Morning, everyone. Thank you for attending our webinar. We're going to wait for a few min. As we know, various analyst investors are following other presentations, we're going to wait a couple of minutes to start. I'd like to share our welcome to all of you who are joining our webinar. Good morning, everyone.
Let us start. It is a pleasure to make the presentation of our earning results first quarter, 2023. I'd like to introduce you Marcelo Bueno, one of our founders, our CEO. Hello. In this 20-year journey, we have Andre Tavares, our CFO. Good morning, everyone. Guilherme Soares is the CEO of Inspirali. You know him quite well, we're very proud of our vertical.
Good morning, everyone. Thank you for the invitation. It is a pleasure to be with us. I'm Marcus Besouro Botafogo. I'm the IR officer of the company.
It's a pleasure to have all of you with us today. We can start with the slides. We'd like to turn over to our founder, Marcelo. Good morning, everyone. It's a pleasure to be with you here. Such important month, we have just completed 20 years. On the morning of 6th of May, 2003, we were getting to the airport of Pampulha to start this history and its important moment.
Considering this aspect, I'd like to greet all of you who trust in us, our partners, Andre Castello, Marcelo Vaz, all the founders. All of you shareholders, analysts following us, and such a crowded room and such important day. To start with our presentation, first message I'd like to share, it's an important moment for the company. It is a moment that shows that our value proposal is very welcome by our students.
I think this is the most important point. This is the most difficult task. hybrid education, the choice we've made, the adjustments we made last year for hybrid education to be used. We see students like hybrid education, IT, engineering, management. They want to use more technology.
Also in medical students, they want to be more present on campus. With that, we have good results in terms of intake. We have a record, 105,000 students with a growth of 13%. Net revenue has grown 6% in a challenging moment in Brazil. I have insisted here that we use the old-fashioned EBITDA or ex IFRS 16. We have to add leasing, an EBITDA of BRL 218 million. I think this is important. Or actually net profit of BRL 15 million.
It's a turning point for the company. It's important to mention average ticket grow in all segments, with highlight to Inspirali and distance learning. With that, we exceed the number of 400,000 students. A great cornerstone for us and reducing leverage. This will be more intense from now onwards.
Thus we consolidate our leadership in the General Course Index, the IGC. I'd like to talk about this important reality for the company, but especially for our seriousness and sobrieties of the past interactions we had. We said that the focus is actually optimizing physical spaces. If we had students using more technology, others using more in-person education, then we would be certain that we have extra physical space.
We analyzed unit by unit, we made important streamlining movements. We have leasing from Laureate, and we have situations that are different from our benchmark. That was pre-COVID or pandemic, 12%.
We managed to bring this cost below 8%, and this is a great accomplishment for the results, as you can see. Now for the CEO agenda. We have a very specific focus in simplifying our structure, reducing our G&A and general expenses and also administrative expenses. This is the focus in our agenda and it is underway.
It's being implemented. It's important to make it very clear, this message. It's an important message so that we can actually end this year generating enough cash to pay our debts to deleverage the company. We haven't managed to do this yet in this quarter.
Free cash flow, we had BRL 40 million increasing a bit our debt. Sure, this is a turning point. This is the main message I'd like to share with you. We have a robust implementation plan that is underway. We have 359 people that have been dismissed. I'd like to thank all of them to have dedicated their time to the company.
This is not a pleasant thing to do. Measures are necessary. We had a reduction in salary so that for the CEO has been reduced so that we can walk the talk and put the company in addition to the evolution of our profitability, our margins, and a significant reduction of our leverage organically. In addition, we also have a clear agenda recommended by the CEOs, the company of inorganic deleveraging.
We're going to bring up alternatives and great possibilities so that we can have faster deleveraging. I turn over to Átila, André and Guilherme, so that we can move on with our presentation.
Thank you, Marcelo. It is important to look at this slide, the concept of quality, because everything we're talking about numbers is the snapshot of today. Looking back the results of the past quarter, the past 12 months. For us to look into the future, the base of everything is the quality that will attract best students. They will get a degree, will be an excellent professional. We set a good example. We'll make a new student in 10, 15 years to join our school. Quality is key to our business model.
