Vitru Limited (VTRU) has announced its financial results for the fourth quarter and the full year of 2023, showcasing significant growth across its key business segments. The company reported a 42% increase in net revenue for its Digital Education Undergraduate segment and a 60% increase in adjusted EBITDA, with a margin of 36.6%.
Adjusted net income rose by 24% to R$253 million. Vitru’s CEO Carlos Freitas highlighted the company’s performance, including a 27% increase in intake in the second half of 2022, driven by UniCesumar’s repositioning and a 13% intake growth for Uniasselvi. The company’s net debt decreased to R$1.94 billion, and it successfully migrated from Nasdaq to B3, improving its financial structure.
Key Takeaways
- Digital Education Undergraduate business grew by 15.4%, with a 10% increase in average ticket.
- Net revenue in the Digital Education Undergraduate segment rose by 42% for the year.
- Adjusted EBITDA and adjusted net income increased by 60% and 24%, respectively.
- Total student base reached 884,000, with 97.5% enrolled in digital courses.
- The company over delivered on its IPO promises, with a CAGR of 20% between December 2021 and December 2023.
- Vitru acquired Rede Enem, a major source of leads, and saw strong performance in its brands.
- Project Ilumina integration is ahead of schedule, yielding cost and commercial synergies.
- Net debt decreased to R$1.94 billion with a net debt to adjusted EBITDA ratio of 2.9.
Company Outlook
- Vitru is expanding geographically and maturing its hubs.
- The company is well-positioned for quality and regulatory changes.
- Net debt to EBITDA ratio is expected to be around 2% by the end of December 2024.
- Trading at B3’s Novo Mercado is anticipated to commence in early June.
Bearish Highlights
- Vitru is prepared to adapt to potential regulations requiring a minimum number of professors per student.
Bullish Highlights
- The company’s offerings are growing more than the market.
- There is no requirement for a minimum number of professors per student, and Vitru is comfortable with its current setup.
Misses
- No specific misses were highlighted in the provided summary.
Q&A Highlights
- CEO Carlos Freitas discussed the potential impact of increased in-person hours regulation on Uniasselvi and UniCesumar.
- He clarified a one-off effect on cash flow from operations.
- The company has experienced low-double-digit growth in intake volume compared to the same period last year.
- Vitru’s courses have received positive evaluations, with a majority having a CC5 rating.
- There has been a slight improvement in retention rates compared to the previous year.
Vitru’s strong financial performance and strategic advancements have positioned the company for continued growth in the digital education market. With a clear focus on expanding its footprint and enhancing its offerings, Vitru is set to capitalize on the increasing demand for online education. The company’s proactive approach to regulatory changes and its robust financial structure further solidify its market standing. As Vitru prepares for its upcoming shareholder meetings and the transition to B3’s Novo Mercado, investors and stakeholders have much to anticipate from this dynamic education provider.
InvestingPro Insights
Vitru Limited (VTRU) has demonstrated a remarkable performance over the last year, which is reflected in its financial metrics and growth indicators. Here are some insights based on real-time data from InvestingPro that may be of interest to investors:
- The company’s market capitalization stands at $519.92 million, indicating a solid market presence within the education sector.
- Vitru’s Price to Earnings (P/E) ratio is currently at 18.64, which has adjusted to a more favorable 13.04 when looking at the last twelve months as of Q3 2023. This suggests that the company’s earnings have grown faster than its share price, potentially making it an attractive valuation for investors.
- An impressive gross profit margin of 66.25% over the last twelve months as of Q3 2023 highlights the company’s efficiency in managing its cost of goods sold and its ability to retain a significant portion of its revenue as gross profit.
InvestingPro Tips also provide valuable insights into Vitru’s prospects:
- Analysts predict that net income is expected to grow this year, which aligns with the company’s reported increase in adjusted net income and EBITDA.
- The company’s stock price often moves in the opposite direction of the market, which could indicate that Vitru has unique market drivers that may offer diversification benefits to an investment portfolio.
