Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Carlson Educational's Q1 2018 earnings conference call. We would like to inform you that this event is being recorded and that all participants will be in listen only mode during the company's presentation. After the company's remarks are completed, there will be a Q and A session for investors. And at this time, further instructions will be given.
Also today's live webcast, both audio and slide show, may be accessed through Crompton Eucon Ternao's Investor Relations website at www.cropton.com.brir by clicking on the banner 3Q 2018 Webcast. The presentation will also be available to download on the company's website. The following information is available in Brazilian reais in accordance with Brazilian corporate law and generally accepted accounting principles, BRGAAP, which now conform with International Financial Reporting Standards, IFRS, except where otherwise indicated. Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Crop To Management and on information currently available to the company. They involve risks, uncertainties and assumptions as they relate to future events and therefore depend on circumstances that may or may not occur in the future.
Pastors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of the company and could cause results to differ materially from those expressed in such forward looking statements. Now I'll turn the conference over to Croton's CEO, Mr. Rodrigo Galindo, who will begin the presentation. Mr. Galindo, you may begin the conference.
Good morning, and welcome to Croco de Santamal earnings conference call for the Q3 of 20 18. With us in this call, we have our IR Officer, Mr. Carlos Zafar our Vice President of Finance, Jamil Marquez and the Head of our 2 most important business areas, our Higher Education Head, Roberto Valerio and our K-twelve Head, Mr. Mario Gill. The Q3 of 2018 represents an important milestone for Croton with the closing of the acquisition of Sonos on October 11.
For us, that transaction is a strategic step that opens our access to the entire K-twelve market in Brazil, where there are many relevant opportunities institution in the 60s and up to the year 2000, we operated exclusively in K-twelve. And we're feeling very excited and hope to discuss at the end of the presentation the status of the integration and the next steps of the integration with Somos. As the closing of the transaction took place recently on October 10 or in other terms, in the Q4, the disclosure of 3rd quarter results does not include any consolidation of results or operating data relating to Somos. Therefore, we'll start today's presentation with our main operating and financial highlights in the quarter. Please let's turn to Slide 4 with key operating indicators of our undergraduate programs.
Beginning with the left side of the slide, we see the results of new students and reenrollments in the second half of twenty eighteen with very strong numbers, even considering all the pressure we've been under in terms of the political scenario, sluggish economy with high levels of unemployment and a very challenging competitive environment as well. But thanks to our assertive commercial strategy and our understanding and also the strength of our brands and a portfolio of programs that is aligned to the demands of the current market, we secured a 2.6% increase in the number of new students, adding 183,000 freshmen to our base despite the lower availability of fees financing in the period. Other contributing factors were we believe that we had a very balanced offer on installment plan products. And also our job referrals channel connected, which has been shown to be a very important advantage and a positive transformation agent for our students. It's also a magnet to attract more students.
Along this year, we saw a substantial increase in the number of students graduating. This is a reflection of the strong enrollment we had in 2013 2014. Years on years, we had a 8.3% increase in the volume of graduation, which in turn reduces the universe of reenrolling students and makes our total reenrollments fall to 4 point 2% in 3Q 2018, comprehending 688,000 students. As a consequence, our total undergraduate base closed the quarter with 871,000 students, down 2.8% compared to the same period of the previous year. Looking only at the On Campus segment, we recorded growth of 5.3% in the number of new students.
And but still, this is something that was affected by the higher number of graduations. So as I was saying, we recorded growth of 5.3% in the number of new students with the admission of over 60,000 students in the period. And beyond the factors mentioned previously, another important driver were the 25 new units launched in 2018, 10 in the first half and 15 in the second half of the year. These greenfields admitted 1,300 new students, still a very small number, but it's a number that exceeds the business plan and that strengthens our trust in our organic growth plans. So we're feeling very confident about the growth strategies we have been using.
And our assertive strategy, both in the locations where the campus are open. We are also seeing new students enrolling, and we believe that we have been really right on track. After we add up the 301,000 on campus reenrollments we had in 3Q 2018, we closed the period with 369,000 students studying in our on campus programs. And as a consequence of the increasing the student graduations and partly offset by a reduction in dropout rate. And all of this has been offset, as I said, with a very positive new enrollment set that's up 5.3%.
