Vitru Ltd
NASDAQ:VTRU
Earnings Call Analysis
Q4-2023 Analysis
Vitru Ltd
Vitru's robust performance can be construed through the lens of its core segment - digital education undergraduate programs, which observed a stellar 42% rise in net revenue. The tale of growth extends to the entirety of the organization, with the consolidated net revenue notching up an impressive 49% year-on-year increment. Bearing witness to this financial fortitude, Adjusted EBITDA recorded a 60% surge over the year, subsequently hoisting the margin from 33.9% to 36.6%. Evidently, the company has not only thrived in terms of revenue but also exhibited laudable prudence in cash flow management, as reflected by the 71% jump in operational cash flow, culminating in an admirable adjusted cash flow conversion rate of 96%. Amidst this fiscal bounty, it's worth noting the significant growth - 24% to be precise - in consolidated adjusted net income, amounting to BRL 253 million.
The narrative of growth spills over to Vitru's student base, which sprawls across 884,000 learners. A noteworthy feather in the cap is a 15.4% expansion in the digital undergraduate segment. The company's laser-focus on digital coursework, composing a hefty 97.5% of its portfolio, is especially commendable. Over two years, Vitru's annual growth rate hovered at around 20%, a testament to the company's unabated advancement.
The tale of expansion would be incomplete without mentioning Vitru's strategic hub maturation, the primary growth propeller ensuring the company's robust presence across Brazil. The geographical blueprint of its hubs reveals a methodical expansion, with a remarkable growth rate of up to 22% in specific regions. Notably, more than 300 hubs have been added over the past year, showcasing the company's strategic prowess and pursuit of growth.
Vitru's emphasis on quality and client service shines brightly, with app ratings peaking at 4.8 on both Play Store and App Store for its subsidiaries Unicesumar and UNIASSELVI. This obsession with quality doesn't end here; the Reclame Aqui grades for both institutions top the list among competitors, further reinforcing the company's client-centric ethos.
Vitru's strategic acquisition of Rede Enem back in September 2022 points to the company's intent to enlarge its digital footprint and amass a vast pool of leads. With Blog do Enem and Curso Enem Gratuito under its belt, the company boasts a combined 17 million views and a legion of 1.3 million Facebook followers, not to mention Youtube's near-million followers. This digital dynamism hints at the company's potential to lock in promising results in the years to tread.
The firm showcases its financial shrewdness by astutely managing capital expenditure (CapEx), which was tapered to 6.2% of net revenue on an annual scale. This reflects a dip from the previous year's 7.4%, illustrating a commitment to fostering an 'asset-light' model heavily reliant on technological investments. Although there was a slight contraction in cash flow in the final quarter, the semiannual perspective reveals a 36% jump in operational cash flow, highlighting the company's adept cash flow management.
Vitru's integration project, named Project Ilumina, is unfolding at an impressive clip, outstripping the preliminary projections. This initiative has paved the way for reductions in cost and expenses, thanks to personnel optimizations and enhanced efficiency in contract negotiations. The subsequent stage involves standardizing student engagement recognition across brands, a move expected to cultivate higher retention rates and improved EBITDA margins.
Peering into the crystal ball, Vitru anticipates the leverage ratio of net debt to adjusted EBITDA to dwindle to around 2 by the year-end. This projection rests on the company's capability to consistently expand EBITDA while concurrently trimming net debt, buoyed by a robust free cash flow that eclipses accrued interest. On the regulatory front, the company stands prepared to navigate potential shifts in educational mandates with agility. To top it off, retention rates have begun to exhibit a slight but promising uptick, suggesting the inception of a recovery from previous downturns.
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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 earnings call can be found. You can also download the presentation from the chat icon. [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, Willaim 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.
