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spk05: Good evening, everyone. Thank you for waiting, and welcome to Vitor's fourth quarter and full year 2022 Earnings Conference call. We advise you that the video conference is being recorded, and it will be available in Vitor's Investor Relations website, where the complete material of our earnings call can be found. You can also download the presentation from the chat icon. During the company's presentation, all participants will have their microphones disabled. Then, we will start the Q&A session, and at this point, you will be able to use your microphone. To ask questions, click on the Q&A icon at the bottom of your screen to join the queue. If you prefer to write your questions, please follow the same steps, and you will be joining the queue as well. When your name is announced, a request to activate your microphone will appear on the screen, and then you must activate your microphone to ask questions. It is recommended that you do all questions at once. We emphasize that the information contained in this presentation and any statements that may be made during the earning calls regarding Viltroo's business prospects, projections, and operational and financial goals constitute the beliefs and assumptions of the company's management, as well as information currently available. Forward considerations are not performance guarantees. They involve risks, uncertainties, and assumptions, and they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect virtuous performance and lead to results that differ materially from those expressed in such forward-looking statements. Today, we have the presence of the company's executives, Pedro Garza, William Matos, Vitruz Co-CEOs, Carlos Freitas, Vitruz CFO and IRO, and Guilherme Franco, VP of Marketing. I will now give the floor to Carlos Freitas. Sir, you may begin.
spk06: Thank you, Pedro. Thank you, Pereira.
spk02: Sorry. Let's go again. Thanks, everybody. And good afternoon, everyone. Thanks for joining us here again. It's a pleasure to be here with you all for the release of our fourth quarter results of last year, as well as the full year results. Here with me, I have Pedro Graça and Willian Matos. the co-CEOs of Vitru, Guilherme Franco, our VP of Marketing and Sales, Maite Carolina Gonçalves, the head of IR, and Raquel Sousaki and Luiz Felipe da Silva, also from our IR department. A slide presentation will be part of today's webcast, which is available, as you know, in our IR website at investors.vitru.com.br. So I trust you all have in front of you this presentation. For those that are not following, uh our our webcast here live with zoom so before i begin just as a quick reminder safe harbor is in effect for this call so now i invite you all to follow me here to this presentation in page four which is here, which brings the main highlights of the last month. The first one is the closing, as you remember, of the primary capital increase of around 400 million reais. both from Criteria Kepto or mostly from Criteria Kepto, but also the issuance of new common shares that we made present to a rights offering that was executed throughout October and November of last year. So with that, we reinforced our Kepto structure. Second, the key highlight was the price adjustment in our business combination with Unicef do Mar. which resulted in a reduction in the price of around 73 million reais. That was part of the share purchase agreement with Unisesamar. It was part of the deal that we would evaluate changes in the balance sheet of Sesamar between the reference balance sheet and the closing balance sheet, which was in May of last year. So with that, we reduced the amounts to be paid in around 73 million Reais. And the third key highlight is clearly the advancement of the integration plan between Vitru and Sesemar, which is being executed ahead, in fact, of schedule with over-delivery of the promises signatures that we expected and that we guided the market when we released this information in May of last year. On the following page, we have the key highlights from a financial perspective. Both the organic numbers, I mean, without the consolidation of once more into vitro and also on a consolidated basis. I mean, weeks of the sedum water since the closing of the combination, which, as I said, took place in May of last year. So roughly, with seven months of sedum water in numbers. Throughout this presentation, and as we did in the last quarter, we are going to provide information on an organic basis and also on a fully consolidated basis. to be as transparent and as clear as possible to you. So here the first key highlight was the 88% increase in net revenue in our core business, which is digital education undergraduate between 2022 and 21. while the overall consolidated net revenue increased around 109%. It is a huge increase, a huge jump in our net revenue in our core business. So more than doubling when took out the full package of consolidated numbers. And on our organic basis, we are showing an increase of around 29%. in the case of UniaSELVI, digital education undergrad business, and the 23% organic increases of UniaSELVI with the three business we have, including on-campus and graduate business. So a clear advancement in our numbers here as expected with SESOMAR. When you see the adjusted cash flow from operations, we increased in 161% in 22 with a improvement in cash conversion from operations from 83% more or less to 96% last year. It is an important pillar in our financing strategy. The fact that we do generate cash, we are a net positive cash flow provider and generator so uh this was an important improvement not only from organic perspective perspective