Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Cruzeiro do Sul conference call to discuss the results of the third quarter of 2021 of Cruzeiro do Sul. Today with us, we have Mr. Fabio Fossen, CEO, Luis Felipe Bresaola, Investor Relations Officer, and other members of the executive board. We would like to inform you that during the company's presentation, all participants will be on listen-only mode.
Next, we will initiate the Q&A session when further instructions will be provided. In case any of you need assistance during this call, please request the operator's assistance by pressing star zero. We would like to inform you that this conference call will be conducted in Portuguese by the management of the company, and the English presentation will be done through simultaneous translation. The event is also being recorded, broadcast simultaneously via webcast.
Before proceeding, we would like to clarify that any forward-looking statements during this conference call related to the company's outlook, projections, and operating and financial goals are mere beliefs and assumptions from Cruzeiro do Sul's management, as well as information currently available for the company. Forward-looking statements or future considerations are not guaranteed performance as they involve risks, uncertainties, and assumptions as they refer 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 can affect the company's future results and therefore may lead to results that differ materially from those expressed in such forward-looking statements. I would now like to turn the floor to Mr. Fabio Fossen, who will then begin the presentation. Please, sir, you may proceed.
Good afternoon, everyone. This is Fabio Fossen, CEO of the company, and thank you for joining us for Cruzeiro do Sul Educacional results call. Before we go into the details of the quarter, I would like to take a step back and comment on my first two and a half months as CEO of the company. The transition we are going through is an important step within the company's 55-year history. This was a position that has always been with the founding families, held by Professor Hermes since its foundation, and succeeded by Renato Padovese and Fábio Figueiredo in the months prior to my arrival.
We are following with the agreed transition plan, and my first impressions are very good, especially regarding the company's main asset, our employees. Here I found a committed and motivated team that knows the market and our business very well, and that has brought impressive results, leading Cruzeiro do Sul to be one of the largest higher education groups in Brazil without losing its commitment to quality standards in teaching.
In this transition process, we have already implemented some important changes. First, the implementation of the people and management office reporting directly to me. Secondly, the introduction of a Technology and IT Executive Board that reports directly to me to speed up our digital transformation and put the topic of technology at the core of the management's discussion. These are relevant changes to help us guide the business in this moment of great transformations that the industry is going through.
Now, moving on to the events of the quarter, our campuses have started to receive their first students, especially in the courses that require laboratory practice. This was an important milestone in the resumption of in-premise activities, with the aim of resuming 100% attendance as of next year. Still in the on-campus segment, the process of student intake in the second half of 2021, which ended on September 30th, brought components that show that we can look forward to a more positive scenario in 2022.
The process grew 23.4% versus 2020, showing the resilience of our brands and a potential recovery in on-campus education. Most importantly, we followed our commercial strategy of focusing on paying students without impacting growth. As for re-enrollment, we observed an evolution of 6.1 percentage points versus the peak of the pandemic, conversion to historical figures reflecting a more resilient student base.
In distance learning, the intake until November 12 indicated a 14% growth in the second half of the year, which ended yesterday, November 16. After intense price competition at the beginning of the cycle, the scenario cooled down in the second half, leading to an acceleration in the intake process. We continue with our strategy of expanding our portfolio and teaching modalities. Premium courses with synchronicity and presence on- campus already account for almost 13% of the student base, which is an evolution of almost 3 percentage points year on year.
The differentiated portfolio, together with the maintenance of our commercial practice of discipline discount management, led to an average ticket of the segment close to BRL 206, slightly lower than in 2020. On the expansion side, in August, we inaugurated our UNIPÊ Super Hub in Campina Grande with distance learning courses that range from 100% online and those with synchronicity to those with an in-person component. The campus is already in the process of accrediting the courses regulated for on-campus offerings in 2022.
In addition to Campina Grande, we added 59 new hubs to the system, looking for attractive locations and partners that contribute to the management on the site. Another important point is that at the end of the quarter, we started the selection process for 2,000 distance learning nursing seats under the seal of the Braz Cubas University [inaudible] our first distance learning seat, representing another important step towards portfolio diversification. On the academic side, Unifran was once again ranked in the Times Higher Education ranking, achieving first place among Brazilian's for-profit universities.
Furthermore, our researchers from Unicid and Unifran registered patents for inputs generated in sewage treatment to be used in agriculture, thus contributing to the country's sustainability and therefore reinforcing our position as a leader in academic quality. As for the third quarter numbers, we ended the year with a student base 5.6% higher than last year, resulting from the growth in distance learning and its business model in line with the period we're going through.
