Vasta Platform Limited

Thank you for standing by. My name is Kathleen and I will be your conference operator today. At this time, I would like to welcome everyone to the VASTA platform first quarter 2025 financial results. All lines have been placed on mute to prevent any background noise. 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 one on your telephone keypad. And if you would like to withdraw your question, press the star one again. Before we begin, I would like to read a forward-looking statement. During today's presentation, our executives 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 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 assumptions and on information currently available to our management. These risks include those set forth in the press release and 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. Thank you. And now, I would like to turn the call over to Sever Silva, CFO. Please go ahead.

Good evening, everyone, and thank you for joining us in this conference call to discuss VASTA Platform's first quarter of 2025 results. I'm Cesar Silva, VASTA's CFO, and today we have the presence of Guilherme Meleger, VASTA's CEO, who will be joining me on the call. Let me now hand over the floor to Guilherme Meleger, our CEO, to make his opening statement.

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 2025 sales cycle. I'm pleased to share our progress and achievements made so far. This first quarter also represents halfway through the 2025 commercial cycle, which runs from October 2024 to September 2025. In this quarter, we have continued delivering strong economic and financial results. with a particularly highlight in our free cash flow. In the 2005 cycle to date, our net revenue increased by 11% to reach $1,129,000,000. This growth was primarily driven by the successful conversion of our annual contract value, ACV, into revenue and achieving $1,000,000,000 and 19 million, a 17% increase compared to 2024 cycle to date. Complementary solutions continue to present the highest growth rate among our business segments, with a 24% expansion in the cycle to date compared to the same period last year. Moving to the company's profitability, our focus on operational efficiency and cost saving continued to bring results. Adjusted ABTDA for the 2025 cycle to date was 420 million reais with a margin of 37.2%. It has been an increase of 5% from 402 million reais performed in the last cycle. These gains were driven by a favorable sales mix benefiting from the growth of our subscription products. Finally, Our cash flow generation was the main highlight of the quarter, totaling 144 million reais in the 2025 sales cycle, which represents 176% higher than the same period in 2024. The last 12 months' free cash flow to adjusted ABTDA conversion rate improved from 42.5% to 50.8%. reflecting our sustained efficiency measures. These measures include improvements in the collection process, such as process automation, reminders and past due notifications, customer segmentation, and faster renegotiation of delayed receivables. Additionally, we implemented several initiatives to achieve better discipline on the payment side, including vigorous financial planning centralization of payments on a single monthly date and negotiating longer payment terms with suppliers. In addition to the financial highlights, I would like to emphasize our continuous development of our technological platform, Plural, which enables us to provide better service to our customers. Starting in 2026, our schools will use Plural AI with many new tools focusing on the concepts of inclusion, diversity, and equity in continuous education. Rural AI advances towards creating a welcoming educational environment for all students with the creation of an individualized education plan. The AI generates personalized pedagogical recommendations and assist teachers and schools in inclusive practice. providing an innovative solution to help educators transform challenges into opportunities for growth. I'll now turn back to Cesar Silva to talk about the financial results of the quarter and the sales cycle to date.

