Cogna Educacao SA

BOVESPA:COGN3

Earnings Call Transcript

[Operator]

[Interpreted] [Operator Instructions] We would like to inform that this teleconference is being recorded and it will be made available in the website of the company, www.ri.com.br, where you have the full material of our results. [Operator Instructions] Before moving on, we would like to clarify that eventual declaration that may be done throughout this teleconference related to the perspectives and the business perspectives of Cogna, projections, operational and financial goals are beliefs and premises of the company as well as information that are currently available about Cogna.



Future considerations are not guarantee of performance and involve hazards and uncertainties and premises because they are related to future events, and therefore, they depend on the circumstances that may or may not occur. Investors and analysts must understand that general conditions, sector conditions among other operational factors may affect the outcomes of Cogna and may guide to outcomes that differ materially of those expressed in future projections. Now I would like to give the floor to Mr. Roberto Valério , CEO from Cogna, who will start our presentation. Please, Mr. Roberto, the floor is yours.

[Roberto Valério, executive]

Thank you. Good morning, everybody, and thank you all for participating in our teleconference to discuss the outcomes of the fourth semester of 2024, as we always do. We have in this call, Frederico Villa, our Financial Vice President; and Guilherme Melega, Director President of Vasta. This call must endure more or less 1 hour with 40 minutes of presentation, followed by 20 minutes for the Q&A session. Well, I would like to start this conference with Slide #3, stating that clearly, the fourth quarter of 2024 was amazing and 2024 as the year was excellent regarding results. But undoubtedly, the highlight is the guidance delivery that we always that we're always certain that it would be in the deadline.



And that we all know because we live in Brazil. We know how things are. But the main highlight, the main satisfaction, both on the management side as well as of the team and the council is that we haven't just reached the guidance, but we reach the goals of EBITDA. We've grown more than 3x our EBITDA, which is an average of 33% a year for the past 3 years in our EBITDA. And GCO, we were even better. We've grown 4x with 45% a year. Here obviously regards the year, but it's important to highlight that everything has been done with the same assets that we started in 2020 with an expressive growth throughout this journey.



Here over this journey and the preparation for this presentation, we've wondered how many companies in Brazil faced with the macro economy as the one we have the competition, which is quite strong in the sectors where we act on. How many companies in Brazil were able to grow that much in 4 years with such a turnaround strategy followed by a growth of such magnitude. I would like to reiterate that the outcome results are fruit of a simple strategy throughout these 4 years, we say there is no rocket science. It's a simple strategy, quite clear. The management, the way I see it is very competent and such a team that is very talented and resilient most of all to overcome all the challenges and to implement all the projects and make the changes that we had to do over these 2 turnaround steps for growth. I am sure that even the skeptical ones must acknowledge our capability for delivering that keeps our down towards perspective. It has consistency, and it shows our consistency green into all.



Now going to Slide #4, the management message focusing on the fourth semester. The revenue 13.2% and almost 9%, 8.9% in 2024. We say that the fourth semester ever since the first semester started, we said that the fourth semester will be very strong. And indeed, it was, especially regarding EBITDA and revenue management, revenue generation 47% with a strong expansion of image to 7 percentage points. And I would like to reinforce that it reflects the consistency that we pursue. This is a 15th consecutive semester of the increase in our EBITDA of our margins. The 3 BUs have been growing quite strong in EBITDA. Kroton is growing 55% Vasta 28% Saber 7%. So it shows the quality of our assets, the quality of our BUs and how are we able to deliver. I would like to highlight Saber has overcome the guidance that we've given.



We all know that Saber are something very difficult to project. So we started this guidance practice, and we have a guidance of BRL 200 million EBITDA for Saber and BRL 200 million to BRL 230 million actually. And we were able to reach BRL 257 million, what shows the quality of our products, especially the strategy of offering complementary solutions, government solutions, especially municipalities, but also a few states of reinforcing learning. So great outcome here.



Now back to the fourth semester, the operational generation of revenue post CapEx has reached BRL 37 million, a growth of 40%. We mentioned - we've said before how the fourth semester will be strong. That's natural. We both Saber they have a lot of income cash in the fourth trimester. So we work throughout the whole year by means of P&L we delivered in the fourth trimester, received the government's cash. This is why we had the fourth trimester very strong.



We always say that it would be strong. And in 2024, our net revenue almost BRL 880 million as a net revenue. This is how our company will be able to resume distributing dividends, and this is the proposal that must be approved in meeting. Now regarding the leverage, there were some questions throughout these 4 years. We were able to reach 1.35x EBITDA. I'd like to highlight that this is a tremendous leveraging since the fourth semester of 2019, of course, we have a growth scenario of interest growth, but our consistency in growing with the results and above all with the reduction of net debt of almost BRL 400 million.



We have a great credit quality for sure. And many look after that, and they want to talk with us. We are very glad with all this generation of revenue and aiming at the future, we believe we'll keep on growing like this. The priorities on the cash use are all oriented towards debt, and we are repurchasing our stocks. Even given the payments of dividends, we will keep reducing net debt and repurchasing stocks because it will keep on growing for 2025.



Well, now moving on to Slide number 6 to talk about Kroton and the operational side, I would like to start talking about the collection. There is little to no impact in our outcomes, the outcomes that the revenue already shows. And still, I need to comment about the collection of fourth [indiscernible] of 2024 14% under the same period in 2023, but this isn't something concerning for us due to some simple reasons that I will explain.