When we were looking at the IGC, the General Course Index in 2019 pre-pandemic, we had some players that had high IGC with a high percentage between 4 and 5. Over the pandemic, we respect everything that happened to our peers. There was a deterioration that was quite significant in IGC, and we kept from 64% to 62% being a leader in this index.
That to us is the most important. Published by the Ministry of Education and Culture this year. Published this early in March this year. Moving on, we're going to talk about intake. Intake reached a record level of 105,000 students, a growth of 13% last year. We look at this segment as if Ânima was a manager of few businesses that have quite different bases, different construction times.
You know, the core where we have this sort of wind against it. Ânima Core is a greater challenge for us both. Distance learning and Inspirali with very strong growth. Even Ânima Core reached 68,000 students, 6% growth with quite important and good scenario. Distance learning with superlative numbers growing by 38%.
Inspirali, Guilherme will mention very strong results. On the next slide, we're able to see more clearly in more detail each one of the segments. The intake of Ânima Core has contributed, if we look at the data that were already known by you of the initial base of 1st of January, 31st of December, already published, the initial base dropped 8% year-over-year.
We had a trend of reducing numbers this base that dropped 8% going through a quarter of positive intake growing by 6% and better dropout 1 percentage point. This shows that the final base only dropped 4%, started by 8 and then dropped only 4%.
The result that over the quarter was positive for Core and the ticket grew by 2% of nominal book value. It's slightly reduced because we have the hybrid that has lower ticket, but we have an effort of keeping the student that would not have sort of full in-person and we try to have part of on-campus and also online. Well, there are students that want a sequence of distance, but they seek this online type of education. We try to increase the hybrid.
The operational performance is much below what we wanted to deliver in the core. The numbers speak for themselves and we have great focus now as you will see in this presentation of addressing expenses just as we've tackled leasing.
As to distance learning, numbers are quite impressive, superlative numbers. Many of you must have seen other peers that are listed have lower numbers. They've closed more or less what they could in terms of the map of Brazil.
Well, we have a lot of blank spots in Brazil, and we show growth that is much above average. You could say the final base grew little, but there are strong numbers. We have 42, 34% intake, 28% above last year and dropout that is high in distance learning, 3 percentage point drop.
Interesting, the ticket has grown almost 10%. The ticket has grown for some reasons. One, that the market where we see there's a bit of less war, price war. People can slow down in terms of the price war. This is positive for the industry as a whole. On our side, we were very clear about growing in places where our brands are well-known.
As we grow with a known brand, we can have better pricing in terms of distance learning delivery, and we see better ticket as a result. For Inspirali, just briefly going over the numbers, Guilherme will go into details. Guilherme, would you like to take over? Thank you, Botafogo. Once again, good morning, everyone. Thank you for the invitation. It's a privilege to be with you at the moment.
Ânima has completed 20 years this month, early this month, we've also completed 1 year of the arrival of DNA. DNA is part of the equity and as a partner or the breakdown of Inspirali. This has been a transformational movement. 2022 was the year of a lot of structuring, construction of the Inspirali project on 3 pillars.
The first of them, setting up the team from a very sound basis in terms of faculty and operations. We set up a team with all the roles that were necessary for the growth of Inspirali. Secondly, governance. Not only setting up our board of directors, the assistance committees, and maturing the relationship between Inspirali and Ânima, reminding you that Inspirali has 2 ways of relating with Ânima.
One, as controlling party of Inspirali, but also as a partner in which we see a competitive differential for Inspirali. We are benefited by the know-hows and expertise and also the scale that's reflected on Inspirali's numbers. We are part of the Ânima ecosystem, also in controls, reports, and we feel today Inspirali increasingly being a owner of its business and ready to capture this growth potential it has.
