Good day, ladies and gentlemen. Thank you for waiting. Welcome to Cruzeiro do Sul Educacional conference call to review third quarter 2022 earnings results. Today we have Mr. Fábio Fossen , CEO of the company, Mr. Luís Felipe Bresaola, IRO. We would like to inform you that participants will be in listen-only mode during the company's presentation. After the remarks of Cruzeiro do Sul, there will be a Q&A session when further instructions will be provided. Should you need assistance during this conference call, please dial star zero to reach the operator. We inform that this conference call will be conducted in Portuguese by the management of the company. The sound in English will be through simultaneous interpreting. This event is being broadcast simultaneously over the web via webcast.
Before proceeding, let me mention that forward-looking statements that might be made during this conference call relative to Cruzeiro do Sul's business perspectives, projections, and operating and financial goals are based on the beliefs and assumptions of Cruzeiro do Sul management and on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Cruzeiro do Sul and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference call over to Mr. Fábio Fossen, CEO, to start the presentation. Mr. Fossen, you may begin.
Good day. This is Fábio Fossen, CEO of the company, and I'd like to thank you for participating in the Cruzeiro do Sul Educacional results call. The beginning of the second academic term was marked by the continuity of important movements focused on intake and re-enrollment initiated in the first half, which contributed to the continuous expansion of our student base. Despite the challenges brought by the macroeconomic context, once again, the company's strategy of operating through leading brands with a focus on quality, coupled with the discipline of price management and cost control, has brought us lasting and consistent results. In on-campus undergrad, the intake of the 22.2 cycle was 13.5% higher than the same period of the previous year.
In re-enrollment, we reached 90.1% in Q3, an increase of 2.4 percentage points versus Q3 2021, reflecting the strategy designed with the active participation of our units, which resulted in the highest level in recent years. With both movements, we ended the quarter with a base of 132,000 undergraduate students, up 4.6% versus last year. With students in courses in the health area already represent more than 51% versus 49% in Q3 2021. In distance learning, DL, the intake processing in Q3 grew 34.5% versus last year, ending the quarter with a base of 267,000 students, up 18% versus the previous year and 7.3% above the initial base of the quarter. We still observe a competitive price environment in 100% DL while in hybrid modality, which has a differentiated portfolio and higher tickets, we continue to expand the base, which already accounts for 17% of the total student base.
The intake cycle and distance learning extends until mid-November, and by November 10, intake was at 108,000 students, which means an increase of 18% in total intake for the second term year-on-year. Following the execution of our plan to increase the number of hubs, we added 108 hubs in the last 12 months, reaching 1,364 hubs in total. On the academic side, the Ministry of Education and Culture, MEC, released the results of ENADE 2021 for courses mostly linked to teachers degrees, human sciences, technology, and we obtained mixed results with a positive highlight for courses in the DL modality, where we are among the top three in criteria three, four and five among listed players. This is an important achievement given that the penetration of DL in these areas of knowledge is relevant and indicates that we are transposing the academic merits of on-campus to digital.
In on-campus modality, the pandemic situation prevented us from progressing as expected, but we achieved maximum grades in physical education and pedagogy courses at UDF, Cesuca and FSG. In addition, Universidade Positivo was a highlight in the pedagogy courses and several courses in technology ranking among the best in the country. Lastly, in terms of financial results, the growth in student base in both segments added to better commercial planning focused on pricing made the ticket, calculated as the quarter's net operating revenue divided by final student base, grow by around 6% in on-campus and 3% in DL, maintaining the trend observed in the first half of 2022, which resulted in revenues of BRL 496 million, up 13.4% over Q3 2021. Gross profit maintained a margin of 47.6% seen in the same period last year, despite impacts on the labor cost line due to the collective bargaining agreement.
Adjusted EBITDA reached BRL 155 million with a margin of 31.2%, up half a percentage point versus last year. Adjusted net income totaled BRL 19 million versus BRL 29 million in the previous period, reflecting higher interest rates and contract updates. I end my comments here and turn the floor to Luís Felipe Bresaola, who will give you more details about third quarter 2022 results. Thank you very much.
Thank you, Fábio. Moving on to Slide 15, and we'll comment on net revenue in Q3, which totaled BRL 496 million, up 13.4% versus Q3 2021. As a result of the larger consolidated student base and ticket expansion. On campus, the healthcare-focused courses grew 15.9%, and the penetration of these courses increased two percentage points, reaching 67% of on-campus course revenues.
