Good afternoon and thank you for holding. Welcome to Cruzeiro do Sul Educacional's conference call, today discussing the earnings release of the third quarter of 2023. 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 of your choice, 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 call is being recorded and will be available on the company's IR website at ir.cruzeirodosuleducacional.com.br, where you will also find the complete set of materials for our earnings release. You can also download the presentation through the chat icon, also available in English. During the company's presentation, all participants will have their microphones turned off. After that, we will begin the questions 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. Then you should enable your microphone and ask your question. We kindly ask you to make all your questions at a single opportunity. 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, market 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. Fábio Fossen, CEO, Felipe Coragem Negrão, CFO, and Luis Felipe Bresaola, Investor Relations Officer. I would like to turn the floor to Mr. Fábio Fossen, who will begin the presentation. Please, Fábio , you may proceed.
Good afternoon, everyone. This is Fábio Fossen, CEO of Cruzeiro do Sul Educacional. Welcome to our earnings conference call for the third quarter of 2023. In addition to the positive evolution and results, the third quarter of 2023 was marked by advances in the areas of technology innovation, which are in line with the company's long-term strategy of placing students and learning at the center of our attention.
The first of these was the launch of the Duda app, which came to improve the student journey. The application was co-built with students, uniting the main demands within the academic and administrative peers, becoming a unified and closer relationship panel. We believe that the proximity that the app provides can result in positive benefits for all stakeholders. In addition to Duda, we launched a relationship app to target prospect students that already has had more than 50,000 downloads, quickening our relationships with potential higher education candidates. Still in the technology sphere, the advancement of digitalization and automation processes added to changes in the management methodologies of the billing area, has been contributing to improving internal indicators, especially those related to PDD.
Additionally, at a strategic level, we made progress in the health business unit, which represents more than 51% of our student base with the structuring of a team of experts in continuing education who should contribute to the expansion of this line of business in a more decisive way. In academic topics in the last 18 months, we received a reaccreditation for nine of our 14 institutions, and 10 were reaccredited with a grade of five, two smaller units with a grade of four in accordance with max institutional concept. It is important to mention that with the most recent reaccreditations, we have reached the milestone of 64% of our institutions with a maximum grade of five. The remaining 36% are all grade four, and it is worth highlighting that they are colleges with no research differential or are institutions with older reaccreditations before 2014 and prior to our acquisition.
In our on-campus student base, more than 85% are in institutions with a top grade of five. Regarding the performance of the third quarter of 2023, undergrad on-campus enrollment or intake was 1.8% higher than the same period of the previous year, with tickets practically stable. For the third consecutive quarter, we broke a record in the re-enrollment KPI, achieving 90.9% retention. The increase of 0.8 percentage points versus the third quarter of 2022 is the result of the strategy implemented around a year ago based on the active participation of our units. We ended the quarter with a base of 146,000 undergrad students, an expansion of 10.1% compared to last year. It is worth noting that students on health courses represent 51.3% of the on-campus base, an increase of 0.4 percentage points versus third quarter of 2022.
In digital, undergrad intake grew 12.3% versus 3Q 2022, ending with a base of 284,000 undergrad students, an expansion of 21.7% versus the previous year. Just like on campus, we made important advances in re-enrollment, reaching the milestone of 77.8% retention, 1.8 percentage points compared to the third quarter of 2022, the highest level in recent years. These levels of re-enrollment that we achieved represent a lot of the policy perceived from students to what we deliver in education at Cruzeiro do Sul units, both for digital and on campus. As for the ticket, we had a slight expansion of 0.5% versus third quarter of 2022 as a result of the increase in hybrid courses, which already represent 21.7% of the digital base, 4.3 percentage points up versus third quarter of 2022.
Given the intake dynamics in the digital segment that extends until the second half of November, more recent data from November 7th, intake was at around 124,000 undergrad students, an increase of 17% versus the same date in 2022. Following the execution of the organic growth strategy within the digital vertical, we ended the third quarter of 2023 with 1,673 DL centers, an extension of 309 units in the last 12 months. Finally, with regard to the third quarter financial results, we achieved net revenue of BRL 565 million, an increase of 13.8%, and gross margin that grew 1.4 percentage points to 49.1%. Adjusted EBITDA was BRL 180 million with a margin of 31.8, an increase of 61 basis points versus the third quarter of 2022. Net profit reached relevant amounts, coming from BRL 4 million last year to BRL 33 million in the third quarter of 2023.
