Good afternoon, and thank you for holding. Welcome to Cruzeiro do Sul Educacional's conference call today discussing the earnings release of the second quarter of 2025. If you need simultaneous translation, this tool is available on the platform. Simply click the interpretation button at the bottom of the screen and select the language you prefer, Portuguese or English. For those listening to the conference in English, there is also the option of muting original audio. We inform that this conference is being recorded and will be available on the company's IR website at ir.cruzeirodosuleducacional.com.br, where you will also find a complete set of materials for our earnings release. You can also download the presentation on the chat icon, also available in English. During the company's presentation, all participants will have their microphone disabled. After that, we will begin the question-and-answer session.
To ask a question, click on the Q&A icon at the bottom of your screen and write your question to join the queue. When your name is announced, a request to enable your microphone will appear on your screen. You should then enable your microphone and ask your question. Please ask all of your questions at that time. Note that the information in this presentation and statements that may be made during this conference call relating to Cruzeiro do Sul Educacional's business prospects, projections, and operational and financial targets are based on the company's management's beliefs and assumptions, as well as on currently available information. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions as they refer to future events and hence depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future performance of Cruzeiro do Sul Educacional and lead to results that differ materially from those expressed in such forward-looking statements. Here with us today, we have Mr. Renato Padovese , CEO; Felipe Negrão , CFO; Beatriz Hoff, executive director of academic excellence and institutional relations; and Luis Felipe Bresaola , investor relations officer. I would now like to turn the floor to Mr. Renato Padovese, who will begin the presentation. Please, you may go ahead.
Good afternoon, everyone. This is Renato Padovese, CEO of the company, and thank you for participating in our second quarter of 2025 earnings call. It is with great satisfaction that we announce today to the market that we ended the first half of 2025 with BRL 149 million in net income, the highest ever disclosed in a six-month period.
To give you an idea, this result exceeds the net income of the full 12 months of 2024. The discipline and assertiveness in conducting our business have been determining factors for this evolution. In addition, the company has been continuously seeking opportunities to generate value for our students and consequently to all our stakeholders. In the quarter, we made progress in initiatives that reinforce our discipline in managing the course portfolio and pursuing greater operational efficiency. The on-campus units continue to be relevant strategic assets with a focus on full utilization and contribution to the expansion of results. Nevertheless, we have started a review of the long-tail course strategy, considering the expected impact of the new regulatory framework with the objective of ensuring the sustainability and attractiveness of the portfolio in the medium and long term.
Envisioning the increase in investment in our students, we continue to deepen our discipline and expense management with a focus on efficiency and standardization. We revisited contracts, seeking better conditions and alignment with financial sustainability guidelines. We have made progress in the implementation of internal benchmarks among the group's institutions, promoting comparability and identification of best practices, in addition to evaluating opportunities against external benchmarks. As part of the evolution of budget governance, we are structuring a metrics budgeting model, which will provide greater visibility and control over cost levers with a focus on efficiency and better capital allocation. In addition, targeted training has been carried out to ensure the incorporation of these initiatives into the culture of the entire management team.
We would also like to inform you that we have started a pilot project for the implementation of a new academic model, which includes computer science and system analysis and development courses in the on-campus and distance learning modalities. The new model consists of a structured and updated response to the contemporary challenges of higher education, placing the student at the center of the experience, combining innovation, flexibility, technology, and direct connection with the job market. Starting next year, the courses offered by Cruzeiro do Sul Educacional will have synergy between the formats of higher education on campus, hybrid, and distance learning, meeting the new regulation of higher education in accordance with the new regulatory framework recently published by the Ministry of Education.
I conclude my comments here and turn the floor to Felipe Negrão. For family reasons, today I will not participate in the question -and -answer session, but the team will be available.
Thank you, Renato. In the next slide, I will talk about the operational performance of on-campus. We registered a growth of 5.6% in the student base, reaching a total of 175,000 students. This result is due to the 1.5 percentage point increase in the retention index, combined with the maintenance of the volume of intake in the period. More targeted marketing initiatives and actions to anticipate re-enrollment were decisive factors for the success in expanding the on-campus space. We also bring the ticket data for the second quarter of 2025, which remains stable vis-a-vis the same period of the previous year, despite the changes in the course mix.