This shows great focus on execution. This first quarter reflects our plan. It reflects this growth project that is long-term, and it also reflects the Inspirali strategy that we have coined as a two-on-one pillar to leverage and strengthen our positioning of our schools anchored in quality and on the other hand, building a lifelong learning platform, positioning ourselves as a major player for the new medical demographics that comes up in Brazil.
In terms of results for the Q1, I'd like to highlight some points. The first of them is ticket. We had sound growth of the ticket, and this is comparable since 2019 when we started analyzing and looking into medical schools in a more vertical way. This has been consistent in terms of our being able to position the ticket according to our positioning in a real way above inflation.
Second is, you know, the full classrooms. Medical schools, they are more regulated than other courses. It's important to look at the phases. Sometimes we speed up in terms of intake, transfers, but this will depend. We're very proud to be working at maximum capacity. This is the reflects of our schools, the brands we have, the location of those brands in major capital cities that are thriving in terms of the healthcare.
I'd like to stress another point that reflects this positioning and the quality. That is the reduction of PDA, provision for doubtful accounts, and dropout. There are two levels that are quite good regarding other courses.
We've been able to reinforce our project, position our science, and we had internal processes so that we can follow up students more closely. We were able to have a better performance. This shows our positioning quite clearly. Lastly, before we move into lifelong learning, we see our very careful look that as we build the Inspirali project, we look at it in terms of building it, focusing on G&A. We have to focus on it, and we have to have a focus on scale gains and benefit from the scale of Ânima and also the share services.
This has been very important to offset a slight reduction in growth margin due to maturation, of course, and also investment in quality, in the faculty compatible with our strategy. Lastly, I'd like to mention the growth in lifelong learning, a project that we started. We are IBCMED with our medical course.
We have several organic projects coming up with innovative educational styles, with great healthcare providers that have become within our MVPs, they have become our good indicators showing that we are on the right track.
I'd like to thank for the opportunity of sharing here, saying that our project is at the service of doctors and future doctors that we believe we must inspire the love for life and those doctors and professionals who will be able to contribute to a more just health system in Brazil and more sustainable in the long term.
Thank you for the opportunity. Thank you, Guilherme. We thank you. The next slide, it is important for us to stress, as Marcelo mentioned in the opening, our serious and sobriety attitude there of what we have to do, but we have important wins. We have a lot to do in topics that depend on the management of the company, so it's in-house. If we look at results, the results of the business themselves. If we talk intake, volume management, everything is quite healthy.
Outwards, the business is doing well. The great challenge we have is indoors, in-house expenses. In the result of the first quarter, it is very clear that great part of the work in the lease front has been done. It's been delivered. There's a lot to be done, and we have an improvement of 2.2 percentage points of revenue in terms of lease disbursement, 9.8% from 7.6% of revenue.
Now it is time to put all the energy and deliver the improvement in those expenses Marcelo mentioned. It depends on us. You can see, well, various analysts and even journalists have been talking about turning point. The first, you know, blossoms. Ânima is turning the game. Ânima is able to improve. Yes, this is the path that we believe that we have this turning point.
The good news here depends on us addressing general expenses, commercial expenses, digital transformation, optimizing our expense structure so that we can do with the rest of our income statement what we have already shown with the lease. We have yet another point I'd like to stress that we've been always about the gains, especially post-integration, post-acquisition of the Laureate units in Brazil.
This point of leases is quite important because Ânima has gotten used to operating. It was used to operating at a level of leases between 8% of its net revenue. When we acquired Laureate units, they had a higher level of leases, 12% approximately. With a simple arithmetic average, we led to a level of 10% in net income for leases.
In the first quarter, for the first time, we get back to the level that Ânima used to operate even slightly below the 8% of net income. I think this is a great point to be stressed here. As Marcelo Botafogo mentioned, we have the same challenge addressing SG&A, especially in Ânima Core.
As Marcelo has already mentioned, this plan has not only been drafted, a robust plan that has been drafted and submitted to our board, and it's also being implemented in the second quarter. We certainly will see in the near future the outcomes of the implementation of this plan. On the next slide, we see non-recurring items in this quarter basically linked to leases. Non-recurring items are extremely positive, BRL 56 million that we had. We had BRL 52 million for pay fines and lease.