Operating cash generation was BRL 184 million, an increase of 18.3% versus the third quarter last year. Finally, the company's leverage, and this is an important piece of information at this time, the company's leverage remains stable at 1.3 times the EBITDA, even after the distribution of about BRL 70 million between dividends to shareholders and share buybacks in the last 12 months. Thank you for attending and participating, and I turn the floor to Felipe Negrão for his comments on the company's financial results. Thank you.
Thank you, Fábio. Moving on to Slide 5, we bring the operational performance data of on-campus student base. We attended the semester with 146,000 students, an expansion of 10% versus the previous year as a result of an intake 2% higher than the 2022.2 cycle and the improvement of one percentage point in the re-involvement KPI.
Health courses with on-campus needs and higher monthly tuition remained relevant within the student base, representing 61% of on-campus undergraduate students. We also bring ticket data, which includes freshmen and seniors from the perspective of net revenue divided by the number of students at the end of the period. It remains stable with a slight decrease of 0.1% year-on-year, impacted by the mix of courses and units with expansion in the student base in lower ticket units. On Slide 6, we present the operational data of digital courses, which closed the quarter with a base expansion of 22% versus the previous year, reflecting the 12% higher intake and the improvement of two percentage points in the re-enrollment KPI.
The average ticket, which includes freshmen plus seniors in digital undergrad courses, increased by 0.5% versus the third quarter of 2022, mainly reflecting the mix of students and hybrid courses, which helped mitigate the more competitive pricing dynamics of 100% online courses. Going into the financial details of the quarter on Slide 8, I will comment on the net revenue in the quarter, which we reached BRL 565 million, an expansion of 14% versus the third quarter of 2022 as a result of the larger consolidated student base. In on-campus education, courses focused on the health area grew 12%, and the penetration of these courses grew by one percentage point, reaching 68% of on-campus revenue. In digital, we expanded revenue by 23%, reaching BRL 182 million as a result of the larger student base and the continued expansion of the hub base.
In the nine months, revenue reached BRL 1.7 billion, 13% higher than in the nine months of 2022. On Slide 9, we show gross margin for the quarter, which reached 49.1%, 1.4 percentage points higher than the third quarter of 2022. The increase in gross margin for the period reflects the initiatives for management efficiency. It should be noted that the cost line was pressured by the increase in the transfer for hub as a result of the expansion of digital revenue and student base in third-party hub. In addition, the other costs line was impacted mainly by the increase in third-party services such as security, technology, laboratory consumables, given the maturity of the courses in the health area. For nine months, gross profit expanded by 13%, reaching BRL 820 million.
Moving on to Slide 11, we bring the adjusted EBITDA for the third quarter of 2023, which was of BRL 180 million, an increase of 16% versus the same period of the previous year. Despite the improvement in the PDA line, which went from 5.7% of net revenue in the third quarter of 2022 to 2.8% in the third quarter of 2023, higher marketing expenses ended up pressuring margin expansion, which stood at 31.8%, 61 basis points up compared to the third quarter of 2022. The improvement in PDA in the quarter is a result of the changes in the billing management model with a focus on technology, as well as the improvements in re-enrollment rates. Adjusted EBITDA reached BRL 531 million in the nine months, 16% higher than in the same period of the previous year, with a margin of 31.3%, an increase of 0.9 percentage points.
Moving on to Slide 13, we show the evolution of net income. Net income in the quarter was of BRL 33 million, 8.7 times higher than in the third quarter of 2022, reflecting the improvement in EBITDA for the period. In the nine months, net income was at BRL 94 million, 4.2 times higher than in the nine months of 2022. In the next slide, we show the evolution in accounts receivable, which in the last 12 months stood at 44 days, an increase of three days when compared to the same period of last year due to the higher volume of agreements in progress.
Moving on to Slide 15, we present the investment made by the company in the third quarter of 2023, which reached approximately BRL 156 million, an increase of 80% versus the third quarter of 2022, as a reflection of the resumption of investment projects in infrastructure and technology, mainly focused on the evolution of the student experience. Investments in the nine months of 2023 were approximately BRL 139 million, reaching the level of 8% of the year-to-date net revenue in 2023 versus 6% in the same period of the previous year. On the next slide, we detail our operating cash generation in the quarter, which reached BRL 184 million, an expansion of 18% versus the third quarter of 2022, and reached 146% of the EBITDA after leases.