In the second quarter of 2024, the student base was more concentrated in courses with higher tuition fees. In this quarter, there was an increase in the share of courses with lower tuition fees, reflecting the current dynamics of market demand. In addition, the growth in the number of seats in the medicine program contributed to a higher proportion of freshmen at the base, which traditionally has a lower ticket price. In the first half of 2025, the average ticket increased by 3.2% compared to the first half of 2024. This growth was driven by the increase in the share of students in the health area, especially in the medicine and dentistry courses. In addition to the improvement of 1.5 percentage points in the re-enrollment rate.
On the next slide, we bring the operational data of digital, which ended the period with a base of 411,000 students, which represents a growth of 17.8% compared to the same period of the previous year. The growth is the result of the 10.6% increase in intake, reaching a half-year record of 171,000 students, and the 0.9 percentage point increase in the re-enrollment KPI. Regarding the average ticket for the quarter, we see a drop of 4.4% compared to the same period of the previous year. This reduction is mainly related to the greater presence of students with below-average tuition fees in the mix acquired in the second half of 2024 during a more aggressive promotional campaign, combined with the graduation of students with higher ticket prices.
Hybrid courses continue to expand and already represent 25% of the digital base, up 2.1 percentage points when compared to the second quarter of 2024. In the first six months, the average tickets decreased by 8% when compared to the same period of last year. Going into the financial details now, I will comment on net revenue in the quarter, which reached BRL 721.1 million. An 8% increase versus the second quarter of 2024 as a result of the larger consolidated student base. In the first half of the year, net revenue was BRL 1.4 billion, 9% higher than in the first half of 2024. In the on-campus segment, net revenue for the quarter grew 6%, reaching BRL 493 million, reflecting the higher student base. Larger student base.
In the first half of the year, the growth was 9% when compared to the same period of the previous year, reaching BRL 973.3 million. Revenue from health courses in the quarter expanded 17%, driven by the revenues from medicine as a result of the acquisition of FAPI and the 180 new seats authorized in 2024. In the half year, the expansion was 18%, reaching BRL 693.6 million. These courses already represent approximately 71% of the on-campus revenue. In digital, we saw an 11% expansion in revenue in the quarter, reaching BRL 249.1 million as a result of the larger student base and the drop in the average ticket. In the first half of the year, the expansion was 8% versus the first half of 2024, reaching BRL 461.9 million.
On the next slide, we demonstrate the gross margin in the quarter, which expanded by 1.5 percentage points when compared to the second quarter of 2024. This margin expansion mainly reflects the adjustments made in personnel, as well as the contribution of the growth of the base in medicine and digital courses. In the first half of the year, gross margin expansion was 2.1 percentage points. Next, we bring the adjusted EBITDA for the quarter, which totaled BRL 201.3 million, representing an expansion of 5.2% compared to the second quarter of 2024. The chart shows the composition of the adjusted EBITDA margin, which was 27.9% versus 28.6% in the previous year. The margin retraction in the period is mainly a reflection of the 33.1% increase in PDA, representing 10.9% of net revenue, an amount that is 2.1 percentage points higher than that recorded in the second quarter of 2024.
As a result of the updates of delinquency estimates implemented in the fourth quarter of 2024 and the change in intra-quarter seasonality. Labor expenses were impacted by the collective bargaining agreement for employees in São Paulo and the provision of the salary adjustment for the months of February to June 2025. The increase in gross cash margin added to the reduction in marketing expenses mitigated part of the impact of the higher PDA and labor expenses in the period. In the first half of the year, adjusted EBITDA totaled BRL 452.6 million, representing an expansion of 16.8% compared to the same period of last year. The adjusted EBITDA margin reached 32.5%, resulting in an increase of 2.2 percentage points compared to the same period of the previous year.
This result reflects the growth of 1.9 percentage point in gross cash margin, combined with efficiency gains of 1.2 percentage point in marketing and administrative expenses. In addition, the PDA in absolute numbers decreased 8.2%, representing 5% of net revenue in the first half of 2025, which represents an improvement of 0.9 percentage points versus the first half of 2024. The increase in PDA reflects the improvement in credit and collection actions implemented over the last few quarters. Moving on to the next slide, we demonstrate the update in the delinquency estimates made in the second quarter of 2025. As disclosed in the fourth quarter of 2024, over the past year, in addition to reviewing processes, the company updated its receivables portfolio provision model by performing an analysis that considers a 24-month horizon from January 2023 to December 2024.
