Vitru Limited
Q2 2021 Earnings Call Transcript

Published: 25 Aug 2021

[Operator:]

Good evening, ladies and gentlemen, and welcome to Vitru's Second Quarter 2021 Earnings Conference Call. All participants are in a listen-only mode. Later on we will conduct the question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded and will be available on Vitru's IR website. Now I would like to introduce the host for today's conference call, Mr. Carlos Freitas, Vitru's CFO. You may begin.

[Carlos Freitas:]

Thank you, operator and good afternoon everyone. Thanks for joining us. It's a real pleasure to be here with you for the release of our second quarter 2021 number. I hope you all are doing well and healthy. Here with me I have Pedro Graça, CEO of Vitru as you know; Maria Carolina Gonçalves, the Head of IR; and from our Investor Relations Team. A slide presentation will be part of today's webcast, which is also available in our Investor Relations website at investors.vitru.com.pr. I hope you all have this presentation in front of you. And before we begin, I like just to make note that as detailed in Slide 2 and 3 of this presentation, Safe Harbor is in effect for this call. So now, I'd like you to go to Page 5 of the presentation. Here, we have a glimpse of the highlights of the second quarter of the year. And as not a surprise to you all, the first highlight was if the announcement that we made yesterday regarding the agreement for business combination with Unicesumar, which as we discussed, is a leading institution and education – for high-quality education here in Brazil and also with a fabulous presence in health-related courses, include medicine. We are very happy and very proud for having reached this agreement with a family that controlled – controlling it, Unicesumar. This transaction is still subject to antitrust authorization, which we expect to have by the beginning of next year. Second highlight is that we have new quarters. We got the approval for the last quarters in Digital Education. This was granted. We have the five grades granted by the Ministry of Education. We're still not allowed to offer these courses. There's still some pending steps in this process. But once it is done, we're going to be allowed to offer more than 22,000 seats of Law in Digital Education. We're going to be a game changer, a revolution in the industry. And also – we – also we got authorization – or in fact, we've got a grade five from Ministry of Education to offer Law courses and we got the authorization to offer now Nursing courses in Digital Education as well, which we already started to offer two weeks ago, in fact. This is also a major push for Digital Education in Brazil. Nursing is a leading course today in on-campus. And by the way, this – our nursing digital course is already the second largest we have today in the current in-taking cycle, and that with only two weeks of intake. So there's a huge demand. We are taking high-quality education to all the places in Brazil where there's no brick-and-mortar education available, and – but with all the quality that you know that we offer, so this is also an important game-changing movement in the sector. Third bullet, we reached nearly 364,000 students in Digital Education, with important growth in the southeast, which I will show later. Net revenue in our core Digital Education segment grew 35% in the second quarter of this year and the consolidated net revenue grew around 30%, so very sound numbers. Regarding adjusted EBITDA, it increased 22% in the quarter and 29% almost in the first semester of this year. Later on, I'll explain the difference between the first – the second quarter and the first semester numbers. And our EBITDA margin in the first half of this year was now 30% compared to 29% one year before. And cash flow generation from operations increasing 33%, reaching R$76 million in the first half of this year, with an important cash conversion of around 84%. Now on Page 6 some highlights of Unicesumar, just for those who could not participate in the call we had yesterday morning. So Unicesumar is a leading institution with net revenue of around R$730 million in 2020 and more than R$250 million last year as well; with a 35% margin; with 760 hubs, more than the number of hubs that we have as well; and in total, more than 300 – in fact, 214,000 Digital Education students, including graduation and undergraduation; 17,000 in on-campus and an important CAGR of around 60% in the last three or four years. On top of that, it is a very relevant player in medicine. It is one of the – it is among the top 10% of medical courses in the educational standards and a high demand ratio of 11

[Operator:]

There are no more questions at this time. Presenters, please continue.

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[Carlos Freitas:]

Yes. There's – there are questions here from the webcast. The first question from Vitor Tomita from Goldman. Hello, Vitor. First question is, could you give us some more color on Unicesumar can expose you to Law, Nursing and Psychology courses? And whether that could support the launch and promotion of digital courses in those areas? Very nice question. Thank you, Vitor. One of the competitive advantages of Unicesumar is that the high quality and the focus they have in health-related courses. They are very known in Paranagua and they have campuses in Maringa, Londrina, Blumenau. They are very known for high-quality heal courses. So it is very clear that we will be able to join forces once approved by the authorities, and then a big profit of their knowledge together with our knowledge, because we also have courses in Psychology and Nursing and create a very nice product. Our Nursing courses is already being offered, as a said. Their nursing courses will still be offered. But once it is approved, it will be also success for sure. And for Law, in our case and also in their case, a very important course in on-campus, but – and we are very confident that once it is allowed to be offered through this location, it's also going to be a success as strong as the one of Nursing. The second question from Vitor is that now that Flex Courses are launched more widely, could you give us some additional color on the commence for Flex, especially in terms of how average ticket compares to your preexisting hybrid courses? Thank you very much. Very important question, Vitor because there is some confusion around that. The ticket is the same. There's no differentiation between the Flex Courses and the hybrid course. The – in the Flex course, you have live in-conference live classes with the tutor. That's a dedicated tutor from their region. You have a class, classmates. You have everything the same. The only difference is that instead of going to the hub, you meet online. So the pricing is the same. There is no price differentiation here for a Flex course. So it is an opportunity for us to enter into either smaller cities that today – that do not support a traditional UNIASSELVI hub and/or those courses that do not have a sufficient demand in a given city. So those are the questions. So thank you very much. It was a pleasure, and we are available here myself Carol, and Pedro to answer further questions going forward. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.