In the first quarter, we had the reduction not only Q31, but ahead we observed improvements in the recurring items. On the next slide, we talk about financial results. We had net financial result negative at BRL 2,000 million. No doubt this is the item today that I would say that is and annoys us most and most motivates us to follow on this line of deleveraging the company.
However, if what we have on this front in our, under our control, I believe we're being doing a good job. Here we can highlight in this liability management, the funding we had in late last year, the fourth debenture, which is BRL 800 million BRL 600 million plus BRL 200 million, two series, with an average cost of CDI plus 175. The liability management allowed us to pay the first series of the third debenture debt matured in April.
It was CDI plus 375. We paid for that, and that was also the payment of the second debenture now. Actually, we've mentioned to the debenture holders, we should pay beforehand with BRL 65 million of Series Two. That costs us today CDI plus 475. We have a weighted total BRL 600 million at a cost to CDI plus 386, plus CDI plus 175.
We obviously expect, as all Brazilians, to have a reduction when timely of the interest rate, so that we can have a boost to Brazilian economy. No doubt, our financial results will be directly benefited with a possible interest rate reduction in Brazil. This is not under our control. What we have under our control is liability management, which is what we have been doing quite well.
Moving to the end of our questions so that we can start our Q&A session, we have, in terms of CapEx, a change that has been happening over time. A significant change, the nature of CapEx, with greater investment in digital transformation. In this specific quarter, higher CapEx in furniture and equipment as a direct consequence of that is significant gain in terms of real estate.
The reduction in leases has demanded from us to adapt the property that remain and administer them more efficiently, and this required higher CapEx in absolute terms, even though in terms of revenue, we have no great changes here. On the next slide, we see the growth of our leverage, of our net debt. We managed to get a slight reduction in Q1 from 4 to 3.9 times.
As Marcelo mentioned, when we put the operating cash generation, payment of interest, amortization of loans, our net debt had a slight increase of 38.6, which was more than offset by the improvement in terms of the EBITDA results, especially ex-IFRS.
I would say that this is our main focus in terms of deleveraging the company organically and looking at this chart that in 2022 was around 4 times, to see this trend on this turning point, the term that Marcelo has used and the others have also used it, that this first quarter, 2023, be this turning point in this trend of reducing our leverage.
Last, I'd like to turn back to Marcelo so that he can wrap up the presentation, and he will talk a bit about, well, although we acknowledge the challenges of reducing SG&A, turnaround of Anima Core and organic deleveraging, we cannot shut our eyes to the results we've been attaining over the past quarters. I turn over back to Marcelo so that he can wrap up the presentation.
Thank you, Andrea Botafogo Guilherme. We should not leave aside what's been said. If we analyze the first quarter of last year, the interest rate was 10.59%, 10.60%. Against the first quarter, compared to this first quarter, that was 3.75%. As Brazilians, we hope the scenario changes. As CEO of the team, we say we have to consider a company and Brazil with high interest rates.
We had a focus in reduction of leases. Everybody in education, they know it's not easy to deliver 10 buildings to rescue all conversations with the families, especially for laureates, not having an impact in the dropout rates.
More than that, I just got from a group results that came back, a recertification of the Universidade Anhembi Morumbi with great scores. We look at the importance of that. We acquired a company that we respect very much and under our management university Universidade Anhembi Morumbi or university has maximum score under our management.
We have to have focus and we know what but as Átila Simões da Cunha mentioned, what is being done will be delivered. We cannot have a level of net debt. We have to lower that. This is a commitment we take.
The good news is that we ended the year or the quarter with the EBITDA ex IFRS 16 that has record of 28%. This motivates us to move ahead, and I'd like, as Guilherme put it quite well, I'd like to thank you all very much, my partners, our partners here, that has been in this journey for 20 years. Everybody in the Ânima system, those that have left recently, the Ânima system recently.
Thank you very much. Diana, Dulce, Pedro Bueno, Matteo, Naders all the team. We've completed another year together, a long-term partnership that is going to be quite successful. With that, I open for the Q&A. If you want to ask questions, you can push the Raise Your Hand button.
