Cogna Educacao S A S/Adr

Good morning everyone and thank you for waiting. Welcome to the conference for the results of the second quarter of 25. If you need simultaneous translation, we have this tool available on the platform. To access it, just click the interpretation button in the globe icon on the bottom part of your screen to choose the preferred language, Portuguese or English. For those hearing the conference in English, you have the option to mute the original audio by clicking the button Mute Original Audio. This teleconference is being recorded and will be available on the website of the company at www.ri.cogna.com.br. where you can find the complete material available for this result disclosure. You can download the presentation also in the chat icon, even in English. During the presentation, all participants will have their microphones disabled and then we'll have the Q&A session. To ask your question, just click the Q&A icon in the bottom part of your screen and write a question to be in line. When called, you have a request to unmute your mic, so you unmute it and ask your questions. We suggest questions are made all at once. Before going on, we would like to tell that any declarations that might happen during the conference regarding the business perspective of Codna Future perspectives and goals are the beliefs and premises of the company administration, as well as information for Cognite Now. Future considerations are not a guarantee of performance involving risks, uncertainties, and premises referring to future events, therefore, depending on the circumstances that may happen or not. Investors and analysts must understand that general conditions of the sector and other operational factors may affect the future results of Cogna and may lead to results different materially from those expressed in future conditions. Now I'd like to pass on the floor to Mr. Roberto Valero, CEO of Cogna, for his presentation. Please, Mr. Roberto, the floor is yours. Good morning, everyone. Thank you for participating on this conference to discuss Cognizant Results in the second quarter of 25. Here with me, I have Frederico Villa, our financial vice president, and Guilherme Melaga, the director of Asta. The call will have about 40 minutes of presentation, followed by 20 minutes for the Q&A. Well, I'd like to start emphasizing that we've had one more quarter with wonderful results, this time across the board with the three business unit, Crota Vasta Saber, Double Digitas in Revenue, Abidine Cash Generation, which make us very happy. Obviously, each business has a different sessionality, but this quarter was wonderful with all the the use with a great performance in all the operational indicators. The result in the second quarter of 25, as well as the first quarter of 25 in the accumulated view, showed that what we are developing here in Cogna in a consistent way was not aimed only to reach the guidance of 24. That was one of the challenges for last year. But what we are developing here also aims at developing a company able of developing values consistently over the years. I think this second quarter and the first semester show clearly that with all the evolution we are having. Obviously, during the journey of the next quarters and years, we will have wonderful quarters like this one, but also challenging ones, because after all, it is part of the game. However, I have no doubt that the strategic vision we are implementing with all the portfolio projects and the brands that we have as the ability of development of Cogniteam is differentiated. I am pretty happy to say that because over the years, we've been showing consistent growth. This is the 17th consecutive quarter that we grow Diabda, for example, and I'm pretty sure that the strategic view and the ability of working of the team is quite differentiated on the market today. But well, let's go to the figures in the first slide. I'd like to start emphasizing the net revenue that we grew more than 15%, 15.5% in the second quarter and accumulated more than 10, 10.5% in the accumulated revenue. growth in all the BUs, all of them with great performance, even Croton in the second quarter that generally the pair semesters have a sessionality that is less intense, but Croton also grew 13.5 in the quarter with more than 15 in the semester, like Vasta and Saber that had wonderful performance in the revenue. In EBITDA, as I said, the three BUs are Pushing the results of EBITDA incognito, the growth in the quarter was 14.5% and 13.5% in the semester. Our EBITDA margin, despite the second quarter, decreased a little, 0.3%. It is important to analyze the semester because it removes a little decisionality, especially in hiring professors and preceptors that is more focused in the second quarter and the third quarters in Croton. But when we analyze the recurring EBITDA margin in the semester, we gained 0.8% showing the ability of the company to keep generating efficiency and leading processes and systems and gaining profitability. From the point of view of net profit, we reached almost 119 million reais with quite an important reversion. We are pretty happy. It's an improvement of 127 million if compared to the 8 million profit. loss that we had in the second quarter, 24. And in the fourth quarter, 24, we opened the season for consistent net revenue over all the semesters we had in the fourth Q and the first Q and now in the second Q in 25. Accumulated, we have almost 214 million reais in net profit with more than 7%. Now, talking about cash generation, post-cap tax, we reach 297 million, which is 206% more than the second semester of 24, which shows that our work, not only to grow the revenue and improve debita, are focused a lot in... the ability to receive payments from students