but also and most importantly because of the strong cash flow position and cash flow uh uh strengths of sedumar On the right part of the slide, we have the adjusted BDA, which increased 145% last year, with the adjusted margin reaching 33.9% from 28.9%. So five points increase in margin last year. Organically, it was an increase of around 22% with a 28.6 margin. So it just confirms the resilience and the strengths of Unicef-Domar is bringing to vitro. And finally, on a just net income perspective, it increased 124%, more or less, reaching a bit more than 200 million reais. So even with the debt financing that was raised for the business combination with Sesamar, we improved substantially our net income. So before we go deeper onto the financial numbers and performance of last year, just a quick reminder of a few slides and the first one, the one that I love the most here in the presentation, which is a follow up of what we said that we were going to do and what we did. So basically we said that we were going to grow in four growth avenues. the ramp up of current hubs, the opening of new hubs throughout the country, the increase in the course offering, and inorganic growth through M&A. So we basically ticked the box in these four growth avenues. So now, as of end of last year, we had 91% of hubs still ramping up, with about 73% of all digital education students in those expansion hubs. So the major hubs now represent around one fourth only of the student base and three fourths in those hubs are still maturing. So this is by itself the most important driver of growth is the maturation of our existing hubs. We now have around 750,000 students. And organically, we are selling almost 400,000, coming from 287,000 a year and a half ago. When you see the hubs, we went from 600 to more than 2,100 hubs now, more or less half, we'd say the modern half, with UniaSelvi, throughout the country, and a strong growth in the southeast region, as I'm going to show later in more details. course offering as well we are improving and increasing our portfolio of courses and this was by the way the the the most important driver for commercial synergies last year was the the in the course offering uh within sismar taking profit of the products that we had already uh uh within unia solving also vice versa but mostly new uh courses within sedomar and finally inorganic growth with the mna which is which made vitro the not only the fastest growing player in brazil high location sector but also the number one player in the digital location segment in brazil which is uh growing which was growing and which is growing and that will keep growing given the still low penetration of higher education in the industry and it will only be slowly but steadily improved and closed through digital location courses On page 7, now going into more details into each and every one of these pillars, the ramp-up of kernel hubs is advancing as expected. You can see here the cohorts, the different cohorts of hubs, summing Unia, Selvi and Sedomar. They follow a very, say, predicted pattern. And now we have, as I said, around 200,000 students in major hubs out of 800, so 25% more or less. And we have a... maturation index of around 42 percent meaning that all of these hubs on average they have they are with less than than half of the full capacity of those hubs as they mature as they keep growing we are going to increase the number of students with limited execution risk The partner is there, the brand of Unicef and slash or is there in the given city, so it is a virtuous cycle that is operating and with that we are going to keep growing throughout the country. On page eight, you see the distribution of our student base in digital education undergraduate. So an important jump throughout the five regions of Brazil, especially in the Southeast. So this here is the the contribution of the market plus the organic growth of UniaSelvi. And both organically and inorganically, we are growing a lot in the Southeast. which was uh one key concern uh of the market when we started to to to grow faster uh in the southeast is our capacity to expand to really expand throughout uh the four states of the southeast so now we are growing 340 percent there in in the southeast uh but in in around 82 in South, 101% in Northeast. So we are now truly present throughout the country. And the Southeast not only with now with second largest citizen base, but also with the largest portfolio of hubs as well in the country. Today we have 730 hubs in the Southeast, more or less one third of our hubs that we have in Brazil. On page nine, the other pillar, which is the expansion in portfolio of courses, we are now fully offering nursing courses in the two brands. It is important layer of growth. And we are confident that one day in the future, we will have the capacity to offer law and psychology and other courses also through digital education courses. These are courses that are today the three most important ones in the on-campus segment. But the true market, the true market to be tapped, the true market to be assessed is not what we see here in the screen. Once we are able and allowed to offer digital education courses in law and psychology, The total addressable market will be larger than what we see here in the screen because of the pure characteristics of this location, we can access more people throughout the country. On page 10, a quick reminder as well on our technology. Today, the most important way to communicate with students and for them to study is through the app. by far uh everybody in brazil has a cell phone everybody has a computer so today we have more than 700 000 students active uh active student uh in the in our apps