Vasta Platform Limited

Good day and thank you for standing by. Welcome to the VASTA platform fourth quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today. Bruno Giardino, Chief Financial Officer. Please go ahead.

Good evening, everyone, and thank you for joining me in this conference call to discuss Vasta Platform's fourth quarter 2021 results. With me on the call today, we have Mario Guil, Vasta CEO, and Guilherme Melega, Vasta COO. During today's presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial events or operating performance and involve known and unknown risks, uncertainties, and other factors that may cause or 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. Forward-looking statements are based on our management beliefs and assumptions and on information currently available to our management. These risks include those set forth in the press release that we issued today, as well as those more fluidly described in our findings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof. You should not rely on them as predictions of the future events and we disclaim any obligation to update any forward-looking statements except as required by law. In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. Let me now give the call over to Gil to make his opening statement.

Hello, everybody. Thank you, Bruno. So moving to the slide number three, the first quarter of 2021 is the beginning of the 2022 cycle, a new chapter in Vasta's history because we reset the company in its growth trajectory. As we commented in the previous calls, 2021 was perhaps the most difficult period in the Brazilian K-12 sector and in the competence history for sure. But 2022 school year began in line with our expectations, with the schools fully reopened, a scenario that enables VASTA to fully convert the 2022 ACD into revenues. In this fourth quarter, we also began the integration with Eleva, the sixth largest learning system in Brazil and the biggest acquisition in the history of our company. We are quite happy to have Eleva with us, and we are excited with all the opportunities we see with its combination with VASTA. Talking about the ACV, as we announced last month, we collected a total of R$1 billion in subscription contracts, which represents a growth of 35% over the subscription revenue for the 2021 cycle. Excluding Eleva, the ACV increased it 22% only by organic means. As we will detail in this presentation, the composition of this ACV is richer than before, with a great performance of our premium brands. In this fourth quarter, the first of ACV 2022 recognition, total net revenues increased 16% year-on-year, with the subscription products up 22%. Excluding part, subscription revenue increased at 34%, which demonstrates that we continue to migrate our textbooks-based revenue to learning systems or digital platforms. Adjusted EBITDA grew 10% following the growth in the net revenue and partly hit by temporary cost pressures, eleva, acquisition, and integration expenses here included. adjusted net profit fell 17% on the higher financial leverage due to the acquisition of 11 and on higher interest rates in Brazil. For the first time, we are releasing a revenue guidance for the next quarter. So we expect to have 307 million reais of total revenues in the first quarter of 22, being 320 million reais in subscription revenues and and more 50 million reais in non-subscription revenues. This implies a growth of 32% in total revenues, reiterating our belief that in 2022 we'll be able to collect 100% of the ACD, but also to stabilize the sales of the non-subscription segments. Now, I'll pass the floor to our COO, Guilherme Nelega. Thank you, Gil. Now, moving to slide number four, let's talk a little bit about our ACV. Our 2022 ACV totaled R$1 billion, a 35% growth versus the subscription revenue collected in 2021 cycle. Organically, it means a 22% growth. Complementary solutions, once again, at the highest growth rate among the business segments, with a 47% increase, evidencing that VASTA has captured the strong cross-selling potential offered by its base. Traditional learning systems, including newly launched textbooks as a service platform and excluding Eleva, grew 31%, compared to 2021 subscription revenue. Traditional learning systems, X-Eleva, and complementary products together grew 32%, Finally, Eleva delivered ACV of 98 million, contributing 13 percentage points to consolidated 2022 ACV growth. Now moving to slide number five, we detail the composition of our ACV growth. I would like to emphasize in this slide that the quality of this ACV, we managed to grow faster in our premium brands, angle and pH, and to initiate the migration from paper-based products to digital subscription products, textbooks as a service platform, in line with our strategy. As you can see in the slide, new clients and the combination of cross-upsell and price readjustments continue to be the main drivers of ACV growth. Each one contributed with 15%. In this cycle, our churn was slightly above 8%. which we attributed to the tougher macroeconomic conditions. While the churn rate of our premium brands remained remarkably low, there was an upward pressure in the churn rate in the mainstream segment and bar clients. Approximately 35% of partner schools that left our base were delinquent as of December 31st. In the slide number six, we give you more information on how our ACV will be distributed over the year. The 2022 ACV is less concentrated in the first two quarters than in previous years due to the different seasonality of our products, such as Eleva, McKinsey, and textbooks as a service platform, as well as lower par revenue, all recognized in Q4 and Q1. That means that although the first two quarters will continue to register the largest part of ACV revenue, there will be less revenue to be captured in the first half of the sales cycle when compared with previous years. And the opposite will happen in the second half. To illustrate, in the fourth quarter we collected 34.7% of 2022 ACV, whereas we have collected 38.3% of subscription revenue of the 2021 cycle in the fourth quarter of 2020. In order to facilitate this understanding, we are providing a guidance for the first quarter of 2022, the second quarter of 2022 ACV recognition. So we expect to have 320 million reais in subscription revenue in Q1 2022. 32% of the ACV, implying a 31% year-on-year growth in this line. As for non-subscription revenue, our forecast is $15 million, implying a 33% year-on-year growth. Combined, VASTA is about to deliver 32% year-on-year growth in the first quarter of 2022, to $370 million, confirming the recovery trend that is suggested by our ACV. In the remaining quarters, as we have more ECV to be recognized, we may expect some growth rates to continue throughout the year. I will now turn the floor to our CFO, Bruno Jardino, who will talk about the financial results of the quarter.