Investors looking for more in-depth analysis can find additional InvestingPro Tips at There are currently 6 more tips available on InvestingPro, offering further detailed analysis and perspectives on Vitru’s financial health and market position.
For those interested in accessing the full suite of InvestingPro features, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This exclusive offer provides investors with an array of tools and insights to make informed investment decisions.
Full transcript – Vitru Ltd (VTRU) Q4 2023:
Operator: Good evening, everyone. Thank you for waiting and welcome to Vitru’s Fourth Quarter and Full Year 2023 Earnings Conference Call. We advise you that the video conference is being recorded and will be available on Vitru’s IR website where the complete material of our earning 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’ll be able to use your microphone. [Operator Instructions] We emphasize that information contained in this presentation and any statements that may be made during the earnings call regarding Vitru’s business prospects, projections and operation 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 as 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 Vitru’s future 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, William Matos, Vitru’s CEO; Carlos Freitas, Vitru’s CFO and IRO; and Maria Carolina, Investor Relations. I’ll now give the floor to Mr. Carlos Freitas. Sir, you may begin.
Carlos Freitas: Thank you. Good afternoon, everyone, and thanks for joining us again. It’s a pleasure to be here with you all for the release of our fourth quarter ’23 numbers, as well as the numbers for the full-year of 2023. A slide presentation will be part of today’s call, which is also available in our Investor Relations website at investors.vitru.com.br. Before we begin, I’d like to make note that as detailed in Slide 2 of this presentation, State Harbor is in effect for this call. So, now let’s start and I invite you to go to Page 4, which I’m going to show you right now. So here, we show the few key operational highlights for the period. The first one is that we had more than 880,000 students as of December of last year, which was a 15.4% increase in our core Digital Education Undergraduate business. That was a major growth and I’m going to talk about it a bit more later. Also we had an important increase of around 10% in the average ticket in the Digital Education Undergraduate segment in the second semester of last year compared to the second semester of 2022. Just as a reminder, we always think, in terms of semesters here at Vitru because it replicates the academic calendar. And this is another, I’d say, reaffirmation of our approach to pricing. Also we closed the third debentures issuance in early December of last year, through which we extended the average debt duration and also reduced our financing costs. The debenture was issued at a rate of CDI plus 2.45, while our previous average cost of that was CDI plus 3. And finally, we had important advancements in the migration process of Vitru from Nasdaq to B3. So, we already called the shareholders meetings that we will approve the transaction, the reverse merger through which Vitru Brazil will incorporate Vitru Limited, these meetings will take place on April 19. So, four weeks for now. And I’m going to give more details about the process in a few minutes. On Page 5, we have the main financial indicators for the year of ‘23. So, net revenue in our core segment of Digital Education Undergraduate, up 42% in the year with overall consolidated net revenue increasing 49% year-on-year. Adjusted EBITDA increased even further, about 60% in the year. And then with that, the margin was up from 33.9% to 36.6% in the full year number. The cash flow from operations, was also up even more, 71% in the full-year, which led to an adjusted cash flow conversion rate of 96%. So, that’s an important piece of our financing approach is to generate cash and take profit of our scale. And finally, even with our debt that is decreasing, we managed to have a consolidated adjusted net income increasing around 24% in the year, reaching R$253 million. On Page 6, as you know, this is a slide that I like a lot because it shows our execution over last years. So, growing several aspects in number of students, EBITDA margin, EBITDA as a whole, cash flow from operations. So we have been, I would say, over delivering on what we intended to do and what we said that we would do during the IPO. On Page 7, growth throughout the company. So, apart from the 15.4% growth in the Digital Education Undergraduate segment, we also grew in graduate business and on campus business. So, it all led to a total student base of 884,000 students, of which 97.5% are in digital courses. So, we are clearly focused on the digital business. And here, we can also see that we managed to grow 15%, as I said, even coming from tough comps. We already grew roughly 25% throughout 2022, taking into account the pro forma student base of Uniasselvi plus UniCesumar in December 2021. So, as we can see here in the bar chart at the bottom right of the slide, our CAGR, our annual growth rate was around 20% between December 21 and December 23. So, on Page 8, we keep maturing the