the whole course is uh uh provided through the course to the app or through the computer and our app our apps in fact are rated the number one and number two when you see the public rates either in App Store or Play Store. And finally, on slide 11, the distribution of hubs as of end of last year, as I said, a bit more than 2,100 hubs, more or less half in Sedumar, half within Selvi, with a very complementary footprint, attracting different people, different publics, different audience, and today we have more than 740 cities in which we have only one of those two brands so here is an important driver for commercial synergies going forward which is the expansion uh with the same partner that is there offering one of the two brands now we'll be able and is already offering a second brand So with that, we moved to page 12 to go a bit deeper about the financials. So as I said, digital education students our focus around 700,000 as of end of December of last year, which together with the graduate digital students represent around 19% of our base. So we are purely the, the leader here in this business and the only listed player truly focused on digital education and on the right you see the evolution over time of our base so on organic basis We grew 90 percent between December of twenty one and twenty two. And with the growth reached one hundred and twenty nine percent. So now we have, as I said, almost 700,000 students as of December in undergraduate digital education courses. When we see intake and tickets here on the bottom part of the slide, we show intake and tickets on a semester basis, which brings a more accurate picture, given the academic cycles that we have in the post-grad sector in Brazil. So first, about intake. This information is not new. This is what we disclosed already in November. Unia Selvi grew 23% in the second half of last year compared to the second half of 2021, while Unia Sesomar grew 51%. So this is important growth in the combined intake of around 31% of SESAMAR and UNICEF is a proof of the competitive advantage of our models and the differentiated quality of our products. So let's go deeper about tickets. As we saw in the third quarter results, And now again, the average ticket of only a selfie has has been growing year after year, while the average ticket of cinema has decreased this year. Why was that? So in the case of Unia Selvi, this is mostly due to our pricing discipline, our marketing intelligence, and the tools and procedures that we have in place, that we have been putting in place in the last years. And as you all know, And that will be showing since the debut, so this is part of our of our model of our business proposition to have. sustained tickets over time, this approach is now being taken. to Unicezumar. This is one of the best practices that we are exchanging between the two brands that going forward will have a positive impact on Unicezumar. Because in Unicezumar there were two main reasons for this decrease in tickets. The first one uh was the the increase in the volume of new students i mean freshmen and fresh women as a percentage of total students as you know the average ticket of a new student is lower than the ticket of a senior one uh and second uh also the decision taken in the past to be more aggressive in tickets uh within uh which was taken a decision taken before the closing of the discrimination uh and i mean the closing of the accommodation was in late may when the first intake of 2022 was over and the strategy for the second intake of 2022 was already being implemented. So now we have been working as a sole company And what we are seeing so far until today is that the intake tickets of Sesumar is increasing by more than inflation. So we are seeing a real increase in the intake tickets up to today within Sesumar. So we are starting to see the effects of this new approach to pricing. And regarding the intake overall up to now, I mean, as of Monday, as of March 13, the growth of intake in the two brands combined was around 17.4% compared to the same period of last year. as I said, with health tickets. So again, we are increasing a lot, even knowing that we had a very high comparable base of last year because of the important growth that we had in both brands in the half of last year, even knowing that this is the first full year after the pandemic. So we do believe that This year, the overall sector of digital location will grow slightly lower than what we saw last year, because it is the first March and the first February after the pandemic. As you know, one year ago, we were still discussing about Omicron. And despite the current crisis, so the high comparable basis, the first year after pandemic and the crisis, we are still delivering a 17% growth in tickets, in intake with health tickets. So this is just to show that we are a different company. We provide a different service to our clients. On page 13, the key financials here, net revenue, gross profit, and adjusted EBITDA. Again, 109% growth in net revenue. The gross profit was more or less growing the same level, 109%. So the gross margin was stable, more or less. uh and the reason for that is that despite the gain of scale the gross profit of the system on campus business is is uh smaller than the the digital location so on average we are the same uh the same margin and the adjusted bda growing five points as i said the margin from 28.9 to 20 to 33.9 uh levered especially on dna and i'm going to show this a bit later so fourth about net revenue on page 14 uh we had as i said a increase in 28 and the digital education undergraduate of UNICEF, a decrease of 20% in on-campus, and the continual education business was more or less stable year after