And we see also growth in same store and a reduction in dropout rates. And as I said, this is something we had predicted before because they enrolled 4 years ago. So it was only to be expected that we would see a lot of students graduating at this point. So nothing is really new. Now moving to our distance learning undergraduate programs.
We reported once again growth of 1.1% in 3Q 2018 in this very challenging competitive scenario. So we believe this is a very positive number. And by the way, we didn't see a growth in the number of business learning centers as facets in our competitors. This represents 115,000 freshmen. And despite the higher number of competitors caused by the change in the regulatory framework in mid-twenty 17, we believe this is very positive.
We have around 10,000 new students that come from the 400 new TL centers we launched in 2017. So that solid performance reflects our efforts to build a very complete platform, which is always based on consistent quality indicators and has highly committed partner centers. And something we often emphasize in our calls is that we have been accredited by the Ministry of Education in our DL centers, and we always hire the best managers with the best education and work on this partnership structure. And this is what will ensure entrance barrier that was created by regulation, but we have several other barriers by to overcome. And the strength of our brand, the strength of our partner network would make the difference in this scenario, in a scenario with less regulation.
This is what we have been witnessing. We see how important it is to have a solid, robust partner network. Even in this very competitive scenario, we've been able to report good numbers in new enrollments, and we continue to grow in distance learning. We know that the strength in our network is really going to make the difference. In terms of reenrollment levels in DLL, we had 387,000 students taking our undergraduate DL base to 502,000 at the end of the quarter, very similar to the comparison to the previous year.
Now let's look at the dropout rates. Starting on On Campus, we are very pleased to report an improvement of 70 basis points in the quarter, reversing the negative trend further than the prior quarter. And in spite of all setbacks we have, for example, our student profile now is more likely to drop out as a result of the reduction of Fientz funded students. And we are adopting several projects and initiatives to increase retention. We have also increased the academic model and the student experience at every touch point, both on campus and in distance learning.
And our students have reacted very positively to the investments we have been making. And turning to TL, in addition to the issues concerning the macroeconomic environment, the increase in dropout rate occurs as a counterpoint to a strong wave of new enrollments. We had a very solid wave on new enrollments. And as a result, the dropout rates rise. And once again, we saw a jump in the number of students in the 100% online program, which also contributes to the deterioration of that indicator.
That's why there was this small increase from 16% to 16.6%. So I think that overall, the numbers are very positive. Considering the current competitive environment and the macroeconomic scenario, we're feeling very optimistic. I would like to talk a little bit about the new enrollments in 2019, and we'll leave that for the end of the presentation. Now with the end of the first part of the presentation, I pass the floor to our Director of IR, Mr.
Carlos Malvaso. He can discuss the financial highlights of the quarter. So before starting, let me underscore that this will be our last quarter without the incorporation of the sum of numbers. As of 4Q 2018, our earnings conference call will include the results of Somos. But we are also working right now to develop a new form of disclosure for the first half of twenty nineteen.
We hope that this will provide greater transparency on our K-twelve business, which, of course, gained more relevance with the acquisition of Somos. So let's start with Slide 6, where we present the main lines of results of this quarter and also consolidated. I would like to start by saying that by September in the year to date analysis, we had achieved 76% of the net revenue, 79% of the adjusted EBITDA and 79% of the adjusted net income that we have informed you in our guidance. This is a sign that we are right on track to deliver the goals we committed to this year. And using the disclosure model we've been using since the beginning of the year, we would like to show you 2 views of the consolidated results.
On the top of the slide, we have the numbers excluding only the results of the assets sold in 2017. And in the bottom, we see the 2018 results, not considering the impact of the new units launched this year. All of this, of course, for greater clarity on the effects in our performance. So starting with the ex sold units consolidated vision, we recorded net revenues of BRL 1,250,000,000 in 3Q 3Q 2018, which represents a fall of 5.4% in the annual comparison. That was the effect of the fall in the basis of undergraduate students since many of them were graduating from progress as detailed by Mr.
