Q3 2024 Vasta Platform Ltd Earnings Call
and the up up up up up up up up up up up up up up up up up up up up up
Thank you for watching!
Julio Cepeda, Lucca Marquezini, Lucca Marquezini [inaudible]
Didi Rufio, Diego Hernandez, Dimitri Neto Ricardo Molina, Cristina Adias, Lucas Brito turn off safeg Investment Futures
Music
Novi: Thank you for standing by. My name is Novi and I will be your conference operator today. At this time, I would like to welcome everyone to the VESTA Platform 3rd Quarter 2024 Financial Results Conference Call.
Novi: All lines have been placed on each to prevent any background noise.
Novi: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.
Novi: Before we begin, I would like to read a forward-looking statement.
During today's presentation, our executives will make forward-looking statements.
Novi: 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.
Novi: Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance, expectations for future periods.
Novi: Our expectations regarding our strategic product initiatives and their related benefits and our expectations regarding the market.
Novi: Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management.
Novi: 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.
Novi: The forward-looking statements in this presentation are based on the information available to us as of today. You should not rely on them as predictions of the future events.
Novi: and we disclaim any obligation to update any forward-looking statements except as required by law.
Speaker Change: I would now like to turn the call over to Cesar Silva, CFO.
César Silva: Good evening everyone and thank you for joining us in this conference call to discuss Kifasta Platform's third quarter of 2024 results.
César Silva: I'm Cesar Silva, Vastas CFO, and today we have the presence of Guilherme Melega, Vastas CEO, who will be joining me on the call. Let me now hand over the floor to Guilherme Melega, our CEO, to make his opening statements.
and Marcelo Werneck.
Guilherme Melega: Thank you, Cesar. Thank you all for participating in our earnings release call. I would like to cover slide number three with some highlights of our 2024 sales cycle.
Guilherme Melega: As we approach the end of the current cycle, we are pleased to report that in the 2024 sales cycle, our subscription net revenue has achieved a growth of 12.5%.
reaching 1,358,000,000 Reais.
Speaker Change: Vasta concluded the 2024 sales cycle with a 6% net revenue growth over the last sales cycle, mostly due to the conversion of ACV into revenue.
Speaker Change: Complementary solutions continue to present the highest growth rate among our B2B segment with a 21% expansion in the cycle compared to the same period last year.
Speaker Change: Moving to the company's profitability, in the 2024 cycle, our adjusted EBITDA experienced a growth of 9%, reaching R$449 million, while increasing an adjusted EBITDA margin to 29.4%.
Speaker Change: This increase was mainly driven by improvement gross margin benefit from premium products expansion, gains in operating efficiency and cost savings.
Speaker Change: Finally, we have seen some stability in our cash flow for this sales cycle. In 2024, cycle 3 cash flow totaled R$146 million, a slight increase from 2023, which achieved R$145 million.
Speaker Change: In Q3, we have above-average payments related to paper and printing, which will be reduced to Q4.
and Marcelo Werneck.
Moving to slide number four
Speaker Change: The annual contract value, ACV bookings for 2024 sales cycle, achieved $1,358,000,000.00, a growth of 12.5%.
Speaker Change: comparing to 2023 sales cycle. This amount represented the conversion of our expected sales based on contracts into revenue during the sales cycle and was slightly higher than previous disclosures.
and Marcelo Werneck.
Speaker Change: Our top performers continue to be premium brands and our complementary products.
Speaker Change: 18.5% of growth, showing our resilience and capacity to keep growing in a higher double digit for several years.
Speaker Change: I will now turn back to Sever to talk about the financial results of the quarter.
Sever: Thank you, Melega. In this slide, we present the composition of Vasta's net revenue. On the left side, you can observe the organic year-on-year growth in total net revenue for the third quarter, which decreased by 14.6 percent, reaching 220 million reais.
Thank you.
Sever: VASTA subscription revenue achieved in the third quarter of 2024, R$ 260 million, a 6% increase compared to the third quarter of 2023.
Sever: in line with the expectation for the sales cycle. Remembering the second and third quarter of the year is always the lowest in volume during the year.