and all the work that Vasta team is doing with the schools, with improvement of processes and the migration to premium teaching systems that is more resilient, less turn. and more receivables. So it shows clearly that 200% growth in GCO shows that the operation is quite well in the accumulated 78% above the first semester 24. Now talking about the free cash flow, that is what Fred likes a lot, is the free cash flow and net profit. We are very happy reaching 134 million reais in free cash flow in the second quarter. semester 24 and accumulated, we have 283 million of free cash flow with all the efforts and the results and the operational cash and all the liability management that we have here. And the reduction of net debt of the company are making us pay less, more financial expenses, which goes directly with the free cash flow, which make us very happy. Now, talking about the net debt in the last 12 months, we reduced more than 526 million reais in the second quarter. Oh, by the way, in the year comparing the two, the second Q, 24 and 25, and specifically in this Q, we reduced the 17 million, but we distributed dividends of 127 million reais. If it were not for that, the net debt would be dropped to 137 million if we consider the 17 that we delivered in net debt. So it's a huge ability of generating cash in the company, the leverage, reached 1.22%. It's not a point of attention anymore. We basically don't have questions or doubts regarding leverage. But we had an important reduction of almost 0.5%, turning 25%, 24%. we reduced compared to the first quarter. And it's nice to emphasize that this is the lowest leverage in the six years of the company. Now go into the next slide to talk about the operational performance of Crota. We have the first graph emphasizing the growth of intake in the first measure of 25. The intake in terms of volume grew 0.9. Remember that what we focus is not the growth in volume, but in revenue, but this 9% of revenue of newcomers generated us in revenue in 17%, which is quite positive because We have a lot of students, so it brings not costs, but revenue. And obviously, it's favored by the mix that was more concentrated in presential on-site courses in Croton Med. We are quite happy about this item. We had a little increase in the dropout. rate, 0.4 points percent, with an improvement in Kratomad, comparing on-site and distant, and the intake previously was stronger in terms of volume. When we grow in volume, you know this effect. Next semester, we have impact on the dropout, but it's quite small, and I would say that from the point of view of underpayment we are quite well with controlled non-payment and enrollments growing so no point of attention here regarding the dropout rate obviously we are working on academic engagement so that we improve the number of students. Our student base reached 1.2 million students with a growth of 5.4% if we include the students in 2020 and 7% if we count only the students paying that generate revenue, which is quite nice to say that this is the trend 16th quarter consecutively that we grow we are diligent in which we consider students we didn't have to adjust basis there is no disconnections they are paying they are active for the 13th Now going to the next slide, talking about net revenue, it grew two digits, both in the quarter and semester, growing 13% in the second semester of the 25. And if we consider the replacement of discounts for inactive courses, students with the renegotiation that we now have in TDD we have on the same base and we would then grow 11% of the revenue in the quarter in the semester grew 12 15.8 if we consider the same thing we would grow 12.6 which is quite robust for the revenue it's an effect of what we talk a lot it's important that the newcomers bring a reset and the old ones have engagement financially so that the base and the average ticket to grow so that we can evolve the revenue. I think the last point here is the average ticket of the base that had 6.5% compared to the first semester. I think it's important to emphasize the growth on-site and DL with the two effects. And this is what we are doing for our students, especially as I mentioned in the previous slide, we have a mix with a lifetime value that is a little greater. and it's helping the average tickets. Now going to the next slide, we have the growth profit growing 13.6 in the semester 17. Even with the gains in the gross margin, we gain, let's say, we are stable 0.2 points percent in the quarter, but in the semester specifically, because this is the way we like to see, we grew 0.8 points percent if we see the third column, the third graph. we see that we lost a little. We are basically stable in the margin of ProtoMed, 0.1%. But we gained on site due to the average ticket and the greater percentage of students in greater LTV courses. And in DL, we gained. So it made Croton to gain 0.8% of gross margin. therefore a lot of efficiency here. Now go into the next slide of costs and expenses. I think here we are presenting the two views of the quarter and the semester. with corporate expenses with an increase of 0.8 points percent due to the update of a social and a previdence payment due to the long-term program when we analyze the semester that is in the next slide you see that the corporate expenses are stable we had only this difference in the second quarter of the 25. The PDA, despite showing the growth of 10.4 to 12.6, we have to remember the reclassification. So it is in the previous method, the 10.4, and 12.6 in the current method. If we were in the same base, especially with our release that we have a table explaining that, the PDA would be stable. So no point of attention here. This increase of 2.2 points percent is due to the change of the discounts for