First of all, the smaller collection of students via ProUni, the number was smaller. And why is that? Because we had to Grupo POEB, there was no need to make available more students. So this base of collection has dropped. Of course, it impacted overall collection and also we've made a few adjustments and we reduced the intensity of the actions we were undertaking to recover the winback students in order to try and recover those students, we are always making account. Of course, bringing innovated student demands a lot of effort and we understand that this is a minor quality revenue. So our efforts are all towards growing in order to -- and the reduction of winback has impacting our collection of course -- it's a complex semester from the perspective of collection and distance learning, people are 100% aligned. It's a very volatile market. But I think now what we must do is look ahead. And of course, we cannot give guidance. There is still some time in the collection cycle, but 2025 is positive in our revenue and very positive, too. So looking ahead, we believe in the continuity of revenue growth.



Now talking about evasion. And I think it's important to note that even though we had a mixed update in EAD distance learning, there was a drop in 0.4% even with the distance learning that has a lot more evasion actually. But now looking on the evasion rate of distance learning, we can see that it had dropped in the year after year, this is also very important in our outcomes. Now specifically talking about the base of students that's grown at a strong rate, 2.5% and growing. Of course, this learning grows at a bigger rate. We would like to highlight the on-site learning. This is the first year we grow based in the on-site learning. That's something special regarding these four years.



Now moving on to Slide number 7, talking about revenue. The revenue in the CF has grown almost 16%, which is very strong. This growth has raised in volume in the last collection cycles and good harvesting that we've done impacts the total revenue of the company, subscription Registration has improved the has been better and better and this is how we were able to share extra specifically here in the fourth semester, I will explore further ahead, but we also have an alteration on the registration of discounts that also contribute to the acceleration of the revenue in the. In the accumulation of, we've grown almost 15% even though it's somewhat revenue has resumed its growth. So it's been strong 13.8% EAD 17% but on-site that have dropped now is resuming its growth and now we see a positive collection cycle on-site learning. So we have good prospects in this business line.



Now moving to Slide 8, talking about the net revenue. I think the raise of 20% of the profit, of course, greater participation for mix of EAD students helps a lot in that because costs are fixed. So greater participation of students and the mix generates the revenue. But I would like to highlight that we've all been able to have on-site students less. So we are -- there are more students being registered to have more robust classrooms and that has an impact in the initial profit margin all businesses growing the net revenue, 10%, 20%, 30%, very healthy in the year accumulation, especially and EAD, the final highlight of 2%, 2 points for this semester.



Now Slide number 9, talking about expenses. I think I would like to highlight that the total expenses has grown 3%. Our revenue has grown a lot more in our revenue has grown 16% and -- of course, it has hit our margin.



Just a quick highlight on corporate expenses. So we won 1.2 percent points of effectiveness, change in process, change in systems, automation, the use of AI has enabled us to gain efficiency. The reduction in corporate expenses of the same items, but also has accelerated due to the revision of contingency in BRL 35 million tax processes in the fourth for 2022 in the fourth semester obviously, BRL 35 million huge number , but not that relevant given our base. But I would like to go a little further on the PCLD. There is a change that is important to clarify to you all.



First, we already expected that PCLD would come a little bit strong in the fourth right given the seasonality of V in the first three semesters. So we renegotiated the first semester students, we renegotiated the second and the reregistration period, so they pay their debt for 12 months. So naturally, in the trimesters and the [indiscernible], this is what happens.



In the second item, we've had a change in the accounting registers of the students and such a change is aligned to market practices. So I think now we are equal to all the other players in the way they do such a registration. But above all, most importantly for us, such a change will enable our collection teams to be more effective in their negotiations, bringing more cash to our company. Very important. Such change has no impact in our EBITDA. It's totally neutral. It's just a change in years. And here, I would like to reinforce the best way to look at things given the seasonality of the trimesters within the PDD or the overall semester. It's I was receiving a lot of highlights.



And now moving to slide number 10 -- year expenses of year, the expenses of the year have grown 13% and revenue has grown 11%. Obviously, it hits our margins. So -- here in the same lines, we see gained efficiency in corporate expenses, 0.5 percentage point, 5.4 percentage points in operational expenses.



Here, I would like to highlight that marketing expenses remained stable and to be conservative in the practice, we didn't want 0.2 percentage points in marketing expenses over net revenue. What reinforces what we stated in the first semester, repeat in the second and third and now we are showing it in the fourth that has just changed the strategy of marketing expenses, focusing a lot more on the markets in the odd semester and the year would be stable. So I'd like to highlight also.



I think this is a construction of credibility that's important, not just because through the last 4 years, we've been delivering consistency, but it reinforces the point of what we've said. We have a tendency of being rather conservative. And we are here carrying out what we said we would do. So we've won 1.3% points due to what I have already mentioned on operational expenses, part of the cost [Indiscernible]. So the baseline growth generates a margin. On the PCLD, specifically speaking about the change of the registration on the accounting, I would like to highlight that [PML] is stable for the fourth year. So in fact, we have no problems in the [PPD], it was just a change in the registration.



Now moving towards Slide 11. Of course, this is the outcome of everything I've said in the previous slides, but EBITDA has grown 55% in the semester. We've won 7.4 percentage points in our margin. And the year accumulation has grown 24%, 3.5% margin points. I remember that we got some questions in the first semester of the year saying, well, have you done everything the whole restructuring for Kroton expanded your portfolio, is it possible to grow more at Kroton? So we said, yes, we may be able to grow 1, 1.5 points, deliver 3.5, but shows that some of the same assets, that shows that there was a lot of -- the team is able to look at the processes of the systems and being able to do it more efficiently, proceeding with our growth, not focusing growing our efficiency. There's a lot of growth, too. That being said, I wrap up the crowding session. I would like to give the floor to Guilherme Melega, President of Vasta, so he can make his comments.