Sever: Non-subscription, which now represents only 6% of the total revenue, dropped 36% to $14 million.
Sever: And in this government segment, in this quarter, we did not generate any revenue. And as you can see in the slide, it represented 41 million in the third quarter of the last year.
Sever: However, in the sales cycle, considering the net revenue performed in the first quarter of the year, we achieved $69 million of revenues, which means a decrease of 15% compared to 2023.
Sever: Moving to the right side of the slide, we analyze the net arrival for the 2024 sales cycle.
Sever: We achieved an organic net revenue growth of 6% in the sales cycle, amounting to R$ 1,529,000,000.
The main factors to this exercise...
exceptional performance were
Firstly, the subscription revenue has increased 12.5%, reaching R$ 1,358,000,000.
Sever: and continues to be the major contributor to our total revenue, representing 8-9% of the total revenue share.
Non-subscription revenue as expected dropped 31% to R$102 million.
Sever: And the net revenue of B2G, achieved $690 million, represents 5% of our overall revenue in this sales cycle.
Moving to slide number six.
Sever: In this quarter, our GSEP day amounted to R$ 21 million, a decrease of 45% from R$ 39 million in the third quarter of 2023, mainly due to lower revenue in this quarter related to the B2G segment.
Sever: On the right side, we see the adjusted bid date in the 2024 sales cycle.
Sever: increased by 9% and reached R$449 million, with a margin of 29.4% or 0.8% above the 2023 sales cycle.
Sever: Let's now move on to the next slide and explain the breakdown of the adjusted BTA margin.
Sever: So, in slide number 7, we observed that the EBITDA margin achieved 29.4% in the 2024 sales cycle. And there has been an increase of 0.8% from 28.6% in 2023.
Sever: Our gross margin has increased 2.3 percentage points, benefiting from better premium product expansion, synergy gains, and cost-efficient initiatives.
Sever: Provision for doubtful accounts was stable between the years, despite having a difficult credit landscape in this sales cycle.
Sever: As a percentage of net revenue, our commercial expense is increased by 2.3 percentage points.
Sever: driven by higher expense related to business expansion to the commercial cycle of 2025, and adjusted G&A expense improved by 0.8 percentage points mainly driven by workforce optimization and budgetary discipline measures.
Sever: Moving to slide number 8, we show the adjusted net profit.
Sever: That's total, in the third quarter of 2024, R$ 48 million, a 59% decrease compared to adjusted net losses of R$ 30 million in the same quarter of 2023.
Sever: On the right side of the slide, in the 2024 sales cycle, adjusted net profit reached R$ 62 million. There has been an increase of 71% from an adjusted net profit of R$ 36 million in the 2023 sales cycle.
Sever: Moving to slide 9, we show the free cash flow evolution.
Sever: that in the third quarter of 2024, the free cash flow totaled R$ 55 million, representing a decrease of 5% comparing to R$ 58 million in 2023.
Sever: On the right side of the slide, in the 2024 sales cycle, our free cash flow reached R$146 million, an increase of R$1 million from the R$145 million in 2023, showing stability in the performance of the year.
Sever: The cash flow was negatively impacted by a higher seasonal volume of payments related to the purchase of paper and printing in the second and third quarters.
that compared to the previous cycles,
Sever: to the previous cycle, where part of this payment occurred in the last quarter of the year.
Sever: It is worth mentioning that we foresee a lower volume of production-related payments in the following quarters and, consequently, we expect to achieve a double-digit growth.
Sever: in the free cash flow for the year-end of 2024 comparing to last year.
Marquez.
Sever: Moving to the next slide, we show the provision for doubtful accounts.
Sever: Total expense with PDA in the third quarter of 2024, total 7 million representing 3.6% of net revenue compared to an expense of R$ 15 million in the comparable quarter.
Sever: For the sales cycle, the total amount of PDA was R$ 60 million, compared to R$ 560 million in 2023. The provision for down-to-accounts represents a...