In the nine-month period, operating cash generation was of BRL 384 million, 38% above the nine months of 2022, reaching 104% of post-lease EBITDA. Finally, on Slide 17, we bring net debt, excluding these liabilities, that reached BRL 570 million versus BRL 509 million last year. Despite the positive operating performance, net debt was impacted by the execution of the buyback plan in the amount of BRL 46 million and the payment of dividends in the amount of BRL 25 million. I conclude my comments here and turn the floor to the operator to start the questions and answers section. Thank you.
We will now begin the questions and answers session. Noting that to pose a question, you should click on the Q&A icon at the bottom of your screen and write down your question to join the queue.
When your name is announced, a request to enable your microphone will appear on your screen when you should enable your microphone to ask your questions. We kindly ask that you ask all of your questions at the same time. Our first question from Lucas Nagano, sell-side analyst, Morgan Stanley. Lucas, we are going to enable your audio for you to ask your question. Please go ahead.
Good afternoon. Thank you for taking my questions. We have two questions on my side. The first, about the public consultation about the distance learning courses. One of the proposals that says that they should have an institutional concept grade four or five. Cruzeiro has one institution with a three grade. I would like to understand what could be done to not have this impact if it could have reaccreditation to achieve four or five grades in time.
The second question about the competitive environment. When we talk to other players in the market, they say that the price was favorable in the first half of the year. It remains favorable in the second half of the year, but not as much as before. But you at Cruzeiro do Sul had a little bit of a less constructive view of that, and we would like to understand a little bit more how your perceptions changed from the first to the second half of the year. Thank you.
Hello, Lucas. This is Fábio Fossen. About the public consultation, it is a process that is still developing. We need to understand exactly what is going to appear in terms of new regulations that the ministry may set forth for us to follow.
We have a series of initiatives that will have an impact on the distant learning as we have been building this positive impact in the on-campus courses. It is just a matter of working on the right indicators. As for that institution with grade 3 that you mentioned, we can always apply for reaccreditation in July of 2024, so that should not cause any impact. We are not working with any relevant impact for whatever restrictions come up about that. This is something that is a constant concern, and I think you can see that with our grades and the ratings that we have been releasing more clearly for the on-campus courses. That is a tradition for the company, and it is a point of attention. I do not see that.
It is a constant concern, but it is not something that we expect to have any impact in the future, at least as far as the discussions that we can foresee that are unfolding. As for your second question about the ticket, I think we mentioned in the two opportunities we had in the first half of the year that our overall consolidated ticket was slightly lower, and it improved now in the third quarter. It was something strongly impacted by the mix of units, especially on the on-campus courses. We added more units than we expected for those units to have a lower ticket naturally. That could have been one of the causes as we were seeing in the first half of the year as a whole.
We now saw a scenario where we've been able to turn this around, reverse this trend that we were seeing in the first semester overall, and we see a scenario that is not free of the macroeconomic issues and everything that's happening in Brazil. We've been working towards that. We've been working on the mix. For 2024, we have more interesting expectations for that.
Excellent. Thank you.
In order to ask a question, please click on the Q&A icon at the bottom of your screen. You can write your question down and join the queue. Our next question is from Wagner, investor. Wagner's question is as follows. "Good afternoon. Congratulations on the results. I have 3 questions. The first, could you please comment a little bit more on the issue of the permissions for the new seats in the medical course, medicine.
The second question, referring to the invitation to bid of Mais Médicos, is the company interested in participating? And is a question about the potential consolidation on education in Brazil, whether the company is open to study new acquisitions and M&A opportunities."
Good afternoon, Wagner. This is Fábio Fossen. About these instances and invitations, it's an ongoing process. Part of our strategy here is to work in this sense, more cautiously. But what I can tell you from what happens is that our grades have all been 5, or the maximum grade for MEC, for the Ministry of Education. So that's part of our strategy. The same thing about Mais Médicos, the program. We're evaluating it and trying to decide whether or not it makes sense for us to participate. It's 60 positions in smaller cities. We have a company strategy that's based on consistent, constant growth over time.
Then we will participate in a very well-structured way with our institutions. We have a capacity to participate in Mais Médicos because one of the criteria is the number of maintenance, and we have a good range of entities for us to participate. As for the consolidation question, this is something that is discussed every quarter, and we're actively looking all of the opportunities for M&A that may occur. We've been participating on bids. There's a lot of coming to the table and then leaving without becoming or moving forward as a choice from the seller. But we're prepared, waiting, and we have cash. We have the balance to make acquisitions and mergers as well. So anything that would add to our shareholders, that would create value to shareholders and students is part of my work focus 24 hours a day here at Cruzeiro do Sul.