[Guilherme Melega, executive]

Thank you, Roberto. We'll move on to Slide 13, talking about the net revenue of Vasta, starting by the chart on the left, talking about the TMS, I would like to highlight the acknowledgment of BRL 619 million in our ACV, the growth of 20% that involved the [Indiscernible]. I would also like to highlight the acknowledgment of BRL 35 million in our new business line, B2G, we've grown -- and the general revenue has grown 35%. So the year revenue has grown 12.6% with a highlight for our acknowledgment on this peak, which is about BRL 1.462 billion, a 14.4% growth, which is aligned to what we imagine we will be able to maintain for the ACV in the next few years. With regard to B2G, and year-over-year, we are growing 29%, reaching BRL 105 million.



On Slide 14, now I will make brief comments on the semester expenses, and I will go deeper on the annual expenses. In the trimester, we had a growth in productivity of absolutely all the SG&A expenses and direct costs, we had a rise of 4.9%, basically a mix of products and seasonality. This is no effective enhancement in the company's costs.





Now Slide 15, we have a better growth rate of the expenses and cost of the year, already normalized throughout all the years trimesters. We see all corporate expenses that are aligned, the operational and PCL expenses will gain productivity specifically in our SG&A with 8% [Indiscernible]. And here, we see our direct costs such as a percentage of the revenue, something that is totally flat at a level of 31%, 38.1%. And the human expenses grew 9.2%. Since our revenue has grown 12.6% expected an EBITDA gain with the margin that you can see in Slide 16, and I will start by reading the trimester on the left, we were able to reach BRL 300 million of EBITDA in the fourth semester, a growth of 28.1%, and here, you can see the margin of the fourth semester [Indiscernible] . Now the accumulated year EBITDA, we reached BRL 500 million, which is a milestone at Vasta. In our IPO, we were able to reach BRL 500 million EBITDA, a 20% growth with regard to 2023. And as the company grows, diluting its cost with a better mix of premium and complementary solutions, we are able to obtain a total margin of EBITDA coming from 28% to 29.9% of the EBITDA margin in our business. So we are very glad with the year we just delivered a robust growth for business and solutions -- complementary solutions.



And what isn't reflected in our numbers is how much we've walked already. [Indiscernible] school, 40 contracts signed, 2 flagships in operations, 7 units that are already operational in 2025. And the 40 contracts for sure will represent some dozen schools opening for the next few years and a growth trend that's very important for us that together with B2G, which is already a reality, will add up to our company's organic growth, that growth -- the organic growth, we are about 2 digits in core and complementary. And that being said, Mr. Villa can move on with this presentation. Floor is yours.

[Frederico da Cunha Villa, executive]

Thank you, Guilherme. Good morning, everybody. And I would like to start my presentation talking about Saber. So Slide 18, talking about S.A's business revenue here in this slide, our net revenue. I would like to highlight the reduction of the trimesters, the reduction of -- that had 2 effects. The main effect is the reduction of the revenue due to PNLD because this is a commercial calendar that doesn't not contemplate purchases and an effect on selling of superior learning -- teaching materials. If I didn't have the accumulation, if I didn't have the selling of SETs impact, revenue would have a growth of 2.5% instead of having in April. What's important is that the first semester now moving to the left side, the semester we had despite growing the revenue, we had a net revenue of medium languages of 75% among other services that are basically here represented by the products for government, Acerta Brasil, which had an extraordinary growth of 92%.



Moving on to the next slide, you will see the results. Slide #19 from Saber, talking about recurring EBITDA and EBITDA margin. It's important to highlight that given the difficulties for projecting projection difficulties by the analysts on how the revenue will be the EBITDA, we see here -- we have a guidance at about BRL 200 million to BRL 230 million accumulated per year. In the year, we were able to reach BRL 257 million. So we hit the superior end of the guidance, BRL 27 million.



Now looking at the trimester, as I've mentioned before, the expansion specifically, as Brasil's products, which have a better margin than that of BLG products that elevated the margin of our business. So really talking about recurring margin, 50% of the fourth trimester and expansion of approximately 23 percent points. So it's been a fantastic year for Saber's fourth semester, which was our expectation. And this is why we passed the guidance. But in some ways, it has overcome our expectations and such a number of EBITDA also is part of our cash, we have the collection of those products within the year 2024 as our expectation.



Now moving to the end of my presentation, then I would like to go to Slide #21 to talk about Cogna. So talking about Cogna's trimester. The fourth semester of Cogna had a growth of 13.2% with reached revenue of BRL 2,160 million, remembering that we've grown together in all our businesses and semester our revenue at Saber grown, but both in the trimester of the year Vasta and Kroton that represent approximately 90% of our business. So indeed, it was a year where our business has delivered excellent outcomes.



Now moving to Slide #22 to talk about EBITDA. Here, recurring EBITDA in the trimester, we have an EBITDA of BRL 812 million, a growth of 47%. And in the year, 25.2%, reaching BRL 2.174 billion remembering that back in 2024, we had a guidance, and the guidance will be BRL 2 billion. We've had a guidance in 2020. We didn't know our revenues. But here, gladly, we see that we want to share to our stakeholders that our guidance has reached the EBITDA of BRL 2. approximately BRL 2.2 billion.