Galindo. Additionally, there was an impact from the average ticket on both segments, but especially in DL as a consequence of an increase in the 100% online student base and also as a result of the fiercer competition among other factors. Please note that we are being very judicious in the awarding of scholarships and discounts, monitoring program prices in different markets and that we are promoting a review of our mix of programs with the introduction of a more premium profile also in the old program. And also on campus where we saw that 57% of our freshmen were going into health and engineering programs. And in addition, these effects were partially offset by the robust enrollments we had in both segments, lower dropout rates and the incorporation of Leonardo da Vinci, a premium K-twelve school acquired in April.
Adjusted EBITDA reached BRL 535,000,000 in 3Q 2018 with a margin of 42.8 percent, down 7% 80 basis points in respect to the same period of the previous year, mainly due to the costs related to the opening of the new on campus UNISDA. Almost 30 of them were opened. And this is something we have discussed with you many times already. I would like to remind you that even though it takes up to 6 years for a new unit to mature, the new units are essential to guarantee robust growth in higher education, both on campus and in distance learning programs. Finally, we observed that the net income adjusted net income for the quarter totaled BRL440 million with a net margin of 35.2%, down 16.7 percent and 4.80 basis points.
This performance reflects the increase in costs related to the new greenfields and also an increase in the depreciation lines, something we had been observing since the beginning of the year. Now going to the analysis, ex greenfield impact, we see a contraction of 6 point 4% year on year. In EBITDA adjusted EBITDA, we have BRL546 1,000,000, down 5.1%. However, with a margin gain of 60 basis points, which is very positive considering the pressure and the changes in the profile of our student base and the large number of graduations of PEACE students and also the substitution of them by paid and out of pocket students with higher PDAs. Once again, we are exercising cost discipline with a high level of austerity since the beginning of the year so that we can preserve our profitability at a very high level without never compromising the quality of education and service we provide to our students.
Finally, the adjusted net income ex greenfields reached BRL453,000,000 with a margin of 36.7%, down 14.3% and 3 30 basis points in relation to 3Q 'seventeen, owing to the reasons I have already explained. With this, I close the second part of the presentation. I hand it over to our VP of Finance, Mr. Jamil Marquez. Thank you very much.
It's great to be with you once again. In the next two slides, I will talk about our provision for doubtful accounts and average receivables term. I will break down the provisioning for losses per segment and per type of students, just like we did in the previous quarters. Excluding from this analysis, the units we sold in 2017, FARS, FAG, Samat and Novatek that had only on campus operations. Starting with on campus, we see a PDA of 13.5% in 3Q 2018, basically flat entering the yearly comparison.
In relation to 2Q 2018, there was an increase of 50 basis points related to the seasonality and the late enrollment installment plans. Analyzing the paying balance, we have 30 basis points, 8% in the quarter, following the same trend we saw in the Q2 2018 and also reflecting the impact of a more challenging macroeconomic scenario with high unemployment levels, which, of course, affect our delinquency rate. Now going to the middle of the slide, we can see the evolution of losses indicators in Distance Learning. In 3Q 2018, our TLPA reached 9 0.9% in the quarter, flat visavis the previous quarter and with an increase of 70 basis points in the comparison with 3Q 2017, also because of the increase of out of pocket students. Considering only our out of pocket in the paying balance, there was an increase of 20 basis points in the comparison with 2Q 2018, also as a consequence of a more challenging macroeconomic scenario and higher representativity or higher numbers of 100% online students that have less engagement and as such, higher dropout rates and higher delinquency rates than other students.
Now let's analyze the behavior of PDA in K12. In 3Q 2018, this indicator totaled 0.8%, showing the stability in annual and quarterly comparatives and also confirming the soundness of the policies adopted by the company. Now let's turn to Slide 9, where we see the average receivables terms, once again excluding the impact of FARS, PACH, FAMAT and Novatek in the on campus segment. In the on campus segment, the total average term reached 157 days in the quarter, up 29 days in relation to the comparison with 3Q 2017. And in the quarterly comparison, we saw a reduction of 24 days because of the regularization of the average term for receivables of TS and also because of the receivables of the final installments under PN 23.