Thank you, Malaga. In this slide, number four, we present the composition of Vastra's natural agro. On the left side, you can observe the organic year-on-year growth in the total natural agro for the first quarter. which decreased by 6.6%, reaching R$430 million. Vast subscription revenue achieved in the first quarter of 2025, R$400 million, a 12% increase compared to the same quarter of 2024. Non-subscription decreased by 27% to R$25 million, as expected. And in the governance segments in this quarter, we generated 5 million revenues coming from five new contracts. Compared to 69 million in the first quarter of 2024, when the totality of PARA contracts, first and second semester, was booked all at once. In 2025 cycle, the first semester of PARA contracts was booked in the fourth quarter of 2024, and second semester is expected to be performed throughout the year. Moving to the right side, we analyzed the net revenue for the 2025 sales cycle to date. We achieved an organic net revenue growth of 11.3% in the 2025 sales cycle to date, amounting to 1,129,000,000 reais. the main factors for this performance were, firstly, the subscription revenue has increased at 17%, reaching 1 billion, 19 million, and continues to be the major contributor to our total revenue, representing 90% of the revenue share. Non-subscription revenue dropped 6% to 69 million reais. And the net revenue of B2G reached 41 million, a decrease of 40% compared to the 2024 sales cycle. Moving to slide number five. In this quarter, our adjusted bid amounted to 121 million, with a margin of 28.2%, a decrease of 25% from 162 million in the first quarter of 2024. mainly due to a lower revenue volume in this quarter and a different product mix. On the right side, we see that adjusted BTA in 2025 sales cycle increased by 5% to reach $420 million, with a margin of 37.2%. Let's now move on to the next slide and explain the breakdown of the adjusted BTA margin. In this slide, in number six, We can observe that the adjusted EBITDA margin achieved 37.2% in the 2025 sales cycle, 3.2 percentage points lower than the same period of 2024. Firstly, our gross margin achieved 63.7%, a decrease of 3.2 percentage points from 66.9% in 2024 sales cycle. due to a lower revenue sales cycle and a different product mix. Provisions for downfall accounts, PDA, achieved 3% in relation to the net revenue and have an improvement of 1.2 percentage points when compared to 2024. By showing improvement in this indicator, the year has been performing a very challenging and restrictive crisis landscape for non-premier brand business. and we still foresee some challenges in the credit scenario for the next month. As a percentage of net revenue, our commercial expenses increased by 1.2 percentage points, driven by higher expenses related to business expansion of the commercial cycle of 2025. And finally, adjusted G&A expenses improved by 0.8 percentage points, mainly driven by workforce optimization and budgetary discipline measures. Moving to slide number seven, which shows the adjusted net profit. In this first quarter of 2025, adjusted net profit totaled $26 million, a 49% increase compared to adjusted net profit of $50 million in the same quarter of 2024. On the right side of the slide, in 2025 sales cycle, Adjusted net profit reached 140 million reais. That has been a decrease of 4.4% from adjusted net profit of 146 million in 2024, as a result of the topics commented before. Moving to slide number eight, we show the free cash flow evolution. We continue to observe the growth of the company's cash flow generation. In the first quarter of 2025, the free cash flow totaled $74 million, representing a relevant increase comparing to $52 million in the same period of 2024. On the right side of this slide, in the 2025 sales cycle, our free cash flow reached $144 million, an increase of 176% from 2024. This quarter and the first semester of 2025 will benefit from early collections regarding 2025 sales cycle, which will be normalized throughout the year, together with consistent efficient measures implemented in the collection process in the payment balance. I'll read the details by Guilherme in his initial remarks. On another metric, our last 12 months free cash flow to adjusted VTA conversion rate increased from 42.5% in 2024 sales cycle to 50.8% in 2025. Despite having an expressive result in this sales cycle to date, we expect to keep this conversion rate in the following quarters. Moving to slide number nine, we show the provision for doubtful accounts. Total expense with PDA in the first quarter of 2025 total 12 million, representing 2.9% of net revenue, the same level as comparable quarter. Moving to the right side of the slide, the PDA for 2025 sales cycle amounted to 34 million, compared to the 42 million reais in 2024. Provision for doubtful accounts represent 3% of net revenue in 2025 sales cycle, an improvement of 1.2 percentage points in comparison to As explained before, we still foresee some difficulties in the credit scenario, mainly for the schools related to mainstream brands. Moving to the next slide, we observed that the average payment terms of VASTA's account receivables portfolio was 180 days in the first quarter of 2025, which is eight days higher than the comparable quarter and in line with the business model seasonality. Moving to slide number 11, let's take a closer look at the net debt movement. In the first quarter of 2025, VASTA had a net debt position of $963 million, $40 million decreased from the previous quarter. This achievement is due to the positive cash flow generated during the period in the amount of $74 million, which surpassed the impact of interest accrual of $34 million. Moving to the right side of the slide, the net debt position decreased by 77 million since last year. This decrease was driven also by the free cash flow generated in 2025 sales cycle, which was partially offset by financial interest costs. I will conclude my part of this presentation with slide 12, explaining some more detail about our net debt composition, which represents R$63 million at the end of the quarter. This amount is composed of R$771 million on the ventures issued to the parent company, in addition to R$149 million on accounts paid for business combinations, mainly related to off-level acquisitions, offset by R$257 million in cash and cash equivalents that the company owns. In the lower left of this slide, we can see that in the first quarter of 2025, the net debt to last 12 months' adjustability ratio has increased 0.09 times from the last quarter. This slide increase was expected, and when compared to the fourth quarter of 2022 or the first quarter of 2024, the indicators are relevant downwards, and now it stands at 2.06 times. We would like to reinforce our commitment to continuing to generate free cash flow and deliver the company. Having said that, I finish our presentation and invite you all to the Q&A session.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, simply press the star 1 again. If you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star 1 to join the queue. And your first question comes from the line of, Jessica Meller of JP Morgan. Please go ahead.

