Vasta Platform Limited

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 benefit and our expectations regarding the market. Forward-looking statements are based on our management's beliefs and our assumptions and on information currently available to our 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 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. I would now like to turn the call over to Cesar Silva, CFO. Please go ahead.

Good evening, everyone, and thank you for joining us in this conference call to discuss Vasta Platform's fourth quarter of 2024 results. I'm Cesar Silva, Vasta's CFO, and today we have the presence of Guilherme Mellega, Vasta's CEO, who will be joining me on the call. Let me now hand over the floor to Guilherme Mellega, our CEO, to make his opening statements.

Thank you, Cesar. Thank you all for participating in our earnings release call. I'd like to cover slide number three with some highlights of the 2024 fiscal year. I'm pleased to share our progress and achievements we have made. 2024 has been marked by significant milestones across our business, reflecting our unwavering commitment to delivering value to our customers, students, shareholders, and stakeholders. In 2024 fiscal year, our net revenue increased by 13% to reach R$1.674 billion. This growth was primarily driven by the successful conversion of our annual contract value, ACV, into revenue and achieved R$1.462 billion, a 14% increase compared to 2023. It is worth mentioning the good performance of our B2G business unit and the continuity of our complementary solution expansion with a 20% growth over 2023. Our focus on operational efficiency and cost savings has yielded results. The adjusted ABTDA for 2024 fiscal year grew by 13% to 580 million reais. with a margin of 30.4%. These gains were driven by a favorable sales mix, benefiting from the growth of our subscription products. Our cash flow generation has achieved 215 million reais, a 14% increase from 2023. The last 12 months, free cash flow to adjusted ABTDA conversion rate improved from 41.8% to 42.4%, reflecting our sustained efficiency measures. Besides the results in financial area, I would like to highlight some commercial and strategic achievements from this year. Our B2G segment continues to be a significant growth avenue, generating 105 million in revenue for the year, a 29% increase compared to 2023. we remain confident on our strategy to positively impact public education, as evidenced by the improved in 2023 TAEBI scores for the state of Farah. The Start a Bilingual School franchise, launched in 2023, has also shown impressive progress. We ended the year with 40 signed contracts and seven operational units. with a strong pipeline of over 350 prospects. This will reinforce the value generation capacity of our brand and our strategic expansion into new revenue streams. Our technology platform, Plural, has reached a new stage of development. Starting in 2025, it features an intelligent assistant powered by AWS, named Blue. This assistant will provide personalized learning experience for students and streamline activities for teachers, enhancing the overall educational experience. I will now turn back to Cesar Silva to talk about the financial results of the Quarton in 2024 fiscal year.