inactive students. Operational loss, then we have some effects like replacing some teams of Croton, working only for Croton. And I'll give an example like Martec team that we would work with. Intensively for I am where a brand and now they are working in all cognitive business. So this is just an example of replacement leaving proton and going to the corporate with some projects also related to the consultation of the academic RP. And also we have gained on efficiency processes, investment in AI that we are talking a lot here. Now go into the next slide that is the cost and expenses of the semester. Basically the same explanations are valid. Here you can see clearly that we gained 1.3 points percent in efficiency and where does it come well the PTA is stable 2.6 points percent here in this graph but stable if we consider the same basis we gain efficiency in operational expenses and marketing as well showing what we have seen before that we are searching for efficiency, concentrating more the marketing expenses is where sessionality is more favorable. And we are also able to improve our conversion rate, which doesn't demand so many investments in market to do that in funnel. The total costs also drop. That is 0.8 points percent that I mentioned in the previous slides. So in general, Croton is quite efficient with this 1.3% of gain that I mentioned. And the last slide of Croton now talks about the recurring EBITDA and EBITDA margin. So the quarter specifically had a reduction in EBITDA margin of 2.1%. Obviously, this is pressured by the reversion that we had of $35 million in the second quarter of 24 related to the S system. So we did that in the second quarter of 24, which pressured a little. So that's why in the quarter, we are losing 1.1% in margin. But it's important that in the semester, we don't have this effect. We see clearly that the Croton semester was good and we are gaining 0.8% due to deficiency that I emphasized. With that, now I pass on the floor to Guilherme Melga so that he comments on Vasta. Thank you, Roberto. I'll start in slide 12 with the operational performance in the B2B. that is the unit providing services to schools. I start with the graph on the right, the left, I'm sorry, that we had the growth of 4% in the system with 1.49 million students and the segment of complementary that is the set of bilingual material and so on, we grew 16.8% in student body reaching 5,000, 6,000, 4,000 students. So the complementary and the penetration that we are getting in schools that we already have content is good. When we translate the number of schools on the right, we can see 5,000 schools, 5,025 schools in the cycle of 25 years. Any complementary, 2,149 schools. So it's quite a robust growth. And the emphasis is complementary with 24.8% growth. And also the start unit that is of franchising, we have seven under operation. The flagships in São José do Rio Preto and Pasteur in São Paulo. And we grew 30 contracts compared to 24, considering the second quarter. So now we have five signed contracts in start-up units. Now going to slide 13 to mention the revenue in the quarter, we grew 21.8%, reaching 350 million. The highlight is the conversion. into revenue of our subscription contracts, reaching 320 million with a growth of 14.7%. When we analyze the cycle that is, in fact, the proper way of seeing the business performance, we reach maturity in the cycle. We only have the next semester for the cycle when it's sessionally lower. So we have a good idea of the growth that we had in the revenue. We reached 1.487 billion revenue with a growth of 13.7%. In subscription, we reached 1.340 billion with a growth of 16%. The expectation is that the expectation of the cycle is closer to what we are performing so far. And now the non-subscription segment that we had a growth of 11% that is a reflex of our operation business in the schools and flagships that I mentioned. And we now have a more significant volume of payments here, which represents a growth comparing year per year, reaching almost 98 million. I also emphasize the B2G segment that we reached 50 million here in the cycle. Remember that this number is only the first semester. In the contract of Pará, when we compare to the cycle last year, we would have the contract in Pará with a 69 million. The good news in B2Gs that we have beside the contract in the first semester in Pará, we have 15 million of revenue of new contracts. So we are now dealing with the municipality It's a segment that is growing and gaining capillarity and expectation for the second semester, quite positive. When we go to the expenses in slide 14, I'll be brief here because I want to emphasize the expenses of the cycle so far, but I emphasize the total growth of expenses with the growth of 16.1% compared to to a revenue that grew 21.8%. So you can see the result on the right with a growth of 3.6% of margin in the quarter. So our growing volume is above the cost growth. So which makes us increase our margin here in the business. Now let me talk about costs in slide 15. Costs and expenses, which is more clear. I'll focus on the table on the right. We can see here all the efforts that we've been making to reduce costs and efficiency. And I'll emphasize the PDA, that we are 1% lower than last year, reflecting not only the good practices of charging, but also our movement for the premium segment, working with schools of better quality of credit. Operational expenses we reduced 1.5%. This is a continuous search of efficiency for us to be more and more efficient with new technologies so that we, in fact, can invest in marketing and sales to ensure our growth. And here you can see 0.6% of growth, which is a reflex of investment for our growth and the benefit of this growth that is seen in the fourth