It is worth mentioning that in on-campus segment, the undergraduate student base remained virtually stable, while the graduate business is still under pressure due to the current scenario. The acceleration of distance learning mitigated the drop in the on-campus student base and caused consolidated revenue to be 1.2% above the numbers for the third quarter of last year, reaching BRL 437 million.
Adjusted EBITDA was BRL 131 million versus BRL 158 million in the third quarter of 2020, with the margin dropping from 36.5%- 30.1%, impacted by higher commercial expenses, salary adjustments, and technology services. Regarding adjusted net income, it came to BRL 30 million, vis-à-vis BRL 68 million reported in the same period of the previous year.
Finally, another very important indicator is our operating managerial cash flow generation, which reached BRL 96 million , accounting for 77% of non-adjusted EBITDA, with an improvement of 1,160 basis points versus the same period of last year. Now I conclude my comments, and I give the floor to Luis Felipe Bresaola, who will talk a little bit more about the details of the third quarter 2021 results.
Thank you. Thank you, Fabio. Now moving to slide eight, I will comment on the evolution of the student base in the third quarter of 2021 with respect to the end of the second quarter of 2021. We ended the period with 360,000 students, a slight reduction in relation to the previous quarter. In regards to the on-campus education, the student base fell by 2.3%, still reflecting the pandemic, especially in the graduate courses.
Now, when we look at distance learning education, the student base was 1.4% below the second quarter due to increased competition and the maintenance of our commercial practice. In the next slide, I will comment on the average ticket in undergraduate courses, adjusted for the mandatory discount at UNIPÊ, and adjustments for the equivalents at University Positivo. In the on-campus undergraduate courses, the mix of students with higher participation of freshmen was the main point for the 3.5% reduction in the ticket, while in the distance learning undergraduate courses, our portfolio improved the ticket despite the competitive environment.
We were close to BRL 106 , a drop of 5.5% in relation to the previous year. Now turning to net revenue, it was BRL 437 million in the quarter, 1.2% above 2020, mainly due to the negative impact of the mandatory discount injunction at UNIPÊ of BRL 9 million , which represented 1.9% of the revenue. Excluding this effect, the expanded revenue would grow 2.7%, benefiting from the growth of the DL business, which mitigated the decline in the on-campus business impacted by the pandemic.
In slide 11, we show the adjusted gross margin of 51%, down 6.9 percentage points vis-à-vis last year, reflecting the increase in the amortization of derivative use impacted by the monetary update of the IGP inflation index, which applies to rents, wage adjustments excluding the state of São Paulo, higher costs with technology services, and higher marketing investments in the intake process of the 2021.2 cycle. Adjusted EBITDA was BRL 131 million , down 17% when compared to the third quarter of 2020, resulting in a margin of 30.1%, down from 35.6% last year.
The drop in margin is basically a reflection of the reduction in gross margin, while in expenses, the positive evolution of the provision for doubtful accounts that improved 2.9 percentage points reaching 5.5% of the revenue was partially mitigated by the absence of reverses of legal provisions this quarter vis-à-vis last year. Now moving on to slide 13, we show the evolution of adjusted net income, which dropped from BRL 70 million in the same period last year to BRL 30 million in the third quarter of this year, mainly impacted by the reduction of the company's operating income.
The next slide, we show the evolution in accounts receivable, and we reinforce our commitment to maintain a low number of students in financing programs, which in the third quarter of 2021 was approximately 5% of the base. Our average accounts receivable term stood at 38 days, in line with the same period of 2020. On slide 15, we show the investments made by the company in Q3 of 2021, we reached approximately BRL 25 million versus BRL 11 million last year, motivated by the resumption in maintenance investment projects that had been halted in early 2020 due to the pandemic.
In regards to operating cash generation, we reached BRL 96 million , 32% above the third quarter of 2020, reaching 77% of non-adjusted EBITDA. The improvement in operating cash generation is a result of a reduction in accounts payable in 2020 due to the provisions of MP 139/2020 regarding the postponement of tax payments, which were paid in the third quarter of 2020 and fourth quarter of that same year. Including non-recurring impacts, the operating managerial cash generation would be close to BRL 103 million when compared to BRL 119 million last year.
Finally, on slide 17, we comment on the net debt, including lease liabilities that reached BRL 458 million , below last year's BRL 1.5 billion, mainly due to the IPO held in February that added more than BRL 1 billion to the cash flow. As for the debt amortization schedule, the deadlines remain balanced without major disbursements over the next two years. With that, I conclude my comments and give the floor back to the operator to start the Q&A session.
