Good morning and thank you for holding. Welcome to Cruzeiro do Sul Educacional's conference call today discussing the earnings release of the fourth quarter of 2023. If you need simultaneous translation, this tool is available on the platform. Simply click the interpretation button at the bottom of your 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. There you will also find the 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 microphones 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 to ask your question. Please ask all of your questions at that time. Note that the information in this presentation and the 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 assumption 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. Fabio Fossen, CEO, Felipe Negrão, CFO, and Luis Felipe Bresaola, Investor Relations Officer. I would like to turn the floor to Mr. Fabio Fossen, who will begin the company's presentation. Please, Mr. Fossen, you may begin.
Good morning and thank you for participating in our earnings call. This is Fabio Fossen, CEO of the company, and Felipe Negrão, our CFO, and Luis Bresaola, our IR officer, are here with me. The year 2023 was marked by important advances in the company's strategic plan with the consolidation of the business model focused on three education verticals.
We implemented the health BU with an initial focus on leveraging the teaching of medicine and dentistry careers. Thus, we reinforced the senior team with the arrival of André Raeli, who has extensive experience in this segment to advance beyond undergrad courses with free courses and graduate degrees. Health-related courses, in addition to medicine and dentistry, have become increasingly important in recent years, mainly due to the high adherence to on-campus education, which already represents 51% of the student base and 68% of the revenue in the segment. It should be noted that in our graduate portfolio, we already offer courses in partnership with two international institutions relevant in their respective segments, where we hope to expand more quickly. The first of them with the MARC Institute in Miami with courses in medicine currently offered at our brand UNICID in São Paulo and Universidade Positivo in Curitiba.
The second with the Universidad de Alcalá de Henares in Spain with undergraduate and graduate courses in dentistry. With this move, we completed the construction of the foundation that guides the company's business lines with the digital BU, on-campus BU, and health BU. Regarding the advances on the on-campus BU, we restructured the curriculum as a way to provide a better student experience, deliver higher quality, and differentiate our product in addition to unlocking productivity gains. On the digital BU, we have teamed up with FURIA, one of the most relevant organizations in e-sports and gaming universes, with the aim of connecting with young people who are digital natives and improving our understanding of the students' profile. In addition, we have partnered with Google Cloud to bring innovation and a more pragmatic and work-oriented approach to our graduate and undergraduate courses in technology.
The aim is to increase the scope of our brands through partnerships with established companies in certain segments, offering up-to-date and hands-on training. Another relevant movement was the alliance signed with Hapvida NotreDame Intermédica with the objective of boosting the training of healthcare professionals, providing internships and hands-on training to distance learning students in hospital environments. We believe that getting closer to the work universe is relevant to further improve the quality of education and integrate students to the current demands of the labor market. On the academic side, we had important achievements in 2023. Leadership in the ranking of listed company for the continuous general course index, IGC, weighted by the number of enrollments, reaffirming our commitment to delivering a quality product to our students.
Achievement of the milestone of 69% of our institutions with a maximum grade of five according to the Institutional Concept, CI, of the Ministry of Education, up 46 percentage points from 2022. Ranking for the second consecutive year of UNIFRAN in Times Higher Education as the best private HEI in Brazil, rising four positions in the Latin American ranking, as well as the presence of Ciências Penprat schools for the first time in this ranking. Selection of the project by the Faculty of UNIFRAN Science Graduate Program to represent Brazil at the World Climate Conference, COP 27, held by the United Nations and the accreditation of UNIFRAN'S medicine course by the Accreditation System of Medical Schools of the Federal Council of Medicine, the only certifier of the quality of medical schools in Brazil.
With this distinction, the course which began in 2012, is now part of a select group of 42 recognized schools, only 26 of which are private. As regard to technology, we continue to build our company's digitalization journey, always aiming at two major objectives: delivering a better, more engaging experience to our students and gaining operational productivity. We launched the Duda app, which was created with the aim of improving the students' journey, meeting the main demands in the administrative spheres, becoming a unified, agile relationship channel that is closer to students. We also made progress in the automation of back-office processes, which reduced by approximately 48% the number of services in the student service central and reduced by approximately 70% the steps required to complete re-enrollment.