Hello. Good evening, everyone. Thank you for taking my question. Actually, I have two. So first, how do you see margins for 2025 comparing to 2024? This is my first question. And second, what is the strategy in terms of MIG? What is the expectation for the BTG business? How much this business can expand going forward? Thank you.

Thank you, Jessica. I will take your questions. I will start with the margins. We expect stable margins for 2025, so we ended 2024. It's likely above 30%. We forecast similar margins, although Q1 and Q2 will have lower margins due to some concentration in marketing spending and mix. We expect mix to catch up in Q2. And now I will jump to the second question about strategy and mix and B2G because it also compounds with the margins. So we have last year in 2024, we had a concentration in B2G because the PARA contract was entirely recognized in Q1. This contract this year on the sales cycle of 2025 was partially recognized in Q4 2024, and we expect to perform the remaining of the contract in Q2 and Q3. Additionally, we already noticed new contracts in B2G. We have five new contracts in Q1. and we have definitely more content to pile up in Kill Channel. So this will enhance mix in terms of segment mix. In terms of B2B product mix, we expect to be very similar to last year, with complementary products growing high double digits, actually above 20%, and core content in double digits. That's what we expected and we expected to have similar margins in 2025.

Very clear, thank you. Again, if you would like to ask a question, please press star 1 to join the queue. We'll pause for just a moment to compile the Q&A roster. And your next question comes from the line of Lucas Nagano of Morgan Stanley. Your line is now open.

Hi, good evening. Madaga, Cesar, thanks for taking our questions. I have just one, and it's related to the B2G. You mentioned that part of the contract was booked last year. So do you expect a lower B2G revenue this year, or should there be a seasonality? The seasonality of the para contract should be kind of the same in which part of it is booked on the fourth quarter of the previous year. Just a question to assess the potential growth of P2G this year. Thank you.

Thank you very much, Lucas. I really would like to have more data to have a a confident seasonality in terms of B2G. But this year, I would say that, for instance, in Pará, we are having a more normal seasonality because first semester should be recognized in late Q4. So when we start classes in January and February, you already have the material. So it's quite similar to the B2B distribution process. So we expect to have the same distribution in 2025. So we do not expect any difference in terms of fiscal year on 2025. Additionally, we have a very heated pipeline. We are prospecting several new contracts that will pile up in the contracts that we already signed. So we expect to grow in the B2G. We will not give a guidance about that, but we are working to have it a sound growth for 2025.

Very clear. Thank you.

And there are no further questions at this time. I will now turn the conference back over to Mr. Guilherme Malaguet, our CEO, for closing remarks.

Thank you all very much for participating in the VASTA platform Q1 conference call. We are very happy with the beginning of the year, with the ACV recognition, with the start of sales campaign of ACV for 2026. We just finalized the Batcha do Car Fair last week. uh that generated a significant pipeline for us in b2b and b2g so both segments with heated pipeline and additionally to that we already see very positive signs in free cash flow that we will remain performed positively throughout the year so thank you very much looking forward to see on our q2 earnings release call Thank you.

Ladies and gentlemen that concludes today's call. Thank you all for joining. You may now disconnect.