Thank you, Melegan. In this slide before, we present the composition of VASTA's net revenue. On the left side, you can observe the organic year-to-year growth in total net revenue for the fourth quarter, which increased by 26.1%, reaching R$69.9 million. Vast subscription revenue achieved in the fourth quarter of 2024, R$619 million, a 20% increase compared to the same quarter of 2023. This increase included some additional revenue anticipated from the first quarter of 2025, which earlier orders coming from our partner schools in the commercial cycle. Non-subscription revenue increased at 12% to $40 million. And in the government segment, in this quarter, we generated $36 million revenues. Moving to the right side of the slide, we analyzed the net revenue for the 2024 fiscal year. We achieved an organic net revenue growth of 12.6% in this fiscal year, amounting to R$1.674 billion. The main factors for this exceptional performance were, first, the subscription revenue has increased by 14%, reaching R$1.462 billion, and continues to be the major contributor to our total revenue, representing 87% of the revenue share. Non-subscription revenue, as expected, dropped 16% to R$107 million. And the net revenue of B2G achieved R$105 million, an increase of 29% compared with 2023 fiscal year, and represents 6% of our overall revenue. Moving to slide number five. this quarter our just update amounted to 299 million reais with a margin of 42.8 percent an increase of almost 25 percent from 240 million reais in the fourth quarter of 2023 many to do to do too were higher revenue volume in this quarter in all lines of revenue as presented before on the right side we see that adjusted bda in 2024 fiscal year increased by almost 13%, and reached $508 million, with a margin of 30.4%. Let's now move on to the next slide to explain the breakdown of the adjusted EBITDA margin. In slide number six, we can observe that the EBITDA margin achieved 30.4% in 2024, 0.1 percentage points higher than 2023. Firstly, our gross margin achieved 61%, a decrease of 0.6 percentage points from the 61.6% in 2023, showing stability in this percentage. Provisions for account achieved 3.2% in relation to the net revenue and have an improvement of 0.6 percentage points when compared to 2023. Despite showing improvement in these indicators, the year was viewed in a very challenging, expressive, correct landscape for non-premial brands. Business and retail foreseen some challenges in the credit scenario for the next month. As a percentage of net revenue, our commercial expense increased by 0.3 percentage points, driven by higher expenses related to the business expansion of the commercial cycle of 2025. And adjusted G&A expenses improved by 0.5 percentage points, mainly driven by workforce optimization and budgetary discipline measures. Moving to slide number 7, we show the adjusted net profit. In the third quarter of 2024, adjusted net profit totaled R$114 million, at 18.9%, increased compared to adjusted net profit of 96 million in the same quarter of 2023. On the right side of the slide in 2004, adjusted net profit reached 8 million. There has been an increase of 34.6% from adjusted net profit of 60 million in 2023. Moving to slide number eight, we show the free cash flow evolution. In this fourth quarter of 2024, the free cash flow totaled 69 million reais, representing a relevant increase compared to minus 0.1 thousand reais in the fourth quarter of 2023. On the right side of the slide, in the 2024 fiscal year, our free cash flow reached 250 million, an increase of 14.2% above 2023. This quarter benefited from a different payment installment with our customers that generated a higher collection difference from previous years. Our last 12 months free cash flow to adjust at the BDA conversion rate increased from 41.8% to 42.4% in 2023. And as we have mentioned in the last quarter, we achieved a double-digit growth in the free cash flow and consequently improved our conversion rate. Moving to slide 9, we show the provision for doubtful accounts. Total expense with PGA in the fourth quarter of 2024 totaled $22 million, representing 3.1% of net revenue compared to an expense of $29 million in the comparable quarter. Moving to the right side, the PGA for 2024 amounted $53 million, comparing to $56 million in 2023. Provision for doubtful accounts represent a 3.2% of the net revenue, an improvement of 0.6 percentage points in comparison to 2023. As explained before, we still foresee some difficulty in the credit scenario, mainly for the schools related to mainstream brain. Moving to the next slide, we observed the average payment in terms of VASTA accounts receivable portfolio was 186 days in the fourth quarter of 2024, which is seven days higher than the comparable quarter and in line with the business model seasonality. Besides, consider revenue generating the B2G business and not receivable yet. Moving to slide 11, Let's take a closer look on the net debt movement. As of the fourth quarter of 2024, Vasta had a net debt position of R$1.3 billion, a R$37 million decrease from the previous quarter. Pre-cash flow was higher than financial interest costs, and this makes possible the reduction in the total net debt in this quarter. Moving to the right side of the slide, the net debt position decreased by 61 million since last year. This decrease was driven also by the free cash flow generated in 2024, which was partially offset by financial interest costs in the second BIDAC program. I will conclude my part of this presentation with slide 12, explaining some more detail about our net debt composition, which represents 1 billion, 3 million reais. at the end of the quarter. This amount is composed by debentures issued to the parent company, accounts payable for business combinations mainly related to offer live acquisitions, and almost 200 million reais cash that the company owns. In the lower left part of the slide, we can see that in the fourth quarter, the net debt to last 12 months adjusted EBITDA ratio has decreased 0.35 times. from the last quarter, showing a relevant downward and now stands at 1.97 times. And we would like to reinforce our commitment to continuing to generate free cash flow and deliver HD companies. With that being said, I pass the word to our CEO, Guilherme Melegan.

Guilherme Melegan Thank you, Cesar. I will give you some exciting updates about StartsAnglu on slide 13. StartAngle Bilingual School, our franchise, launched in 2023, which combines bilingualism and academic excellence, keeps the pace of signing new contracts every month. And we have already signed 40 contracts as of this date. And we have over 350 prospects in negotiation. This strong pipeline underscores the robust potential for further growth and market penetration of StartAngle. In 2024, we concluded the revitalization project of the Liceu Complex. And besides creating an operating unit with more than 1,000 students capacity, we will preserve the entire historical architecture design and we already started our flagship operation in São Paulo. This year we have five new units in operation. The Liceu Pasteur Complex, our flagship in São Paulo, Jardim Marajoara, Granja Julieta, both in the city of São Paulo, Piracicaba, and Luiz Eduardo Magalhães. And together with São José do Rio Preto and Alphaville, we will achieve the total of seven units running and providing a high-quality education service for our students. After launching this important avenue of growth in 2023, we already can see solid results and looking forward to see the next years. Having said that, I finish our presentation and invite you all to the Q&A session.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Luca Marquezini with ETAL. Please go ahead.

Hey, good evening, everyone, and thank you for taking our question. So we saw a significant decrease in PGA expenses as a percentage of net revenue in the quarter. So can you please comment on the initiatives that led to this decrease? And also, if we should consider this level as recurring for the next month, please.

Thank you, Luca, for your question. We come serving this quarter a reduction of the PGA. uh achieving the 3.2 percent however uh despite having uh improving this indicator we first foresee a little have a little difficult in the next month so we cannot provide a guide for this number but we expected some some things higher than this 3.2 percent and probably the historical figure is closest to the forthcoming provision

Thank you very much.