Now moving to Slide #23 to talk about net revenue. The best way to see our net revenue is not the semester, but the semester. What we need to know is the accumulated net revenue. We've had a loss of BRL 492 million. Just reminding everyone that last year, we had a drop in the IRS that has impacted our loss. And now this year, we've had a revenue for distributing dividends of BRL 870 million that profit comes from the use of our revenue, especially of our Kroton and Vasta businesses, a strong growth of our revenue in all our business, the EBITDA growth and the effects and reversions on the contingencies that represented and that's written is described and presented in our release.



The contingency had an effect on our net revenue of net profit of BRL 800 million. And thereby, the company has resumed its generation of profit. We are proposing payment of dividends for May 2025 that's been proposed of BRL 120 million that will be approved in our general ordinary meeting.



Now Slide #24, second guidance, the generation of operational cash. And here, we don't have guidance on our free cash, but I would like to highlight both the operational and the free generation of cash flow. We had guidance for the year of delivering operational cash of BRL 1 billion, we've delivered BRL 1.045 billion in the year of 70%, and the growth of 40%. As I have mentioned, such a growth in our cash that comes from revenue and a better conversion of cash given the incoming of P&D and other products. Here, I would like to mention in our free cash generation, we here the generation operational cash post-CapEx and post payment of interest of our debt, we were able to generate BRL 395 million. This is the message that I would like you to keep in mind.



So we can move to the next slide on the debt leveraging. The company had a debt in 2023 of 1.83x, remembering that our leveraging of net debt over the past years, we were able to reach in the fourth semester 1.35x. So it's noteworthy the amount of BRL 400 million of debt. That is why I wanted you to keep in mind because it has a match with our generation of free cash. It was BRL 395 million, that's represented in our cash and our debt. So we had this reduction of our net debt, reaching BRL 2.288 billion. And this is another message I wanted to share with you, the average cost of our -- considering the CDI, but in the first semester of 2023, we had an average cost of CDI plus 1, and we were able to reach the first semester of 2024, the CDI of 1.65.



Now I would like just to remind you that the company in the year 2024 has renegotiated the liability of 100% of the debt. So is represented in the financial results and a message that is in our numbers and in our figures I want to share with you the company. According to the accounting practices, we mark on financial instruments, and we have debts that are IPCA and we've changed CDI. So we've registered the debt the cap and the market considering the expectation of CDI on the long-term curve of CD close to 7% and our outcomes would be approximately BRL 100 million. And this is in our figures. If we didn't need to do that our leveraging would reduce a little bit.



Now moving to the end of my presentation on the position of cash and leveraging. The message I would like to share with you is that the company has a net debt of BRL 4.2 billion and an availability of BRL 1.3 billion. The net debt, as I mentioned before, is BRL 2.280 billion. But now looking ahead, our timetables, given our renegotiations of the debt in 2020, we will be BRL 160 million, and BRL 24 million. And starting from 2027, we will have a tower near to BRL 1 billion. So it's noteworthy that for the last 2 years, we don't have a robust drop program.



I'm not talking about 2025. I would like just to remind you all to remind of 2024, but the operational cash generation of BRL 1 billion, a net cash generation of BRL 25 million. This doesn't look like a problem.



And the final, the ending, I'd like just to remind you all that the company in January 2025, we announced the closure of the repurchase program of BRL 44 million and approximately BRL 144 million. In December 2024, we repurchased approximately BRL 30 million and our capital allocation is the best allocation of capital that we could do, repurchasing stocks means debt payment. If we haven't done such an investment, our net debt would reduce a lot more. It would be BRL 2.5 billion.



But in our hands from the Board, this is the best we could do, and we've carried it out. And that being said, I would like to wrap up the part of the presentation of Cogna and the financial results, and I would like to give the floor to Roberto Valerio.

[Roberto Valério, executive]

Fred, thank you very much. Slide 27 to wrap up the year. 2024, as we've always said, a simple strategy, 6 pillars because they are very diligent in keeping up with all of them and improving all of them regarding our growth. grown. Fred has explained the seasonality of Saber.



But most importantly, you must know that we keep on growing in the best in the case of reregistration [Indiscernible] and complementary solutions, new product lines that we didn't have before, complementary solutions, selling both to selling to governments, several lines are growing. And we have perspectives of having even more things ahead of us.



And our experience, I think that we've been quite well in all checklist, not just in the student experience, but also clients experience, the expansion of processes with the government, Kroton has been awarded reference price awards in the market that reinforce our commitment in providing the best experience possible to our students.



And obviously, this means an acknowledgment on the trust and the confidence that both our clients and students. ever since the journey, has grown 22 percentage points in the NPS of the students of higher and has improved 22 percent points in the satisfaction and the being recommended by partnering schools. So these are incredible outcomes that suggests that we have been working hard in improving our processes, focusing on clients, effectiveness is in our DNA. We gain efficiency in all business units.



We're very diligent in the operational side and the processes. using new technologies, and that certainly has helped us reaching this 4-year guidance without such a perspective, we wouldn't be able to go this far and efficiency, something that's not a privilege from one or another area. All products are have the efficiency in hand.



And culture is very important our teamwork spirit, vision of growth, shared growth and thinking about the new, not being stood to what we already know, looking ahead and the research of the survey of engagement with our employees shows very positive improvements in these 4 years, ANPS employee which is the goal that we apply has improved 70% of clients that shows that we have a team that likes the company, likes to work here. They are all quite engaged. They believe in our strategy.