year. And on the right part of this chart, the contribution of UNICEF, a very important contribution, including here 130 million reais of the medical business in seven months. Now providing to you the breakdown about the two companies combined. So more or less, we have about 75% of our net revenue in undergraduate digital education courses. More or less around 5% in continual education, which is basically digital as well. So we have almost 80% of our revenues coming from the digital segment. And on top of that, we have around 13% of our net revenue coming from a very resilient medical business. And going now deeper about this segment on page 16, the net revenue, as I said, grew a lot, 88% in the digital education undergraduate segment. both on organic and inorganic basis, And this was not because of any major shift in mix of products. When you see the numbers between 2021 and 2022, the two brands were slowly but steadily improving in health, but not much. There is still a lot of space for Unicezumar to improve and to increase the percentage of health course as well. So this is also going to be an important lever for tickets over time. But basically, we have a very well distributed portfolio of courses in the two brands. On page 17, our medical business with the Unisamar brand. Here, a number of highlights. Again, it is the fifth best private medical school in Brazil. Those who could attend our first virtual day there in Maringá that we held in January of this year could see that, could see the quality and the the differentiated approach we have to this business. It is a different segment. It is the largest medical school in the south of Brazil, which brings its scale there in Maringá with around almost 200 seats with every ticket of more than 10,000 reais. so so this is a a business that on a annualized basis uh we have a net revenue of roughly 220 million reais per year but tickets are increasing above inflation and the seats are still maturing so we do expect promising results from our medical business uh this year On page 18, on campus and continuing education. So first on campus. On organic basis, I mean UNICEF alone, there was a reduction in net revenue in the segments, mostly due to the shrinking base, which is aligned to our long-term view for the education sector in Brazil. However, there was an important contribution of UNICEF the consideration numbers given the resilience and the high quality of the health related on-campus courses of the water by the way this health courses in on campus represent more than half of the on-campus revenues of tomorrow excluding medicine so it is a very resilient business with high tickets uh and on that front i'd like to to highlight that In the current intake cycle, up to today, we are seeing an increase in intake of slightly more than 20% in the Universidade do Mar on-campus business, with rising tickets. So this is a nice complement to our digital education focus. Regarding continual education, on the right part of the slide, in the last quarters, we saw a continual reduction in the average duration of the graduate courses. But this shift was basically over now. So we saw in the last two quarters an organic increase already in the continual education net revenue of UNICEF. And now, which is more we are growing around 30%. So now going to the BDA, now jump to page 20. the cost of service and G&A. So cost of service, when there was an increase, organic increase of 20%. So there was a clear gain of scale within UNICEF. But the overall number, when you saw the percentage of net revenue was higher. And basically, as I said, because of the lower growth margin of the on-campus segment of UNICEF. And when you saw DNA on the right part of the slide, there was a decrease both on our organic and inorganic basis. So organically, we increased only by 7% within the V2X, conforming our lean structure and our lean approach to management. And when you saw the overall consolidated number there was a reduction from 8.1 to 5.9 percent only of a net revenue uh conforming uh the gains of scale and the synergies so the the key driver for synergies uh last year was in gna uh especially within cinema uh as i'm going to show a bit later On page 21, selling expenses and PDA. So CENEX expenses on an organic basis, there was a increase of 24%, so slightly higher than the increase of net revenue as a whole, but at a lower CAC, given the important intake that we had last year. So the overall CAC of 2022 was 1.5% lower than what we had in 21. And regarding SEDOMAR, the hubs are more active than in the case of UNIASELVI in this overall sale process. So that's why when you saw the overall picture, the overall number, there was a reduction from 17.7% to 16% of the overall net revenue in SENEXPENSES. The same happened in PDA. PDA, the overall PDA, meaning the provision for doubtful accounts, was down from 17.5 to 14.2. last year. So there was an increase in the PDA of UNIASELVI. So organically, the most important reason was the deterioration in the macro and overall credit scenario in the fourth quarter of last year that we saw and that was clear for the whole economy. And we are not immune to that, which affected more UNIASELVI, given that the students of UNIASELVI have a lower average income than students of SEDOMAR. So we saw that deterioration in the fourth quarter of last year. Nevertheless, it was more than overstated by 2001. And going forward, when we look to 2023 as a whole, we expect the overall consolidated PDA level to remain more or less at this level of 14%. I mean, six months ago, if you asked me this question, I was expecting a lower PDA amount for 2023 and even for 2022. Now, seeing what we see today, we do expect that for 