Cogna Educacao S A S/Adr

morning and thank you for waiting. Welcome to the live broadcast on Cognos Earnings Conference Call in the third quarter 2022. We would like to inform you that this event is being recorded and that all participants will be in listen-only mode during the company's presentation. After the company's remarks are complete, there will be a Q&A session, and at that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Also, today's live webcast, both audio and slideshow may be accessed through the address ir.cogna.com.br. where you will find the presentation. The slides will be shown by you and replay of this event will be available shortly after it's end. We would like to remind you that webcast participants may submit questions to Coghlan and they will be answered after the end of the conference call by the IR officers. We would like to let you know before proceeding that any forward-looking statements on cognizant beliefs and assumptions are based on our beliefs and information currently available to the company. They involve risks and uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of the company and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Roberto Valério, Cogna's CEO, who will start the presentation. You may proceed, sir.

Hello, good morning, everyone. Thank you for participating in our call to discuss our results in the third Q22. With me today, Federico Villa, our Finance VP, Mario Guiu, Vasta CEO, and Eduardo Gonzalez, our IRO and Corporate Finance Officer. This call will last approximately one hour, 40-minute presentation plus 20-minute Q&A. Let me begin from slide three. This is a general view of the third queue and our view about Cogna performance. Beginning with Croton, we've had another cycle of intake growth, the fourth in a row. We've grown in revenue 10.8% and we've grown in student intake volume 16.6%. Yet another cohort of growth that is the third trench of revenue in this cycle. That is why we've had this increase in revenue again delivering our target undergraduate student base has grown 11.7 percent this quarter reaching 985 000 students the fifth quarter in a row we've seen a growth in our student base this is of course a result of student intake growth that is more enrollments and This is a sequence of positive intake plus a better retention. So, of course, that had to hit. That had to hit revenue. We said it would grow as of 2023. And now this cycle of renewals, of enrollment renewals, has been very positive. So we've been able to deliver the results I mean, we expected to deliver this result in 2023, and we've already delivered this target now in the third quarter 22. It means in this year, we've had a year-to-date revenue growth. So it shows that we have passed our inflection point. Also, profitability has grown. Croton recurring EBITDA margin is up 3.7 percentage points in the third quarter. Even with the inflation pressure, we see students coming back on campus. So it shows our capacity to execute our strategy. Revenue growth, of course, helped us. improve the EBITDA margin. But let me remind you that we already had positive results in the recurring EBITDA margin, even though we had a growth in revenue. As to CrotonMed, it meets our expectations, delivering this half-year guidance. I mean, even if we do not look at proportional contributions along the year, we have overcome the guidance. And it shows we were right to be so confident in hybrid and digital programs. Our medical vertical, CrotonMed, and also the products we offer on Plurau platform and Vasta. Now, the quality of receivables, is up we've had a reduction in ada of approximately 30 percent that is 29.9 in the year to date this used to be a concern but we continue to look at the commercial aspect we want to continue to grow enrollments but with high quality we've mentioned this in previous meetings In the last two years, we've been hard on the negotiation of payments from students. So little by little, we've been able to improve the credit profile of our students. And this is what you can see in this 30% reduction in ADA. Now, talking about VASTA, we feel extremely happy to talk about the results of VASTA. We've delivered our 1 billion reals annual contract value guidance. We are actually above 1 billion. Net revenue has grown almost 30%. And more important than growing, we must look at the quality of this growth, which is concentrated on subscription products. that has grown 35% in this half, and today they account for 8.5% of our revenue mix. Let me also highlight, we had an increasing share of complementary solutions from 7 to 9.6% of the revenue mix, which confirms Costa's plan that this is a great avenue for growth. Now, Profitability followed suit. I mean, together with the revenue growth, EBITDA margin has grown 10.4 percentage points this quarter, which is a very strong growth. FOSTA did great work in restructuring in the first half of the year. And you can see the result. Recurring EBITDA increased more than double, more than 114%. in this order it is high quality performance high quality results we can see that in operational indicators and it shows that we were right to be confident in our guidance we expect our guidance to grow 20 percent in 2023 reaching one That is, we feel very confident in the work done by FOSTA. Now, as a result, because our two operations are performing so well, and Vasta, Cogna continues to advance. This is our sixth consecutive quarter we've seen