And this is one of our main strengths. The innovation is also part of our strategy. We've been investing a lot in several front lines, not just the AI, the type ones like AI. But obviously, building alliance with start-ups and the opening, bringing improvements to everything we can do. I'm very glad with the award from Valor on innovation. We are amongst the 3 biggest companies, most cation the 27. And for sure, in education, we are the first.



ESG several of our actions, especially those focused-on education, our core. I'm glad to be able to keep on performing as much to deserve the Education award, and we are glad to support this initiative aside from several other forums education and ESG. And that being said, the presentation is finished. So we start the Q&A session. Thank you all very much.

[Operator]

[Operator Instructions] So let's go to our first question, Raphael Elage, sell-side analyst of XP.

[Raphael Elage, analyst]

We have 3 questions on our end. Regarding how should we see the behavior related to greater representation of the impact of the ticket. I'm trying to understand whether there was some effect that you think it's worth mentioning.



And the second question, essentially, regarding the vision that was reverted in the previous semester regarding I think more model. And the third is more related to 2025. There was a brief talk on how do you see the cycle of collection. But I would like you to give a little bit more details on competitiveness on competition or perhaps marketing side and also separating regarding the different segments.

[Roberto Valério, executive]

Thank you, Raphael. I will take some questions. Fred, feel free to contribute regarding the net margin of Kroton. Actually, we give guidance, but I'd like to tell you that the great participation of distance learning should be neutral on the margin. We indeed have more students growing the base of Med students in the total.



We also have the maturation of several new courses. So this year alone, we've approved 110 positions on medicine, Santa Luis and that will affect our margin [Indiscernible] that we have the maturation of courses of more Medical. So in general, I could say that it's neutral to the I think your question regarding the PCLD, right?



Well you've mentioned reversion, PCLD, I guess. And I think Raphael, please feel free to make your comments. It's not reversion, but rather the effect that I've mentioned in the third trimester. In fact, we have a minor PCLD due to the renegotiation. And the fourth trimester is stronger because the student base is not that much debt, but it ends up more with that in the fourth semester.



That's natural because in the end, we were mixing accountable reversion. Indeed, it's the natural seasonality have less PDD in the third trimester than in the second. And the way we describe this slide maybe have brought such a conclusion. It's not a reversion, but rather a seasonality. And would you like to add something? Exactly that.

[Frederico da Cunha Villa, executive]

Seasonality, reminding that in that, the odd trimesters, the ones students renegotiate if they have debt, they have a percentage. When they renegotiate has been negotiated. So there is a payment of a tax, and I try to revert the PDD. Naturally, if such a student is in debt over even trimers, PDD will return. That's normal. That's I made this comment on the results call on the first semester. Again, PDD in the first semester, it's structural. The net revenue on PDD in the first semester is approximately 7%. And that naturally is about 10%, 11%, which is what happened. So there is no accountable effect. This is something natural in our business, and it happens trimesters have the PDD, reversion of the PDD, so it's smaller and even semester is bigger. How is the best way to analyze that semester year and within trimester year, you will see that there is. And now third question of Raphael was about the cycles of collection.



And now being careful not to give any guidance, talking in the quality both in volume and revenue, it's better in the revenue because we've been able to grow more in on-site and hybrid courses, courses that demand attendance in the distance learning segment. So we are positive in this cycle. It's a very important cycle that brings a lot of registrations, and that keeps us in a positive regarding the vision of future by.

[Operator]

Next question comes from Lucca Marquezini, senior analyst at Itau.

[Lucca Marquezini, analyst]

We have 2 questions from our end. Regarding dividends, we've seen the announcement of dividends after a few years. So thinking about 2025 with the mindset of improving cash, I would like to make a comment whether we will have a similar level. If you keep on seeing the distribution of dividends would be a similar level as been presented. We were talking about the rationale of dividends. And the second point would be regarding marketing profit. We've seen a drop in the past semesters. So could you explain a little bit to us regarding the marketing strategy? Will there be a drop in the next? That would be helpful to us, please.

[Frederico da Cunha Villa, executive]

Lucca, Fred here. First question on the dividends. We've had a profit that had an effect on the contingencies. We paid dividends when our proposal for dividends, as I've mentioned, BRL 120 million, and the company here inaugurates a strong generation of cash, and we are opening up a new stage on paying dividends. I cannot give you a guidance on how much will it be, how much our EBITDA will be on our net profit. But here, we have a new normal in our company. It inaugurates the cycle of return to stakeholders the capital by means of dividends.

[Roberto Valério, executive]

Great. I would like to reinforce what Fred said, we are very glad of being able to distribute dividends to our stakeholders. We knew from the beginning that improving things, aligning things, growing our margin, cash generation, that will hit our profit at some point. So we've returned, and the point that this is the way to return one of the ways actually of returning capital to stakeholders, and we keep on working in this front line. Then Lucca, regarding your second question on marketing and, think there is efficiency to gain marketing, but you can assume... Some efficiency over the year, more stable on the percent of net revenue. This is our vision.

[Operator]

Our next question comes from Samuel Campos sell-side BTG analyst.

[Samuel Alves, analyst]

Two questions from our end. First question is about the effects of reaching the guidance. Of course, taking queue to congratulate the company by delivering the guidance. I would like to ask whether there is a PR on the achievement of the goal and if it happens that would have some position? This is the first question. And the second question about course, there are different cycles in the PLD, but I imagine that there is room for growing 2025, that in the purchase cycle, we mentioned that the revenue will grow, but we bring this question there was an expansion of the margin at 24 of 11 percent points. But we would like to understand whether this margin will be recurring because that's a key point to understand if the EBITDA can grow or not. This is it.