quarter when we start having the new contracts. So now let's go to the EBITDA in slide 16. So the EBITDA of the quarter is 40.5 million with a growth of 31%. So it's a weak semester compared to the previous semesters. So it is important in the growth, we are reaching the growth of 26. So despite the investments with the growth, we see the margin of more than three points reaching 40.5 million, 80% than the EBITDA previous year. When we analyze the cycle, we see 458 million of EBITDA, the greatest one so far. with a growth of 10% compared to the previous semester, and we reached 30.8% of margin. This margin we hope to grow with the growth in the fourth quarter, making the company grow not only in absolute values of EBITDA, but also in margin. Now I pass on the floor to Fred to talk about Saber. Thank you, Malega. I'll start my presentation with Saber. Just to remind you, we have the business of the PDA Solutions for Governo, Red Balloon Fundos. And we had a growth in net revenue in the third quarter of 13.6%, reaching the net revenue of about 84 million reais. And here I have to mention that until the second quarter of 24, we had a business of sets that we sold last year, so it's not comparable to this business. In the second quarter of 24, it represented 10.2 million reais in our revenue. The highlight here are the other solutions for government and a product that we have inside the Brazil with a growth of 82% reaching 48 million reais. From the left to the right, talking about the semester, we had in the semester a revenue of R$ 217 million. The highlight is positive in revenue, also with the solutions for government and others, with a 57% growth reaching R$ 85.7 million to R$ 134.7 million. And the negative aspect here that is mainly in the PDA is seasonal. So I have decisionality of the program of purchase and repurchase. So remember that the year 2015, is the year for purchase of high school and elementary school one and two. And this is the year that we mentioned to grow the revenue, but with a neutral EBITDA comparing one year to the other. Now, leaving the revenue and going to EBITDA of Sabir, the recurring EBITDA and the EBITDA margin, you see that in the third quarter, we reached an EBITDA of 2.4 million reais, with an expansion, a growth of 124%. In the same period, the last year, we had the negative EBITDA of about 10 million reais, with a growth in margin of 2.4%, and last year, a negative margin. So here, when we look to the right to the semester, we had the growth in EBITDA of 36%, reaching 51 million reais, and we had a margin of 23.5%, with a growth of margin of about 9.4%. With that, I finished the presentation of Saber and I start the last part of presentation showing the numbers of Cogna as a whole consolidated. In slide 21, I start the presentation talking about the quarter. In the quarter, we grew the net revenue in 15.5%, reaching 1.664.6 billion reais. We grew in the three business units. So we had the group of Croton, 21.8 in Vast and 14.6 in Saber. As we had the first quarter that was quite strong, we had a growth of 10.5% of revenue, reaching a revenue of 3,202,000,000 reais. In the next slide, we'll slide 22, Leaving the revenue and talking to the EBITDA, we had a growth in EBITDA according to the second quarter of 24 to 24, of 14.4%. We had, we reached here in the semester, a growth in EBITDA of 13.4%, reaching 1%. 0.8 billion reais with an expansion in margin of 0.8 points percent showing the strength of our businesses we grew in revenue in ebida in all the three businesses and here in the consolidated it only shows the whole situation in slide 23 In the end of last year, we presented a net profit that last year in 24, we had an effect of reversion of contingencies that helped our net profit, but we had a net profit X reversion in the fourth quarter of 24, we had a net profit of about 95 billion here, 96 billion in the first quarter of 25. And now in this quarter, we had the net profit of 119 billion reais. So we have a margin of 7.1%. If compared to the same period last year, it was negative in about 0.6%. And in the semester, we have a net profit here in R$ 215 with a growth of more than 1,000% compared to the same period in the previous year. So it in fact is something that we launched in the fourth quarter last year with this virtual cycle and this virtual cycle of net profit is now in the next slide to talk about the cash generation for the company. that since 24, we were talking about the cash generation, the operational and the free cash, and the cash after CapEx and the free cash and the generation of operational cash after CapEx. And that's all the interest that we paid the debt. And last year, we finished the operational cash generation with 1 billion 44, reaching the guidance of 1 billion. And the free cash generation last year was 395 million. million in the year so in the trimester this quarter now we have 297 and the growth in the quarter of 206 percent and the free cash in the second quarter 25 25 reached 135 million reais and remember that last year the cash the free cash generation was negative Now talking about the quarter, as we also generated positively, both operational went free in the first quarter of 25, our semester delivered an operational cash generation of 547 million reais with a growth of 78% and the free cash generation of 284 million reais. And in the first semester of 25, our free cash generation was 95 million negative. So it shows that the company is on the right pathway, growing revenue in all units, EBITDA, No other payments are under control when everything is under control. I'm sorry, I got lost in the slide. So now going to slide 25, talking about the position of cash and debt in the end of the second quarter of 25, we have a debt in the position