In DL, the larger student base, plus 18%, the opening of new learning hubs, plus 108 in the last 12 months, contributed to the 18.9% in net revenue from scholarships, cancellations, and discounts. On Slide 16, we show adjusted gross margin for the quarter, 47.6%, down 49 BPS compared to Q3 2021, reflecting the collective bargaining agreement in São Paulo, the provision of salary bonus of 50%, and the increase in the number of preceptors due to the progression of healthcare courses. In addition, the cost line was impacted by higher amortization of usage rights, reflecting rent adjustments and rent increase in the pass-through, given the expansion in both number of learning centers or hubs and the DL student base. On the next slide, we have adjusted EBITDA, which totaled BRL 154.8 million, 15.3% higher than Q3 2021, resulting in a margin of 31.6%, up 52 bps.
This higher adjusted EBITDA in Q3 2022 is mainly the result of the return of on-campus events that benefited the rental of our spaces and mitigated the impact of the administrative salary adjustment in São Paulo, higher marketing expenses +0.3 percentage point versus Q3 2021, and the higher allowance for doubtful debts, ADA. 5.7% this quarter versus 5.4% in Q3 2021. As a reflection of the more challenging macroeconomic scenario of the period, added to the change in the mix of students with higher penetration of DL. Moving on to Slide 18, we show the evolution of adjusted net income. Adjusted net income went from BRL 29.2 million in Q3 2021 to BRL 18.8 million in Q3 2022, impacted mainly by higher interest rates and higher rents.
The next slide shows the evolution in accounts receivable, which in Q3 was 41 days, three days higher year-on-year and two days lower quarter-on-quarter, corresponding to the end of the school term. Moving on to Slide 20, we show investments made by the company in Q3 2022, which totaled approximately BRL 33 million versus BRL 24 million last year, driven by the resumption of investment projects in structure and technology. On the next slide, we detail our operating cash generation, which was BRL 175 million, up 24% over last year. When we look at adjusted operating cash generation, it was 118% of adjusted EBITDA versus 111% last year, reflecting positive working capital in the period.
Lastly, on Slide 22, we have our net debt excluding lease liabilities, which was BRL 509 million versus BRL 458 million year-on-year, impacted mainly by the payment of dividends in the amount of BRL 50 million. I end my comments here and give the floor to the operator to start the Q&A session. Thank you.
Thank you. We will now begin the question-and-answer session. If you want to ask a question, please dial star one. If your question was asked, you can remove yourself from the queue by dialing star two. Questions will be answered in the order in which they are received. We kindly ask you to take your phone off the hook before you ask your question so as to improve sound quality. Our first question comes from Pedro Lima with BTG Pactual.
Good afternoon, Fábio, Bresaola. Good afternoon, the whole team. We have two questions. The first question has to do with dynamics in distance learning. We can see you managed to have a ticket expansion year-over-year in Q3. However, there was a slowdown in such increase. I would like you to make some comments on how do you envisage competitive dynamics. Do you believe competition is to bring in the ticket down, or do you think there is still room for tickets to remain under pressure in the short term? Or do you believe that possibly DL ticket already reached the floor and chances are you manage to have higher price transfer now? The second question is about M&As. Could you tell us more about how you see valuation and negotiations?
Is it possible to have conversations or if these negotiations are tighter once we have this outlook of interest curves longer for an extended time frame? Thank you.
Hello. Good afternoon, Pedro. With regards to DL ticket dynamics, we've been very diligent when it comes to the whole discount methodology in terms of intake, and this has helped us, not to mention that our hybrid courses are increasing in the mix as a whole. As to the market, yes, there is a pressure, a ticket pressure, and it's very significant. We can see it daily, and we've been managing to handle this throughout the year. However, that's a reality that we don't consider to continue or to improve in the future compared to the macroeconomic scenario and the whole dynamics in the industry.
With regards to M&A, as I said in previous quarters, we assess and analyze a number of possibilities. Naturally, we don't make comments on them. However, we are considering every opportunity ahead of us and also encouraging other opportunities. This is no different in this case.
Great. Thank you, Fábio.
The next question comes from Luca Marchesini with Itaú BBA.
Good afternoon, Fossen, Bresaola, and everyone. Thank you for taking our questions. We have two questions. First question is about distance learning. One of the reasons why you had an increase in revenue was 189 new learning centers vis-à-vis last year. What is the expected expansion for new centers, 21 down the road? And the second question is about commercial expenses and marketing expenses. Some players in the market are more aggressive, trying to have stronger intake. Could you tell us more about the strategy in the future?
Do you expect to see an increase in marketing expenses? That would be helpful. Thank you.