2023, we shall expect more or less the same level of PDA of around 14% of net revenue. On page 22, cash flow and net income. The first net income, an increase in margin from 14.5% to 15.6%, driven by the business combination. And we have a slightly higher margin, even knowing that we have a higher leverage in this quarter. We raised funds for the combination with SESMAR. uh and even with this uh debt level that we today have a net debt of around 2.4 billion uh we managed to increase uh net income overall uh seen uh and because of the of the numbers of cesmar by the way about net debt uh we when we see the overall uh numbers that we have uh for last year i mean if we take the full year of vitro x onto the model plus if we take the normalized and annualized numbers of units of the model for a full year our adjustability number for last year was more or less around 600 million reais So we had net debt of 2.4 billion as of December, divided by 600. So we had a net debt over EBITDA of around four times. which is lower than our covenants and going down. So we do expect that this ratio for the end of this year will probably reach around three because of the growth of the business as a whole. And because as I said before, we are a net positive cash generator. And this cash generation is here seen on the right part of the slide. We increase the cash flow generation for operations in 162% between 21 and 22. And the cash conversion from 83 to 96%. So this is a very important pillar or financing strategy. uh we managed to to raise that and to have the the acquisition of the model because the both companies together are important cash flow generator and and by the way it's important to highlight that these numbers are before capex But our capex for last year was only 7.4% of net revenue, down from 9.2% in 2021. So even with capex, we are generating a cash on a net net perspective. So finally, on page 23, the integration plan and synergies so far. So the whole plan was designed before the closing of the business combination and it was detailed and implemented after the combination, taking into account several perspectives and with a lot of care and consideration for our people. But the plan is being executed ahead of schedule. we are we have around today uh around 100 projects throughout the country running at full steam each of them with an action plan with an owner with deliverables with deadlines uh with a timetable so this is being implemented and this is the key priority of the company today And with that, we over-delivered in the synergies expected for this year. So on the right part of the slide, we see in yellow the expected evolution of synergies that we communicated to the market in May 2022. So as you will certainly remember, at that time, we mentioned that we expected an increase in the EBITDA margin of six points between 2021 and 2025. So now, the synergies that we delivered, I mean, the 32 million reais more or less in costs and expenses, represented an increase in our EBITDA margin of around 2.4 points. I mean, without the synergies, our margin would have been 31.5 instead of 33.9. And on top of that, we started to have synergies as well on commercial front, also over delivering. Instead of 5.6, we delivered 10.7. So the main levers from a commercial perspective will be for this year, the better pricing, et cetera, again the new offerings of course and products and the faster expansion of hubs throughout brazil so today we already announced the market that we this year we are going to open around 500 hubs which is more than the rate the rate that we used to open and on a opex perspective the main levers was and will be personal optimization. But now, with more importance in gain of scale in contracts and also bear retention practice at UniaSELVI. We already had a number of pilot projects implemented and tested within Uniastelvi using the intelligence and the procedures of UniSysOMAR for onboarding, for retention, for collection, which have shown already promising results and that now we are starting to deploy this throughout Uniastelvi. So we are very confident in our capacity to deliver the expected synergies and the gains in margins. So with that, I finish this presentation and I'd like to open for questions.
spk05: We will now begin the Q&A session. Remember that to ask questions, you must click on the Q&A icon at the bottom of the screen to join the queue. If you prefer to write your questions, please follow the same steps and you will be joining the queue as well. Upon being announced, a request to activate your microphone will appear on the screen, and then you must activate your microphone to ask questions. We kindly request that all questions be asked at once. Let's now move on to our first question. We have Luca Marchesini, Sales Site Analyst from Itaú BVA. Luca, we will open your audio so that you can ask your question. Please proceed.
spk07: Good evening, everyone, and thanks for taking our questions. We have two questions from our side. The first one would be regarding the integration plan and the initial synergy. So the company has mentioned that it has executed the plan ahead of the schedule. So can you please provide some more detail on what has caused this overachievement? And then secondly, what are the new expectations for synergies in 2023? That will be our first question. And then the second one would be regarding the average ticket. So we saw an 8% increase in the average ticket of Unia Selvi, the digital business. So can you please provide some more detail on what has driven does increase? And then besides the higher contribution of courses such as nursing, was the company also able to readjust prices in other courses? Thanks.