Breaking down the types of students, the average out of pocket on campus average term totaled 107 days with the impact of the challenging economic scenario and also with a higher number of negotiation of tuition in arrears with the incidence of late charges as well, which created a better result in our interest revenue line. By the way, in Fies, the average term was 78 days in 3Q 2018, down 29 days versus 3Q 2017 because of the 50% remaining installments to be received under PM 23 in August. Finally, the receivables transfer PEP and for the late enrollment plan totaled 4 89 days, an increase of 184 days in the comparison, just 74 days in the quarterly comparison. Now moving on to Distance Learning, where the average out of pocket term was 85 days, we saw that this was 3 days smaller than 3q 2017 10 days below 2q 2018, reflecting the improving collection results we have obtained in spite of the challenging economic scenario. We were able to recover some of the debt.
So the average term in distance learning, late enrollment plan reached 5 56 days in this quarter as a consequence of the evolution we were expecting for this line and also of the smaller revenues for this product in the quarter. Now going to K12, the average term for receivables was 84 days as a result of the cooperation of new schools in our balance sheet. To summarize, the macroeconomic scenario and the high unemployment levels continue to put pressure on our performance, especially in terms of the provisioning for losses and also in the on campus average term for receivables. In spite of this, we were able to get some achievements or an improvement in some indicators that are also impacted by these scenarios. For example, new enrollments, improvement in dropout rates and reduction in the average TL term.
And this, of course, is the result of our soundness in policies and collection practices. So we're feeling very confident about the sustainability of our deliveries and results, and we are poised to continue searching for responsible and sustainable growth. Now moving on to the next session, we'll take a look at CapEx cash generation and debt levels in the quarter. Considering only recurring CapEx, we invested BRL 121,000,000 in the quarter. This represents 9.7 percent of our net revenues in the period, growing 9% and 130 basis points in the annual comparison.
These investments were directed to development of content and systems, expansions and also renovations of our units, considering how our program portfolio is becoming more premium. This, of course, requires the installation of labs and also practical lessons for the health and engineering programs. With this, CapEx reached BRL 330,000,000 year to date up to September, up 8% or representing 8% of the net revenues and up 10% visavis the 1st 9 months of 2017. Now turning to the right side of the slide. We see total CapEx recorded at BRL 193,000,000, representing 15.4% of the rent revenues.
And this, of course, led our total CapEx into the 1st 9 months to BRL 471,000,000. This amount represents 11 point 4% of our net revenues and comes very close to our expectations of 13.5% for the year. These investments are driving organic growth projects and include BRL 86,000,000 for that intention. Now for the cash generation in the quarter year to date. In the quarter, as we had been talking about in the previous call, our operating cash generation was more robust with the receiving of the 50% of the fees installment that are owed under PN 23, in total, BRL 400,000,000.
And in 3Q 2017, we had received only 25% of the installments due. As a result of this, our operating cash generation reached BRL 538,000,000 with EBITDA to cash conversion of 114.2%, up 30% and 34 point 4 34.5 percent in the annual comparison. Year to date until September, our operating cash generation was at BRL 731,000,000 with EBITDA to cash of 45.5%, down 21 point 2% and 7.30 basis points in the comparison with the previous year. This owing to the impact on working capital and the change in the profile of our students with high volume of graduating TIES students and their substitutions by out of pocket and PEP funded students. In addition to this, we have invested more capital to fuel the organic growth projects we had mentioned.
And in this year, they have used up EUR 80,000,000 of cash year to date until September. And in operations, with an impact a negative impact of 5 percentage points in EBITDA to cash that we hope to reverse as the operations mature. Finally, our free cash flow was favored by the first emission of debentures of Sabir, our K-twelve holding, to finance the acquisition of Somo de Buitasal, a transaction that was completed on 11 October. And as a result, our free cash flow was positive at BRL 5,700,000,000 in 3Q 2018 and BRL 5,100,000,000 year to date. In the next slide, we see the bridge showing the evolution of operating cash generation after CapEx to free cash flow in the 1st 9 months of 2018 to give you more transparency about the impact on our expansion and funding activities.