in the gross debt of 307 and availability of 944 and activity of 2697 and our agenda of amortization. You have to remember that in 26, we only have one amortization of about 500 million reais in Cogna 19. So it's not a point of concern to us in the company. And we are here still working in one more operation of liability management to reduce our costs of capital, not to have this for indebtedness for the first quarter of 26. Now going to the last slide, slide 26, in the company in the second quarter of 24, we had the leverage. on EBITDA of the last 20 months of 1.16 times. And here we reached 1.22 times with a reduction of 0.257 EBITDA in the leverage of this year. And the company additionally We also reduced the net debt compared to the last quarter and the first one in 25. And remember that in the first semester of 25, besides reducing the net debt, we also have a back of the payment of dividends of 121 million reais. With that, I finish my presentation of Cogna and the leverage of the company and pass on the floor to Roberto again. Thank you, Fred. Going to the next slide, when we talk about the six pillars, we talk specifically about growth and it's clear the growth in double digits in the unit business second quarter. We are quite optimistic to the year, analyzing all the businesses, the the titles that is positive in on-site and distance learning in Croton in the first semester it was good and the intake was good so we have everything to have a wonderful year in Croton vast as well progressing a lot In the ACV cycle for 26, the team is thrilled, growing. They started the Malaga mentioned that we have 30 contracts more than last year. So 50 contracts, solutions, also complementary, progressing well. The next growth line is especially in Saber. In PDA, we are having contracts, so we had some discussions last week, some news saying that the government wouldn't buy the books. I see that as speculation, we are receiving the contracts for repurchase of Fungi 1 and 2. We have a perspective of having, obviously, high school now with the fourth quarter. Everything progressing and important parts of our growth progressing with, as Fred mentioned, EBITDA stable and solutions for Vasta and Sabir. We have... serving to the city halls and the state governments with discussions and processes in the pipeline. So we are quite optimistic in this front. So from the point of view of growth, we are okay for 2025. Obviously, The greatest question mark on the market is the impact of the regulatory framework for higher education. We reinforce the point that we see positively, the clear criteria, the interpretations less spread. Making all teaching institutions working similarly, which is easier for the student to teach. To choose, I'm sorry, and I understand the needs of on-site education increase the cost, but we know how to operate semi-presentially. This is our origin. Our polls are quite experienced, most of them with more than 20 years of experience with us. So it's more cost, but we understand that the price repass. We gave an estimate to the market saying that... We have an estimate of 105 reais for DL. It should be 150. And we understand that this repass in price increase won't prevent us from growing as well as in presential on-site education. That is a growth estimated for students, but students pay 800 reais. So we don't believe it's a big problem. We need to live with this adjustment, but everything going well and the cycle of intake is good. So analyzing the growth, we are quite optimistic from the point of view of experience. We keep growing all senses in experience of clients, students and clients like schools and governments. I emphasize two awards we had yesterday. This semester, MAST 25 in Best Companies for Client Satisfaction and Smart Customer 25 as well, specifically for the use of AI. We are investing a lot as well. So it's us talking about us, but it's the market acknowledging our progress from the point of view of efficiency. It is in the culture of the company. We've been progressing, especially in engagement and re-enrollment in Croton with all the performance of ACV Hyatt that is developed delivered by Vasta and also advancing B2G in Saber so you can see that in the margins that we are showing in our businesses so here we have a lot ahead of us and we understand we still have opportunities to gain on efficiency in people and culture we are investing a lot in improving and having the best talent and creating an environment for them to develop. I emphasize here the awards of great place to work that we've been receiving every year in Cogna and Somos and Vasta and emphasize specifically two awards that we received in 25. That is the great place to work from the point of view of diversity in two categories, both the two women. And in ethnics and race, it reinforces the importance we give to diversity. In innovation, we keep going on. in CognaWeb, and we are responsible for corporate building. We are working intensively close to the use with new projects, will be progressing, starting and progressing. So in terms of innovation, it is present. So we are quite optimistic with what we can develop over the years. And to finish, from the point of view of ESG, for the third year consecutively, we are in... the sustainability portfolio of B3 in EASE. We recently presented an integrated report that is quite complete for the first time being independently audited by KPMG with a complete material that you can know a lot about Cogna. If you can read the material, you have a lot of information. With that, I finish by saying that we are pretty happy with the second quarter, thrilled with what is about to come. Positive perspective. The team is quite optimistic. We have a lot of work, but obviously we are quite thrilled.