Your next question comes from the line of Marcelo Santos with JP Morgan. Please go ahead.

Good evening. Thanks for the opportunity for asking questions. I have two on my side. The first one, I wanted to ask about the ACV. Maybe I missed it, but I couldn't find. But I saw that you increased the core students by some, I think, 12% and the complementary students by 22%. much more than the increase previous year. So could you give us a range or maybe a better view on what that could be, if possible? And the second question is regarding the margin outlook for 2025. I mean, in 2024, the margin was, the EBITDA, just the EBITDA margin was mostly relatively flattish, I think, 10 basis point up. What could we expect for the coming year? Thank you very much.

Hi Marcelo, thanks for your question. Let me give you some color about ACV. ACV growth in the fourth quarter was 20%, but considering the fiscal year of 2024, we recorded a 14% increase. This is we expect similar level for 2025. We are increasing market share. price increase and complementary products keep moving fast. So the same growth in 2004 is expected for 2005, keeping the same strategy of growing in complementary products and premium learning systems. Regarding margins, we are operating on the target of 30%. Every year we expect to have slightly improvements due to the fast growth and dilution that it brings and the better sales mix. So we are already performing on our target level and you can expect slightly increase.

Thank you. So just one follow up. On the first, sorry, my phone didn't work so well. So you said ACV growth was 20% in the fourth quarter. It was 14% up in 2024. And then I couldn't hear you. You said we should expect the same number for 2025. That would be 14 or 20?

No, the 14. The same level of 2025, 24 year, fiscal year.

Ah, okay. And you said something about price. Sorry. Do you mind repeating? Sorry about that.

Sure. I said that we had a high single digit price increase. So we expect to gain market share with the volume growth, and the remaining part of the ACV growth comes from the complementary products that grew 20%. Okay, perfect.

Thank you very much.

Your next question comes from the line of Marilla Olivero with Bank of America. Please go ahead.

Good evening, Cesar, Malaga, and everyone. Thank you for the space to make questions. I have one on G&A. We understand that this line is virtually flat during the year, but when we exclude the effects of the contingencies reversal, we see a 20% year-on-year growth in the fourth quarter. Could you please give us some color on what happened there, if we should expect higher GNA going forward, or if it's just a one-time expense?

Hi, Mirela. Thanks for your question. When we see SGNA, when you see the GNA as a percentage of sales, we actually see pretty flat. our GNA around 27, 28% in terms of GNA. We did have a slight increase in the commercial expenses following the growth of revenues. In terms of sales percentage, we grew on commercial expenses from 16.6% to 16.9%. But besides that, GNA remained Okay, thank you.

Your next question comes from the line of Lucas Nagano with Morgan Stanley. Please go ahead.

Hey, Madaga, Cesar. Thanks for taking our questions. We have two questions. The first is related to B2G. Do you expect the contract with Para to be similar as last year's? I think it was around 70 or 80 million reais. And also, if you could provide some color on the pipeline of other projects in B2G. And the second question is about StartAnglu. Roughly, how much revenue do you expect to generate in 2025 if it's material or not yet? Thank you.

Hi Lucas, thanks for your question. Giving some color about B2G. So we renewed the Pará contract, which is around 80 million. So this is so far the current contract that we are operating. We have a very heated pipeline in B2G. The prospection is lowered a little bit in January and February as the as the schools and the government is engaged in the back to school season. But now we do expect to have March and April very heated season. Keep in mind that this year is SIEB year, so we do have an examination of SIEB in October. And due to the results in Pará, we are bringing lots of discussions to the table and we expect to to have new contracts soon in the pipeline. Regarding StartAngulo, StartAngulo is a reality. We have around 1,000 students enrolled in our seven schools. 500 students out of the 1,000 are proprietary students, students in Liceu, Pasteur, and São José do Rio Preto, the two flagships that we have. the remaining 500 students are franchise students. So in terms of revenues, we have around 25 million reais of the entire operation of StartAnglo. It's not yet that significant, but in terms of growth for the coming cycle and also in Q4 when we we make the shipments for the teaching materials for the new opening units in 2025 that can generate a significant increase in this business unit.

Okay, very clear. Thank you.

I will now turn the call back to Guilherme and Lulega for closing remarks.

Thank you all to participate in the VASTA Q4 conference call. 2024 was a very important year for us. Not only we grew our operation, we already delivered significant results in B2G with the contracts that we secured, and start angle also grew fast. This keeps us confident that 2025 We'll have a very interesting year and significant for all our stakeholders. Thank you all for supporting VASTA. Looking forward to see you back in the next call.

Ladies and gentlemen, that concludes today's call. Thank you and have a great day.