We have created an operational and management platform for our hub partners, enabling greater commercial agility at the end and easier management of the student base by the hub. We introduced e-commerce for graduate courses with a 70% reduction in the number of clicks for hiring and 24/7 sales for this portfolio. Together with a large technology company, we developed a prediction model that can contribute to the reduction of dropout rates. We are now running the pilot in the 2024 one cycle. Finally, we improved our dynamic pricing model, contributing to a faster and more efficient maximization of results. Regarding operational and financial performance, 2023 was a year marked by important achievement. In on-campus undergrad courses, we ended the base with 141,000 students, an expansion of 10.6% versus 2022.
The second consecutive year of growth in the post-pandemic period, 15.4% growth versus 2021 compared to an overall relevant drop in the on-campus segment in Brazil. In the re-enrollment of on-campus courses, we renewed our record, evolving 3.8 percentage points versus 2022, reaching 91.2% in the second half of 2023, as a reflection of our employee retention and incentive alignment initiatives. Regarding the on-campus ticket, we managed to grow throughout the year, recovering the levels of the second half of 2022. In digital undergrad courses, we renew the record in intake volume 25.6%, higher than 2022, ending up with an undergraduate student base of 296,000 students, an expansion of 24.7% year on year. In digital re-enrollment, we grew 1.9 percentage points in the first half of 2023 and 1.4 percentage points in the second half of 2023, reaching 78.5% re-enrollment in the second half of 2023.
As for the digital tickets, we also grew during the year, but the higher share of freshmen in the student base up 11.3 percentage points in the first half of 2023 and up 0.7 percentage points in the second half of 2023. The higher demand for 100% online courses impacted average tickets, decreasing 1.7% in the first half and 2% in the second half of 2023. Moving on to the financial results, we ended the year with net revenue of BRL 2.3 billion, 13% higher than in 2022, reflecting the expansion of all of the company's business lines.
Adjusted EBITDA reached BRL 684 million with a margin of 29.8%, an increase of 1.2 percentage points versus the previous year as a reflection of the efficiency gain in general and admin expenses and the improvement of PDD by one percentage point, which mitigated the impact of higher marketing expenses in the period. Net income reached BRL 100 million with a net margin of 4.4%, one of the highest in the sector, and operating cash generation was BRL 370 million, up 21.6% versus 2022. Finally, the company's leverage remains stable at 1.6 times versus 2022 even after the distribution of BRL 121 million between dividends to shareholders and share buybacks in the last 12 months, which represented a payment to shareholders of dividends plus buyback over EBITDA ex-IFRS 16 of 26%, the highest level since the IPO in 2021. Thank you.
I turn the floor now to Felipe Negrão, who will provide more details on our financial performance.
Thank you, Fossen. Going into the financial details on Slide 10, I will comment on the net revenue in the quarter, which reached BRL 599 million, an expansion of 15% versus the fourth quarter of 2022 as a result of the larger consolidated student base. In on-campus, courses focused on the health area grew 12%, and their penetration reached 68%. In digital, we extended revenue by 22%, reaching BRL 198 million as a result of the larger student base and the continued expansion of the hub base. In 2023, revenue reached BRL 2.3 billion, 13% higher than 2022. On Slide 11, we show the growth margin for the quarter, which reached 46.7%, 4.7 percentage points higher than the fourth quarter of 2022.
The margin expansion reflects the comparison basis in the fourth quarter of 2022, which was impacted by the provision for the faculty collective bargaining agreement retroactive to March 2022 and by the adjustments in the academic matrix. Added to this are the efficiency gains in the personnel line, a result of initiatives implemented in the components of the curriculum. It is worth mentioning that the impact of provisions was normalized in the annual analysis. Note that the cost lines was pressured by the increase in the pass-through to the L hub as a result of digital's revenue expansion, which grew by 22% in the student base in third-party hub, which expanded 27%. In 2023, growth margin expansion was of 1.1 percentage point. Moving on to Slide 13, we bring the adjusted EBITDA for the fourth quarter of 2023, which was BRL 153 million, up 24% year-on-year.
