Good afternoon, everybody. Thank you for waiting. Welcome to Cruzeiro do Sul Educacional conference call to discuss the fourth quarter of 2022 results. Those of you who need simultaneous translation, we do have this tool available on the platform. In order to access it, you just click on the interpretation button by means of the globe icon on the lower part of the screen, and you choose your preferred language, Portuguese or English. For those of you who are listening to the English translation, you may mute the original audio by clicking on the corresponding button. We would like to inform you that this call is being recorded, and it will be made available at the investor relations website of the company, ri.cruzeirodosuleducacional.com.br, where you will find the complete material for this quarterly results. During the company presentation, all participant microphones will be muted.
Afterwards, we will have the Q and A session. In order to ask a question, please click on the Q&A button on the lower part of your screen and write your question. When your name is announced, a request to activate your microphone will appear on the screen, and then you should unmute your microphone in order to ask your questions. Please ask all your questions at the same time. I would like to inform that information contained in this presentation and forward-looking statement that might be made during the call in relation to the business perspectives of the company, projections and targets, both operating and financial, of Cruzeiro do Sul Educacional, are beliefs and assumptions of the company as well as information currently available.
Forward-looking statements are no guarantee of performance, as they involve risks, uncertainties, and assumptions, as they refer to future events, and therefore, they 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 may lead to results that differ materially from those expressed in such forward-looking statements. Today with us, we have Mr. Fabio Fossen, CEO, Luis Felipe Bresaola, Investor Relations Officer. Now we would like to turn the floor over to Mr. Fossen, who will start the presentation. You may proceed, Mr. Fossen.
Good afternoon, everybody. Welcome to Cruzeiro do Sul conference call. This is Fabio Fossen, CEO of the company. In 2022, we addressed important projects for the future of Cruzeiro do Sul.
Ever since the beginning of my presence here, we devoted ourselves to develop new corporate strategies, reinforcing the on-campus and medicine and DL long life learning business lines to ensure the execution of the strategy. We restructured the organizational leadership with the appointments of VPs focused on the development of these verticals. We enforced our focus on student success with the creation of an academic and innovation team with relevant changes in the student assistance pillar with design and implementation of our digital evolution. Since August, we created Digital Education VP with the mission of accelerating the development of digital businesses on the undergraduate, graduate, and non-regulated education business, like the on-campus VP focused on the evolution of on-campus education, operating efficiency, technology, and reincorporating the student services as a part of our digital evolution. We also restructured our back office in finance and human resources and technology departments.
Looking to the operational side, 2022 was marked by the achievement of a record intake volume in both segments. In on-campus, we enrolled 82,000 students throughout the year, volume 14.5% higher than 2021, ended the year with a base of 128,000 students, an increase of 4.5% vis-à-vis last year. In on-campus re-enrollment, KPI surpassed the pre-pandemic levels, reinforcing the value of our brand in DL, as well as on-campus. We reached a record intake, 14.6% vis-à-vis 2021, ended the student base with 238,000 students, an expansion of 8.5%. Following the execution of our growth plan in the number of hubs, we added 188 hubs in 2022, 1,404 total. It should be noted that in addition to base growth, better commercial planning with focus on pricing, prioritizing the portfolio of more profitable courses called the ticket ROI year final student base to grow by around 6% in on-campus.
While on distance learning, despite the competitive environment in 100% online courses, the advance on penetration of hybrid courses in the distance learning base, 17% vis-à-vis 14% in 2021, contributed to a 7% expansion in the segment ticket. On the academic side, for the second consecutive year, UNIFRAN was ranked by Times Higher Education as the best private higher education institution in Brazil. We climbed four positions in the ranking in Latin America, going to the 151st position. Our professor, Dr. Lucimara Pires Martins, from the graduate program in astrophysics and computational physics and the astrophysics nucleus at UNICID, went to the U.S. to develop the first stage of a project approved in 2021 by NASA Space Telescope Science Institute.