Sever: 3.9% of the net rival for both cycles. PDA, despite showing stability in the number, was built in a very challenging and recreative landscape for non-premium brands business.
Sever: Moving to the next slide, we observe that the average payment in terms of Fastest Account Receivable Portfolio was 112 days in the third quarter of 2024, which is 6 days lower than the comparable quarter and in line with the seasonality of our business model.
Sever: Moving to slide number 12, let's take a closer look on the Net Debt Movement.
Sever: As of the third quarter of 2024, Vasta had a net debt position of R$ 1,040,000, a R$ 23,000,000 decrease from the previous quarter. Free cash flow was higher than financial interest costs and this made possible the reduction in the total net debt in this quarter.
Sever: In comparison to 3rd quarter of 2023, the beginning of this cycle,
Sever: The net deposition increased R$ 42 million from R$ 998 million.
Sever: This increase was driven also by the financial interest costs and the second repurchase program, which were partially offset by the positive free cash flow of R$146 million in the period.
Speaker Change: I will conclude my part of this presentation with Baseline 13, explaining some more detail about our Net Debt Composition, which represents $1,040,000,000 at the end of this quarter.
Speaker Change: This amount is composed by debentures issued to the parent company in the amount of R$ 765 million and account payables for business combinations, which total R$ 630 million.
Reduced by our cash availability, which represents R$ 355 million.
Speaker Change: 0.04 times from the last quarter, showing stability and now stands at 2.32 times.
Speaker Change: And compared to the third quarter of 2023, the indicator has improved from 2.43 times a decrease of 0.11 times.
Speaker Change: With that being said, I pass the word to our CEO, Guilherme Melega.
some updates about our growth avenues in our platform Plural.
Guilherme Melega: Starting with Start Anglo, our initiative to launch this new model of franchise combining bilingualism with academic excellence continues to ramp up and signifies a strategic expansion in our new revenue streams.
Guilherme Melega: We keep the pace of signing new contracts every month, and we have already signed 34 contracts as of this date, and we have over 200 prospects.
Guilherme Melega: The strong pipeline underscores the robust potential for further growth and market penetration of start-angle.
Speaker Change: Last quarter, we launched the revitalization project of the Liceu complex. And this project, besides creating an operating unit with 1,000 student capacity, will preserve the entire historical architecture design. And we expect to commence our flagship operation in São Paulo in 2025.
Speaker Change: In 2025, we are going to have five new units in operation, Deliceu Pasteur Complex, our flagship in São Paulo, Jardim Marajoara, Granja Julieta, Piracicaba and Luiz Eduardo Magalhões, all franchised units.
Speaker Change: And together with São José do Rio Preto and Alphaville, we will achieve the total of seven units running and provide a high-quality education service for our students.
Speaker Change: After launching this important avenue of growth of VAST in 2023, we already can see expressive results and look forward to see the next years.
Thank you.
Speaker Change: Moving to slide 16, I'll talk about the exceptional SAEBI result in Pará.
Speaker Change: Firstly, I would like to explain what is SAEBI and, in a simple way, I can say that it is a large-scale assessment system for basic education in Brazil.
So that�s it.
Speaker Change: The last five results showed an exceptional improvement of the state of Pará in the national ranking, moving from the 26th position in the 2021 exam to the 6th place in the 2023 exam for high school students.
The scores of these students increased by 43%
students from elementary years got excellent results as well.
Speaker Change: To remember, at the beginning of 2023, we were contracted by the State of Palau to implement a customized solution, aiming to learn recomposition core skills.
Speaker Change: and preparation for SIAB. We used our Plural technology as the platform and throughout the use of large-scale tests and teaching training, we managed to help over 340,000 students to achieve these impressive results.
Speaker Change: Pará's performance was highlighted in the most important media and with this significant achievement we were able to validate our value proposition.
Moving on to slide 17.
Speaker Change: Finally, I would like to remember that starting in 2025, all our schools will have at their disposal the intelligent assistant, through our artificial intelligence, integrated in our platform.
Speaker Change: We launched this innovation at BETI EDUCAR at the beginning of the year with great success and high receptivity.
