Vitru Limited

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Good evening, ladies and gentlemen, and welcome to VTRU's second quarter 2022 earnings conference call. All participants are in listen-only mode now. Later on, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call is being recorded and will be available on VTRU's IR website. Now I'd like to introduce your host for today's conference call, Mr. Carlos Fritos, Vitru's CFO. Please, you may begin.

Thank you, Operator. And good afternoon, everyone. Thanks for joining us again. It's a real pleasure to be here with you all for the release of our second quarter 2022 numbers. Here with me, I have Pedro Graça and William Matos, our co-CEOs. Maria Carolina Gonçalves, the head of our IR department, and Raquel Kozaki, Luiz Felipe da Silva, and Hélio Crespo Jr. from our Investor Relations team. A slide presentation will be part of today's webcast, which is available as usual in our IR website at investors.vitru.com.br. So I trust you all have this presentation in front of you. And before we begin, I'd like to make note that as detailed in slide two of the presentation, safe harbor is in effect for this call. So now I invite you all to go to page four of this presentation, in which we have the main highlights for this quarter. And clearly, this quarter, the most important highlights were linked to the closing of the business combination with Unicef Amar, which we closed on The 20th of May, we created with this the leading player, the largest player in the Brazilian digital education space. So both institutions were already growing a lot organically, and now with the two combined, we are now the number one player in Brazil in digital education for higher education space. We also updated our governance with the appointment of new members of our board of directors, including two people from the Matos family, the one that created and managed Unto the Mars for 30 years. So Professor Wilson Matos is now our vice chairman for the board, and the definition of the new offshore structure with the new sea level team that I'm going to show you a bit later. We also had the issuance of the ventures for 1.95 billion reais in May of this year to finance a part of the transaction. And, of course, we kicked off the integration process that we have been preparing for in the last nine, ten months since the signing of the deal in August of last year, aiming at ensuring a as smooth as possible process and to capture substantial synergies as we have already presented to you all in the past. So in terms of financial indicators, the summary for this quarter on page 5, here we have the indicators both on organic and consolidated basis. So here throughout this presentation and in the release material as a whole, we're going to provide you information with only Vitru standalone, before the combination, and a consolidated basis as well, consolidated in Unicef-Lamar, between May 20th and June 30th, so the 42 days of Unicef-Lamar, so that you can have as much information, as transparent as possible, so that you can make your appropriate analysis. So here, net revenue this quarter increased around 75% compared to the second quarter of last year, and the consolidated, the overall net revenue was up 85 percent this quarter uh and did it with 42 days of until tomorrow uh the organic growth was 33 percent for net revenue uh in digital location on the red rate for union sales and 26 percent for uh when you sell the as a whole on organic base so strong growth in stop line uh that just a big day increased more than 100 108 percent this quarter, with the margin reaching 38%. Margin on organic basis was 34% this quarter, and a growth in the BDA of 28% when we take a check out of Vitru before Saisomar. In terms of adjusted cash flow from operations, a strong increase as well, almost 97%, 95.2% this quarter, with a nice cash conversion of 83% as well. And in terms of adjusted net income, it was up 168% with Sedomar, reaching 63%, 33 million Riyals. So here in cash flow and net income, we don't have the organic numbers because things start to be mixed between Sedomar and Uniaselvi, but whenever we can, we're going to show you the organic and the overall numbers with and without Unse do Mar. On page six, you have our C-level team, which includes executives who came from both Unse do Mar and the former Vitru before the built combination. So, since the signing of the deal, it was quite clear to us that we were going to combine two winning companies with similar and winning cultures. and that we all would benefit from this smooth integration process, bringing together these two leading teams. That's why, for example, we decided to, as I mentioned before, to have two co-CEOs, co-leading the company, Pedro Guerraza, former CEO of DITRU, and William Matos, which was the former head of digital education at Unicelumar. The idea here is to not have a takeover of one culture over the other. We have to blend and put together these two winning entities. So with that, we have a stronger and faster integration aiming at creating value for the students and for all stakeholders. So here in the team, the C-level team, we are basically with people from more or less heads coming from, the modern heads coming from a former teacher, still two positions to be filled, including the head of people and management. So we wanted to have a person from outside to lead the HR, exactly to have this message that we are not using or forcing one culture over the other. The idea here is to have somebody from outside to lead the HR department of the company. And for integration, before the closing we had an in-depth analysis of opportunities in terms of cost and expenses synergies between signing and closing. Part of it was already captured and part will be captured throughout this year. We had as well several commercial initiatives that are met respecting the specifics of each brand, and several projects, each of them with a given action plan, with an owner, with a list of deliverables, a set of prioritizations, and regular follow-ups. So we are really on the integration mode, with our mindset focused on integration. That's the number one priority for everybody here at Biture. On page 7, this is just as a reminder the main levers of synergies that we are pursuing. This was shown to you in May when we closed the transaction. So, for example, in terms of OPEX, we have optimization of payroll costs, gain of scale as a whole in contracts, for example. We have improved collection practice for UniaSELVI and retention practice as well for within SEDOMAR that is going to be useful for UniaSELVI. And for us, it was very clear that we have identified two, let's say, crystal clear opportunities regarding the exchange of BEX practices. When we talk about retention, and customer experience, and even at the collection process, has a better job. Sorry. has a better job.