With that, I finish the presentations and now we go to the Q&A session. We'll now start the Q&A session. Remember that to ask your questions, you must click the Q&A icon in the bottom part of your screen and write your questions to be in line. When called, you have a request to unmute your mic, and then you unmute your mic and ask your questions. We ask you to ask all questions at once. So now let's go to the first question from Luca Marchesini, sales site analyst from Itaú. We'll open your audio so that you make your questions. Luca, please, you may go on. Good morning, everyone. Thank you. I have two questions here.

First, you can update the intake for the third quarter so far, especially considering this transition period that finishes in August and the impact of that, if it is speeding up the new enrollment, if the company is more promotional facing that. I mean, if you can... give a glimpse on intake considering this transition period. It helps. And the second point regarding the medicine, a ticket that was stable annually, obviously, with the impact of CS calendar. But if we excluded this effect and if you could comment on how it evolved comparing the years and a little bit of the competition scenario in medicine, if you feel any resistance in price readjustment, it will help us. Thank you.

Well, Luca, thank you for the questions.

I'll answer, but then Fred, if you have anything to mention, please compliment.

From the point of view of intake, Luca, we are, let's say, optimistic because intake is good.

It's growing a lot, presencial and DL and SEMI. Somehow it is surprising to us. I don't know if it was a repressed demand due to all the discussions of the regulatory framework that made students move later for the enrollment. So I cannot say if it's structural. So the intake is growing and we gained efficiency from the point of view of funnel with a lot of changes that we had in the process of conversion. converting leads and it is helping us improve the growth. But yeah, we see a growing intake and understand this is part of the market. We are benefiting from this market and maybe evolving a little more due to this conversion. Regarding the transition period, I don't know if you have access to this information, but recently, I guess on Tuesday, the Ministry of Education launched a note saying that the transition period due to some systemic adjustments they have to do is extended to the first two weeks of September. So we don't know exactly if there is a specific date. We had the 19th as the onset of the new framework.

But due to the systems and adjustments, it extended.

So maybe we'll gain 15, 20, maybe 30 days of intake so that we can progress more and get closer to the transition happening in the cycle of 26.1, which would be positive for us not to get a drop in the beginning. So many players had some discounts considering this window of debate. We followed some offers. I emphasize the point of the strategy not being focused on the volume, but in the intake period. So we are following some prices, but we are focused on making this cycle easier having more revenue than necessarily the amount of volume, the volume of students compared to last year. I think I answered all the points.

The second question about the dynamic of the average ticket in medicine. So I'll consider here and thank you for your question. So the average ticket in medicine has a dynamic

with a more consolidated schools can be possible to repass inflation better and less consolidated ones only for old students and for new students in fact the ticket is stable regardless of the place okay okay guys thank you for your answers The next question is from Marcelo Santos Celside, analyst from JP Morgan. Marcelo, you may go on.

Well, good morning, everyone. Thank you for considering my questions. You were talking about leverage and reverting UCS as a healthy goal for Cognitive. And what to do when you reach this goal? And How is the M&A mind now that we are reaching this leverage? Thank you. These are my questions. Well, Marcelo, thank you for your question. From the point of view of allocating the capital, our mindset is the same. We are focusing primarily in using the cash to reduce the debt, therefore having less financial debt. Obviously,