hubs. This is the most important driver for growth and expansion of revenues throughout Brazil. On Page 9, we grew throughout the country in terms of hubs and student base. So, even here in the south of the country grew by 9% year-on-year, an important growth of 20% in the Southeast, 22% in the Northeast and now the number of hubs also increasing by more than 300 hubs year-on-year with important increase also in the Southeast. On Page 10, we show the geographical footprint of our hubs, which is quite complementary, as you can see here in the table at the left of the page that you know already. So as I said, throughout last year, we opened more than 200 hubs and a lot of them were opened by partners who used to offer only one brand and now are working with both brands. And this can be seen here in the table in the bottom right part of the page. You can see here that we increased by 20.6% the number of cities, in which we operate with both brands. So, the overall number of cities went up by 5.7%, but overall number of cities in which we already operate now with both brands went up by more than 20%. So this is synergies. This is part of our commercial synergies that we showed to you two years ago. And then now, we are delivering on that. And I’m going to show you more details about the execution of the integration a bit later. On Page 11, another important slide to show our client orientation, our focus on quality. So here, on the left, another confirmation that our average app ratings, taken into account Play Store and App Store, is 4.8 in both UniCesumar and Uniasselvi, which are the best in the market. And here on the right, you can see the Reclame Aqui grades as well. As you know Reclame Aqui is a site that kind of states and confirms the client orientation and client service in the last six months. We have a reputation 8.0 in Uniasselvi and 7.7 at UniCesumar. Those are the highest numbers among the listed players in the country. Page 12, this is a new slide. This is to illustrate that we are top positioned regarding quality of our courses. In the chart at the left, we show the distribution of the institutional concepts, the CIs, as you know. Of the six institutions of the Vitru Group, as well as the other listed players, We have five institutions in the Vitru Group with the maximum score of CI5 and only one with a safe 4, which by the way has few students. This is even important even more now than ever because as you know, one of the possible regulatory changes that have been discussed is to increase the bar, to raise the bar from CI3 to CI4 for an institution to be allowed to offer different learning courses. And in the chart at the right, we show an indicator that is not usually mentioned, but it is public information. It is part of MEC evaluation. It is at INEP, which is the CC, which is the course concept. As most of you know, every three years usually, the Ministry of Education makes in local evaluation about the quality of a course, take into account different aspects such as the academic model, the technological infrastructure and the level of teachers. So as you can see in the chart, 61% of the Vitru courses that were evaluated over the last three evaluation cycles, meaning all courses, have a CC5, which is two times the average of the market, which is the first bar here at the left. And by the way, regarding regulation, we don’t know what will change and we don’t know if anything would change. We don’t know when it will change, but we do believe that there will be a stricter focus on quality, which is good, as well as a need for more hybrid design in several courses. So in this scenario, we’re showing here that Vitru would be quite well-positioned and the changes in regulations may even benefit us. So for us, the higher the bar, the better. Slide 13, is also new, and it mentions Rede Enem. So Rede Enem, most of you probably don’t know that we acquired Rede Enem two years ago in September 2022. Rede Enem has different products, including Blog do Enem, which is one of the leading sites with content for the Enem preparation, which had 17 million views and 1.3 million followers on Facebook (NASDAQ:). And also, Curso Enem Gratuito is part of the Group, with 3.1 million users and almost 1 million followers on YouTube and 12 million views. So, this is a major source of leads for us and a very nice piece of our digital education platform. Page 14, in this slide we show details of the intake and average ticket for each of the brands in the Digital Education Undergraduate business, during the second half of last year comparing to the second half of ‘22. So for intake, the intake in the second half of last year was 27% higher than the previous year, especially due to the performance of UniCesumar. And as I mentioned in the previous call, last year we worked in the repositioning of UniCesumar and achieved a more balanced split between the first and the second semesters of the year. We saw an untapped opportunity to increase the intake of this brand in the second intake cycle of the year and then we grew 59% over the previous year. In the case of Uniasselvi, intake grew by 13%, which is a strong performance considering that the quite high comparison base, the quite tough comp, knowing that the intake