So we turn to Slide 13, where we see the operating cash generation after CapEx at EUR 731,000,000 year to date. And in the first block of doing all projects, we invested BRL 2 62,000,000 of which BRL 86,000,000 were invested in our organic expansion, including the opening of 25 new greenfields and BRL 176,000,000 were used to acquire on campus higher education schools and 2 premium T12 schools, Granada da Vinci and Lantos Sinco. Now moving to the next block, value generation for shareholders. We had BRL 718 BRL 717,000,000, including BRL 210,000,000 in repurchase of shares and exercise of options and BRL 7,000,000 distributed in dividends, pay down the dividends in relating to the results of 4Q 2017, maintaining a payout of 40% in spite of our growth projects. In our 3rd cash drop, we had compensation of 3rd parties.
We paid also our interest totaling BRL 500,000,000 in the 1st 9 months of 2018. Other impact used up BRL 10,000,000 of cash considering debt amortization and origination of EUR 5,500,000,000 in the first emission of debentures for holding Sabe, that was used to finance the acquisition of control from the LucasArts. And this acquisition was completed in October 11, and the disbursement will be shown in our cash for the 4Q 2018. And as such, our free cash flow closed the 1st 9 months of 2018 positive at BRL 5.1 billion. Now moving to Slide 14, we see our net debt for the period.
We closed the quarter with a total cash equivalent of BRL 6,800,000,000, up 3 13% in the annual comparison, owing to 2 impacts: the receiving of the 50% remaining under PN 23 I was talking about, representing BRL 400,000,000 and also relating to the emission of debentures, the Sabeel debentures at BRL 5,500,000,000. If we add up our finance commitments and short- and long term liabilities, we have a net cash of BRL 781,000,000,000 in this quarter. It's important to remember that we also have receivables. The second installment for the sale of UNYA Celpi adjusted to the net present value that was to be received in 5 annual installments. So if we and also the payment for the sale of SAAR and Faxamax concluded in August 2017.
So with this, I close this section of the presentation, and I would like to hand it over to Rodrigo for his final remarks. Thank you very much. Rodrigo, 11 October is a milestone for content. It's the start of a new phase, the fruit of a strategic discussion we have been discussing for 2 years. Since 2017, we have been discussing which would be the best path to follow.
And we took this decision to go into K-twelve. This is a very large market with opportunities for professional management, a very fragmented market and without major consolidators. And we saw that there were 2 opportunities in the management of schools, B2C and by creating a service platform for schools in a B2B offering. So we decided then to go into this market, and we stopped the negotiations with the one we consider the largest and the best K-twelve education platform in Brazil. This is something that was very similar to what we did in 2012.
We decided to work with the distance learning at the time, and we chose the best platform available in the country, Uropar. So once again, this is something that reminds us exactly of this period when we decided to go into distance learning. And the more we get to know some of the more certain we are that we took just the right step. And to make sure that all the opportunities are identified and captured, we have implemented a very sound integration methodology with clear activities, detailed time lines. We know that integration processes are all different from each other, but our track record at Crofton in integrating important assets has been fundamental for the success of this project.
In Slide 16, we see some of the numbers that derive from the integration of the companies and that have been very positive so far. We have dedicated 1500 hours to the integration project. We have 12 committees involving the CEOs and other heads and VPs of the companies. We had 5 days and workshops, kickoff, including 75 meetings and functional front with the participation of 4 external consultancies. And we also got 12,000 responses on our climate survey.
And on October 15, we had a meeting with 480 400 sorry, 148 leaders of the 2 companies. And with the participation of 1400 employees, always marked by the transparency. And as I said, we closed the deal on October 11. The following day was a holiday. And on the Monday following the closing, we had this meeting with all leaders to communicate the changes and the different roles they would take on in the new organization.