one or other strategic M&A, a lower one, we may work and we are in fact analyzing some small things, but nothing to consume our cash. And I'll let Fred talk more. And we also discuss on how to return part of this capital to the shareholders. We distribute dividends on May, but we are also discussing potentially using other instruments to give back the money to the shareholders. But from the point of view of mindset, this is what we have. Spending less in financial expenses is the primary intention, Fred. Well, additionally, and basically Fred said everything, but the leverage for the future, Marcelo, How we analyze that? Well, we have this leverage of 1.22 times and we understand that without guidance, this leverage should be closer to one time for the year of 26 and 27. And later on for the structure of the company starting on 27, I reduce the amortization and I can have a new leverage. Okay, thank you. Our next question is from Mirella Oliveira Celside, analyst of Bank of America. Mirella, please, you may go on. The next question comes from Eduardo Rezende, sell side analyst of UBS. Eduardo, please, the floor is yours. Good morning, Roberto, Fred, Guilherme. We have two questions here. The first is regarding a DL regulation. You mentioned the deadline for the restriction of transition was extended. I'd like to understand what is the greatest concern in the very short term considering the intake for the beginning of next year. What are the main operational adjustments to be carried out in your operation? If you can give an idea of that, it would be interesting to us. And the second question is about the B2G revenue invest. I'd like to understand your mindset on on what to expect to the second semester, what to expect for the year in this sense. Thank you. Well, Eduardo, thank you for the questions. From the point of view of the very short term, we had good news of extending the term, which allows us to deal with the intake in the current modality. And more important than extending the deadline, considering we have to face the transition. But better than that is to improve this movement. movement of growth in the intake obviously there is a change we have to change it in the website and explain the new model that was dl now with semi it can bring disruption so to us it's better not to have changes in the middle of the cycle it's better when we close one cycle and start the other one And despite the deadline is extended, although we don't know the future date, we need to wait for the information of the ministry, but this is positive. And I think what is still missing on the ordinance is to be clear on how we have to carry out the transition in nursing, but it will be for 26.1%. So it's not in the very short term. We have time for this transition. In the B2G, I guess Malaga can comment on that. Thank you, Eduardo. Now let me talk about the B2G here. The perspectives of B2G are quite positive. Looking at the cycle so far, we can see 5 million of revenue in B2G. And this is the first semester and the first contract that we have to compare. So in the first semester, we acknowledge 15 million. The novelty is 15 million acknowledge new contract. So, in fact, we increase the capillarity of the business. We reduce the dependence of the business on big contracts. We keep prospecting new contracts in states. And retail gets stronger as well. So... Looking at the next semester and the future performance, our expectation is to grow in the cities. We have 15, we can grow more. And the fourth quarter is the one where in fact there is the supply for 26. You may expect... a more significant acknowledgement of revenue in the fourth quarter that would be for the classes in 26 but still depending on new contracts to be assigned over this last next six months but the perspective is quite favorable just to complement eduardo because you asked about the short-term concerns, and I reinforce the point that we understand this change in the regulation for the big players, and we are obviously included, and this is positive. Obviously, we have a change of costs. We cannot deny that we have increasing costs, but the regulatory changes will remove small players that in general have no differential, no capillarity players, they decrease the prices and they pressure the average ticketing intake. And these players are lower participation on the process. And maybe without them, we can grow more. But just to emphasize this aspect here. Okay, perfect. It's quite clear. Thank you very much. Have a nice day. The next question is from Milera Oliveira, sales side analyst from Bank of America. Milera, please, you may go on. Good morning, everyone. Can you hear me now? Yes, yes, we can hear you. Thank you. We had a connection problem, but thank you for the space for questions. I have two questions here. In the first semester, the company showed the cash generation that is quite strong, reflecting all the changes that you faced over the years. But in the second semester, we should start seeing, at least in the fourth quarter, the impact of the new regulations, especially in competition. So I'd like to know if you expect a decrease in the cash generation of the company from now on in the second semester, or even if you have some visibility, if you can comment for the next year. how to deal with the changes. The second question, more operational, that you briefly mentioned on the dropout rate in the second semester that is regarding somehow greater than last year. It calls attention that this movement is with the company delivering an average ticket with improvement in the mix of students. We would like to understand that if there is an effect that you believe are more effective specific or if it's a trend that we should pay attention in the next quarters. Hi Mirela, Fred here. The first question about the operational cash generation and I'll talk about it and the free cash generation because this is how we manage business in the company. The point that you mentioned is that we expected deceleration no but i would like to explain wow and this is the why and the beauty of the business is our strength point for the second semester is the p and ld so we have a growth of revenue and a strong cash generation for the second semester Additionally, I have Vasta that also has business with diversity and governmental business that we also have expectation of cash generation for the second semester. And we don't foresee today considering where we are in the cycle of intent. short term in Croton, we don't see deceleration for the second semester. Additionally, I'd like to emphasize in the free cash generation that the company is in the leverage. If you analyze the financial results, we have a cruel minus interest of the previous years or semesters. We can see But keeping the interest rate and the leak in 15%, we should have a second semester quite similar to what we have regarding the free cash generation, quite similarly to what we had in the first quarter of 25. And just to complement in the cash generation, our understanding, analyzing specifically Croton with the new regulatory framework, we have a change in the intake and some costs in DL go to the same presidential. And I understand that this change from the point of view of competition is quite favorable. It removes a lot of players that reduce benefits. prices because they are 