[Frederico da Cunha Villa, executive]

Fred here. And I'll take the first question, the company, our workers had in their internal goals reaching guidance, both operational cash generation of operational cash, both. So there is no difference from what we have in our prognostics 0 effect. Those figures are open in our notifications because we are obliged to do that. So you can check them. Now regarding the question of Saber, would you like to take that Guilherme ?

[Guilherme Melega, executive]

Yes, I can add that. So Saber, Samuel. So we have plenty of marketing expenses. Teaching materials, we have samples for our teachers. We'll be traveling a lot. So it's a little bit more difficult growing our EBITDA. So I could say that it's a more stable EBITDA, but let's experience here and see how the win. So can I just add something here Samuel, since we are repurchasing things, rebuying things, the revenue growth year after year, of course, the first investment, everything I have on marketing and the editorial, we have a cost that is launched, but despite the revenue growth, the EBITDA here that Roberto had mentioned reflects, but I would like to reinforce what we mentioned. It is up to us to find out. We all know the avenues where we will work, and we will work on what happened to our guidance 2024.

[Operator]

Our next question from Caio Moscardini, analyst at Santander.

[Caio Moscardini, analyst]

My question is related to Kroton. Apparently, the overall feedback is that there is a better dynamic in distance learning, especially in the 100% online distance learning. And I would like to ask about your vision on the dynamic in the long run whether you think that will extend a little bit longer. And regarding Vasta, a question on the number of students at Vasta. We have very good theatres, 2.2 complementary. How is this growth? Is that more premium or baseline revenue? If you could give us something about that?

[Roberto Valério, executive]

Melega, would you like to start?

[Guilherme Melega, executive]

Yes. Thank you, Caio, for your question. So, in fact, we had a very robust growth in our systems, both in learning systems and complementary solutions, reminding everyone that this number of growth in the first semester suffers a slight adjustment in the second semester when we received the contractual evolution. So it's normal having a first semester a little higher than the second. But the volumes, the figures are in that order. I would like to highlight that in other areas, we've been growing premium tickets. So Angle, Anglo, TEKA and Ampli and Mackenzie have been the growing growth drivers is an average medium ticket of companies. So we've had a gain of the next season in 2025 and complementary solutions that have a level of 20%, which is something that reaches BRL 200 million in our revenue. So it also represents an important growth, and it's something complementary to the premium mix gain that was mentioned.

[Roberto Valério, executive]

Well, Caio, regarding your question on growth. It's quite noteworthy in the fact is that when students or families have more income available, they end up choosing more expensive courses, courses that they effectively want. And when they have more income, these are the courses they can afford. It's very hard to pinpoint something for sure as an explanation. But I would say that due to the level of unemployment, which is lower, the income of families is slightly higher right now. I think this is what has influenced the growth in the collection, which is more positive in on-site learning and attendance. I don't know if that's something structural. Time will tell. Obviously, we are glad with those circumstances, but I think that's too early to pinpoint something as a new trend.

[Operator]

Next question, Jessica sell-side analyst at JPMorgan.

[Jessica Mehler, analyst]

My first question is about if you could talk a little bit more on the margin expectation for 2025. And how is it compared to 2024, having the reversion of the fourth semester? And then I would like to do a follow-up on the answer on the market line. You've mentioned that it must be stable for 2025. And I would like to confirm if that's how it will be stable? And how much stable are we talking about?

[Roberto Valério, executive]

I will take your question. Fred, feel free to add something if you would like to. Regarding the margin expectation, I think there are 2 answers. It depends on how you see our figures. If you're seeing printed figures, I could say that the margins are stable. So we forecast stable margins to understand that the printed margin isn't structural and then each one has their own. I would say that there is a growth in margin. Now regarding margin, I think the guidance here has to do with the percentage on net revenue. It's not a guidance for the reference, we don't give guidance for the reference stable marketing as a percentage of the net revenue in line with what we've done in '24. We understand that even in a competitive market as it is, we don't need to spend more proportionately to our revenue.

[Operator]

Lucas Nagano, sell-side Morgan Stanley analyst.

[Lucas Nagano, analyst]

I have 2, first, on the new accountable criteria. I think it's quite clear that it won't impact EBITDA, but it may be what we've seen in the last semester of 2024. It's grown 25% on a comparative basis because the second '23, there was a drop in the revenue. I know you made a few comments on the past, but I would like just to ask you more objectively on compared baseline is the growth of revenue for the second semester of 2024. The second question is about the regulation I'd like to be more objective on the perspective and the [indiscernible], what is the demand for more time study? I understand there's no spaceship but theoretical classes on site. How such a demand will change the operation and will change the structure of Kroton.

[Frederico da Cunha Villa, executive]

Lucas is Fred. I will take the first question about revenue and PCLD. This is an accountable criterion. This adjustment was done because it was counterintuitive. There was a discount, and you reduced your revenue and the effect could be just on the PBT. And the answer I'd like to give you is that in order not to demonstrate our principles of transparency, Page #10 of our release has the growth of revenue for the first semester, which was 15.9%, your question. And what is the growth without such an adjustment of 70%. And what was the year growth, 11.4% and that growth without this adjustment was 9.1% and this effect is the contrary in the PLD. So you can see that on Page #10 in our release. If you have any other questions, me and [indiscernible] we are at your disposal to we show some frame we can arrange that.

[Roberto Valério, executive]

And now the second question, regulation. Thank you for your question.