Despite the improvement in the provision for doubtful accounts line, which went from 7.7% of net revenue in the fourth quarter of 2022 to 7.2% in the fourth quarter of 2023, higher marketing expenses ended up pressuring margin expansion. The improvement in PDD in the quarter is the result of the systematization and change in the billing management model. In the year, adjusted EBITDA reached BRL 684 million, 18% higher than in the same period of the previous year, with a margin of 29.8%, up 1.2 percentage points. Moving on to Slide 15, we show the evolution of the company's net income, which went from a net loss of BRL 16 million in the fourth quarter of 2022 to a net profit of BRL 7 million in the fourth quarter of 2023.
In 2023, net income was BRL 100 million, 15 times higher than in 2022, reflecting the improvement in EBITDA, in addition to the reduction of growth debt. On the next slide, we show the evolution in accounts receivable, which in the last 12 months stood at 44 days, an increase of two days when compared to the same period of last year due to the higher volume of agreements in progress. Moving on to Slide 17, we present the investments made by the company in the fourth quarter of 2023, which reached approximately BRL 64 million, an increase of 19% versus the fourth quarter of 2022. CapEx in 2023 was BRL 203 million, reflecting investment in new laboratories, given the progression of classes in health courses, in addition to investment in technology for a better student experience, efficiency gains, and the certification of the new medical school seats.
Finally, on Slide 19, we bring the net debt excluding lease liabilities, which reached BRL 742 million versus BRL 587 million last year. Net debt was impacted by the execution of the share buyback plan in the amount of BRL 36 million and by the payment of dividends in the amount of BRL 85 million . I conclude my comments here and turn the floor to the operator to start the question-and-answer session. Thank you.
We will now begin the questions and answer session. Remember that if you want to ask a question, click on the Q&A icon at the bottom of your screen and write down your question to join the queue. When we announce your name, a request to enable your microphone will appear on your screen when you should activate your microphone and ask your question.
We kindly ask you that you ask all of your questions at that time. Our first question is from Fred Mendes, sell-side analyst, Bank of America. Fred, we are going to enable your microphone to ask your question. Please go ahead.
Good morning, everyone. Thank you for the call. I have two questions. The first one, whatever you can tell us about intake for the first half of 2024, especially for the on campus. We are seeing different speeches from companies. Some are more optimistic; others are less optimistic about the on campus. It would be great if we could define the trend. The second is your PDD has been dropping. Maybe it is one of the most positive highlights of this result, highly influenced by the new billing you are implementing.
I would like to understand if we could understand these new levels as normalized or if there is still more room to drop further since you are doing this implementation. Thank you.
Good morning, Fred. This is Fabio Fossen. As for the intake, what we have been seeing recently, we should close the growth of our student base for on-campus. Now in the first quarter, between mid to high single digit for on-campus, and for DL, the student base growth should be on high double digits. We have a series of mechanisms that we have been using, and deep down, we are always aiming at the total growth of revenue. So, the mix of different tools and strategies to increase student base and ticket that are part of the total in our strategy. But it is important to see the student base growing. The student base growth is more important than intake.
Good morning, Fred. This is Felipe. About the PTA. First, it is important to mention that it is always an important component that is both macro and student index and geographic details and so on. Some areas have higher delinquency and cost, but maintaining it all constant, in 2023, we see a lot about billing management.
We have worked a lot in policies, discount policies, renegotiation, administration of proxies and collection offices. That was a result of our billing management. In 2024, during this first quarter, we were able to implement 100% of our billing platform. So, it is possible to see it at better levels compared to last year. It depends on mix and macro, but there is still room for improvement, yes, for the billing side and credit recovery.
Excellent, Fossen and Felipe. That was very clear. If you allow me another one, I apologize for taking so much time, but about dividend.
You have a very strong policy, and we believe it's positive as well, this strong payout, even slightly above the income for the year. But the trend for us to model here, is it to remain close or slightly above net income upcoming years? I mean, dividends and share buyback and everything. Thank you.