Speaker Change: In the recent months, we have trained employees, school managers, and teachers, and conducted several demonstrations validating and presenting the implemented tools.
Speaker Change: In summary, we gather all our excellence content from our basic education systems, and Plural.ai itself divides, classifies and prepares the content, creating several knowledge bases separated by brand and material.
Speaker Change: which each interaction PluralAI understands your request, searches all related knowledge, and decides its best response.
Speaker Change: Building on this preparation, Generative AI enables teachers to create supplementary lesson plans, generate images, scripts for presentation, question lists, and help students develop study guides.
Speaker Change: This innovation aims to empower the teacher in the teaching process and enhance student learning.
Speaker Change: This groundbreaking truth is reshaping how educators and learners engage offering a more dynamic and efficient education experience.
and Marcelo Werneck.
Speaker Change: Having said that, I finish our presentation and invite you all to the Q&A session.
Thank you.
Speaker Change: At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad.
Speaker Change: We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Luca Marchesini with ITAL.
Marquez.
Speaker Change: Hey, good evening everyone. Thank you for taking our questions. We have actually two questions from our other side
Speaker Change: First one would be regarding the B2G units, so we saw another quarter of no Ravnir coming.
Thank you for listening.
Luca Marchesini: Thank you very much, Luca. Let me start with the B2G.
Yes, B2G did not secure new contracts yet.
given municipal elections in Brazil on October.
Luca Marchesini: Any guidance by now, but I can guarantee we have a very heated pipeline on that.
Thank you.
Regarding your second question about commercial expenses...
Luca Marchesini: We increased the commercial expenses because we are increasing growth. We have also a very sound 2025 sales cycle, boosted by premium learning systems and complementary products.
Luca Marchesini: And since we are growing fastly, we are investing more on commercial expenses. But we believe we are reaching a very good...
Luca Marchesini: double-digit growth for the next coming years. We have been expanding around 12%, 18% of our revenues on commercial expenses, and this probably will be our level going forward.
Thank you. Thank you.
It's very helpful, thank you.
Your next question...
comes from the line of Marcelo Santos with J.P. Morgan.
Marcelo Santos: Hi, good evening. Thanks for taking my questions. The first question I wanted to ask is about the competitive environment. Like, was there any significant change in the environment
Marcelo Santos: Since one of your main competitors went private, did that change or did any other thing change that you would be worth highlighting? And if you could give us a color of how the GMV, sorry GMV, no, the ACV is shaping up.
Marcelo Santos: for the next cycle. I know you're not going to report that now, but maybe some directional indicator.
Speaker Change: Hi, Marcelo. Thanks very much for your questions. We didn't see any change in the competitive environment. It's definitely a competitive industry, but...
Speaker Change: We are having, and I will comment on our second question as well, on the ACV. We have a very strong portfolio with premium brands, and this year we are leveraging on our technology since we launched the Plural AI.
Speaker Change: and we are launching it for the entire platform, all the brands, and we are pricing it for the next ACV.
So, we have a very robust pricing for 2025.
plus a very good premium learning system.
commercial cycle.
the high double-digit growth. So, putting all together...
We definitely expect
Speaker Change: a higher growth from the previous cycle. We just recorded 12.5% growth from...
Speaker Change: our last cycle, we are definitely forecasting a higher double digit for the next cycle. I think for now that's the best color I can give you.
Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad.
Speaker Change: I will now turn the call back over to Guilherme Melega, CEO, for closing remarks.
Thank you very much. Thank you.
Speaker Change: and B2G also delivered great results on the academic side from the Pará contract and that definitely is helping us a lot on our prospects. And we have a very heated pipeline and we are close to secure new contracts and we do expect revenues for Q4.
Speaker Change: Start Anglo, reaching 34 contracts signed, 2 operating units in 2024, moving to 7 operating units in 2025. So, we are up to a very good momentum.
Speaker Change: creating a very robust platform for 2025. Looking forward to talk to you on our next earnings call. Thank you very much for participating.
Speaker Change: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
and others. Thank you. Thank you. Thank you. Thank you.