And we had this meeting once again with 1400 employees and with the online broadcast of all employees in the Somos Group. This, of course, marks the 1st day of the merged companies. All of this to give peace of mind and transparency to those affected by the integration process. We also had 87 individual meetings to communicate the cases when there were changes in the reporting lines and also a change in scope. So all of this planning work was very beneficial for a smooth transition.
In the next slide, we see some images that reinforce our sense of purpose and our ability to transform education. And in the early release, the message of the administration is that we are feeling very happy with the technical quality, the engagement and the sense of purpose we identified in the Somos teams. This is going to make the integration much easier. And with this, I would like to express my gratitude to all of Gazpromo's employees. Together, we are an even stronger company.
Now I would like to go to Slide 17 to discuss some of the next steps. On October 11, we closed this process, but a new process started. It's the process that ensures the same rights to the controlling shareholders and the minority shareholders of Soles. A few days after the closing on October 22, Somos held shareholders meeting to define who would be responsible for drafting the valuation opinion. And as controlling shareholders at this time, we abstained from voting.
And among the shareholders, they elected Merrill Lynch. They have already started to work on this project. Very soon, we'll be able to file with CBM and B3 the application for the IPO. And as soon we get approval from the CBM, we'll be publishing the IPO standard, clarify terms and conditions for participation and counting 30 days after this publication. And we'll have the auction at B3.
And if we get 2 thirds of participation in the auction, then we can close the transaction with Fromos. And we'll be able to close the capital, always keeping the market informed about any development. So in short, this is what I wanted to share with you. We are starting the closing of the capital with the tagalong. And this is just a little preview of the proposed timeline for this process.
Going to the final slide, I have some final remarks. We have already started our enrollment campaign for the Q1 2019. We are feeling optimistic about it even though it's a process that has just begun. We see some positive indications. We are feeling very confident about the strong brands we have and the improvement in the student experience we have created.
Our capillarity of operations portfolio will ensure that we'll be able to deliver very solid earnings results. And as we had mentioned in the previous call, we will have 19 new camping and 100 new distance learning centers that will be launched together with the first enrollment phase in 2019, demonstrating that our organic growth project continues to be implemented. And by the way, at the end of September, we acquired our 2nd premium education premium K-twelve education brand, Lattos Senso, with 4 years in Manaus and 1 in Rio Branco, and a total of 3,800 students since 2018. Liberato Sensus has a very differentiated pedagogical proposition and focused greatly on education. It's ranked 1st and second in the inane test results in the state of Amazonas for the past 10 years.
And all of this is consistent with our educations in K-twelve. We'll be opening our 1st greenfield of this brand still in 2019. Now about our acknowledgment, we have some important recognitions. We were 1st place among the companies that best communicate with journalists in the category of education. We also got a prize in education as the most valuable company in education.
And we are now reaching 30,000 employees. And all of this is motivating us to do our very best to transform the future of education. And once again, I would like to express my thanks to all of those who contributed to these achievements. And now our Board has approved dividend payout of BRL 132.2 million, which represents BRL 0.08 per share, maintaining the payout at 40%, in spite of all the organic growth projects and also the inorganic growth projects we are involved in. And the dividends will be paid by November 27, 2018.
I would also like to invite you all to participate in our call today that will be held on November 26. It's an opportunity for you to find out more about our strategy, integration and synergies in all projects and segments where we operate. The cross a day will be held on Cobo Itau. As you know, we have a partnership with Cobo Itau, which is the largest edtech hub in Latin America. And in this event, we'll communicate our strategic vision for the field.
This is very important for us. And it's also a great chance for you, investors, to understand better our strategic view. And to conclude, I would like to say that in spite of all obstacles we saw in 2018, we're still making progress and delivering on our guidance, honoring the commitments we made to the market. Our organic growth projects and digital transformation projects made great strides this year. And we also have the integration with Somos, which is a great driver for transformation in our history.