The work was carried out with the aim of establishing greater adherence to the profile of the portfolio in the post-pandemic period, when there was a faster expansion of the digital student base, which went from 62% in 2020 to 69% in 2024 in relation to the total student base. In addition, the company revisited its policy of writing off overdue securities and accounts receivables, reducing the time from 720 to 360 days. In the chart, we present a from-to between the pre-update and post-update PDA and the delinquency estimates and a pro forma table illustrating the effect of the PDA on EBITDA. Due to the update of the PDA throughout 2025, we will have temporal differences in relation to the PDA presented throughout 2024, with more pronounced variations throughout the quarters.
Moving on with the presentation, we show the company's costs and expenses as a percentage of revenue, excluding non-recurring effects. In the quarter, costs and expenses cash effect totaled 73.2% of the company's net revenue, 0.7 percentage points above the second quarter of 2024, with emphasis on efficiency gains in the personnel and marketing lines, which decreased by 3.3 percentage points compared to the second quarter of 2024. It is also worth mentioning that the PDA line was impacted by the update of delinquency estimates implemented in the second quarter of 2024. In the first half of the year, costs and expenses totaled 68.5%, representing a reduction of 2.3 percentage points when compared to the same period of the previous year. This result is due to the improvements in the personnel PDA and marketing lines in the period.
On the next slide, we show the evolution of the company's adjusted net earnings, which was BRL 62.7 million, representing an increase of 1.3% versus the same period of the previous year. In the first half of the year, adjusted net earnings were BRL 150 million, 41.6% higher than the amount registered in the first half of 2024, with a margin of 10.8% of the expansion. The delinquency estimates. Next, we present investments made by the company in the second quarter of 2025, which were of approximately BRL 26.9 million, an amount that is 9.8% lower than the second quarter of 2024. In the first half, investments totaled BRL 39.2 million versus BRL 68.2 million in the same period of last year.
It is important to note that the company continues with its annual investment budget and that in 2025 we should see a greater concentration in the second half of the year. Going forward, we show the free cash flow to equity in the second quarter of 2025, which was of BRL -20.1 million versus BRL 6.8 million in the same period of the previous year, mainly impacted by the negative variation in working capital. In the first half of the year, cash flow to equity reached the amount of BRL 306.5 million, which represents an increase of 121% versus the first half of 2024. On the last slide, we present the company's net debt, which stood at BRL 672.7 million compared to BRL 851.7 million in the previous year, representing a decrease of 21%.
In addition, as disclosed in the material facts of June 23, 2025, the second issue of the debentures of the ACEF was re-profiled with a change in the final maturity date from December 24, 2028, to June 24, 2030. A change in the spread from 1.6% to 1.35%. Renegotiations are one of the pillars of the company's active capital management strategy, reflecting the commitment to financial soundness and discipline in the allocation of resources. To better illustrate the company's debt profile, we present below the amortization schedule broken down by type of debt. Noting that the current level of cash allows us to honor almost all debts by the end of 2027. With that, I conclude my comments and turn the floor to the operator to start the question-and-answer session. Thank you.
We will now begin the question-and-answer session. Please note that in order to ask a question, you should click on the Q&A icon at the bottom of your screen. Write down your question to join the queue. When announced, you will see a request to enable your microphone, and you should switch your microphone on and ask your question. We kindly ask that the questions are all made at that time. Beginning with our first question, Lucca Marquezini from Itaú. Lucca, your audio will be enabled. Please go ahead.
Good afternoon. How are you? Thank you for taking our questions. We have two questions on our side. The first is if you can give us an update on the intake in the first half and on campus and DL and comment whether this period with the new regulatory mark has affected the intake, if you have been feeling a more aggressive competitive environment in terms of discounts and overall. The second question about the level of PDA. Of course, there's that factor in comparison to 2024 due to the update of the estimates. But thinking about the current levels, does it make sense that this should be a normalized level going forward, or do you think there's still room for improvement to dilute this line? Thank you.
Hello, Lucca. This is Felipe Negrão. Good afternoon. In terms of what it's like today, it's a process between DL goes into November on campus. There's still some time as well. Until today on distance learning, we have a much better ticket than from what we had last year. There's a good ticket growth, and we are also being able to increase intake. We don't see, since it extended for a longer period for the regulatory aspect, we don't see the impact today on the competitive side. We are very well-positioned, but it's a process that goes on until November.
On the campus side, we are or were until yesterday with a much higher ticket than we had in the past. Intake just slightly lower, pretty much in line with what we had last year. But I think unlike the case of DL, where we had to look at revenue maximization, I think there are opportunities that we see in the increase of tickets in the short term.