In November, the project by professors from the graduate program in science of UNIFRAN was selected to represent Brazil at the World Climate Conference, the COP27, organized by the United Nations with the aim of discussing climate change and proposing solutions in order to minimize its effects. From the financial viewpoint, 2022 was marked by a very challenging macroeconomic scenario, with high inflation and interest rates, which negatively impacted the purchasing power of our students, increasing the levels of default that affected our results. Despite the challenges, we ended the year with a net revenue of BRL 2 billion, 11.4% higher year over year, as a result of the expansion of the On-Campus and Distance Learning business, together with the increase in the ticket. Our gross profit was BRL 948 million, an increase of 10.5% year over year, with a gross margin of 46.7%, despite the challenges with the unions.
Adjusted EBITDA reached BRL 580 million, with a margin of 28.6%, impacted by the worsening of the ADA, 6.7% vis-à-vis 5.4% in 2020. And adjusted net earnings, BRL 69 million, vis-à-vis BRL 143.6 million the previous year. Entry in 2023, following our commercial strategy, the intake process until March 26th shows 11% growth in On-Campus and 40% growth in Distance Learning, renewing the record that we had achieved in 2022. Additionally, re-enrollment KPI continue at pre-pandemic levels. As for the ticket, as in 2022, in On-Campus, we increased prices for freshmen, reinforcing the strategy of a positive trend in tickets, aiming at mitigating the student base recruiting during the pandemic. In Distance Learning, we continue to observe competition in 100% digital segment, and we carry on with the strategy of expanding our hybrid segment.
Now, I would like to turn the floor over to Luis Felipe, who will give you more details about our financials.
Thank you, Fabio. Now on slide 15, we talk about the net revenue in the quarter. We reached BRL 522 million, up by 8% year-on-year, driven by the larger consolidated student base and higher ticket. On-campus health courses went up by 11.7%, and the penetration of these courses grew 2 percentage points, reaching 67% On-Campus revenue. In DL, in spite of the slowdown in intake in the period, which impacted revenue growth, the larger student base, 10% bigger, and the opening of new hubs, 15.5% increase, drove the 11.6% expansion in net revenue from scholarship cancellation and discounts, which closed the year with BRL 2 billion in revenue, up by 11.4% year-on-year, growing 10.3% in on campus, 15.2% in DL.
On slide 16, we show the adjusted gross margin in the quarter of 42%, 4.4 percentage points lower year-on-year, impacted in part by the revenue deceleration. Payroll costs were impacted by the additional provision for the faculty collective agreement, retroactive to March, and by the larger number of preceptors given the upswing in health courses. Besides, the cost line was impacted by the increase in the right of use amortization stemming from IGPM-IPCA variation at the birthday of the lease contract increase in the transfers, given the increase both in centers or poles, hubs. The other cost line was affected by the resumption of on-campus activity. In the year, the gross margin reached 46.7%, 37 basis points below last year. Net of lease liability, the margin would have remained flat.
On the next page, we bring the adjusted EBITDA of BRL 123.7 million in the quarter, lower year-on-year by 5 basis points, staying at 23.7%. The drop in the adjusted EBITDA in fourth quarter explained mainly by the lower gross profit and the higher AOL, 7.7% of the revenue vis-à-vis 5.1% in 4Q 2021. Due to the challenging macroeconomic scenario, together with the change in the student mix with a higher penetration of freshmen in both segments, besides the expansion of DL. In the year, we had BRL 580.6 million adjusted EBITDA, up by 8.4% at 28.6% margin, 81 basis points lower year-on-year. Now turning to slide 18, we show the evolution of the adjusted net income. Adjusted net income went from BRL 39.2 million in 4Q 2021 to adjusted net loss of BRL 1 million for 4Q 2022, impacted mainly by interest rates and rents.
We closed the year with an adjusted net income of BRL 69 million vis-à-vis BRL 143.6 million in 2021. On the next slide, we show our accounts receivable 41 days in the quarter, one day longer than for 4Q 2021 and below 4Q 2022, the period corresponding to the end of the school semester. On slide 20, we show investments made by the company for 4Q 2022 reaching approximately BRL 54 million vis-à-vis BRL 21 million last year, driven by the resumption of investments in infrastructure and technology, mainly focused on the evolution of the students' experience. In the year, investments were BRL 145 million, an increase of 65% over 2021, driven by the resumption of investments in infrastructure after return of 100% on-campus classes occurring in 2022. On the next slide, we show our operating cash generation in the quarter, approximately BRL 25 million, vis-à-vis BRL 45 million in the same period last year.