Our first question is from Marcelo from, JP Morgan. Your microphone is open.
Hi, Marcelo.
Hi, good morning. Thank you for the opportunity of asking questions. I have two. The first is the hybrid education. I'd like to hear the management opinion as to how much space hybrid has in Ânima, and if this could help to revert the trend for the core business, supposing that we have no fees, no strong economic improvements that would have students back to campus. First question.
Second question, future growth of distance learning. You had the growth based on the Ânima brands, where brands are influential, that increased ticket, and you talked about, you know, going to other spaces in Brazil, and you say competition is occupying other spaces. How do you see the areas of influence, areas of no influence? What should be the balance from now onwards? What should be the ticket, considering this factor specifically?
Thank you, Marcelo. Two excellent questions. What we have seen, I mentioned this sometimes in our earnings results calls, is that Laureate had projects called Go Digital, with a thesis in which there is a new market to be served by distance learning, more synchronous and at a lower ticket. ISU was actually asked by the board to run this business, understand how would the business grow, and see if the strategy is true for us to move strongly in a market that Ânima would not be serving.
Our mission in transforming the country through education, we should do that. We have specialized consulting services, carrying out services internally to approve this decision. In the meantime, we're moving forward. What we have seen is that actually there is a market to be served with the power of our brands.
We're present in 75% of the national territory with the main private higher education brands. We have a great possibility and advantages for Ânima to fill in those gaps in terms of distance learning.
We had a project called Live with the same price positioning on-campus. We noticed post-pandemic, we mentioned this sometimes even in this call, we are choosing the use of more or less technology to improve the relationship of learning, teaching according to areas of knowledge.
There would be a bridge between this proposal of Go Digital, Laureate, and our digital to be filled to the on-campus to be seen by another student, as Botafogo put it quite well. They don't want an experience that is mostly, totally synchronous. They want to use technology.
They want to use what we call hybrid, but at higher ticket. We adapted this line and the results have been quite good. Actually, we've seen that there is no cannibalization, but an adaptation so that we can better serve the market within the concept of various experiences that meet the needs of the kids, of our students.
Thank you. Okay. Thank you for the answers.
Thank you, Marcelo.
Our next question is from Lucas Nagano from Morgan Stanley. Lucas, your mic is open.
Hi, everyone. Good morning. Thank you for the opportunity of asking questions. We have two on our side. The first is regarding Ânima Core. Could you give some more color in terms of quantity, quality in terms of student base and tickets comparing traditional on campus and hybrid?
Regarding corporate expenses since the Q4, it's been reflecting gains in terms of streamlining, layoffs. Do you think this level is normalized? Do you capture fully the gains in the structuring, or do you still have incremental gains that you expected here?
Sure. Andrea, would you like to start?
I'll start with the first question now, and then you answer the first. Thank you, Lucas, for the question. Well, more than looking at corporate expenses in an isolated fashion, we're paying attention to SG&A overall, in a consolidated way. We have an evolution on one point where we still have some homework to do in terms of SG&A. I would tell you that we don't see this level as a normalized level. We still view space for improvement on SG&A corporate expenses, but SG&A in a consolidated fashion, we are implementing that.
We see this space for improvement, no doubt. I believe that we should deliver better results, especially in this front. Lucas. They are not incremental improvements, they are significant improvements in a clear agenda that has been brought to the CEO agenda of simplifying the structure and actually having reductions that are major in this area that are being implemented.
It's important to follow that very closely. With regards to the question on the student base, we see that hybrid education has gained importance. It does not significantly change the numbers that we've seen. We've seen in hybrid overall intake growing by over 6%. No doubt, more than half of this growth comes from hybrid education. We're seeing the base reducing. As Marina Gelman mentioned, we had a reduction of 8. It was a drop of 4.
No doubt, most of this reduction is from hybrid and not semi-on-campus. As Marcelo mentioned, those are initiatives that we've been experimenting, and over the semesters, it's been proving more important. I'd say that still does not change the pointer of the numbers that we're seeing in the Ânima Core student base.
