Q4 2023 Vasta Platform Ltd Earnings Call
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Good day, everyone and welcome to the Boston platform fourth quarter 2023 financial results call before we begin I would like to read forward looking statements. During today's presentation. Our executives will make forward looking statements forward looking statements generally relate to future events or future financial.
Our operating performance and involve known and unknown risks uncertainties and other facts that may cause our actual results to differ materially from those contemplated by those 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 to that and our expectations regarding the market.
Looking statements are based on our management's beliefs and assumptions and on information currently available to management.
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.
The forward looking statements in this presentation are based on the information available to us as of today.
You should not really not lie on them as predictions of future events and we just clean any obligation to update any forward looking statements, except as required by law.
In addition management may reference non I F. R. S financial measures on this call. The nine I FRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with I F. R. S.
I will now turn the call over to Marcelo Warnicke Investor Relations. Please go ahead.
Yeah.
Marcelo Werneck: Good evening, everyone. Thank you for joining yours sculptors Golden just goes back to the platform fourth quarter and full year <unk> results.
The fourth quarter also represented the first quarter of the 'twenty 'twenty four sales cycle, which goes from October 23 to September 24.
And Mark that was enacted boxes investor relations and today, you would have the presence of <unk>.
Uh huh.
The CEO and sense of humor fastest CFO, who will be joining me on the call.
Let me now hand over the floor to <unk>.
Marcelo Werneck: To make his opening statement.
Thank you Marcelo and thank you all for participating in our earnings release call.
I'd like to cover is alive number three with some highlights of 2023 fiscal years.
Gloucester concluded this year with our 18% net revenue growth over the same period of last year, mostly due to the conversion of <unk>.
Revenue in the performance of the vehicle.
Yeah.
But the subscription revenue has Richard.
1.278 billion.
Our complementary solutions segment continues to stand out.
Showing.
The highest growth rate among our business segments with a 34% increase compared to 2022.
And we've accelerated increase in both student base and market penetration.
Moreover, as mentioned in the last quarter and 2023 vastly Stockton tool for its products and service to the Brazilian public sector.
And we generated 81 million Reais and revenue from the BTG sector in 2023 fiscal year.
The expansion into the public sector marks a momentous opportunity for Boston, allowing us to contribute to advance the location in Brazil, while creating new revenue streams.
Moving to the company's profitability in 2023, our adjusted EBITDA experienced a growth of 20%, reaching 451 million Ross.
While in Cleveland, and adjusted EBITDA margin to 33%.
This increase was mainly driven by gains in operating efficiency cost savings and sales mix that benefited from the growth of subscription products.
Finally, this was another year of significant improvement in our cash flow in 2023 free cash flow totaled 189 million.
A 100 million Reais increase from 89 million Reais in 2022.
The free cash flow to adjusted EBITDA conversion rate improving from 24% to 42%.
As a result of faster growth in <unk>.
Limitation of efficiency measures.
I will now turn it back to Marcelo who will talk about the financial results from the quarter and 2023.
Thank you Melanie.
And this is why we presented the composition.
Thus the net revenue.
On the left side you can observe the organic year on year growth in total net revenue for the fourth quarter.
Increased by 10%, reaching 554 million Reais.
Marcelo Werneck: Yeah.
On the right side, let me take them to keep them for next year's revenue growth.
Total subscription revenue had an increase of 16%, reaching 515 million and representing 93% of our total revenue for this quarter.
Bar, our textbook subscription products also increased by 16% a multitude of 17 to 18 million benefiting from the migration of Nelson discrete Shawn.
No subscription dropping to 35% compared to $90 million and as expected we did not record <unk> revenue in this quarter.
Yeah.
Moving to slide number five we analyze the net revenue for the 23 fiscal year.
The 'twenty to 'twenty three we achieved organic net revenue growth of 18% amounting to 1.486 billion Reais.
As you can see on the right our total subscription revenue increased by 14%.
Organic basis, two 1.278 billion Reais.
Subscription revenue, excluding par had an increase of 60%, reaching $1.155 billion and bar our textbooks institution products declined by 3% in the year amounting to 123 million.
Subscription revenue continues to be the major contributor to our total revenue representing 86% of the revenue share.
<unk> contributed two 5% of our overall revenue in 'twenty, three and generated $8 1 million in revenue.
<unk> Creek two revenue now comprises only 9% of total revenue and as expenses dropped 11% to 127 million.
Marcelo Werneck: Moving to slide number six.
In this quarter, our adjusted EBITDA amounted to 240 million and leave a margin of 243.
2%, an increase of 20% from the 200 million in the fourth quarter of 'twenty two.
This positive performance can be attributed to several factors, including strong sales results cost dilution and operational efficiencies.
On the right side, we see that adjusted EBITDA in 'twenty. Three also increased by two 8% and the reach the 451 million, we felt margin of 13, 3%.
Let's now move to the next slide and explain the breakdown of the adjusted EBITDA margin.
In slide number seven we observed that EBITDA margin improved 60 basis points from 20 972.
233 in 2003.
Firstly, our gross margin declined one percentage points as the link between the three wasn't a year that the industry faces a higher inventory costs caused by the rising inflation on paper and production costs.
