <unk>.
Speaker 3: seven, we will deliver our guideline. We will wait until the end since we are on the peak of the campaign, but just giving you some color, we do not expect any difference on the trend.
Kevin.
We will deliver our guideline.
Andrew.
We will wait for <unk> since we have we are in the peak of the campaign, but giving you some color we do not expect any.
The difference on the trends.
<unk>.
Speaker 3: B2G, we recognize the second half of the same contract that refers to the state of Para with the first half of the year. Now we deliver the second half of the year. So it's a single contract.
Mid <unk>.
We recognize in the second half of the same contract.
That refers to the state of para. So we delivered the first half of the year now we delivered the second half of the year. So it's a single contract.
Speaker 3: and the contract with the public entity must be renewed every year. So although we believe we set the baseline to growth on next year, it represents a single contract for us.
The contract with the public entity must be renewed every year. So although we believe we set the baseline to grow next year. It represents a single contract.
For us.
Speaker 3: but definitely respect growth coming from the B2G, from this baseline for next...
Definitely we expect growth coming from the BTG.
These baseline for next year.
Speaker 4: Are you clear? You mentioned that for next year there's a baseline, but should there be like some kind of volatility in the process like in the next quarter and the next two quarters?
That's very clear you mentioned that for next year, there is a baseline but.
Should there be like some kind of volatility in the process in the next quarter in the next few quarters. Thank you.
Speaker 3: We do not expect any new revenue in Q4 since this product is related to Syedby and the Syedby Exam is in November . So we already delivered all our product and services for this year. But we expect to renew...
Sure.
We do not expect any new revenue in Q4. Since this project is related to <unk> in November. So we are ready to deliver all our products and services.
For this year.
But we expect to renew.
The contract award to acquire new contracts for next year and normally the revenue recognition should be Q2 and Q3.
Speaker 3: the contractor to acquire new contracts for next year. And normally the revenue recognition should be Q2 and Q3. But that's not a rule.
But that's not that's not the rule.
Perfect. Thank you.
Speaker 1: As a reminder, if you'd like to ask questions, please press the star, follow by the one on your telephone.
As a reminder, if you'd like to ask a question. Please press the star followed by the one on your telephone.
Speaker 1: Our next question comes on line of Marcelo Santos from JP Morgan. Please go ahead with your question.
Our next question comes from London, Marcelo Santos from JP Morgan. Please go ahead with your question.
Speaker 3: Hi, good evening, Mael, Agassiz, Marcelo, thank you for the opportunity to make questions. I have two also on our side. The first, if you could comment a bit, the margin outlook for the coming cycle. So you said like this cycle you had a slight decrease, you listed the issues like a little bit of bad debt, production costs and paper. How do you see the outlook for the coming cycle?
Hi, Good evening Malaga gathering marcella, thank you for.
Opportunities to make questions I have two also on our side. The first if you could comment on the margin outlook for the coming cycle. So you said like <unk> had a slight decrease you listed the issues like a little bit of bad debt.
Production cost in paper, how do you see the outlook for the coming cycle and the second question is if you could comment a bit on a Duke bank is there any metric of performance that you could share.
Speaker 3: And the second question is if you could comment a bit on a Duke bank, is there any metric of performance that you could share? We see a few generating that losses, but it's in early stages, so there are any insights you could provide on this initiative.
We seek to.
Generating net losses, but he is in early stages. So there any insight you could provide on these initiatives. Thank you.
Okay.
Speaker 3: Hi Marcelo, thank you for your question. Regarding margins, we expect to have...
Hi, Marcelo Thank you for your question.
Regarding margins.
We expect to have.
Speaker 3: better margins for next year. We are always pursuing the 30% adjusted EBITDA margin. We will not expect new impacts from paper for next year. So we already recognize.
Better margins for next year, we are always pursuing the 30% adjusted EBITDA margin.
We will not expect.
New impacts from paper for next year, So we already recognize.