Whenever opportunities come up, and they are opportunities that will add to us both for shareholders and benefiting students, this is very important for us. And we have to find that in acquisitions or maybe consolidations or mergers, as you asked. We need to seek deals that make sense for the company's long-term mission, which is to serve the students and increase the level of their learning throughout the way.
Thank you. Next question, Yan Cesquim, sell-side analyst at BTG. Yan, we're going to open your microphone so that you can ask your question. Please, you may go ahead.
Good afternoon, Fossen, Negrão, Bresaola. I'd like to ask 2 questions. First, looking at CapEx, we see that it accelerated a little bit in this quarter.
I'd like to understand whether you can give us a perspective in terms of CapEx for the next year, since we're getting to the end of this cycle, this current cycle, and understand a little bit better if you can put more color into the pricing dynamics for the on-campus courses. We see that there's an effect of the base that has a negative impact in the ticket evolution year-on-year. But I'd like to understand what you're thinking looking forward, maybe for the next intake or cycle, if we should consider that these tickets will behave the same way, or whether you imagine this scenario may change in this next cycle. Thank you.
Good afternoon, Yan. This is Negrão speaking.
In terms of CapEx, just to explain a little bit more of this year, since we have already talked about it, there was a lot of progression of classes of medicine and health courses, and we had to bring more investments than usual to build laboratories. This is done. I think there's very little to come, so we have a smaller CapEx level. We do not provide a CapEx guidance for that. On the ticket side, I'll turn over to Fossen, and he'll talk a little bit more about it.
We don't disclose the guidance, but we've been working constantly. If you look at the monthly tuition, our monthly tuition sends a different message than what the ticket says. Ticket is actually an average of the average.
When we look at our units one by one, building by building, course by course, that's what we do every week here, we see a slightly different perspective. What I said is the mix kind of hinders the mix of units, the consolidated results. But we have a permanent ongoing concern, especially on the on-campus courses, where the size of the asset is a given, and what we need to do is guarantee the productivity of that asset, both in terms of cost and in terms of revenue efficiency. We have a very sophisticated structure apparatus for pricing that we work on constantly. I know I'm more positive in future pricing since we're gaining more and more insights over time and visibility of how to price our courses, especially on the on-campus side, where we know the local competition because they're based building by building.
Distance learning courses is a different dynamic for price competition, but we do have knowledge of how to manage that. But sometimes the demand comes strongly where we weren't expecting it. So of course we're going to serve it. There's no doubt we're going to meet the demand. But on the weighted average, maybe the message is not quite as precise. And I focused a lot on revenue increase because it was important for us to grow top line to guarantee top line expansion, less so than tickets. And I look a lot at monthly tuitions. That's what's more important to me. If I'm building financial health for our future, invest on monthly tuitions, not necessarily on type tickets.
Excellent. Fossen, Negrão, thank you for the answers.
Once again, if you have a question, please click on the Q&A icon at the bottom of your screen and write down your question to join the queue. Once again, if you have a question, please click on the Q&A icon and write your question down and your name to join the queue. If there are no further questions, I would like to inform you that the Q&A session is closed. I will turn the floor to Mr. Fábio Fossen for his final closing remarks. Mr. Fábio, please go ahead.
Thank you. I would like to conclude today's comments here. We are moving towards an end of year with good results. We have been able to reverse a growth margin situation that we had at the beginning of the year. And with a series of digitalization initiatives and innovation processes internally, we are turning the situation around.
Compared to last year, we should end the year at a very positive note in terms of growth margin. I am very optimistic for next year in various of the topics involved in our sector. There is all those discussions as people ask about distant learning. I think it is very important to have a discussion about the quality of education that helps the country grow, and it will set the good ones aside. And I really do believe in Cruzeiro do Sul taking the lead when the separation is done. If that regulation is well done, if the work to assert quality is well done, we are confident that we will do well. That is the same thing for the medicine processes that we also mentioned.
We are very confident, depending on all the decisions and processes and regulations, of course, but we are confident on our internal capacity to create, manage, and deliver quality education. I have no doubt in these two years leading the company. I believe we will get into 2024 in a more positive note than 2023. That is the vision that we are having in all dynamics that we are analyzing and the areas that we are looking into for our industry where we focused in terms of revenue and our operations. Thank you all very much. Have a great day.
Cruzeiro do Sul's earnings conference call for the third quarter of 2023 is now concluded. The Investor Relations department will remain available to answer any questions you may have. Thank you all very much. Have a great day.