Provision for doubtful accounts RPT eight declined <unk> two percentage points between the years in line with the revised credit landscape.
As a percentage of net revenue our commercial expenses increased by one two percentage points.
By higher expenses related to business expansion and marketing investments.
And digested cash G&A expenses improved by two nine percentage points.
Mainly driven by workforce optimization and budgetary discipline.
Slide number eight in the fourth quarter of 2023, adjusted net profit totaled $9 6, million% to 32% increase compared to adjusted net profit is up $73 million in the fourth quarter of 'twenty two.
In 2023 fiscal year <unk>.
Net profit reached <unk> 60 million.
55% increase from an adjusted net profit of $39 million in 'twenty two.
Finance costs in the Sydney area off the Spike of interest rates continues to impact our bottom line. However, we have remained committed to the deleveraging as you see further in this presentation.
Yeah.
Moving to slide number nine we show the free cash flow evolution.
Our cash flow generation was one of the main highlights of this year and the fourth quarter of 2003, the free cash flow totaled negative 100000, representing an increase compared to negative 43 million in the fourth quarter of 'twenty two.
Now on the right sites in 2023, our free cash flow reached 180 to 90 million.
Marcelo Werneck: 100 billion increase from the $80 million to $90 million in 'twenty two as a result of boxes growth implementation of efficiency measures.
Another important metric our free cash flow to EBITDA conversion rates improved from $23 824 to $1 eight week Boston did message that cash generation continues to be a key focus of our business.
Okay.
Moving to slide number 10, we showed the provision for doubtful accounts.
Total expenses with PD in the fourth quarter of 2003 totaled 29 million representing.
Five 2% of the net revenue compared to an expenses of 2000 19 million in the comparable quarter.
Moving to the right side of the slide you can observe that CD 23 fiscal year grew from three 6% to three 8% of net revenue.
<unk> had an impact of the provisional up to 100% of the accounts receivable from a large retail companies undergoing digital recovery in 'twenty three PGE is Lincoln, Greg scenario review tied the refinance of our customer base is strategy that we have chosen.
Marcelo Werneck: <unk> financing mainstream school with low value contract and we're increasingly putting emphasis on training, bringing the schools.
The shift is promoting growth in high quality education system, such as envelope.
Unclear Mackenzie and similar action.
Marcelo Werneck: These brands.
Marcelo Werneck: So higher average tickets values lower default rates greater adoption of complement their solution and foster long term relationship.
Moving to the next slide we observed that the average payment terms of Masters accounts receivable portfolio was 160 90 days in the fourth quarter of 'twenty, three which is 16 days lower than the fourth quarter of 'twenty two.
Moving to slide number 12, let's take a closer look at the net debt movements.
As of the end of 'twenty three fiscal years Vasta had a net debt position of $1 billion and 64 million.
A 66 million increase compared to the third quarter of 2003, mainly due to the impacts of financial interest costs and this share repurchase program.
Marcelo Werneck: In comparison to the fourth quarter of 'twenty two the net debt position increased 22 million from $1.042 billion driven also by the financial interest costs this share repurchase program.
<unk> expenses, which will partially offset by the positive free cash flow of $180 million to $90 million in 'twenty three.
I will conclude my presentation with slide number 13, where we can observe that as of the fourth quarter of 2003, the net debt to adjusted EBITDA ratio stands at 236 times.
Which margin improvements authors user point of view seven times compared to the third quarter of 2003, and an improvement of 0.4 times when compared to the fourth quarter of 'twenty two.
With that being said, our past awards to our CEO Guillaume in Alagoas.
Okay.
Thank you Marcella moving to slide 14.
Let's talk about HCV.
Speaker Change: From the commercial cycle of 2020 to 2023, we have achieved a compound annual growth rate of 22%.
And the commercial cycle of 2024.
<unk>.
With $1 4 billion Reais.
Contracts Thailand.
Traditional learning system represents 77% of our subscription revenue and we will increase 14% in comparison to the 2023 commercial cycle.
Higher growth of service in our premium brands, such as <unk> <unk>.
Fibonacci tenant per year.
Speaker Change: We are assuring our perception that quality and reputation remain destitute.
Our business.
Complementary solutions, we will have the highest growth rate among the business segments with a 24% increase compared to the 2023 cycle subscription revenue.
Continuing to ramp up penetration across our client client base. The partner Schools' base that uses our complementary solutions increased by over 300, New Skus, surpassing one 7000 schools and a 14% growth in the number of students served by our solutions.
The growth of the complementary solutions is concentrated in three main solutions my maker.
Delivering an Ed Wolfe and.
<unk> <unk> per basic products to par digital subscription products, our textbooks as a service platform offered on a fee per student basis.
Moving to slide 15.
Let me provide you with exciting updates on our significant avenue of growth.
As mentioned last quarter. The launch of start earned ROE franchise, combining bilingualism with academic excellence signifies a strategic expansion in our quest for new revenue.
And we are happy to report that we currently have two fully operational units in 2024.
The first is our flagship in <unk>, which is operating with 300 students and.