Speaker 3: Our inventory level is already at the old price level. We do not expect new paper price increases.
Our inventory levels is already at.
At the old price level, we do not expect new paper price increases.
Speaker 3: Of course there are inflation but we have been able
Of course, there are inflation, but we have been able to move cost based price adjustment so our pricing for our next year.
Speaker 3: to move cost-based price adjustment. So our pricing for next year is around a double-digit level. So we expect to visit with several of our brands in the area and the current pick up strategy wise for data baseball deer.
Our on the double digit level, so we expect to.
Speaker 3: We cover some of our margins for 2024.
And we cover some of our margins for 2024.
Speaker 3: And regarding the Duke Bank, Duke Bank were very excited with Duke Bank performance. This year, the company was able to fund themselves with 70 million realize secretization and they have new credit lines in place to fund the growth. We expect to end this year, December , with 85,000 students bill it.
And regarding <unk> Bank <unk> Bank, we are very excited with <unk> Bank performance.
This year.
Yeah.
The company was able to fund themselves with 70 million Reais securitization and they have new credit lines in place to to fund the growth.
We expect to end.
This year December with 85000 students billet.
Speaker 3: And next year, December next year with 220,000 students bill it. So it's a very fast growth company that are funded by itself in the market.
And next year December next year with 220000 students billing so it's a very fast growth company.
That are funded by itself in the market.
Speaker 3: that proves the confidence that everybody has with the business model. And in terms of PPPV, we are reaching the 50 million REI level right now and obviously this will grow with the
That proves the confidence that everybody has with the business model.
In terms of PPV, we are reaching the 50 million reais level right now.
These will grow.
With the.
Speaker 3: with the Billage students for the new Billage students level for next.
With the ability to students for the new billet students' level for next year.
Speaker 5: Just a clarification, the 50 million is what, if you when you're alive, like today's student, it's 50 million or it's 50 million for this year. Just to understand, no, it's monthly. 50 million, yeah, it monthly. Six, 600 million.
Just a clarification the $50 million, what if you annualize like two days of student, it's $50 million or is $50 million for this year just to understand it.
It's monthly 50 million in <unk> six.
600 million annualized on all islands.
Speaker 4: Okay, 50 million monthly 600 million analyzed. Thank you very much. Very clear.
Okay 50 million monthly 600 million annualized thank you very much very clear.
Thank you Marcello.
Okay.
Speaker 1: As a final reminder, if you'd like to ask a question, please press the star, follow by the one on your telephone.
As a final reminder, if you'd like to ask a question. Please press star followed by the one on <unk>.
We have a follow up question from Marcellus Anthos from JP Morgan.
Speaker 3: We have a follow-up question from Marcelo Santos from JP Morgan. Hi, thanks for the follow-up. Just wanted to ask one single question. Usually the third quarter was very weak quarter in terms of margins, like seasonally speaking, and you have been proving that what's happening, what's causing you to generate this improvement over the last several years? And is this something that we should start seeing more as moved a bit at distribution in the coming years? Your entry to dis Pareli's
Hi, Thanks for the follow up just wanted to ask one single question.
Usually the third quarter was a very weak quarter in terms of margins like seasonally speaking and you have been proving that.
What's happening, what's causing you to.
Generated improvement over the last several years and is this something that we should start seeing more and more.
EBITDA distribution in the coming years. Thank you.
Okay.
Speaker 3: So the major contribution is volume. We are growing and Q3 benefits from higher volumes and not only on the B2B.
Hello.
The major contribution is volume we're growing in Q3 benefits from higher volumes.
Not only on the B to B segment, but also on the <unk>, we just recognized.
Speaker 3: Faginate but also the B2G we just recognized 40 million realize on the B2G So margins are growing because the company is growing that's pretty much it there is no and Thesonality Q drives our margins Q4 will be the biggest margin on our business Followed by Q1 and then we have Q2 in Q3 that we are stabilizing it on a new level of around 10%
$40 million of eyes on the BTG, where margins are growing because the company is growing.