Okay, so this is Felipe again. This is a decision that we always make. Together with the board, we make a proposal, but the final decision is at the board of directors meeting. What we always look at, the drivers that we look at for this decision. First is the company's leverage, that I believe is very healthy. This year, we had that decision. Because of that, it's better to leave cash with the shareholders than in the company sitting. In addition to low leverage, we also have a long-term debt profile within our financial plan.
We don't see a need for a lot of debt rollout. Even operating cash generation, if there's no extraordinary event, we are able to pay the entire debt. Of course, a company doesn't have an optimal capital structure, so we do this distribution, so share buyback to adjust it to our capital structure.
Excellent. Very clear. Thank you.
Thank you, Fred. Next question. Lucas Nagano, Morgan Stanley. Lucas, we're going to enable your microphone. Please go ahead.
Good morning, Fabio, Felipe, Bresaola. We have two questions as well. The first, we'd like to understand the moving parts of average ticket for 2024. If you see a similar pricing dynamic as last year, how the student mix will influence. Because as I understood, in 2023, the ticket was more stable because the environment was more difficult and due to price, and on campus was more the ITI mix.
The second question is about CapEx. If you can tell us what led to this greater need for investment last year, and whether CapEx will stay at this higher level at 8.59% of revenue in 2024.
Good morning, Lucas. This is Fossen. About the ticket dynamic, we're pleased with the first quarter. We're seeing a more favorable dynamics for us now in this beginning of the year, both for on-campus and digital. There's always influence. You talked about last year. But there's always a lot of influence from the size of intake compared to the student base we had last year. That was relevant, and a great share of 100% online courses. If you look at the other types of DL, the other formats of distance learning, we do very well. But 100% online courses is where we have the most competition in the market.
So it's more difficult in terms of pricing. But we see it in a good light for 2024. Now, about the CapEx of last year, we had the medical courses accreditation, and the additional investments made for those courses. We had the maximum grade of five. That's the top grade in all of our medicine courses that we requested authorization from the Ministry of Education. So, everything is already ready to go. We're waiting for the final decision from the government. So that was extraordinary CapEx to grow for this push in medicine that was done last year. Last year, there was also a lot of CapEx recovery from the pandemic. In 2022, we did a part of it. In 2023, we did the rest. Technology CapEx tends to remain at significant level because we must invest in technology.
But in terms of infrastructure, we believe that there is a reduction for 2024 compared to 2023.
Thank you, Fossen. Just a follow-up. If you can talk about the number of requests and requests that had that grade from the Ministry of Education, and what you're expecting, the most likely scenario for the decision of the Supreme Court.
Lucas, as regards the Supreme Court's decision, it's hard to try to guess at this time. The score, it's a tie right now, so we're waiting to see what happens. But what's important is that we did our homework. Everything that depended on us to prepare the evaluation process, to implement all of the quality of our faculty, the quality of the education that we provide in the medical courses at Cruzeiro.
If you look at our opening message to when, and Franco, I love this, at UNIFRAN certification from the medical board in Brazil, it's not something that all medical schools can achieve in Brazil. So that is proof of our overall quality. So, we're waiting to see what's happening, and there are changes coming in the Ministry of Education. There's a new secretary; there's a lot of things changing for us to be able to guess the future. But what's important is that we did our homework, and we had the top grade. So, that's what's relevant here in this process so far. As for the number, we don't disclose this information yet. It's strategic information for us.
Great, Fossen. Thank you.
Thank you, Lucas, for your question. Next question, Lucca Marquezini , Itaú BBA. We are going to enable your microphone. Please ask your question.
Good morning. Thank you for taking my questions. We have two. First, if you can give us an update about the regulatory aspect of DL. We know that a considerable share of the company's revenue come from DL. So, if you can give us an update about this, what can change and what may be the impact for the company. And the second point is about cost with personnel. We saw a good dilution this quarter due to the decisions of the company to optimize cost. So, if you can remind us if there's more efficiencies to come or if this is a sustainable level looking forward, that would be helpful. Thank you.