The year, the operating cash generation was BRL 362 million, 65% of the EBITDA, a 17.5% decrease vis-a-vis 2021. The adjusted operating cash generation for the year was 67% of the adjusted EBITDA, vis-a-vis 87% last year, due to the drop in the accounts payable that had a positive impact on 2021, and the CapEx of maintenance and technology and the return of on-campus classes. Lastly, on slide 22, we show our net debt, net of lease liabilities reaching BRL 587 million vis-a-vis BRL 487 million last year, impacted by the dividend payout of BRL 50 million, and also the execution of the buyback plan of BRL 23 million. I end my remarks and turn the floor to the operation to open for the Q and A session.
Thank you. We will now start the Q and A session. In order to ask questions, you must click on the Q&A icon on the bottom of your screen and write your question to get in line. When you are announced, you will be prompted to open your microphone, and then you must wait for your microphone to ask questions. Here is our first question coming from Nagano, a sell-side analyst from Morgan Stanley. He has two questions. Number one: 2023 intake cycle, which may place the pandemic. For 2023, is the trend the same growth as or most of the management network? What is the expectation for the full half year?
Hello, Nagano. This is Fabio Fossen speaking, the CEO of the company. We are quite happy with the intake that we presented to you to date, and that we disclosed in our release. We cannot speak about the second quarter because, as a policy, we do not provide guidance regarding specific future numbers. I think that there are good indications here. The performance we had of students and an intake per year, more payment slips are being paid, and we have the student with us for longer. This shows that these children are more adopting our products. A lot of people in the education world that were outside the education world during the pandemic, now they feel more comfortable to change their career level through education. This gives us some confidence regarding what is happening with intake.
I think that there are these two effects, more relatives or payment slip in-house because we brought forward the intake cycle. This was compared to previous cycles.
Second question by Mr. Nagano regarding the gross margin. There was an impact, but it seems that this one-off impacts retroactive adjustment and layoffs. To what extent did the gross margins suffer due to recurring impact, and which factors should influence the gross margin in 2023?
Hello, this is Felipe Negrão, the CFO speaking. You are correct. I think that it was a big impact in terms of one-off effects. The gross margin, 2.7%, which was actually one impact. What [Nagano] is referring to one-off events, part to the collective bargaining agreement with the union. Everybody was digitalized. In a conservative approach, we made that provision for this adjustment.
The rest is recurrent expenses due to the return of on-campus, and there was also an impact because of that.
Thank you for the answers. Next question comes from Carlos [Herrera], sell-side analyst with Morgan Stanley. He asks, please can you give us some color on what you're expecting in terms of evolution of ADA? Allowance for doubtful accounts to expect ADA to represent 20%, representing 10% of the net revenue.
Good afternoon, Mr. Herrera. This is Felipe Negrão. Again, we don't give future guidance. That's number one. But I believe that we can speak about the allowance for doubtful accounts. There are some upsides and downsides. The negative side is the macroeconomic scenario, which is bad for everyone. And of course, this tends to leave our ADA more difficult. I believe another important point is that we have a number of new students that is increasing a lot more in our student base. And of course, that deserves a higher ADA.
Finally, the On-Campus and the DL mix is changing. So in normal ADA, we would increase. But we are adopting a different action and still containing delinquency. There are a number of actions that we can adopt. We have an important project, which is throughout the year. This is not very short term, but during the year, this project can bring important benefits, not only for this year, but also and particularly for the future of the company.
Thank you. Our next question comes from Jan, this is Jan Southside, analyst with BTG Pactual. Probably enable your microphone so you can ask. Jan, you may proceed.
Hello. Good afternoon. I would like to ask three questions. Number one, about the intake cycle, the first intake cycle of 2022.
Can you give us a good color in terms of the intake progress rate and something more qualitative about why you drilled that part. Was there any on-campus? And should be an improvement in acceleration in the traditional crisis that is being signed and applied to. And we think that's something stability for just like in the industry, there is still an expected reduction in the economy. So that's the first part. The second part is about margins. Just to go about ADA, profit effects, and then on to the sale. What is your margin expectation for 2023? Instead, the works you do to improve ADA, including expanding student base. Are you working on what allow have improved 2023? My third and last question is about the CapEx. I would like to understand what is the CapEx expectation.
