Q1 2024 Vasta Platform Ltd Earnings Call
Okay.
Desert Mean: Ladies and gentlemen, thank you for standing by my name is desert mean, I will be your conference operator today at this time I would like to welcome everyone to the vast up lot for first quarter 'twenty 'twenty four financial results.
Desert Mean: Before we begin I would like to read a forward looking statement.
During today's presentation I read second is we will make forward looking statements.
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. In this presentation include but are not limited to Steve mentioned, we'll need that 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.
Forward looking statements are based on our management's beliefs and assumptions and on information currently available to our management.
This recent pieces those set forth in the press release that we are issuing today as well as those more fully described in our filings with the security and Exchange Commission.
The forward looking statements in this presentation are based.
On the information available to us as of today.
You should not rely on damaged predictions of the future events and we disclaim any obligations to update any forward looking statements, except as required by law.
In addition management be rip referendum, none I F. R. S financial measures on this call.
The non I F. R. S financial measures are not intended to be considered in isolation or as substitute for results prepared in accordance with I F. R. S. Thank you.
Desert Mean: I would now like to turn the conference over to Marcelo Vernon Fast US Investor Relations. Please go ahead.
Marcelo Peev dos Santos: Good evening, everyone. Thank you for joining us in this conference call to discuss <unk> first quarter.
Marcelo Peev dos Santos: Q4 results.
Marcelo Peev dos Santos: Hello, there neck investors Investor Relations and today you have the presence.
Marcelo Peev dos Santos: Vasil instead of Hugo boss, the CFO, who will be joining me on the call.
Marcelo Peev dos Santos: Let me now hand over the floor to Latin America, our CEO to make his opening.
Marcelo Peev dos Santos: [laughter].
Latin America: Thank you Marcella. Thank you all for participating in our earnings release call I would like to cover in slide number three with some highlights of our 2024 cycle today.
Speaker Change: This first quarter also represents half way through the 2024 commercial cycle, which goes from October 2023 through September 2024, and we haven't delivered strong economic and financial results.
Speaker Change: Well that's the concluded the 2024.
Speaker Change: Cycle to date with a 12% net revenue growth over the same period last year, mostly due to the conversion of the C V into revenue and so the performance of the <unk> business.
Speaker Change: Vasco subscription revenue has reached 872 million reais.
Speaker Change: 9% increase compared to 2023.
Speaker Change: Complementary solutions continue to present, the highest growth rate among our business segments with a 21% expansion in the cycle to date compared to the same period last year.
Speaker Change: And Thats for announced in our last earnings release, we have already renewed our forces between your culture toward 2024, and we have generated 69 million reais from the <unk> sector in the first quarter of 2024.
Speaker Change: Moving to the company's profitability in 2000, and thank you for cycle to date, our adjusted EBITDA experienced a growth of 21%.
Speaker Change: 402 million Reais, while in prison and adjusted EBITDA margin to 39, 6%.
Speaker Change: This increase was mainly driven by improvement in gross margin benefiting from better product are reducing impact of product cost and operating efficiencies.
Speaker Change: Finally, we continue to see significant improvement in our cash flow.
Speaker Change: 2003 to four cycle to be free cash flow totaled 52 million Ross.
Speaker Change: 59 million.
Speaker Change: There is increased from negative 7 million Reais in 2023.
Speaker Change: In the last 12 months free cash flow to adjusted EBT vehicle virtual rate improving from 31% to 43% as a result of some faster growth in implementation of efficiency measures.
Speaker Change: Yeah.
Speaker Change: I will now move to slide number four to discuss 2020 for HCV.
Speaker Change: Okay.
Speaker Change: In line with our commitment to total transparency, we have adjusted our ACB bookings for 2024 sales cycle.
Speaker Change: Important to note that our previous HCV booking has been revised downward by three 7% to 1 billion 350 <unk>.
Speaker Change: Due to the effective number of students at our partners' schools after complement their reorders in Q1.
Speaker Change: New ACD bookings represent an organic growth of 12% compared to 2023 sales cycle.
Speaker Change: Our top performers continue to be premium brands in our complementary solutions.
Speaker Change: Okay.
Speaker Change: On slide number five.
Speaker Change: As previously mentioned roster of subscription revenue in 2000 2024 cycle to date has reached 872 million Reais, a 9% increase compared to the same period last year.
Speaker Change: It's not was.
Speaker Change: With that the distribution of subscription revenue throughout 2020 for differed slightly from the previous year.
Speaker Change: With last concentration in the first two quarters.
Please wait for the next available operator.
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13 million <unk>, representing two 9% of total net revenue compared to an expenses of 10 million reais in the comparable quarter.
Moving to the right side of the slide we can observe that pega fluctuate between Q4 sales cycle shows us a slight improvement, although still impacted by the credit landscape review.
Dropping to zero point to one percentage points to four two percentage percentage of the net revenue.
Moving to the next slide we observed that the average payment terms of buses accounts receivable portfolio was 180 days in the first quarter of 'twenty four.