value generation. That is EBITDA growing, EBITDA margin growing, operating cash generation also up. So it shows that we have been consistent to deliver our commitment into the future. Net revenues grown 3.5%. But beyond revenue growth, it is important to look at the quality of this revenue. We've seen a reduction in non-payments in Croton and Vasta now has a much bigger share of subscription in its revenue mix, which again points to a higher quality. So we see very favorable prospects in the future. Recovering EBITDA has grown 17.2% with an expansion of 3.4 percentage points in the margin. So that's important growth. Operating cash generation has increased by 22.4%, reaching 477 million Brazilian reals in the S&P. quarter operating cash generation was kept steady because we are making important capex investment so we believe our prospects for cash generation are extremely favorable now if we affect higher cash generation, so our leverage is at a healthy level today. In this quarter, it remained stable 2.15 times, which is a comfortable distance from the covenants. But it's important to talk about how confident this management feels in terms of our capacity to generate cash. continue to use our business models, we see a reduction in leverage in the future. Having said this, let me now move on to Grotto, slide number five, talking about our student base growing 11.7%. But I think I want to highlight that we are growing on both high on campus content or high on-site attendance, and also we're growing on low on-site attendance. We're growing on digital products. This is an avenue of growth, but as you can see, we're also growing on high on-site attendant programs. They still account for a very important share, and they've grown 9% this quarter. This growth in our student base comes from a strong cycle of enrolments, both existing students, students in our base and also renewals and also new students. And I think it's important to explain as you look at these two segments, so renewals, students on our base and new enrolments. Now, Well, they were new enrollments and now they will renew for the first time. As you can see, both lines, you know, renewal of students in the base and the first renewal of new students, they're both very favorable. Our intake is growing strong, especially for students enrolled in low on-site attendance programs. We see that in the mix, we have a higher churn, a higher student dropout. But if you look at high onsite attendance, the dropout rate is lower. And because we have a very strong student intake, the mix is influencing the higher churn rate. But what we see is a consistent growth in student base. This is because the student intake has a very high quality. Now in slide number six, talking a bit more about student intake. we've broken down the 16.6% growth. So on low on-site attendance programs, we've grown more than 21%, 21.5%. This is a great driver of growth for us. Now high on-site attendance has also grown less, but it has also grown. The main highlight in this slide is the revenue growth. I mean, when you look at the whole cycle, the revenue of this intake cycle is growing 10.8% in low on-site attendance, basically, but also on high on-site attendance. And you see that the volume has grown 16%, the revenue has grown 10%. Why? Well, because we're growing much more in low on-site attendance, but we see an overall growth trend and also in segments, growing volume and revenue. So that's a very positive growth. One more year growing revenue, which makes us confident that our Croton revenue will continue to grow in the future. Because if we have an increasing revenue, the future will be even better. Now slide number seven, talking about our revenue. The second chart on the slide is the one we have been showing in the last meetings, showing that, well, we began the first quarter of 21 with minus 19%. And then we had this favorable trend. We knew we would have a point of inflection looking at revenue because of the work we were doing. We thought it would be in 2023. But because of the reasons I have already mentioned, the point of inflection came earlier. we feel confident that our revenue will just continue to grow. We are now beyond the inflection point, so we're now generating cash and profitability. So it's much better than last year. Let me repeat that we are, I mean, as we said earlier, after the restructuring of Croton, we said, well, first we will break even, then reach profitability. We will improve profitability and revenue will grow again. And so our EBITDA and cash generation would grow even more. It is still the same thing we say today, the same thing we believe. Now recurring EBITDA, shows the quality of our work, the work of restructuring and also the work we've been doing to control cost and expenses. We've had a growth of almost 30% in this quarter EBITDA, almost 10% in the year-to-date EBITDA. As you can see on the chart, EBITDA margin also up. And as we break it down, we can see corporate expenses are down, expenses with sales and marketing. Although we are already a very efficient operation, we have the best rate on the market, but we still have an opportunity, as you can see here, to gain more efficiency as of next year. Probably, I mean, we have included this in our budget. We will invest more in marketing because we believe there is an opportunity here. Today, our LTV on cash is six. And we believe we can invest a little bit more in marketing so that we can have