Thank you. Good afternoon, everyone, and thanks for joining us again. It's the 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 '23. 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 on Slide 2 of the presentation, safe harbor is in effect for this call.So now let's start and invite you to go to Page 4, which I'm going to show you right now. So here, we show the key operational highlights for the period. The first one is that we had more than 808,000 students as of December of last year, which was a 15.4% increase in our core digital education undergrad 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 undergrad segment in the second semester of last year compared to the second semester of '22. Just as a reminder, we always think in terms of semesters here at Vitru because it replicates the calendar. And this is another, let's say, reaffirmation of our approach to pricing.Also, we closed the third debenture 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 debt 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 B3 will incorporate Vitru Limited. These meetings will take place on April 19, so 4 weeks from 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 undergrad, 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 BRL 253 million.On Page 6, this is a slide that I like a lot because it shows our execution over last year. 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 undergrad segment, we also grew in graduate business in the on-campus business. So it all led to a total students 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 '21. 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, important growth of [ 22% ] 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 2 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 taking 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 6 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 concept, the CIS, as you know, of the 6 institutions of the Vitru Group as well as the other listed players, we have 5 institutions in the Vitru Group with the maximum score of CI-5 and only one with a [ CI-4 ], which by the way, has few students. This is even important reason more now than 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 CI-3 to CI-4 for an institution to be allowed to offer these learning courses. And in the chart at the right, we show an indicator that it's not usually mentioned, but it is public information. It is part of MEC's evaluation. It is at [indiscernible], which is the CC which is the course content.As most of you know, every 3 years, usually, the Minister of Education makes in local evaluation about the quality of course, taking 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 quarters that were evaluated over the last 3 evaluation cycles, meaning all courses, have a CC-5, which is 2x the average of the market, which is the fourth bar here at the left.And by the way, regarding regulation, we don't know what we change and we don't know if anything we 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 hybridism in several quarters. 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. Slide 13 is also new. And it mentions Rede Enem. Rede Enem, both of you probably don't know that we acquired Rede Enem 2 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 ending preparation, which had 17 million views and 1.3 million followers on Facebook and also curso enem gratuito is also part of the group with 3.1 million users and almost 1 million followers at 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 the average tickets for each of the brands in the digital education undergrad 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 in 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 achieve the more benefit 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 [ take 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 a quite tough comp, knowing that the intake of UNIASSELVI grew at an annual rate of almost 30% between 2019 and '22. So for tickets in the case of UNIASSELVI, average ticket grew slightly above inflation, about 7%. This is mostly due to this pricing discipline that I mentioned before, our market 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 4 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 the implementation of best practice between the 2 brands that we started in '22, and we are reaping now the results in '23. So these things had to do with several improvements, including the commercial approach to attracting students, the annual increase of tuition for some 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, March 21, 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 4 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 undergrad business, which is our core business, and we grew by 42% in the segment in the year. Quarter-on-quarter was a 17% increase of importance. And we kept and keep on gaining market share in the segment. So here on the right, you can see, 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 South of Brazil, with tickets now over BRL 12,000, increasing above inflation, given this higher quality and seats still maturing. So we 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 segment. 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 because 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 these prospects, 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 post graduate courses and 7.7 million graduates in high school in Brazil, which is an important flow for our technical and professional courses as well besides the undergrad business. But 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 2 years ago, more or less, was regulated only at state level in Brazil. But 2 years ago, the Ministry of Education, the MEC, authorized digital larning players such as Vitru and others to offer this type of courses at federal level based on the quality rates of the digital education undergrad courses. So because we offer high-quality undergrad 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-point over the year, and let me show now where you come from. So regarding cost of service, we had a slight increase in the quarterly numbers because of intra-year some variations. But the yearly numbers, they were declined at 2.3 points year-on-year, which is basically due to operational synergies that I have been mentioned to you over the last quarters. For G&A is the same. We had a slight increase in the quarter, but basically because we had a strong decrease in the third quarter. So when you 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 at a percentage of net revenue, which given certain gains of scale and especially a more optimized mix between digital and off-line marketing for the whole group. For PDA at the rights, 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 for 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 deal 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 2 effects, 2 things. One was higher financial expenses, given that we prepaid the sale of financing this in December, when we issue debentures, we prepaid the sales 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 BRL 30 million lower in the fourth quarter of '23 versus the fourth quarter of '22. So this deferred income taxes, 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, were stronger in the fourth quarter of '22 in $30 million than it was in the fourth quarter of '23.Anyway, we are presenting an important growth in the adjusted income in the year numbers, even with the Unicesumar acquisition that in our balance sheet throughout the year. So as you do remember, we acquired Unicesumar in May of '22, that when we issued our BRL 1.9 billion the debentures of the company. And here, you can see on the right part of the slide, the increase in expenses, financial expenses that I mentioned. So even with the increase in expenses of about BRL 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 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 2/3 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 bit 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 a 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 second half of '23, we had a 36% increase in the operational cash flow between the 2 years. And by the way, as I mentioned, we acquired [ Unicesumar ]in May '22. So here, we are comparing apples to apples. 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 reduced in almost 11%, the accounts receivable. So this is cash flow in 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 cost and expenses, the cost expense reduction that we overtake what we said that we're going to do. These levers are not only personal optimization but also gains of scale in contracts and better retention practices at UNIASSELVI. And also on the commercial side, as I've mentioned before, through the expansion with other brands with [indiscernible] through different new products and courses, we also managed to beat our estimation for commercial synergies.So now the next step will be the harmonization of the criteria for recognition of the student engagement, meaning that have formed 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 BRL 1.94 billion in net debt, this without leasing, this is the way banks used to look at debt levels. So BRL 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 doing best. 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 these new debentures that I mentioned before, we also extended the average duration and the amortization schedule of our debt.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 Brazil SA from a B category to A category in Brazil in December 4 of last year. And then just at Christmas, we got the green light from B3 for the Novo Mercado listing. And finally, we got the green light from the SEC, the F4 form was declared effective by the SEC 2 weeks ago, March 6, finally, it was a long, long process, but we managed to accomplish it. And then we were able to call the shareholders' meeting, which was done last week at Friday. And then the next step will be the shareholder meetings of both Vitru Brazil and Vitru Limited will take place, as I mentioned before, on April 19 and 1 month from now, then there will be an election period of about 1 month as well, during which the shareholders of Vitru Limited will be able to choose whether to receive Vitru Brazil's shares or Vitru Brazil ADRs. 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 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.