Thank you very much. Ladies and gentlemen, we will now initiate the Q&A session. In case you have questions, please press star one. If your question was answered, you can leave the queue by pressing star two. Questions will be answered in the order they are received. We would like to urge you to remove your phone from the hook when asking a question to improve the quality of sound. Our first question come from BTG Pactual.
Good morning, Fabio and Luis. I have two questions on my side. My first question is about the ticket. I would like to know whether you could elaborate a bit about the ticket dynamics going forward, looking at a more pressure ticket with the entry of students with lower tickets. How do you envision this dynamic going forward? My second question is about your digital strategy going forward. We also saw that in the past quarters, there was a lower growth in the number of hubs, but I just want to understand what you have in mind going forward, whether we could expect a more relevant opening of new hubs for the next cycle of intake. That's all. Thank you very much.
Samuel, it's a pleasure to talk to you. Here is Wilson Diniz. About your first question related to the ticket, I will split that into two answers: on-campus and distance learning. In terms of on campus, our ticket is equal to the level of last year for the last nine months. It is a resilient business, but there was a higher pressure, especially in the first half, because we still suffer the impacts of the pandemic in our country.
We had some late enrollments or students enrolling later in our organizations, and this put some pressure on the ticket. But then if we look in the nine month period, our ticket has been impacted vis-a-vis last year. What is interesting to say about the ticket is that intake in the middle of the year for on campus, which was 23% higher vis-a-vis last year, and you have to remember that our intake base is for 2019 and 2020. This is the freshman intake is slightly higher when we look at the quarter before that.
In fact, there is great pressure in this first half, and we see room for improvement next year. In terms of DL, distance learning, competition was much stronger this year. In fact, there was a slight drop in the ticket, but I think because now the market dynamics is more competitive, more aggressive, and therefore we experienced that in the first half. Now, in the second half, we just concluded the intake last September, and that was 15% higher vis-a-vis last year.
But in fact, the pricing dynamic is a bit more aggressive when compared to on campus. In general, what is the takeaway message? On- campus, we see further improvement in the ticket stemming from a higher intake in the second half with a ticket for freshmen being higher when compared to the second half of last year, and this is a very good indicator going forward. For DL, for next year, we still see some competition and ticket under pressure.
Therefore, our strategy is to leverage the hybrid courses just to mitigate losses on average ticket for distance learning courses. Now, to answer your second question, you talked about the growth of the hubs. We had our first ramp-up to grow our hubs from 2017- 2020. We reached about 1,000 hubs, and I think by the end of this year, we would have about 1,050 hubs. This is a year when our hub network became more stable.
We made several improvements in terms of procedures, processes, and operations of our entire hub network so that now we can proceed with a second expansion round, which will be expedited going forward. Certainly, we will grow our hubs year-on-year in a very substantial way. We were on a very aggressive growth this year.
We already mapped all of the local markets, and mainly, we work with more engaged partners with a more entrepreneurial spirit and able to move our business forward, and at the same time, deliver good services to our students and to increase the retention process. Next year, we will focus again on that project to grow our hubs. Thank you.
Thank you very much.
Ladies and gentlemen, as a reminder for questions, just press star one. We have a question coming from the webcast. I would like to turn the floor over to the company.
Good afternoon. This is Luis Bresaola. I will read the question from Carlos Sequeira. The drop in on-campus average ticket was also impacted by higher competition. You said that the price pressure on DL occurred at the end of the cycle. Do you believe that that level of the average ticket should be maintained throughout 2022?
Well, to answer your question, I think I already answered part of that question. I think that on-campus ticket suffered the impact from the competition in the second half, but as we said before, that was mainly due to the late enrollments in the second half. That's what we saw. But it's important also to highlight that in the second half of the year, in terms of intake, there was a 23% growth in intake and 20% in same-store growth in 25 units.
Therefore, I think we can count in the fingers of one hand what are the good areas that have good metrics in terms of students per campus, strong brands, relevant brands, and a good quality indicator. In a very unusual mode, we were able to grow our intake in the middle of the year. There was a slight growth on the ticket of new entrants or freshman students. This is a good sign of a rebound. Next year, we will be able to see better numbers on- campus. Now, in terms of distance learning, you mentioned lower prices at the end of the cycle.
For DL for 2022, we see the maintenance of this higher aggressiveness and higher competition. There was a small reduction in terms of intake, especially regarding all of the commercial policies, and people are being more aggressive in the market. Our intake had a 15% growth with a ticket slightly lower than that of last year. For 2022, we believe that this will be the new market dynamic for 2022. In order to mitigate that, we are looking at the pricing issue in every single geography where we think that we should apply more aggressive policies.