spk02: Thank you, Luca, for your questions. So regarding the integration, The reason for the overachievement here on page 23. The most important reason for this overachievement was that we were able to integrate areas faster than what we thought. So we had a plan for area per sector with different timetables, sectors that we were going to integrate last year, sectors that we were not going to integrate. And we had an idea, a plan for this integration of areas, and what we saw is that Detailing the plan after May, that we were able to accelerate this integration, and now we have already several areas of the company operating as one area, and this was the key driver for the over-delivery of synergies. So going forward, I mean, for 2023, what we expect is what we have here on the screen. 80 binaries in EBITDA impact coming from synergies. I mean, the 31 that we had delivered, plus 50, more or less. So this is the guidance for synergies that we expect an ABDA impact coming from synergies of 80 million reais more or less in 2023, being the 30 that we had already plus 50 more or less for 2023. So with that, we shall expect coming from synergies a continued improvement in margins overall within the future. The second question about tickets. of UNIASELVI, I'm going to go back there on page 12. In fact, the ticket of UNIASELVI in the second semester grew 8.4%, which is above inflation. This was not really because of nursing, because nursing started to be offered in August of 21. So there was an increase in the tickets last year. I mean, when we showed the second half of 21, we saw an increase compared to 20 because of nursing. Not the case now. We are already offering nursing since August 2021. So the reason for the increase here is basically twofold. The first one is that we were able to increase prices in the intake cycles because of the resilience of our model and the differentiated aspects of our product. So we were able on average increased prices throughout the country, in some areas more, in some areas less, in some products more than in others. But on average, we were able to increase intake tickets last year. And the second reason also is that we generally, and we have been doing this for the last years, we also increased tickets for the seniors above inflation. So we, for example, this year, just to give one real example, this year, in January of this year, we increased the seniors tickets in 8.8%, which is more than inflation. And then a third one as well, that throughout the course, we also increased the density of the course. So that's why when we saw a ticket of a senior, for example, in the eighth semester, the ticket of those people is higher than a ticket of someone in the second semester, for example. Because of the higher density, we add more disciplines and more courses. And with that, we charge a bit more. so those are the three uh uh say reasons being the first one the most important one the capacity to to to to increase prices given our pricing discipline and the differentiated aspects of our products uh is what has been uh uh uh has made us possible to increase prices above inflation at unia selfie and this pricing uh intelligence this great granularity that we have this fast reaction to change in the market that we have been implementing within UNICEF in the last four or five years, we are now also starting to implement within UNICEF. And that's why we are seeing already an increase in the intake tickets of silver this this last two months.
spk07: That's very clear. Thank you, Carlos. Thank you, Luca.
spk05: Thank you. The next question now comes from Luca Naganov, the sell side analyst from Morgan Stanley. We will open your audio, Lucas, so that you can ask a question. Please proceed.
spk03: Hey, good evening. Thanks for taking our questions. First question is regarding the intake cycle. You mentioned the combined volume growth is 17%, but we were wondering if you could give a bit more color on the mix between both brands to get a sense on how the ticket repositioning at Unisys MR is impacting the demand. And the second question is regarding the delay of the distance learning loss suspension. In our view, it doesn't seem to be a priority for Mac right now, but it could be an important catalyst for the sector. And could you give some of your comments and perspectives on the outcomes of this working group?
spk02: Hi, Lucas. Perfect. So the first one is regarding intake. So today, I mean, as of March 13, I mean, Monday, we have on average, or the two brands combined, 17.4%, slightly more than that within UniaSelv and slightly less than that within Sedomar. So more or less 14% Sedomar, more or less 21% UniaSelv, more or less. So this is not only an impact of the tickets, but most importantly, the high comparable basis. I guess this is more important. In this case, when you see the two different brands, you saw that there was a very important increase in intake at Unicef do Mar. not only the second half of last year, which is here on the screen, 51%, but also in the first semester. In the first semester, there was an even higher increase in intake within SEDEMAR, while the number of UNIASELV was more or less aligned to the more or less between 20% and 30% growth that we have been showing in the last years. So the comparable basis, the bar of only set them up is higher than the bar of only a service that's why it is natural now that only set them up shall grow less than them are in this current intake cycle. And the second question about the law and psychology. You're fully right. There was a committee created by the Ministry of Education in September of last year for six months with the possibility to be renewed for more six months. So now what was done was that this term was extended to two 17 days, so nine months, with the possibility to be extended again. So, I mean, we are expecting evolutions on this front so far, nothing that we can comment here. We are still positive about the intrinsic capacity of being able to offer law and psychology in digital education. There is no underlying reason for us or for the sector not to be allowed to offer law and psychology through a hybrid quality digital education solution. uh but if it is something that would take some time uh so i mean for with this committee we do not expect this to be a possibility this year that's clear for now but we are still optimistic that in the medium term this will be a possibility very clear thanks thank you lucas
spk05: Moving on, we're going to go to the next question from Fred Menges, Sales Site Analyst from Bank of America. Fred, we're going to open your audio so that you can ask a question. Please proceed.