Looking at the long term, we have the possibility of having original pricing that we don't practice today for on campus. We also have this increase in the short-term ticket and changing the strategy not only to maximize revenue from what we've been doing until now, but to have a better positioning in terms of price, considering the brands that we have with a very considerable reputation, and also improving EBITDA not only in the short term but in the long term as well. As for the PDA, we've been improving consistently since 2022. The part of recovery and collection overall, consistently since 2022, we've been showing a lot of improvement. There are a series of different initiatives that we implemented, but we still see a possibility for gains this year and next year.
We have a lot of initiatives that we're running where I see opportunities for gain significantly in terms of PDA. Accounting comes, it may take some time because we always use estimates from the past of putting accounts receivables overdue based on estimates from the past. When we update it again, you will see PDA at a much better level than what we have today.
Very clear. Thank you.
Next question, Mirela Oliveira from Bank of America. Mirela, we'll enable your audio. Please go ahead.
Good afternoon. Thank you for this opportunity to ask the question. If you can, tell us a little bit of what you expect in terms of cash generation for the second half of the year, and what are the main levers that you see that could help with this generation?
Good afternoon, Mirela. This is Felipe. Okay, we don't provide guidance for cash generation. I think it's important to look first at the first half, not only the second quarter, because there's a variation. I think there's two points that impact working capital. A lot of things we had the opportunity to work on over the quarter. So for the company to advance and monetize credits we had, it already yields financial revenue. It was better for the company in the first quarter above expected. In the second quarter, overall, we are better than what we had budgeted for the second quarter. I think there's this impact of working capital that is a one-off in the second quarter, but for the half year, I think we're doing well. There's also the impact of leases. Lease payments are a lot higher than last year.
Not in accounting terms, but today we're turning the company to a new ERP. Because of that, we have the leasing of some units, and we've been moving along with that. We brought forward the payment of some units due to that change of ERP. This is cyclic. We can't simply multiply it by two. There's important seasonality in the education industry, but in our cash relationship, there's a constant focus we have for cash generation, and we continue to see quite positive cash generation looking forward.
Thank you.
Once again, in order to ask a question, please click on the Q&A icon at the bottom of your screen, write down your question, and join the queue. We have a question by Beatriz de Paula from BTG Pactual.
You talk a little bit about intake, but more specifically in medicine. Considering the acquisition of FAPI and the new seats authorized, I'd like to understand better how you feel the competitive dynamic is. Is intake smooth, or does it require more efforts? How is the revenue share in the account?
Hello, Beatriz . This is Felipe once again. We had significant growth last year in terms of medicine seats, so that's higher. The contracted growth that we have until all of the seats mature. For us, I think it was very positive. In terms of price, it's something historical for the company. We have always chosen to work on large centers with high per capita income and recognized institutions. That was the model of growth for the group in the last 60 years since it was founded. It was the right model, I believe, especially now for medicine courses, because we have seats where the income is.
So we don't see anything in terms of greater competition. We're still able to place as many students as we could before without having to work on price. For us, we are filling the seats without any major price competition. We're simply seeing the maturity of the seats.
Once again, in order to ask a question, please click on the Q&A icon at the bottom of your screen, write down your question, and join the queue. Next question, Alexandre Pavan from Meta Assets.
What are the reasons for negative working capital, even with the reduction of the average days to accounts receivable? That's Alexandre's question.
Again, we need to look at the half year. Looking at the quarter alone, you can have variations in the assessment of working capital in the first quarter, and it ends up getting worse in the second quarter. But if you look at the half year, the first half against the first half of last year, I think it's the best way to look at it. There's a slight variation from year-on-year, but it's nothing relevant. There's just small accounts that, for example, last year we were able to monetize. There was a taxes to recover that we were able to monetize that this year, this opportunity had already passed. So there's a small event, but I think it's something that's pretty much under control for us. In the year, we deliver what we had expected in terms of budget.
The questions-and-answers session is concluded. I will turn the floor to Mr. Renato Padovese for his closing remarks. Please, you may go ahead.
Thank you for everyone's participation. I would like to end by reinforcing the commitment to our purpose of driving learning and inspiring the student to transform their future and impact the community. We remain continuously investing in technology and in our new academic model to offer increasingly innovative, personalized learning experiences aligned with the demands of the contemporary world.
Cruzeiro do Sul's conference call on the second quarter of 2025 earnings is now concluded. The investor's relations department remains available to ask any further questions. Thank you very much, and have an excellent day.