Perfect. If I could just, if you could comment on the ticket in the traditional on-campus.
Lucas and everyone here on the call, our on-campus, ex medicine for various semester, we've been saying that the company has an intent of being close to inflation. Our internal inflation, of course, is smaller than Brazilian inflation. We try to transfer that or carry over that. Our on-campus had an improvement a bit higher than 2% of average close to inflation.
With these semi-on-campus, this value is reduced to 2, which is minimum, but on-campus is transferring close to inflation as usual. A metaphor that Marcelo Bueno always uses is, you know, you're driving a plane. If you do not get a height, so at some point you hit the hill. Our quality education should not deteriorate its purchasing power.
We have to charge fair price for it, which is a transfer slightly above inflation. Ticket is a daily fight. We talk about revenue intake and ticket. We have to go a minimum above inflation. This is a basic rule. We have a challenge of talking about the old-fashioned EBITDA, ex IFRS. I'll, you know, I'll keep repeating that we have to look at the business with leases and so. A bit of a ticket.
To remind you also, Lucas, that I think the bit distance we forget, we have to remember that this point has been a point, perhaps one of the most sensitive points that we have observed when we acquired Laureate as well. Last year, we had this strong reversal project of the average ticket of Ânima Core at the units that came from Laureate.
We know that this year, when we look at the average ticket, we're still living a bit of the effect of the carryover of that lower ticket that we inherited on the integrated units. The effort is quite great. I believe in the next year the effect will be minimum. We lived this last year and we're living a bit of this effect this year as well.
Okay, perfect. Thank you very much. Very clear.
Thank you, Lucas.
Next question is from Mirella Oliveira , Bank of America.
Good morning, Mirela.
Good morning, everyone. Thank you for the space for questions. We have two on our side. As a follow-up from the previous question, if you could comment on how you see cash generation for the year, consequently reduction of net debt. We know that you still have this impact that Andrea mentioned regarding these contracts.
If you could talk a bit about the magnitude of such expenses, what are you expecting? Also a question on the same topic, if you need to renegotiation for 2023 payment, if you could address something in this sense as well. Thank you very much.
Well, I'm going to start about the turning point and your report is praising us. As founder of company and CEO, we cannot close the year with this level of EBITDA. This is not acceptable. We have this effect depends on us. Everything will be done. If the company had revenue problems, people were different with E2A, this is another conversation. This is not it. We have to close.
Well, we have to have organic cash generation, amortization, debt service, and generate cash to be able to lower net debt. This is our goal for this year, and this is our trend. I turn over to André to talk about amortizations, et cetera.
Actually, we've had end of last year, we had relevant intake, as we've mentioned, or fundraising of BRL 800 million that addressed directly the maturities of this year. In the second quarter. We're talking about the Q1 results, some things have already happened.
We had most of the maturities of our debentures, BRL 600 million, and we've already paid for them or settled them. Payments, especially benefited by the fundraising we had late last year. We have some needs for refinancing something that is totally addressed and something that is very little relevant regarding our net debt.
I think the great goal here is the following. We have no major issues in the short term. In 2024, the greatest percentage, greatest volume for payments that will mature are of Inspirali that has a leverage level. If we look at our business, it has a much lower leverage level and very strong cash generation. We see no big issue on this topic.
We're always looking at additional liability management opportunities, even though we know the credit market is very much pressured for all the reasons we are all aware of. As Marcelo said, our great goal here is to end the year with a net debt reduction, and this Q1 should be marking this turning point and this clearer trend of reducing our net debt.
Perfect. Thank you very much.
If anyone has a last question, we are here. You can raise your hand. If we have no further questions, we can move on to the closing remarks. Marcelo.
Thank you very much. It's very good to see a full house with a lot of prestigious treatment as how we complete 20 years of history. I thank you all very much. Let's work, let's be disciplined and focused to deliver great results. Thank you all very much for your presence and let's work. Thank you very much.