of Uniasselvi grew at an annual rate of almost 30% between 2019 and 2022. So for tickets, in the case of Uniasselvi, every ticket grew slightly above inflation, about 7%. This is mostly due to this price in this thing that I mentioned before, our marketing intelligence and the tools and the procedures, the systems that we have in place to set our prices, to adjust our prices and this is the kind of discipline that we have been using and mentioning to you over the last years. When we see the evolution of the average ticket of Uniasselvi in the last four years, the CAGR of the increase is virtually the same as the annual inflation rate in Brazil over the period. In the case of UniCesumar, we have noticed a clear improvement in the pricing throughout last year, so a 13% increase semester-on-semester. And these are the first results of implementation of best practice between the two brands that we started in ‘22 and we are reaping now the results in ‘23. So this change had to do with several improvements, including the commercial approach attracting students, the annual increase of tuition for senior students and a more granular and data oriented use, as we used to do at Uniasselvi. And by the way, regarding the current intake cycle until today, 21st of March, we are growing at a level of low double-digits in the first quarter of this year compared to the first quarter of previous year. So Page 15, the big numbers, big financial numbers. Net revenue, as I mentioned, growing by 49% year-on-year. Gross profit increasing 59%, so margin went up by four points from 61.9% to 65.9% in the year and the EBITDA margin went up by 2.7%, reaching as I mentioned before 36.6% in the year. Now let’s talk about each of these segments. On Page 18, first, the Digital Education Undergraduate Business, which is our core business and we grew by 42% in the segment in the year. Quarter-on-quarter was a 17% increase, also important. And we kept and keep on gaining market share in the segment. So here on the right, you can see that we as you know, that we have been gaining market share throughout the last years in a booming business. On Page 19, some remarks about our Medical business. As you know, a quite high-quality business, the fifth best private school in Brazil, the largest medical campus in the South of Brazil, with tickets now over R$12,000 increasing above inflation given this higher quality and seats is still maturing. So expect promising results for this business over the next years. So with this combination of seats maturing and tickets growing above inflation, the net revenue of our Medical business grew 31% in the quarter. On Page 20, the on-campus, ex-Medical business, which grew by 6% in the quarter, but an important growth year-on-year given the relevancy of this business within UniCesumar, especially the health related courses. And Continuing Education on the right, a strong growth here in the Continuing Education course segment, sorry. This comprises not only our graduate courses, but also a growing business of technical courses and professional courses. This segment is our smallest today, so far with only 5% of our net revenue, but it is the one that is presenting the fastest growth. So, this is also a very promising area and we do believe that we can offer complementary products to our students throughout their adult life. And to illustrate this potential, to illustrate this prospect, we created Slide 21 to show the prospects of the Continuing Education segment. So, just a few numbers here. We have in Brazil today around 1.2 million college graduates, which is an important flow for our postgraduate courses and some 7.7 million graduates in high school in Brazil, which is an important flow for our technical and professional courses as well besides the undergraduate business. But, it’s also important to highlight here that we have around 58,000 students in this segment, most of them still in graduate courses, but the fastest growing business is the technical courses. This is a new business that until two years ago, more or less, was regulated only at state level in Brazil. But two years ago, the Ministry of Education, the MEC, authorized this learning place such as Vitru and others to offer this type of courses at federal level based on the quality rates of the Digital Education Undergraduate courses. So, because we offer high-quality undergraduate courses, we were allowed to offer, and there is a specific accreditation process for each course, to offer these technical courses. So given our quality, we were granted so far 42.8% of the seats authorized by the MEC. So, this can be a nice contributor for our numbers over the next years. So, now about EBITDA. With the margin growing, as I mentioned, 2.7 percent point over the year and let me show you now where it comes from. So, regarding cost of service, we had a slight increase in the quarterly numbers because of intra-year semester variations, but the yearly numbers, they were declined at 2.3 percent points year-on-year, which is basically due to operational synergies that I have been mentioning to you over the last quarters. For G&A, it’s the same. We had a slight increase in the quarter, but basically because we had a strong decrease in the third quarter. So, when