an even faster growth. So this is what we are willing to do, you know, invest a bit more in marketing. marketing. I think the market understands better our capacity to deliver results and so we will now begin to invest a bit more in marketing. I've already spoken about ADA as of 2023. This is something you still do not see in Croton results but as of 2023 we will begin to see minor improvements in the product. Influenced by the distance learning platform. So for this revenue today, the cost is higher. It will be increasingly lower, which will help us in leverage. As you know, distance learning has a very positive margin, so we expect to see improvements in this indicator. Now slide 9, talking about accounts receivable, average collection period and coverage ratio, we've seen a decrease from 17 to 13 in these provisions. We still have a coverage of about 69%. That's a stable coverage. And I think this is relevant information that ADA is falling. Average collection period is also falling if you compare Both years, we used to have 110 years. Last year, the average collection period decreased to 55 days. And now we've had another improvement, minus seven days. Today, 48 days is the average collection period. So again, we feel confident that we will continue to improve here. Now on slide 10, talking about Croton Med. Today we have 556 medical seats, approximately 800 in the near future. So we still have an opportunity for organic growth in this opportunity. The guidance for this year in revenue, we've already reached 83% of our guidance. So we're doing very well in terms of growth. Also recurring EBITDA, we've attained 78% of our guidance. So it confirms not only the opportunity, but also the quality of execution. Just like VASTA, we will also deliver our guidance this year. We feel very confident about the growth potential of Crockton Met, so it will continue to contribute for Crockton Group. Having said this, let me now give the floor to Mario Gil, VASTA CEO, who will talk about the operating highlights of VASTA.

Thank you very much, Roberto. Welcome to all. Let's start with slide 12 in which we discuss the revenue for the quarter. This was a very strong quarter with more than 48% of increase in revenue in the third quarter. But even more important for us is to analyze the cycle because we have four quarters from one year to the next year. So closing our commercial cycle, This is the best way in our view to understand FASTA's business. So in this cycle, our revenue is growing approximately 30%, underscoring the importance and the weight of subscription revenue that's growing. And within subscription revenue, once again, we highlight the complementary solutions business that are growing 77% in this commercial cycle. So once again, we have high quality revenue at high predictability as well. Moving on to slide number 13, I would like to remind you of our annual or preliminary annual contract value of 1 million for next year. should be confirmed, we will be announcing this guidance at the end of January, February, as we have been doing every year. The preliminary ACV includes all contract signs until October 31, and as the campaign finishes by the end of February, we'll report the ACV that's definitive for 2018. But looking at the ACV in 2022, I would like to highlight that the market can expect recognition. The percentage of recognition of revenue of ACV per quarter is similar to what we recognize in 2022. In 2022, we have incorporated two characteristics that have changed recognition. Firstly, it's not a year that has suffered with the effect of the pandemic. And the new brands such as McKenzie and Eleva have had their revenue normalized. So from this $1,230,000,000 of preliminary ACV for 2023, we hope to recognize per semester the same percentages that we recognize for 2022 and that are reported in this slide. Also, we met the guidance because it was 1 billion in ACV. We actually surpassed this by 24 million, but we are not considering in the preliminary ACV the fact that schools will have their student base recovering differently from 2022. So we are not predicting that there will be a larger a larger number of students. And next year, we'll see how things turn out. And of course, this is also an indicator that's only announced next year to see whether the volume of students has bounced back. Now, turning to slide 14, I want to mention our increased margin. We saw improvements in all P&L groups, our cost efficiency, and this led to an EBITDA that's twice as big as last year, five against five, and in all P&L lines we saw improvements that derive from our great financial discipline and the reorganization of our workforce, and obviously the reduction of costs that came together with greater revenue. It's important to highlight that as a result of all these efforts, we gained more than 10 percentage points in margin, jumping from 16% last year, which was a year that covered with a pandemic, to a consolidated margin in the Cogna division of 26%, an increase of 10.4%. And just to close, I just wanted to highlight that the revenue from, well, in fact, we made an effort last year of not renewing agreements with the schools that had difficulties with So as a result of this, our allowance for doubtful account has decreased and we'll see this declining further once the effects of COVID reduce. And now considering the preliminary ECV, we are expecting next year to be very positive. And now I'll turn it over to Fredy.