It's pretty much if there is no.
As analogy still drives our margins Q4 will be the biggest margin on our business.
Following by Q1, and then we have Q2 and Q3.
We have stabilized stabilizing.
On a on a.
A new level of around 10%.
Perfect. Thank you very much very clear.
Okay.
Okay.
Thank you. Our next question comes from non our latest <unk> from Morgan Stanley. Please go ahead with your question.
Speaker 1: Thank you, Annex Question Control, and Lana of Lucas Nagada for Morgan Stanley . Please go over the question.
Speaker 4: Thanks for the follow up question. I have a question on PDA specifically. So looking at Q3 alone, the PDA expenses increased because of churn. Mainly no premium brands, as you say. I just wanted to understand what causes churn and how does the financial situation in those schools
Thanks for the follow up question.
I have a question on <unk>, specifically, so looking at Q.
Q3 alone <unk> expenses increased because of churn mainly.
Mainly known premium brands as you say I just wanted to understand what causes churn and how is it a financial situation.
And those calls.
Speaker 4: The hypothesis is that things should improve from now, led by microindicators, so I just wanted to understand there's kind of any short-term change there. Thank you.
Because the hypothesis is that things should improve from now.
Led by macro indicators. So just wanted to understand if there is a kind of any structural change there. Thank you.
Hi, Hi, Lucas Thank you.
Speaker 3: Hi, Lucas. Thank you.
Speaker 3: And you are right. Your hypothesis is right. We had one off in terms of cycle. We had the recognition of 9 million reais from the large retail company in bankruptcy procedures. Taking it, this considering it, our PDA level is now at 3.1%.
And you are right your hypothesis is right.
We had a one off in terms of cycle, we have the recognition of 9 million Reais.
The larger retail.
<unk>.
Company in bankruptcy, but <unk> procedures.
This considering it.
Our PGA level is now at three 1% and this increase of <unk>, 7% from the cycle of 2022 is pretty much due to macroeconomic environment.
Speaker 3: And this increase of 0.7% from the cycle of 2022 is pretty much due to macroeconomic environment. We are seeing slightly delinquency increase in the entire economy, and the schools are also facing that. But 3.1, we believe it's...
We are seeing is likely.
Delinquency increase in the entire economy and the schools are also facing that.
But three one we believe it's.
Speaker 3: Still a very low PDA level and definitely is one of the lowest in the industry.
Still a very low PDA level and definitely is one of the lower in the industry.
Okay. Thank you.
Speaker 1: I'm so afraid to be not fed the questions at this time. Marcel O'Renek, I'll tell Nicole back to over to you.
Okay. No further questions at this time, Marcelo Vernon technical back to <unk>.
Okay.
Speaker 3: I'll take it here. Thank you all.
I'll take it here.
In Q all.
Sure.
Speaker 3: for participating in Q3 earnings release. We are very proud to deliver the cycle results that we just delivered with 24% revenue growth, 23% EBITDA growth, and the free cash flow EBITDA moving from 16% to 35%. Moreover, to have implemented two very important growth avenues, such as the B2G and the start, TangoBiz.
For participating in Q3.
News release.
We are very proud to deliver the cycle results that we just delivered with 24% revenue growth, 23% EBITDA growth.
And the free cash flow EBITDA, moving from 16% to 35%. Moreover to have implemented two very important groups growth avenues, such as the BTG and a start date in group business and I'm looking forward to see you again and we reaffirm.
Speaker 3: and looking forward to see you again. And we reaffirmed our commitment and excitement for the new cycle and looking forward to see you at the Kogunade.
Our commitment and excitement for the new cycle and looking forward to see you at cognizant.
Speaker 1: Thank you ladies and gentlemen. We will conclude today's conference call. Thank you for participating. Happy No-D
Thank you ladies and gentlemen, we will conclude today's conference call. Thank you for participating you may now disconnect.
Speaker 6: and And
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