We will now begin the Q&A session. [Operator Instructions] Let's proceed to our first question. It's from Lucas Nagano, Morgan Stanley.
I have 2. The first one is related to average ticket. The increase last year was particularly high and for 2024, should both tickets move more aligned with inflation. And in the case of Unicesumar, are you seeing any impact with attrition 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 kind of like 30% to 50%, let's say, how do you see an impact in your operations, both for UNIASSELVI and Unicesumar?
Great, Lucas. So regarding tickets, let's indeed return there to the slide about tickets, which is here. So indeed, we had an 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 ticket more or less in line with inflation. So there are quarters in which we'll be able to deliver more inflation, in 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 intake, 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 at the same level of last year. But it will mean that our average ticket, we increased more than 0, but I don't know yet it's due to 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% Unicesumar. So this is way more than inflation. So it's not feasible to keep growing more inflation forever. So let's see how this evolves for the year.And for regulation regarding in-person hours, I mean we were adapt, 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 the quarters.
The next question is from Mirela Oliveira, Bank of America.
I have 1 question here on costs. What do you think on cost-cutting opportunities? What do you think it's the main lines 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.
Great. So for cost opportunities, I mean, we are, I mean, quite well advanced in the integration. So I'd say most of the against the 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 cost and G&A. So when you renew a contract, a service contract for example or a IT contract, now we have scale or contracts which are 2 years, 3 years or 1 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 current ERP is still separate, the one for Unicesumar and UNIASSELVI, one of UNIASSELVI is proprietary. The one of Unicesumar is not. So we are now integrating and moving to the one of UNIASSELVI, which also means some cost savings in costs 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, 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 and which grew 36%, if not mistaken, which is here, 36% semester on semester. So my point is that the basis for this year is what we have here. So BRL 225 million in cash flow from operations in the semester is a very nice level and a very important cash conversion as well.
The next question is from Lucca Marquezini, Itau BBA.
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 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 trend for Vitru?
In our case, what we have been seeing so far is a growth in intake. Until today, March 24, we have a low double-digit growth in the intake compared to the first semester of last year, 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.
The next question is from Caio Moscardini, Santander.
I have 2 questions here. One in regards to regulation, right, one of the discussions that we have been hearing 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 that, 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, thinking just purely organically here.
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 net debt will be lower in December of this year than it was in September last year. So our expectation that this ratio of net debt over adjusted EBITDA, we will be at around 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 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.And for regulation, I mean, regarding the number of professors or students per professor. This is not a requirement from the Ministry of Education. When the requirements were defined a few years ago, there was no indication, there was no requirement about having a maximum number of students per professor.So what we have been doing is that we are quite, I'd say, an easy 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 is no such requirement such as you cannot have more than X students per professor. 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 are quite, let's say, comfortable with that. And that's why we showed that anyway, when we see the [indiscernible] course concepts that the Ministry of Education itself gives every institution and to a course in fact, that I'm put here as well in the screening on Page 12, you see that 61% of our courses have a 65% and 99% of our courses have 4 or 5, sorry. So this is just an illustration that I mean we are not very worried about it.
[Operator Instructions] The next question is from Bruno Gebara, Tarpon.
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.
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 duration of these retention rates both at Unicesumar and UNIASSELVI and so this is, I think, the start of this recovery process. We had a deterioration of the retention rate in the last years, given the economic situation, et cetera, given off our growth. And now even, I mean despite the fact that we are growing a lot and we had important intake also last year, we managed to decrease slightly, but the trend is positive, the churn. And I mean 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 3-piece equilibrium must be reached. And I guess that now we are closer to reaching this balance.
This Q&A session is now closed. I would like to turn the floor over to Mr. Freitas for the company's closing remarks.
So thank you, everybody, for joining us throughout last year, and we are available for any further questions you may have over the net please. Thanks, and good evening.
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.