we analyze these numbers, even for cost of service and for G&A, we had, in case of cost of service a decrease, in the case of G&A, a stable number of around 6% of net revenue, which is, by the way, the lowest in the industry. So, we are quite lean and quite focused on maintaining a lower level of G&A. For selling expenses on Page 24, the quarterly expenses as a percentage of net revenue were basically flat at 16.6%. And if you look at the yearly numbers, there was a slight reduction in such expenses as a percentage of net revenue, which given certain gains of scale and especially a more optimized mix between digital and offline marketing for the whole group. For PDA, at the right, as it was the case in the third quarter of last year, the fourth quarter of ‘23 was very positive for us in terms of cash collection. With that, the PDA is starting to go down. So, PDA in the year amounted to 13.4%, so a reduction of 0.8 points over the number of ‘22, even despite the strong intake results of last year. This is not yet the ideal level, but I do believe that we are going in the right direction. On Page 25, adjusted net income. This quarter, we had a reduction in this net income for the quarter, which was impacted by two effects, two things. One was higher financial expenses, given that we prepaid the self-financing this in December. When we issued debentures, we prepaid the self-financing in the same day, which was associated with the acquisition of UniCesumar. And this prepayment generated an accounting increase in expenses. The other effect was due to lower deferred income taxes in the fourth quarter of ‘23 compared to the fourth quarter of ‘22. So, the positive impact was roughly R$30 million lower in the fourth quarter of ‘23 versus the fourth quarter of ‘22. So, this deferred income tax, as you know, is generated as we have taxable losses over time, which is our case. But the positive contribution of this was more important and more was stronger in the fourth quarter of ‘22 in R$30 million than it was in fourth quarter of ‘23. Anyway, we’re presenting an important growth in the adjusted net income in the year numbers. Even with the UniCesumar acquisition that’s in our balance sheet throughout the year. So as you do remember, we acquired UniCesumar in May of ‘22. That’s when we issued our R$1.9 billion debentures, the deferred debentures of the company. And here you can see on the right part of slides, the increase in expenses, in financial expenses that I mentioned. But even with the increase in expenses of about R$100 million last year compared to ‘23 with ‘22, we had an increase of about 24% in the net income adjusted of last year. Page 26. So, an important cash flow generation and a reducing level of CapEx. So first, CapEx. CapEx went down throughout the year. So in the fourth quarter, reaching 7.1% of net revenue, reaching 6.2% throughout the year on average last year in ‘23, going down from 7.4% in ‘22. So, this is relatively low given our asset light operation. And by the way, around two-thirds of our CapEx is related to investments in learning and IT systems and technology. So most of our CapEx is focused on technology and very few of it very, very little of it is focused on hard assets. On the right part of the slide, cash flow. So, we had a slight decrease in the cash flow in the quarter. This was because of certain the same way that we had in cost. We had very strong performance in the third quarter, a smaller performance in the fourth quarter. So, that’s why we showed here as well the semester numbers in the middle of the chart. The second half of ’22 and the second half of ‘23, we had a 36% increase in the operational cash flow between these two years. And by the way, as I mentioned, we acquired UniCesumar in May ‘22. So, here we are due comparing apples-to-apples. But this is just to illustrate the positive, I’d say, working capital environment that we managed to have in the second half of last year. For example, we are now in December, we were at the lowest level ever in receivable days with 44 days compared to 57 days that we had, for example, in June of ‘23. And if we take, for example, our net revenue in ‘23 and compare this net revenue to the net revenue accumulated in the previous quarter, I mean, between October ‘22 and September ‘23, there was an increase of 4.1% more or less, which is more or less what we’ve been growing on a yearly basis. But there was a decrease of around 10.8% in our short-term accounts receivables position in December ‘23 compared to September ‘23. So, we managed to grow revenues by 4.1% in one quarter and reduce in almost 11% the accounts receivables. So, this is cash flow itself. So Page 27, the integration, which is called here Project Ilumina, integration with UniCesumar is advanced and is advancing faster than expected. So here on the right, you can see the impact on EBITDA through costs and expenses, the cost and expense reductions we had that we over kicked what we said that we were going to do. These levers are not only personal optimization, but also gains of scale in contracts and better retention practice at Uniasselvi. And also on the commercial side, as I’ve mentioned before, through the expansion with other brands, [Sing City] (ph), through