100% online and they won't be on the market when it's semi-presential because they have no classrooms, no libraries, no labs. So they have no infrastructure. So we see no reason to believe that the cash generation in absolute terms will be reduced due to the change from DL to the semi-presential. Just to give you an idea, okay, obviously the semi-presential model from the point of view of percentage has a lower margin, but the absolute contribution is lower. So in fact, I believe that the competition will drop drastically. And I remember in 2017, when there was a change in regulation in some cities, we were competing with two or three competitors. And then we would have 10, 12. And the 10, 12 keep not having structured polls. They need to leave competition. And we'll again have the three or four with infrastructure. So the competition from the point of view of price will reduce. The average tickets will move and we should eventually have a positive result from the point of view of competition. Students, so this is a view we have to live with that and we have to live to see what will happen. Regarding our question of dropout of new students, dropouts, I mean, I was responding a question. It is the impact of a greater number of students, new students. When we analyze per line, we see that presidential had a little increase in dropout, 0.2 points per cent. DL with a slight increase and then Present show a small drop from the point of view of new students in the last cycle, especially the last two ones in intake. When we have more volume of new students, the trend is that then we'll have a little more turn, but nothing to be concerning, point of attention, nothing out of the regular work for us. We are working in structuring projects as we always do. There is no point of attention in terms of engagement or increase. of non-payment. Thank you very much. Our next question is from Renan Prata, sell-side analyst of CITI. Renan, you may go on. Okay, good morning, everyone. Briefly, two follow-ups. The first one in P&LD Valério mentioned they are receiving the contracts and I would like to understand that according to the news we see and the manifestation was that they were receiving Portuguese mathematics and it was missing sciences books and I would like to know if the new contracts involve that or if it's only Portuguese and mathematics first question and the second one in PNLD about The company budget, if you foresee any delays in the purchase for a high school in the third quarter, if the government will pay that this year. So that's it. Thank you. Hannah, thank you for the question. Fred, if you want to complement. Well, in fact, Hannah, the orders were delayed. So when the association talks about the delays, it is because it's concrete, it's real. According to the agenda expected, the contracts were quite delayed and we are receiving the last days, the last weeks. This is the first point. So even conceptually, thinking conceptually, it's quite difficult for the government not to purchase books to schools. for funding one and two especially in this electoral context i personally do not believe it will happen despite one delay here and there so that's why we were paying attention but believing that the call forbid that was even uh signed in the past and those who uh One, the call, they have contracts and the government has to pay for that. So if we have delays for logistics or something, it's not good for us. But as I said, contracts are being paid. And one thing that in fact didn't come is sciences, but the rest are regular. So now regarding, oh, high school. In high school, in our budget, For the fourth quarter, we have some budget and we have a part that will be receiving in the first quarter. It's common and we work with this scenario. Okay, perfect. Thank you very much. The next question is from Lucas Nagano, sell-side analyst of Morgan Stanley. Lucas, please, the floor is yours. Hello, everyone. Thank you for the space. We also have two questions. The first about the partner polls. How is the environment regarding that and the new regulation? Because we saw the news of the government closing polls on March. So how... it can impact the economic viability if we have a conformity environment with the adjustment or if there is some rationalization. And the second one about Acerta Brasil, because the same way B2G is consolidated as a leverage to Vasta, how do you see a potential market and the focus of management regarding this solution? Thank you. Hi, Lucas. I'll answer about the polls and Fred responds about Acerta Brasil. I can tell you for sure that our polls regarding the regulatory changes are quite thrilled. Despite it sounds strange to you, but I can explain it easily. The new regulation came in 2017. with a lot of effort and resources offered to the polls, it was, I don't know if I can say, I can say frustration because our essence, our origin is semi-presential. the poles have infrastructure and the great majority of our poles bringing the 80-20 in the intake are poles that evolved from individual poles to economic groups with a big amount of poles with infrastructure all set So to them, the change in 100% DL to semipresential is a great push-up, and it's helping us in this aspect that we are speeding up the enrollment of DL and SAMI because the Poles are thrilled because they are structured with labs, with all the structure. For years, they're facing that part of sale with no infrastructure and lower prices. That was the history so far. It's quite difficult to compete. And now they understand they have competitive differentials to keep growing. So I reaffirm here that our polls are quite thrilled. Regarding Acerta Brasil, Fred, well, Lucas, thank you for your question. Regarding Acerta Brasil, in Saber, we are consolidating that as a growth of the company.

the reason for our ability to distribute and to intake schools and students and governments and states to sell the products and secondly due to the quality of our product and here analyzing here

With EAR, we are growing double digits and there's nothing in the future to tell us that it's different from what we've seen. And just to give you some idea, these products of portfolio, go-to-market, B2D, this is something that we analyze closely here. Flagea, that is the leader in Saber, Meliga, leader of Vasta, Fred and I and other executives, they are in... meetings every two weeks to check the initiatives and points of improvement because we understand that B2G is an important path of growth to our operation as a whole.

So we have malignant identification to make that business grow. Okay, guys, thank you.

The Q&A session is over. And now we would like to pass on the floor to the final considerations of the company. Well, I thank once again you all for following our result call. I congratulate all the Cogna team, our 24,000 employees working nonstop for us to reach our goals. Let's keep up the good work. We still have a lot ahead of us. And I reinforce that our team is available to clear any doubts the investors might have. Feel free to get in contact. Thank you and see you next quarter. The result teleconference regarding the second quarter 25 of Cogna Educação is over. The Department of Relations with Investors is available to answer the other questions you might have. Thank you all participants. Have a nice evening.