spk00: Hello. Good afternoon, everyone. I have two questions here as well. I mean, the first one, Carlos, if you can just comment a little bit more on the strategy about entering into the Southeast. How is that working out? And even with that, you're able to raise prices and decrease the CAC you were expecting since you were expanding to somehow, I wouldn't say a new region, but a region where market share is lower. There would probably be an impact in CAC. This is the first one. And then the second is more like a strategic question. When does your market share start to become, I wouldn't say a concern, but something that you start to think, okay, maybe that is getting too much. It's going to be harder to grow from now on. Maybe I need to expand my addressable market. Maybe I need to come out with some English course. I don't know. But at which level do you think it would start to make sense to have not only a strategy of gaining market share, but also maybe trying to expand this market through your platform? Thank you.
spk02: Thank you, Fred, for this very good questions. So the first one about Southeast here on the screen on page eight. Not only within the Southeast, but throughout the country in any new region or macro region that we enter, we have to start offering a slightly lower ticket that's a price to be paid that's natural and after we have more brand recognition locally we start to normalize prices that's what we have we did in the past in other regions that we did in the past in in minas gerais That's what we are starting to do now in some areas of Rio and Sao Paulo. But clearly, when you see the Southeast, it is the last frontier, especially Rio and Sao Paulo, from the perspective of UNIASELVI. because in the case of only Sezumar, there was already an important presence there. But overall, it is still the region in which we have the lower presence. So when you see the, for example, tickets that we offer in São Paulo and Rio today, they are on average smaller than the ones that we offer in other regions. in other states. This is part of the overall commercial approach to enter a new region. So in the first one, two, three semesters, we have to pay the price. And then once we have more brand recognition locally, we have word of mouth as well working in our favor. Once we have as well the partner going through a learning curve to operate and to sell locally with our support. So once we pay this initial, I'd say, price, we start to normalize tickets and that's what we have been doing in the last years and that is working already. So for the Southeast, It is a region that we are growing a lot, that we are growing the most, in fact, throughout the country, both on organic and inorganic basis. And we are very confident that we are going to keep growing there. For the overall market share to be a concern or not, We are still far from the level in which we will be concerned with being too big. Today we have in the last census, we had around 23% of the market as of 2021. probably now is a bit higher than that, maybe 25%. We're still not in a position in which we don't have space to grow. There are several regions in which we're not present, either with both brands or with one of two brands. And as I said, they attract different people. the hybrid product of UniaSelvi attracts a different person than the model of Unicezumar. So our market is not the same. And we are present in some areas with only one brand and some areas with no brand. So there's still a lot of space to be occupied. That's the issue. So there's no single answer to your question. But on average, we are not concerned from a market share perspective. And anyway, the most important single driver for growth in student base is not going to be gaining market share it's because of the overall market is going to keep growing uh this is not a hoba monte In Portuguese, again, this is a sector that has been growing a lot, grew even faster during the pandemic. This year, we do believe that we will grow slightly lower than the normalized numbers because of the high comparable base of last year. But for several years, we'll keep growing because of the lower penetration of higher education in Brazil. uh so the overall when when we see the overall uh uh post-grad sector in brazil with seven million people in the private sector in brazil as of 2021 this is not the total addressable market that we can tap The more we have hubs from Vitro or other players being open throughout the country, the bigger the market will be. So the increase in supply drives demand. So we're not concerned about being too big here. No. But anyway, which does not prevent us from exploring other avenues for growth. I mean, when we IPO the company, we said that we had a number of M&A possibilities. And most of them, by the way, were not in our core business. Most of them were not in undergrad business in this location. We had discussions going on. in other players that offer graduate courses, that offer technical courses, preparatory courses for the first jobs, and that we are now already offering. We already have these courses in our portfolio. So when we see our continuing education segment, It is a bunch of things, mostly graduate courses, but not only. But we are we are looking for future growth, not now in the very short term, but more in the medium term. uh with other growth avenues apart from our core business of uh undergraduate business because we do believe that we have the two leading brands that on an organic basis when you sell and until tomorrow we'll keep growing and we'll keep gaining market share but the key driver for growth uh in our revenues is the expansion of the market at all not only gain market share
spk00: Perfect.