different new products and courses. We also managed to beat our estimation for commercial synergies. So now, next step will be the amortization of the criteria for recognition of the students’ engagements, meaning that from this year, Uniasselvi will use the same criteria of UniCesumar for the activation of students. This will result over time in higher retention rates, lower PDA and higher EBITDA margins as well. So on Page 28, our debt level. Our debt level was R$1.94 billion in net debt. This without leasings, this is the way banks use to look at debt levels. So R$1.9 billion of net debt, which meant a ratio of net debt over adjusted EBITDA of 2.9 in December. So it was 3.3 in June, 3.1 in September of last year and then 2.9 in December. So, we are not only deleveraging but also reinvest. And of course, this was all aligned with our financing plan that we draw, that we designed when we had the combination with UniCesumar. And also with this new debentures that I mentioned before, we also extended the average duration and the mortgage schedule of our debts. Finally, on Page 29, the status of the migration from Nasdaq to B3. So, what we have been able to do in the last months. We launched the transaction in September of last year, as you know. We got the green light from CVM to convert Vitru Brasil SA from B Category to A Category in Brazil in December 4th of last year. And then just after Christmas, we got the green light from B3 for the Novo Mercado listing. And finally, we got the green light from the SEC. The F-4 form was declared effective by the SEC two weeks ago, March 6th, finally. It was a long, long process, but we managed to accomplish it. And now, and then we were able to call the shareholders meeting, which was done last week, last Friday. And then the next steps will be the shareholder meetings of both Vitru Brazil and Vitru Limited will take place, as I mentioned before, on April 19, and one month from now. Then there will be an election period of about one month as well, during which the shareholders of Vitru Limited will be able to choose whether to receive Vitru Brazil shares or Vitru Brazil ADR. So some of them will choose to receive directly shares, which would be easier to trade here at B3. Some of them, for example, some small shareholders in the U.S, for example, they would choose to receive ADRs. So we do expect that the delivery delivery of the securities, ADRs and shares will take place potentially early June and then we will be able to start trading at B3 at Novo Mercado. So that was it. I think it was a good set of results, and now I would like to open for questions.
Operator: We will now begin the Q&A session. [Operator Instructions] Let’s proceed to our first question. It’s from Lucas Dai Nagano, Morgan Stanley. Lucas, we will now open your audio so that you can ask a question. Please proceed.
Lucas Dai Nagano: Hi, Carlos. Good evening. Thanks for taking our questions. We have two. The first one is related to average ticket. The increase, last year was particularly high. And for 2024, should both move, both tickets move more aligned with inflation? And in the case of any system, are you seeing any impact, with attrition due to this new pricing policy? And the second question is related to regulation. If MEC, goes in the direction of increasing, the percentage of in-person hours, to something from, like, 30% to 50%, let’s say. How do you see an impact in your operations both for Uniasselvi and UniCesumar? Thanks.
Carlos Freitas: Great, Lucas. Thanks for your questions. So regarding tickets, let’s indeed return there to the slide about tickets, which is here. So indeed, we had important growth last year in the first semester, also in the second semester. Now looking forward, I mean, we have the intention and we have been working to deliver it to increase tickets more or less in-line with inflation. So, there are quarters in which we’ll be able to deliver more inflation and some quarters less inflation. I think it’s still a bit premature to mention how this will evolve over time. What we are seeing that is that, so far we have been able to have intakes, for example, more or less at the same level of last year. So, we were able last year to grow intake tickets quite well. This year, we have already a higher price. So year-on-year, our intake price is more or less the same level of last year. But this will mean that our average ticket will increase more than zero. But I don’t know yet if this will be in-line with inflation or slightly less inflation. Let’s see. Over time, I mean, last year, we grew by 7% on Uniasselvi and 13% on UniCesumar. So, this is way more than inflation. So I mean, it’s not feasible to keep growing more than inflation forever. So, let’s see how this evolves for the year. And for regulation regarding in person hours, I mean, we were that we have when we see our hubs on a comparable basis, I mean, we have in the case of Uniasselvi, the current model is hybrid. In the case of UniCesumar, the hubs are also way better and bigger than the ones of the peers. And so, we will adapt, so let’s see what that comes. We do believe that we are better prepared than anybody else to adapt to this type of requirement for more in person hours or percentage for these courses.