We're feeling really optimistic about the opportunities and the soundness of our history. We are certain that we are taking the right steps and that Croton is just starting out on this journey. There's still a lot more to be done. And you're all invited to learn more about these opportunities on our proton day. Thank you very much.
Let's move on to the Q and A. Thank you very much. Now our Q and A session is open. Our first question is from Mr. Marcelo Sant from JPMorgan.
Good morning, everyone. Thank you very much for accepting questions. I have a question about the distance learning opportunities. I know you talked about it more on Crop and Day. But do you see an opportunity, for example, in public education in the distance learning format?
We now have a new president in the country. What's your perspective on this issue? And a question about the MAID enrollment installment plan, PMT. You used it less this time. What were the lessons learned?
What are you observing in this area? Hi, Marcelo. How are you? This is Rodrigo. Thank you very much for your question.
I'll answer the first part, and Jamil will answer the second one. Well, considering distance learning for secondary education, we had a meeting with the Council of Education, and we are more than ready to support any policies, any new policies adopted by the federal government. And if the federal government approves these policies, we have the largest DL platform in Brazil and the best K-twelve content platform in Brazil. As such, we can add a lot of value to the country and also add value to the company. So we are ready to take on this demand, but we are depending on the decisions in the area of public policies.
But if this is the way to go, we are ready to serve. Thank you very much. In relation to the late enrollment installment plan, considering on campus, we are very concerned with the timing of the offering. Volume was smaller in the Q4. But in distance learning, this is linked to strategy because what we saw, the ticket is smaller.
So late enrollments have a lesser contribution in comparison to other types of enrollment. Our next question is from Mr. Thiago Petaluci, Goldman Sachs. Hi, good afternoon. Thank you so much for taking this question.
Let's talk about the organic margin ex greenfields. For the Q3, you talked about an expansion, 60 bps, and it dropped 160 bps in the 1st semester. Could you give us a little guidance on the behavior of this margin on on campus and TL? And how do you view the like for like margin from now to the future? Even with smaller contribution of the FIES students, could we expect organic margin to be regularized?
Or could we see pressure still in 2019? These are my questions. This is Jeanil. Thank you so much Thiago for your questions. Starting with a question on our long term margins.
Yes, we are expecting some pressure because of the organic initiatives, But it will be a lesser pressure, not as big as this year because we have some units that are now 3 and 4 semesters old already. In the breakdown, TL versus on campus, usually PL suffered more pressures than on campus. Also because we see that there is a substitution of staff and out of pocket students. And in relation to what you were saying, I think it really makes sense to expect pressure on the Q4 again. Well, in relation to late enrollment in summertime, yes, but this will depend on the initiatives that are maturing in the Q4.
Thank you very much. This is clear. Thanks. Our next question is from Mr. Rodrigo Garcia, BTG Capital.
Good morning. I have two questions. But first in relation to cash generation, I think that when you consider the FIES installments, of course, this deteriorates the cash position and then the conversion to EBITDA. Just like you said in the presentation, there's a worsening of receivables owing to the macroeconomic scenario. So could you please tell me about the cash flow initiatives for the company?
If this is something that you will look into in the near future. What are you doing to give priority to cash generation? And how much should we expect in terms of conversion? And secondly, I would like to talk more about on campus, out of pocket on campus. This is something excluding late enrollments for from this number because they diminish year on year.
And I know that this reduction, I was seeing as something very positive for the year. So What is the strategy of the company? Are you focusing more on out of pocket because they have a better performance? Could you please explain what are the opportunities to improve the average ticket post on campus? Well, I'll answer the first question.
In relation to your first question, I think that in 2018, 2019, there is an expectation of lower conversion. This is something we have been saying for a long time. It's very much to be expected because of the change in profile and the change in the available financing. As for post CapEx cash generation in the 9, 1st months of 2018 before the investments related to expansion, we were at 45.5%. But the negative cash generation, the using up of cash that the greenfields use while these are very initial operations, so they use up cash.
This should bring back more than 5 percentage points in the conversion. So the effective conversion is closer to 51%. This improves the scenario. And all of our efforts are geared to organic growth. We're investing in organic growth in higher education.