We saw that there were a little more investments with a resumption on-campus operation, investment in technology. What do we expect for 2023? Those are my questions. Thank you very much.
This is Fossen speaking. Again, we do not provide price guidance, but we do see that in this fall, in accordance with our plan, we have invested a lot in pricing discipline, say, 2024 on campus in our DL. We have seen very fierce competition for DL. Prices continue to be very competitive. The future itself implies competitive competition. But we have found a way, either through mix or through graduate discipline, managing discounts and more renewal so that we can achieve our revenue goals as a whole. It is always a balance of quantities and tickets to get to the revenue.
We have been thinking a lot about that, not only working with students, but also in the cycle of re-enrollments. Since last year, we have been talking about our efforts towards price discipline. In the several meetings that we attended last year, we have been speaking about our prioritization to make the prices detached from the value offered and how it is represented throughout the job. But this is not exclusivity for us, it is the whole industry. The value of education and visibility of price in which education is being offered has an important gap strategically for the whole industry, and we are working on that. Your question regarding the margin as regards to margin, there is a one-off 1.7% and we provide guidance. As regards the CapEx, yes, we are investing more in the CapEx. A lot of financial discipline.
All our investment projects have to be approved by the minister department. They have to provide return to shareholders. We have to either grow revenue or improve efficiency and collection. There will be technology topics, but it will bring us a lot of good results. And also focus on students. Same thing with our management and pressure from our Board to have student satisfaction. We measure it. There are important investments with that, because at the end of the day, this will impact pricing, volume of students, so on and so forth. At one point, again, I repeat with the guidance, but yes, we do have targets, individual targets to grow revenue. The management team has been trying to achieve a better margin. I think that is about it.
Thank you very much.
Thank you again for your question.
As a reminder, if you want to ask questions, you have to click the Q&A button at the bottom of your Zoom screen. Please write your name and company, and you will get in line. Q&A session is ended. Now I would like to turn the floor to for his remarks. Please proceed.
Thank you. Well, I think it is important, the take home message for you, particularly with so much instability. We see the stock exchange up and down, and sometimes the real expectations are lost in such challenging moments. But I would like to address some points for 2022. And I think that it can provide in terms of our. Number one, Cruzeiro do Sul has a unique debt situation in the sector. We have the lowest debtness in the industry. If we look at EBITDA, we also have a unique position in the industry.
Sometimes one third or half of what we see in our peers in terms of management of ADA, and this has been historically, it is not a one-off. It is part of the management process of the company. Another important topic is cash generation. It has sustained us. If you look at our net debt, it increased BRL 100 million. This BRL 100 million, there are enough dividend payout and some share buyback, so it is return to shareholders who remained with us in 2020. Cruzeiro do Sul had 2017 cash consumption. In a market where IGPM growing as it did last year, contracts were adjusted a lot later based on the prior IGPM inflation. It was a big blow in terms of adjustments and the whole industry. You all know what. Considering this whole output, the company was able to generate cash from net [BRL 1 million].
If you look at our numbers more carefully, you will see. You will see that within [BRL 70 million], we were practically neutral in terms of when we had to pay IGPM interest rates restatement. In addition, at the end, we invested more in natural movement after the pandemic, when we resumed on-campus classes. It was expected that operating expenses in the campuses would require an upgrade in capital. Our health courses, particularly those health-related courses, they have been very successful, and we had to make investments in laboratories. I believe that all that shows a cash generation that was able to sustain a blow, and I think that is the important message, a take home message for you in this video conference call. I want to speak about the resilience of the company, our brand, the equity, particularly our on-campus brand.
We are having a greater intake of students, and we are being successful in the middle of market instability. The ability to generate at the end of the day was going to create value to shareholders, and we had a dividend payout and a buyback process. These are important effects to take into account. You do not do these things overnight, but structurally, we have an operation that is able to do this, that has been doing this over the years, even when it was an unlisted company. I would like to thank all of you for participating in this video conference call. We will see you in some weeks from now so we can speak about video conference of Cruzeiro do Sul Educacional's earnings for year 2022 and present it.
The investor relations department is available to answer any further questions that you might have, including those after we close the Q&A. Thank you very much to all participants, and have a good day.