Lucas Dai Nagano: Okay, Carlos. Thanks.
Carlos Freitas: Thanks, Lucas.
Operator: The next question is from Mirela Oliveira, Bank of America. Mirela, we’ll open your audio so that you can ask a question. Please proceed.
Mirela Oliveira: Good evening, Carlos, Will and [Carol] (ph). I have one question here on costs. What do you think on cost opportunities, cost cutting opportunities, what do you think is the main line that could bring gross margin expansions in 2024? And secondly, you mentioned on the release on the cash flow from operations that there was a one-off effect for the semester, which effect was that if you could give more details on the impact for the semester? Thank you.
Carlos Freitas: Great. So for cost opportunities, I mean, we are, I mean, quite well advanced in the integration. So, I’d say that most of the gains and synergies, they are already incorporated in the numbers of last year. But there will still be some more gains for 24%. And one of the lines that we do expect gains is, for example, contracts. So, this impacts both costs and G&A. So, when you renew a contract, a service contract, for example, or an IT contract, now we have a much bigger scale and for our contracts which are two years or one year in duration. So when you renew it, you have only the full-year effect of this better rate, only in the following year. So, we’re still going to have more impact for this year. We are also integrating our academic ERP. So, our academic ERP is still separate, the one for UniCesumar and Uniasselvi. The one of Uniasselvi is proprietary. The one of UniCesumar is not. So, we are now integrating and moving to the one of Uniasselvi, which will also mean some cost savings in cost for this year. But I would tell you, to be frank, that I mean most of the gains coming from the integration, they are already in-house. We do expect, of course, some more gains of scale with the dilution of fixed costs, which is normal given our business, our size. But gains from integration, they are mostly in-house or done. And I mean, the one-off effect in cash that we mentioned, we have a very strong collection in the third quarter of last year. We had also some postponements of payments in the third quarter. So, and then we had to pay this cost or to have a higher comparable basis in the fourth quarter of this year. So basically, that’s why we mentioned here that the normalized number for the semester is much more important to show, which grew 36%, if I’m not mistaken, which is here, 36%, semester-on-semester. So my point is that, the basis for the next for this year is what we have here. So R$225 million in cash flow from operations in the semester, is a very nice level and a very important cash conversion as well.
Mirela Oliveira: Thank you. That’s super clear.
Operator: The next question is from Lucca Marquezini, Itau BBA. Lucca, we’ll open your audio so that you can ask a question. Please proceed.
Lucca Marquezini: Good evening, everyone. Thank you for taking our question. Just, we’ve been hearing from other players that intake volume has been flattish so far in the first half intake cycle for this year, mainly due to not only a strong comparison base, but also due to the top down scenario as a whole. So, can you provide us with some color on the intake so far and if you have been seeing the same trends for Vitru? Thank you.
Carlos Freitas: Thanks, Luca, for the question. In our case, what we have been seeing so far is a growth in intake. So, the first until now, until today, 24th of March, we have a low-double-digit growth in intake compared to the first semester of last year, the first same period of last year, in fact, about low-double-digit growth in intake and more or less flattish tickets for intake. That’s what we’ve been seeing. So, it seems that we are growing more than the market. Again, given the quality of our offerings.
Lucca Marquezini: That’s very clear. Thank you, Carlos.
Carlos Freitas: Thank you, Lucca.
Operator: The next question is from Caio Moscardini, Santander (BME:). Caio, we’ll open your audio so that you can ask a question. Please you may proceed.