[Audio Gap]

semi special courses. So we all know how to operate all our poles. They have classrooms, they have labs, even in the smaller poles, they have such an infrastructure. So that would be no barrier to ouredagog professorship. I think the main challenge of professorship isn't in the on-site attendance, but rather in the apprenticeship.



Given the previous DCN, the apprenticeship was something more to the end of the course. So you imagine that you -- let me give you a hypothetical example, 100 students in one town and when you are going to send them to the apprenticeship, you send 40 or 50 because they are more towards the second half, and there is a natural evasion. The new regulation, the apprenticeship takes place more in the beginning. What means that you have more students who need to be assigned in schools so they can perform their apprenticeship. So given the amount of students, I think this is our main challenge. Finding apprenticeship, fill documents a coordination with city halls, state governments. This is the point we are working more strongly.

[Operator]

Our next question comes from Gustavo Miele, sell-side analyst at Goldman Sachs.

[Gustavo Miele, analyst]

I have two questions. The first taking on the capital. You see this deleveraging of the company brings a reduction of cost and debt that's very important, which has been a flag that you've been using for the market. I'd like just to understand in order to be more in tune with what you have in perspective for debt in 2025. That would be the first question. The second question on Kroton. I'd like you to help us to try to understand this growth in ticket both on-site and distance learning and what was a readjustment and what is the mix effect, so we can understand how close to the inflation, the adjustments of remain in these two categories. That's it.

[Roberto Valério, executive]

Thank you, Gustavo. Fred would like to answer the first one.

[Frederico da Cunha Villa, executive]

Gustavo, thank you. Fred here. The allocation of capital, I would like to reinforce our commitment of the allocation of capital to our stakeholders, always preserving what would be our net debt and the reduction of net debt. That is, as I said previously, the allocation of capital, we believe that our best capital allocation here is to rebuy our stocks and for the payment of debt with different investments. And on debt costs, we are in a optimal level. I think it's hard to reduce the net debt. The reduction of our leveraging comes from the generation of operational cash in our business. As I said before, the company is out the guidance, and we are not talking about 2025. This is a company that's generating an operational cash flow of more than BRL 1 billion in 2024. In 2025, must not be that much difference. So it remains natural, but our commitment here is to allocate capital to generate the best return to stakeholders.

[Roberto Valério, executive]

Gustavo, regarding your question on the median average ticket, it's important to explain two things. The entrance average ticket, we have some power of influencing that price. Of course, -- we work for the -- our prices based on the course. We try to optimize some here and there, so we can be competitive the course, but without losing average ticket, minimizing the impact and the potential competitiveness of the entrance ticket. But on the other hand, we have been able to share by several different tools, the reduction of cost and the average ticket of students throughout the journey, et cetera. What in an average means that we are able to give to repass the price by means of the strategies that I've mentioned. So it has a lot less to do with the mix. Especially with the mix of the last cycles because it's been more concentrated in distance learning, smaller ticket, but rather effectiveness in our operation in price reviews for each of the students according to the clusters that we look at. I think it's about operational efficiency.

[Operator]

Our next question from Renan Prata, sell-side Citi analyst.

[Renan Prata, analyst]

Two quick questions on cash generation. One, can you help us a qualitative perspective to consolidate the fourth semester cash on the PNLD. But now just to understand what were the drivers? And the second question, thinking about generation of cash for 2025, if we should continue the seasonality similar to 2024 or especially regarding the fester, I don't know if you have some seasonality for 2025.

[Frederico da Cunha Villa, executive]

Okay. Fred talking here, talking about the operational cash generation. We've been talking about that. There was a strong cash generation for the first semester given the seasonality of our business. We all know that our business PNLD, the income comes from Saber PNLD as the past few years have been. So the way I see it in the -- and we must reconciliate the numbers, but we have a generation of operational cash that's been positive in all our businesses, in all our three businesses. So effectively, there wasn't just the generation of operational cash. There are something positive in Kroton, Vasta at Saber, and you can give us a call, help you out regarding that.



And now looking at 2025, I see that I don't see how much different it will be. Just reminding everyone that we had here approximately using a Rule of three, we had a slightly stronger fourth semester. But this semester, we had something about BRL 250 million. Many times, we have said BRL 100 billion, so slightly bigger in the fourth semester, but it isn't simply explained given the seasonality of Saber because our business are generating operational cash. And I'd like to reiterate our ticket here in the company is in the operational cash generation. This is gone. The free cash and the reduction of net debt that shows that generation of free cash is on the direct method, BRL 395 million, and that has conversed with the net debt reduction of BRL 100 million that could have reduced even more with the better allocation of our cash. So answering, I think we are quite comfortable that the seasonality should be similar to 2024 and all our business generated operational cash in the first semester of 2024.

[Roberto Valério, executive]

Now regarding the seasonality, I would like to highlight aside from what Fred has said, I think it's important that everyone look at the seasonality of it different. I'd like to remind everyone that less than 65% of our revenue comes from higher education and the other 35% comes from Vasta and Saber do have a seasonality that's different. So I think that when the market somehow were regarding our capability of generating cash in the first semester, I think it's more about not taking into account in the modeling the seasonality of Saber and Vasta. And there are structural seasonalities. And this is why Fred is stating that from the perspective of generation of cash and distribution, it should be a lot more similar to 2024 because this is the structure of the company. This is how we are.

[Operator]

Our next question, Flavio Yoshida, sell-side Bank of America.