Which is 19 days lower.
In the comparable quarter and in line with the seasonality of our business.
Moving now to slide number 13, let's take a closer look on the net debt movements.
As of the first quarter of 'twenty for the vast had a net debt position of 1 billion and six 9 million Reais.
<unk> 5 million increase compared to the last quarter, mainly due to the impacts of financial interest cost in the second deliver change program, which were fully completed during this quarter.
In comparison to the third quarter of 2003, the beginning of the 24 sales cycle. The net debt position increased to 71 million Reais for Madden from 998 million driven also by the financial interest costs in the second repurchase program.
Which were partially offset by the positive cash inflow of 52 million in the periods.
I will conclude my part of this presentation with slide number 14.
Where we can observe that as of the first acquired of 24.
The net debt to last 12 months adjusted EBITDA ratio continues to improve for the fourth consecutive quarter and now stands at $2 22 times, which marks an improvement of zero point 14 times compared to the fourth quarter of 2003, and an improvement of two zero.
Six three times when comparison to the first quarter of 'twenty three.
With that said I'll pass the word to our CEO Glenn Milligan.
Yes.
Thank you Marcello.
He was alive 15, let.
Let me provide you with an exciting update on.
A significant avenue of growth of Boston.
Mentioned last quarter, the launch of the stock under franchise, combining bilingualism with academic excellence continues to ramp up and signifies a strategic expansion and our new revenue streams.
Both of our two fully operational units in 2024 are exceeding expectation in our first franchising Alpha really is now operating with over 190 students surpassing our target of 420 students.
We have signed five new <unk> contracts and we now have 20 contracts.
Security distributed across 10 states in Brazil, and over 200 prospects. The negotiation is broad geographic presence and strong pipeline underscore the robust potential for future growth and market penetration of stop.
Okay.
Okay.
Moving to slide 16.
Finally, I would like to introduce our latest breakthrough.
At Bachelor to Cod last month, which has been met with tremendous success with teachers and students intelligent assistant our food our AI platform in summary, we gathered.
All of our excellent content from our basic education systems that we want to enable and put AI itself.
Divides classifies and prepares the content, creating several knowledge basis separate by branded materials.
Rich itching duration throughout AI understands your quest searches or related knowledge and.
The science, it's best response building on its preparation generative AI enables features to create supplementary lessons plans generate images scripts for presentation question lists and help students develop studios is to the guidelines.
This innovation aims to empower features in the teaching process and enhance students learning.
This groundbreaking to.
Reshaping, how educators and learners engage offering a more dynamic and efficient allocation of experience.
With the garage AI platform, we are transforming application, providing a smarter and more inspiring learning environment and we can't wait to see how it will further enhance pitching in and learning national wise.
Having said that I finish our presentation and invite you all to the Q&A session.
Thank you.
We'll now begin the question and answer session.
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Your first question comes from the line of <unk> <unk>.
With Bank of America. Your line is open.
Good evening, everyone and thank you for your time for taking questions.
Two on my side first on <unk>.
<unk> contract could you comment a little bit on the recognition seasonality.
Unused seasonality or is tomorrow.
One off from the 2024 cycle.
And secondly on the BTG contract. We previously understood that these contracts were more expected from the second quarter onwards.
The seasonality of government contract, so could you comment a bit on those specifics.
This revenue recognition in the first Q. This is related to SAB Boris is another.
Ultra.
Thank you.
Thank you for your questions I will start with the HCV and seasonality.
Every year, we have slightly different seasonality this year.
We have more contracts more new contracts that were that were serving twice and year, so concentrates a little bit.
The de recognition on Q2 and Q3. So that's why we expect more recognition of HCV as mentioned on the presentation on Q2, and Q3 related to last year to the same period last year.
And for now you can expect this functionality because thats the <unk>.
The landscape that we have from our contracts.
Related to the to the ACB bookings.
The redemption of HCV bookings, we are seeing a soft market.
In terms of enrolling students with our partner schools and we do expect it to be a one off this year.
Regarding <unk>, we recognize that.
The orders that three.
<unk> received so far from the same contract that we had last year from the governmental fossil we already secured 69 million reais from that contract and we can have more orders coming in Q2.
And also more services being provided in Q2, we don't we don't secure the orders yet, but we definitely expect more to come.
Regarding this contract and yes. This contract as it related to the SAB enhancement projects that we are serving products.
Okay.
Thank you.
Our next question comes from the line of Matt Boss.
Boss with Jpmorgan Your line is open.
Hi, Good evening Malaga with Nick Thanks for taking my questions I wanted to go a little bit deeper on <unk> product.
<unk> enhancement.
What would be the extra orders you could get like just trying to understand the mechanics I mean.
You didn't service all of the students in the first quarter.
They would be buying.
Just wanted to get a little bit better the dynamics and I would I wanted to ask because the second question. How do you see the margin outlook for 2024, when compared to 2023, I mean you had.