Caio Moscardini: Good afternoon. Thanks for taking my question. I have two questions here. One, in regards to regulation, right? One of the discussions that we have been hearing is that the Ministry of Education could implement a minimum number of professors per student, right? So I would like to ask, how can you protect yourself if something goes on that direction, right? And you have to increase the number of professors that you have, to achieve a certain minimum we don’t know, right? And the other question is in regards to leverage, right? What is your expectation in terms of net debt to EBITDA during 2024? What level could you achieve in the end of 2024? Pure thinking, just purely organic here. So, thank you for the opportunity.
Carlos Freitas: Thank you, Caio. So, regarding the second question about leverage, we keep on expanding EBITDA and also reducing net debt given that we generate more free cash flow than accrued interest. So, our net debt will go down over time. So, the net debt will be lower in December of this year than it was December last year. So, our expectation that this ratio of net debt over adjusted EBITDA will be at around 2%, around 2% by the end of December of this year. And again, not taking into account leasing expenses in the debt, but take into account leasing expenses as an expense in the EBITDA. So, the way banks use it to calculate the covenant. So, around 2% today, we are 2.9% and this will go down at around more or less 0.2 points per quarter more or less. I mean and for regulation, I mean regarding the number of professors or students per professor, this is not a requirement for the Ministry of Education. When this was when the requirements were defined a few years ago, there was no indication, there was no requirement about having a minimum number or maximum number, sorry, of professors or sorry, maximum number of teachers of students per professor, sorry. So, what we have been doing is that we are quite, I’d say, at ease with this issue. We have the academic agents, which are also tutors. So, the regulation mentions academic agents which are professors and tutors. And we have today more than 3,500 tutors throughout Brazil. So, this is what is required to have academic agents. There’s no such requirement such as you cannot have more than x students per processor. So otherwise, we will not be complying a law. So, how can I not comply a law if there’s no law? There’s no maximum ratio. So we’re quite, I’d say, comfortable with that. And, that’s why we showed that anyway, when we see the CC, the course concepts, that the Ministry of Education itself gives to every institution and to every course in fact that I’m putting here as well in the screen on Page 12, you see that 61% of our course have a CC5 and 99% of our courses have a CC4 or CC5, sorry. So, this is just an illustration that I mean, we are not very worried about it.
Caio Moscardini: That’s very clear, Carlos. Thank you very much. And, good evening.
Carlos Freitas: Thanks, Caio. You too.
Operator: [Operator Instructions] The next question is from Bruno Gebara, Tarpon. Bruno, we’ll open your audio so you can ask a question. Please proceed.
Bruno Gebara: Hi all, thanks for taking the question and congrats on the results. I have a specific question. I know it was not part of the discussion here, but it’s related to churn. If there is any change in churn in 2024? And, if you could give us some information on that? Thank you very much.
Carlos Freitas: Thank you, Bruno, for your question. Regarding churn and retention rates, that’s an important issue. When you compare the fourth quarter of last year with the fourth quarter of ‘22, there was a slight improvement in deterioration in this retention rate, both at UniCesumar and Uniasselvi. And so this is, I think, the start of this recovery process. We had a deterioration of this retention rate in the last years, given the economic situation, etcetera, given off our growth. And now even I mean, despite the fact that we are growing a lot and we had this important intake also last year, we managed to decrease it slightly, but the trend is positive, the churn. So, and I mentioned the intake because most of the churn is related to newcomers, to new students. So, we could have a very low churn, low overall average churn, if we have no intake, for example. But we don’t want it. So, we have to have a balance between churn and intake and tickets. So, this three piece equilibrium must be reached. I guess that now we are closer to reaching this balance.
Bruno Gebara: Thank you.
Operator: This Q&A session is now closed. I would like to turn the floor over to Mr. Freitas for the company’s closing remarks.
Carlos Freitas: Well, thank you, everybody, for following us throughout last year. And we are available for any further questions you may have over the next days. Thanks and good evening.
Operator: The video conference of results referring to Vitru’s fourth quarter and full year 2023 is closed. The Investor Relations department is available to address further questions and concerns. Thank you so much to all participants and have a good evening.
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