[Flavio Yoshida, analyst]

I have 2 questions from my end. The first one, look specifically to general administrative revenue, even adjusting the reversion of contingencies, we see that in the percentage of the revenue, this represents 13% of the net revenue. And compared to a history of 18%, 20%, I would like to understand that if there was something specific for the smaller ground, was it something recurring? I'd like you to explore a little bit further on that. And my other question has to do with PPD. So when you look at PPD of 2024 compared to 2024 and the percent of the revenue, we see that it has increased a little bit. I would like to understand what has we PPD and what you're expecting for 2025.

[Frederico da Cunha Villa, executive]

I will take your questions. Regarding general and administrative expenses, what happens is that in 2023, our general administrative expenses were worse. We had some effects in 2023. Such effects in our end, they were recurring effect, but it isn't up to me to judge whether it was recurring or not. We will comment about that. But now the figures are smaller. We see that something structural. So looking ahead, that should be the same percent on the PDD revenue, the efficiency that we were able to capture. So just to reinforce the point that we like to talk a lot about being recurring or not by the way, I see that always see recurring, they are always negative.



So there is no problem. It isn't up to us to take so. It's up to you to generate the figure and that's structuring and you can project on the same percent. I'm talking about PDD, I'd like to reinforce on Page #10 of our release. Here, what do we talk about? Nothing different to what's been. If I didn't have the adjustment, our PDD would be 10.8% on the net revenue. Since we have done adjustment, our revenue became greater. Our PDD to our real revenue was 2.7% a year. The projection for next year, I have no evidence that it would be different from what's been happening in the past few years of the company.



And you can see in our chart, our PDD in the criteria was close to 10%. And the new criteria to 2%. So any criteria, I'm not reaffirming guidance, but what I'm saying is that this is string part of the company was based in the past few years history, and we will keep on the same way. What's something important that is in price for us is that such a change that we performed the expectation is bringing more cash to the company. And on the criterion that we used in the past, there was a discount and there was a negative effect on the revenue. It's a counter, now you just have an effect on the PDD, but we believe that it may have an effect on generation of operational cash.

[Operator]

The next and last question comes from Eduardo Resende, sell-side analyst at UBS.

[Eduardo Resende, analyst]

Two questions from my end. First, about the evasion. We've seen continuous improvements throughout the last semesters. So I would like to know from you if you could give an overview on the strategy you've been approaching to reduce. And if you think there is room for keep improving? And the second question on B2G and Acerta Brasil and Saber I would like to know about the visibility you may have on the evolution of such lines from now on, if you could share that with us. This is it.

[Roberto Valério, executive]

Thank you, Eduardo. I will take the question on evasion and Melega can talk about Vasta, and we can add up on Saber too. So evasion, let me give you a few colors without giving spoilers. I think there is not much a secret. It's redoing the basis, improving the student experience, both in the on-site experience, so improving the processes within the camp, improving the infrastructure, everything that is digital experience, updating our experiences. We have a very ambitious program called Cogna transformation program, which has a systemic important systemic change.



All EAD business learning students are entering on this new system, which has a state-of-the-art app, great experience from financial perspective, we are making available recurring payments. We are trying to guarantee students not to be finding a hard time to pay their debts because otherwise, it will be very difficult for them to pay. So it's a set of actions that's very broad. There is no silver bullet. There's a lot being done right now that helps improving our numbers distance learning 100% is a little more difficult. And there are opportunities for improvement. There is always room for improvement. There is always systems to be improved, experiences to be improved, well, onboarding to be better performed. So I think for sure, that improves besides the element of quality on capturing on collection.



We've been quite criteria on what we consider the amount of collection that we consider as a revenue. So student must have signed a contract must have paid. They must have experience in the virtual learning environment. So we consider have more engaged students. I think there are special trends scholar fronts that go towards using - the proceeds using more data, more AI, so we can custom-made experience or that planning that always been a dream for us in the sector. But now given the new technology has been very possible. So the way I see it, there is plenty of opportunity to keep on improving in levels. And then Melega, I will talk about B2G, and we'll give a few colors on the B2G market and our expectations.

[Guilherme Melega, executive]

So Eduardo, you mentioned Saber's product, Acerta. that product addresses the same market at Somos Prepara. It's a recomposition of learning product. And we've seen great volumetrics for the past few years. This year, 2025 is the year where SAEB will be measured in October. So both Acerta and Prepara are preparations for this exam. So in fact, we have a huge positive expectation for growing the first trimester to prepare students of the fifth year, the third year, aiming at October's exam. And we see that in Saber's figures, products and it's basically B2Gommos focused on the market. Additionally, Saber offers a gamut of products, teaching materials, bilingual materials that follow the growth a good growth level. So perspectives are very favorable for BTG this year. And I think just to add up the validity of the products in fact, the quality of the product has been very good, and we've been able to help education offices, numbers and that is a market for us to catch new clients.

[Operator]

The Q&A session is over. Now we would like to give the floor for the final words of the company.

[Roberto Valério, executive]

Well, thank you. Above all, I would like to thank our 24,000 collaborators for those in the past 4 years, not just here in the first semester of 2024. I'd like to state that we are very optimistic with what we can do. There is a lot ahead of us, a lot that can be done, and we'd like to reinforce the availability that we have to answer any questions. Thank you, and good day for everyone.

[Operator]

The teleconference on results related to the first semester of 2024 of Cogna Educação is over. The Department of Relations with Investors is at your disposal to answer any questions you may have. Thank you all participants, and enjoy your afternoon.



[Statements in English on this transcript were spoken by an interpreter present on the live call.]