Very good start in the beginning of the year. So is this something that we should expect for the following quarters to our remaining please thank you very much.
Hi, Marcelo Thanks for your questions. Let me give you more details about the <unk> contract.
This year, we are serving.
Not exactly the same the same grades that foodservice last year. This year, we are serving.
Sure.
Thanks.
Second grade and in high school.
Which represents.
Which represents a different number of students.
There are more products that are.
We're not shifted in Q1, such as feature training materials and assessments that.
We can provide even in Q2.
That's pretty much it from this contract we do not expect.
Much more to be recognize them, but there is room to improvement in the same contract.
Regarding the margin outlook for the remainder of the year.
We had a great start.
This good start.
Is it related to a better mix, we are focusing on pre owned premium products. We have stated our strategy is.
Growth from premium products, obviously with better margins.
And this is already reflected on Q1 margin and we have the huge recognition of b to G that dilutes, our our fixed costs.
So we're looking to and we don't and we don't have the same cost.
And fresh ore that we have in production costs as we had last year. So when we look to the remaining of the year, we expect a better margin, but its realigned his own more volume of BTG.
With with fewer volume will be two G. We should convert a little bit below the historical margin.
Yes.
Thank you. Thank you very much.
Next question.
Comes from the line of Mo <unk> with Morgan Stanley. Your line is open.
Okay.
Thank you. Thank you for the opportunity.
I have two questions first one if you could detail a little bit more.
About the revision of the ECG exam.
Exactly the mechanism.
It should happen so as far as I understand there was there was kind of a tolerance in the contracts for <unk>.
You saw that there would be less students this year than it was foreseen regionally. The culture. So if you can explain a little bit the mechanisms that allow it to standard.
Variation and how it translates to the future.
Is that we should expect.
Kind of.
Varian <unk> versus revenue recognition.
<unk>.
And then my second question is about the mix.
If you could comment a little bit on your strategy.
In terms of mix.
I want to play in the private markets in terms of products that positioning and how it could help you.
In the in the gross margin EBITDA et cetera. Thank you.
Okay.
Thank you. Thank you very much.
Mauricio for your questions.
Give you.
More details about the CV mechanism.
HCV.
When we shadow HCV bookings, we are sharing our contracts the number of students that we have on our contracts with the price.
The new pricing discounts that we have.
Secured under contract with each of our customers. There is some room in the contract for the schools to border fewer students normally it doesn't happen.
We see normally a breakeven in the contracts and the overall contracts or is it slightly above this year during the complementary orders because in Q4.
We feel the majority of the contracts to the schools and in Q1, we receive complimentary orders depending on the pace of enrollments.
We observe it in this quarter.
We received fewer complementary orders than expected from the contracts and.
In the schools.
Reporting fewer students then.
Initially contracted.
So our decision was to respect the number of students.
And do not push.
Products to the chain.
And we are sharing with you.
There's using fact of three.
Three 7%.
Slightly above the.
The ACB bookings previously.
Reported but the mechanics pretty it's pretty much the same what we have this year is in our opinion a soft market.
That in fact, much more of the mainstream schools and the premium schools are always more protected.
That's obviously why our strategy is on premium schools.
It allows me to comment on mix.
Our strategy is to pursue.
Better market share for our premium brands and Falcon about envelope ph Fibonacci and unclear.
And we're moving fast.
We have a very good start on Q1 sales campaign for 2000 2025.
Where we are investing our campaign and enhancing product as I mentioned the board all AI debt goals.
Pretty much focusing on the premium brands and we are enhancing product enhancing.
Sales campaign for the the the premium schools.
In the first quarter of our 2025 sales campaign.
Let us very optimistic that we are on the right in the right track.
But.
What we are pursuing is to grow on premium and cross sell complementary products to.
Two two to those schools.
There are no further questions at this time.
<unk> Edman Melinda I turn the call back over to you.
Okay.
Thank you very much to participate in the fastest Q1 conference call.
I'd like to make some comments.
We just launched at our sales campaign for 2025.
We had a very very strong first quarter, we already sign a three times more contracts than.
We had on the same period last year.
Obviously, it's not it's not yet.
Significative amounts in terms of total of the campaign, but a very good start is very important too to make us confident that we are on the right track.
We have a very robust pipeline on BTG.
We expect to have more contract soon the assignment.
This quarter.
Let me start and bilingual school, we already reached 20 contracts. It's already ahead of our forecast sales and we have a huge demand.
48, and we're very confident that in a few years. This will be a very important segment for us.
<unk>.
Absolutely.
Very important we implementing a big breakthrough technology, and our <unk> platform with the implementation of AI.
<unk> allows our allow our features.
To save time and to be much more efficient producing materials for their classes and their students and by doing so we really believe that we are strong in our relationship with our schools and our network of features.
Having said that we are very optimistic for the remaining of the year.
Ah.
I look forward to talk with you in Q2.
Earnings call.
Thank you very much.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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