spk06: Makes a lot of sense, Carlos. Very clear. Thank you.
spk05: The next question now comes from Mauricio, a sales side analyst from Credit Suisse. Mauricio, we're going to open your audio so that you can ask your question. You may proceed.
spk01: Thank you, Carlos. This is Cepeda from Credit Suisse. EDUCS reported yesterday results, so I think there are things that we ask them that we should ask you because, first of all, congratulations on the results and the clarity of the presentation. uh one of the things that was discussed with then and i think it's a fair point to ask you as well is about all this commercial dynamics to attract first-year students all the commercial dynamics to have more intakes so i will ask you a little bit about the necessity to in a certain way subsidize this this first-year student so that you can have intake And then, let's say, try to retain them even without the subsidies throughout time. You mentioned that Sesumar had a period where the tickets were still, were a little bit lower, and now there has been a recovery of tickets in Sesumar. So my question would be, okay, if you keep this kind of policy, which kind of policy, how aggressive is the market in terms of prices so that you can obtain more or less growth in this first year? And the second question would be about FIAS. I know it's kind of a tricky discussion because there is There's nothing concrete about that. But what is the sector discussing with the working group there about the inclusion of distance learning in a future program design? Thank you.
spk02: Thank you, Cepeda. So regarding the market and prices and intake, et cetera, I mean, what we are seeing in this current intake cycle, which was already saw also to a certain extent last year, was a more ease and was a more rational market. I mean, competition is here, it's fierce, as it has always been. We are operating in a competitive environment. It is as tough this year as it was last year as it was in 2021. It is a tough market in which you have to have differentiation, you have to have high quality, you must have delivery. But anyway, what we are seeing in this intake in the last year, I mean the last 12 months more or less, is a more rational environment. Rational is a strange word. Less players with two aggressive strategies. So in the end, a sector that is operating in a very competitive environment, but in a more disciplined approach with some differences per region, per product. It is in some cases with some changes over time with some players start to be less aggressive and then more aggressive at the end. It changed from player to player, from region to region. But overall, it is a competitive environment in which we keep gaining market share with a disciplined ticket. So we don't want to grow for the sake of growing. We are growing, operating in a market that is growing, and we are delivering what we believe to be high quality products uh and we keep gaining market share so so this is this is not we don't see today a more competitive market than what we saw in 22 or 21 or 20. uh and for cs i mean that's the million dollar question or billion dollar question uh we our opinion is the following when cs was created uh distant learning or this location was the exception now it is the norm so now when we see that more than two-thirds of the new students are deciding to enroll in digital education quarters instead of on campus so one-third of the newcomers is going to on campus two-thirds to digital the norm is i mean the the The standard decision, the base case decision now is to go to digital location, so, in our opinion, a potential new version of yes or any other name. Will. will include this and learning of for sure. We do not believe in possibility only for on campus. It is not impossible. We do believe it is unlikely. And also from a purely economic perspective, when we see the efficiency of capital location it is more efficient also to allocate capital to to impact more people especially people that need education and are and that also are part of the overall base of the current administration, we do believe that in case there is new fears, it will include on campus and digital education. And also because today there's more gray areas than the past is today. Education is becoming more and more hybrid than than what we saw 10 years ago. So, the short answer is that we don't know, but we do believe that if there is something, it will be for the overall sector.
spk01: Very clear. Thank you, Carlos.
spk06: Thanks, Abel.
spk05: The Q&A session is closed, and now we would like to turn the floor over to the company's closing remark. So, Mr. Carlos Freitas, please make your final remarks and close the call.
spk02: Thank you all. Thanks for following this. Thanks for your trust. And we keep open for any final question that you may have. Thank you. Good night.
spk05: The video conference of results for individuals fourth quarter and for year 2022 is closed. The Investor Relations Department is available to answer other questions and concerns. Thanks so much to the participants and have a good evening.
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