Expansion plans for learning centers remain the same. I made comments a couple of quarters ago. Actually, we were rearranging some aspects of our learning center network. Last quarter, I mentioned the structure of a new digital learning vertical and also on campus. The digital one will have Wilson, who left the marketing areas and now will be in charge of operations of distance learning. We're increasing the number of centers and expect to increase even more. That is, there are other areas to tap into, but we also are going to change our approach vis-à-vis these centers. We see this as a positive outlook. With regards to marketing expenses, we've been working, trying to optimize and streamline marketing expenses. We grew vis-à-vis last year. This stems from our strategies of intake.
Down the road, well, we don't give guidance. We are only getting started in intake in this season, so we don't disclose this yet. But what we've done so far is to try to optimize and try to match our intake, which was good, matching it with investments in marketing that we've been having so far.
Very clear, Fossen. Thank you.
You're welcome.
The next question comes from Mirela Oliveira with Bank of America.
Good afternoon, everyone. Thank you for taking our questions. Actually, it's a follow-up question from previous questions about distance learning. This growth in ticket, you mentioned there was an increase supported by growth in hybrid courses. Could you tell us more about the performance of ticket in 100% DL courses? Do you still see competition increasing? The second question is about FIES.
Any expectation to participate in the program should it come back, and what do you expect to see along those lines? Thank you.
Good afternoon, Mirela. With regards to the ticket, obviously 100% DL has more pressure in the market. It applies to all players, I believe. In hybrid, we have our unique brands. Not to mention that hybrid mostly happens in areas and locations where we have our buildings and facilities, HEIs. So, there is a lot of circumstances that help us with our reputation and quality perception and value perception by students. At the end of the day, this is very important. 100% DL, these courses have more ticket pressure in the market at large. You are right. As for FIES, I think we made a couple of comments on this. Anyway, we do not depend on FIES, and we do not depend on our future plans related to FIES.
We are getting ready for that, and if you consider the company's track record, the success lever was never being part of FIES. Many things are still to be set. Everything has to be defined about the new federal administration. We have to see the rules that will be at the negotiation table and how we can adapt to them. We are getting ready to be involved in the program regardless of the format. Managing to lever the program or not will depend on the scenario and will largely depend on future rules. It is too early to make any comments on FIES, as far as I remember, based on two statements only about the future administration.
Perfect. Thank you.
The next question comes from Lucas Nagano with Morgan Stanley.
Hello. Thank you for taking our questions. We have two questions. First question about margins.
Expansion was consistent over the year, and this year we had the impact more focused on the collective bargaining agreements. How do you see that in terms of efficient margins for 2023? The second question is about the market. There is a strong move to bring back some real estate and properties. How do you consider this, considering the pursuit for cost optimization, digitalization with hybrid courses, and on the other hand, apparently more resilient demand vis-à-vis the average in the market?
Lucas, thank you. Bresaola answering the question. When it comes to collective bargaining agreement, we have been discussing this process. It has not been concluded yet. However, we have been working with pricing, trying to optimize our margins. The cost base brings opportunities, but we work up to a limit.
There comes a moment you have to work on prices, and that is precisely what we have been doing, trying to see how we can make use of the brand and the campus. Like you said, we have good structures. So, how can we make use of everything we have, all our assets, and converting this into price? So that is part of the management strategy in order to try to streamline specific costs in the region and see how we can transfer a little bit more to work on those that are indexed in Brazil, which is quite strong in Brazil.
Lucas, with regards to optimization and the use of our assets, we are pretty comfortable. We have approximately 25 physical units or facilities throughout the country.
Occupancy rate is about the historical averages we have, and there is room to grow within the same assets, but there is no asset that is bleeding the company today. Naturally, contract negotiation, sit down with the owners, it has always been happening. It happened last year and also this year. It is part of the company's business as usual, but we do not have any major adjustment to be performed in facilities or our on-campus assets.
Perfect. Thank you, Bresaola and Fossen, for your answers.
Ladies and gentlemen, as a reminder, if you want to ask questions, please press star one. I would like to give the floor back to Mr. Fábio Fossen for the closing remarks. Over to you, Mr. Fossen.
I would just like to thank you all for joining our conference call today. We are halfway through this process.
You have all been following it up over the years since the IPO, and last year, several transformations have taken place at the company. At the end of the day, it shows our consistent path. We are consistently moving forward and bringing results to the company. I think that is a take-home message that we would like to give all of you. Our confidence and trust in the whole structuring and evolution process at the company. Numbers show our persistence and consistency trying to strengthen the company's DNA, strong brands, very significant regional reputation, and top-quality learning and teaching. This is what we have been highlighting and what makes the company successful. Thank you very much.
This concludes Cruzeiro do Sul Educacional earnings conference call. Thank you all for joining us today. Have a great day. You may disconnect your lines now.