And Additionally, our <unk> franchise and offer really is exceeding expectations, mostly over 170 students.
Passing our targets of 120 sugars.
Furthermore.
We have secured a contract with the procedures institutionally surpassed their.
Toward our new flagship in some fall planning to commence operation as under the stars Carnival brands in 2025.
Which 15 contracts already in place we are optimist that this franchise model will play a pivotal role in the successful execution of our business strategy.
Moving to slide 16.
Finally, let me provide you an update on another growth Avenue, our BTG initiative 2023 market the year, when we expanded our products and service to serve the Brazilian public sector.
We generated 81 million <unk> revenue from the <unk> sector in 2023.
And we have already renewed this contract for 2024.
We are very optimistic about the possibilities this development presence in.
Our committed to deliver high quality education solutions tailored to the unique needs of the public sector.
With all of these accomplishments in mind 2023 was an extraordinary year and another milestone in our journey.
These achievements position us favorably to face the future challenges we have the confidence that we are on the right path to continue delivering outstanding results for our shareholders solidified partnerships and make a significant contribution to education in our country.
Having said that I finish our presentation and invite you all to the Q&A session.
Thank you if you would like to ask a question. Please press star one on your telephone keypad. If you would like to withdraw your question. It is star one again.
We will take our first question from Marcelo Santos with Jpmorgan.
Hi, good evening, Thanks for taking my questions I have actually two.
Question is on the ACC.
Could you discuss the evolution of HCV that you have.
The 2024 cycle in terms of volume price churn could you give us an idea of how these things move versus the previous years just to understand the dynamics sorry, if that wasn't looks like but I couldnt really get the presentation. So far.
And the second question is regarding the margin outlook for 2024. So now that you have the cost pressure is behind us.
Speaker Change: What kind of evolution.
It looks like is going to be a good evolution in terms of margin for 2000 and Forbes.
Is that the case what are the moving parts here to understand the Delta co op margin for 2010 core. Thank you.
Speaker Change: Okay.
Hi, Marcelo Thanks, very much for your question.
Let me, let me give you some color about <unk> now since we are the only player.
Delivering details about the results.
We will consider to reduce a little bit the disclosure about the ACB details, but I can give you some color about that.
Pretty much breakeven in terms of volume.
And our ACB growth realize on pricing and better mix, that's pretty much the major drivers of growth on our HCV and in terms of margins I would say, we already reached the 30% margin that we aimed for costs or cost pressures.
Definitely behind Us and we had a very good year in terms of savings.
Reducing redundancy and process with SG&A savings.
But we intend to expand.
Commercially in acquiring new contracts. So we do not forecast major improves in the margins so they should be around the 30% level.
Okay, perfect very clear thank you very much.
Yes.
Yes.
Okay.
If you'd like to ask a question that is star one and we will take our next question from Mario <unk> with Bank of America.
Good evening Mulligan, Russia, when everyone I have one question on the growth perspective.
For for the next year implies a slight deceleration from the <unk> could you comment a little bit on the distillery.
Deceleration is driven more by the traditional learning system Maury.
Lower growth on their complementary solutions, so a little bit of the mix here.
And the second question could you provide any more details on the <unk> contract that you just.
Renewed.
Thank you very much gorilla for your questions. So in terms of HCV.
Complement Perry.
Boosting the growth of the the most fasting.
That we have here, we grew more than 30% less cycle and we intend to keep the pace is definitely where we have more room to growth.
In terms of products software learning system.
So we will.
<unk> focus on premium schools sooner.
Focusing on <unk>.
<unk> and Mackenzie.
That does.
This will be the major focus for our alerting system growth, but complementary to the main.
As the main lever for further growth and regarding <unk>, we renewed our contract with BARDA on pretty much in December <unk> that we had last year. So it's already a huge accomplishment so.
Our business will keep the same.
We'll start with growth from the same.
Lateral that we lapsed on 2023, and we're very confident.
To book New contracts very soon we have a very heated pipeline.
On Q to Q1, we already have.
Sales for the product contract and we expect to have new contracts in Q2, but for the time being we don't have any one sign of it yet so I can just share with you our positive sensation above the business.
Okay.
Thank you that's very clear.
Thank you Mr. A reminder, everyone that is star one to ask a question, we'll pause for a moment.
And there are no further questions at this time I would like to turn the call back over to Dave <unk> for closing remarks.
Thank you all very much for attending.
<unk> Q4 conference call. We are very proud to deliver the results that we reached in 2023 just to mention a few.
Our revenue.
Dave: <unk> grew 18% our EBITDA, 20%, our free cash flow grew 112% so very solid results and we opened our 2010.
Four years at a very good momentum.
We launched <unk>.
Last year, they start to grow and we are seeing.
The the new.
Franchisees, finding up new contracts being signed at very positive for the company and also b to B with a very significant pipeline for new contracts.
Yeah.
<unk>.
Major states and huge municipalities. So we definitely expect to have new contracts very soon.
Thank you all very much looking forward to see you in the Q1 conference call.
Speaker Change: Thank you that does conclude todays presentation. Thank you for your participation and you may now disconnect.
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