Good morning, Lucca. This is Fossen. About your question on DL. As everybody, we're on standby looking at the Ministry's next steps. We have a very positive overview.
Whatever comes, at least considering the intentions that have been mentioned by the Ministry of Education's representatives, whatever they bring to improve the quality of education has our full support. We have the capacity to make that type of investment in intellectual capital or the capital required to continue to grow in distance learning. So, this is something that does not worry us, because if it does come, it will be to improve quality of education. If there's measures to restrain growth, of course, it's going to harm everyone. And we do not see that as the tone that they're using. Everything we've been talking about, improving quality of education, we believe that for us, we'll adapt to whatever guideline that the Ministry of Education puts forward.
In cost of personnel or the company's operating cost overall, more recently, we've been making more investments in digitalization, both in terms of student experience and internal digitalization of the company, and we believe that there is still room for improvement in terms of productivity. We do not provide a guidance on that sense, but recently we started to make all of the investments needed in technology. So, there is room for us to improve further.
Very clear. Thank you.
Thank you, Lucca. Next question, Caio Moscardini, Santander. Caio, we are enabling your microphone. Please go ahead and ask your question.
Good morning. Thank you for taking my questions. I have two. First, about re-enrollment. That has been a positive highlight, and we saw good improvement this year, both in the on campus side and on digital.
I would like to understand a little bit more about the opportunities that you have to continue to improve this and what we should expect for 2024. The second question is about the strategy in the health field, especially now with André Raeli's arrival. What we should expect, the changes you may have in mind, or which direction you might be headed. Anything in this sense would help us. Thank you.
Good morning, Caio. This is Fossen. About re-enrollment, this is the result of a process we started in the beginning of 2022, a series of process improvements, engagement, and the institution within the re-enrollment process. This is very important for us. For me, it is a great way to measure the actual quality of our courses, which is the repeated purchase that the customer makes at the end of the day. We can call it like that.
The student comes and they are liking it. They enjoy the classes. They want to continue at our institution. So, we have very high levels if we compare with other players that we normally compare ourselves with, both for DL and on campus, we are at very high levels for this metric. We are still progressing. There are the dropout algorithms that we are working on. So, we are moving towards improving this even further, understanding where we need to improve in our internal processes, the quality of the education we deliver, so that we continue to motivate students to come and stay with us. About the health education. We understand, and throughout the year, this will be clearer to everyone. This year, we are going to have our first Cruzeiro day during this year, and you will understand more our strategy about the health education vertical.
We had already been developing some aspects internally with André Raeli's arrival at the end of last year. We will progress further for us to structure and advance in this sense. We have high expectations, and we have already those two major international partnerships signed.
I think we never talked about them in details with everyone, but we have been developing this for two years, and we believe that this will be a driver of growth for the company in coming years. It is a vertical in the health area that we are seeing appeals both for the undergrad and the continued education, especially as a base to expand our revenue lines.
Excellent, Fossen. Thank you very much.
Thank you, Caio, for your question. We would like to remind you that to ask a question, please click on the Q&A icon at the bottom of your screen to join the queue.
When we announce your name, there will be a request to enable your microphone. You should then enable your microphone and ask your question. We would like to conclude the questions and answers session. I will turn the floor to Fabio Fossen for his final remarks. Please, Mr. Fossen, you may go ahead.
Thank you all very much for participating on our earnings conference call. We conclude the year of 2023 showing our best results since the company's IPO on half and quarter-on-quarter with significant growth. We are very excited and optimistic with 2024. We are seeing the first indicators, and they are very relevant for us. We will continue with all of our strategies, and we expect to deliver good results this year.
We see it in a very positive light, and the barriers and hurdles that may arise in terms of regulation or any other topic are things that we can handle and move forward. I think it is very important to look forward and see that there is a lot of growth to capture than we have had in the past. Thank you all very much. Have a great day.
Cruzeiro do Sul Educacional earnings conference call for the fourth quarter of 2023 has been concluded. The investor relations department remains available to ask any questions and doubts. Thank you to all participants. Have a great day.