And we have 2 CapEx 2 effects today, the effect of CapEx and the negative impact on the cash operations in the 1st semester. However, we should take into account that the investments in organic growth has over 40% in perpetuity. So from the shareholder point of view, this is a great business. It's something that adds more value in the longer term. And all of the signs coming from the greenfields are above expectations.
We're feeling very comfortable with this strategy. As for operating cash, yes, we have some opportunities for optimization. We have 2 blocks of measures, the operational measures and the strategic measures that will cause an impact on cash generation in coming years. In terms of operational measures, in 2019, we'll start giving more focus to the management. For example, we are reviewing our nonrecurring concepts.
So in the new report of results for 2019 that we'll see in the 1st semester of 2019, in addition to the consolidation and integration of Somos, there will be a new criteria for nonrecurring expenses. We'll have items related to growth as nonrecurring items. For example, organic expansion items and everything that relates to growth. We also have the operating management of cash. Through our improved collection practices, we have been obtaining good recovery levels within even in this asset macroeconomic scenario, but there's a lot of room for improvement.
We can make great improvements. Thirdly, we have been concentrating mostly on OpEx, but we are going to focus more on CapEx in the future, Including recurring CapEx, our investments will be submitted to a much more judicious analysis. They will be under the magnifying lenses. And we also have a review of our variable compensation programs in the company, and we'll put the emphasis on cash generation. This is already one of the indicators that is linked to the compensation of our executives, But this will be reinforced to send out this sign that cash generation is a priority for the company in the next 2 years because we know that cash generation will be a little tight.
There will be some pressure on cash generation. And we have 2 strategic issues to consider. As of 2021, we'll start receiving PEP installments. And this will change our perspective. Our cash will grow, not substantially.
And it will start growing, and it will be much better after 2021. This will create a structural change in our conversion profile. And we also have the operation with SOMOS. Structurally, the conversion there is higher, and this will also change our perspective. So cash generation is definitely at the center of our attention in the company.
Some growth decisions will have an impact on cash, and the company believes that this is still the best option for the shareholders. And to improve operating cash, we're taking a number of operational measures, including some that we have already discussed. Thank you very much for your question. Going to the first part of your question about the behavior of the ticket in out of pocket, this is something that's favored by the mix of new students. In promoting those programs with higher average ticket.
This, of course, has a very strong impact in the new enrollment cycle. And as for your question about petty finance, as we see the macroeconomic scenario improving, we'll see a trend for more students paying out of pocket. And our strategy will be reducing FAB 30 and increasing margin at FAB 50. This, of course, increases the out of pocket participation. Thank you very much, Rodrigo Jamil, for your answers.
Our next question is from Mr. Joao Morrone of Santander. Thank you very much. Could you give us some more light on the collection initiatives? And also about the growth in the arrears line, were there any significant changes in the collection and receivables policies?
Thank you very much. Here is Jamil speaking. In relation to the collection initiatives we discussed in the previous call, it's been implemented 99% implemented, and we saw some improvement both in terms of strategy and in performance. We know that the macroeconomic scenario is still very complicated. So these initiatives are helping us mitigate the asset conditions.
And in Distance Learning, we see improvement in the receivables terms with a better control of losses. And on campus, the scenario for terms is still challenging. But in interest lines and penalties, we see that there was a significant increase in this line. In fact, there are 2 impacts. We have the monetary adjustment on receivables and also the charges on late tuitions.
What we can't control is monetary adjustment. But if we compare it to the previous quarter, we will know that there's an impact on inflation, but the charges on tuitions increased both in DL and on campus. This is the result of the collection strategies we have implemented with better control and more discipline. And specifically, in the charges on arrears, the impact was over 50% in fact. Thank you very much.
We are now closing the Q and A session. We hand it over to Crofton for their final remarks. Thank you very much. Once again, you're invited to participate in our Croppant Day in Cobo, Itau, where we'll talk about our strategies. Thank you very much, and we'll see you there.
The earnings conference call for Croce de Acacional is now closed. We thank you all for your participation and wish you a great day.