We would do so in terms of market share. We can operate based on the strength of our brand to generate further margin. This is a bit of our dynamics and how we think that we can control that. Another important thing is the hybrid system, given the relevance in the student base. 14% of the DL student base are with the hybrid mode, and then we are exploiting that in our hubs. That's why we believe that through that, we will be able to gain ticket in the DL segment.
There was another question from Carlos. Have you started the intake for 2022.1? How do you see the choices between on campus and DL? On campus, does it present continued signs of improvement? The other question, what is the profile of companies that you are looking at for possible M&As?
Let me just answer the first part of the question, then I'll turn the floor to Fossen to answer about the M&A. We already started the intake for on campus for 2022.1. We are now also working on the second intake cycle. We do see signs of improvement. I think there is a combination of factors that we must take into account, and also it's important that I comment on that. First, we saw the slowdown because of the pandemic. Second, we saw the rebound of in-person activities, and that will be fully operational as of next year.
On campus, same store, we grew 14% and then 23%, and a slight reduction in discount, so higher tickets for those newcomers in this half year. We are very confident that we will be able to post a good performance throughout the private system, particularly Cruzeiro do Sul, that has strong and relevant brands with very good and strong indicators.
Therefore, we believe that we will have very positive and favorable results in 2022. DL, the cycle just started now. It is a very long cycle because it goes up to next May. Therefore, we are very confident that we will maintain our good intake performance, and by the same token, we will be able to sustain the tickets at levels that they are today. Now I will give the floor to Fossen, and he can talk about M&A.
Regarding M&A, we remain very confident in the strategy of the company, which is to seek for leading brands in all of the geographies. This has become the main profile of our most recent acquisitions in the past three or four years, and the way we navigated through the pandemic. It was good. That proved to be a very good strategy, a winning strategy for Cruzeiro do Sul. We are having many different kinds of conversations with some players at different stages, and we are also opening our range, and we are beginning to assess some other acquisitions related to technology, as long as it makes sense to leverage our business at the end of the day.
This is pretty much something related to our position, and we do believe in the presence of quality leading brands in every geography that can help us leverage our potential. The fact that we went through the pandemic quite well, especially in terms of our on-campus education, is a good indication that we are moving in the right direction.
Our next question is from Pedro Lima from BTG Pactual.
Good afternoon, and thank you for taking my questions. I have two questions, and they are more related to your student base. In terms of intake, I just want to understand whether we could expect a growth of intake next year considering the growth level we experienced in the second half in the on-campus segment.
In terms of DL, I mean, in terms of the new hubs, whether this could also impact growth of intake for next year. The second point is about the dropout rate. What do you expect to see going forward, whether the dropout rate would be close to the current one, or whether you anticipate a reduction or growth next year? Thank you.
Thank you, Pedro, for your questions. I will start with your last question about dropout rate. We see an improvement in that KPI in our company. The on-campus segment, the last re-enrollment was around 88%, very close to our historical level of 89%. So what do we see going forward? It is possible to pursue that historical number and move around that 89% of re-enrollment for on-campus education. In terms of DL, we see a rebound next year of re-enrollment reaching historical levels. I mean, this year re-enrollment was a bit later this year because of that competition dynamic, as we mentioned before.
We are working very hard in-house so that we can go back to our historical numbers in terms of distance learning education. Your other question about the hubs and bring on board a larger number of students. We do believe that that is a strong possibility. We have today 1,250 hubs, very active ones. We improved the management of the hubs, processes, and excellence programs. We enhanced many of our internal initiatives to initiate a second expansion wave, and this expansion wave will lead us to an exponential growth going forward with engaged partners.
I think this is important to say, engaged partners that really know how to manage the operation, and therefore they will contribute to increased customer satisfaction or student satisfaction. I think your first question was about intake 2022.1. Well, it is very difficult to say because we are still in the initial phase of that intake for on campus. We know that on-campus intake will go as far as March. I mean, this year it went as far as the end of April because of the pandemic, but we are looking very closely to all of the indicators. The first signs are very positive, stemming from this last intake, where same store, once again, we grew 20% same store intake for hybrid education.
This reinstates the strategy of the company as we have been mentioning in our previous calls. We do believe that the initial KPIs are very positive. We see a greater interest. We have to remember that we are just resuming the on-premise participation. We have good numbers and a student inventory because many students were out of the system last year, and now they are resuming their search for good education organizations to restart their education. But maybe further on, I will be able to give you more information about that.
That is great. Thank you very much.
Ladies and gentlemen, I would like to remind you that for questions, please press star one. We now conclude the Q&A session. I would like to turn the floor back to Mr. Fabio Fossen for his final remarks. You may proceed, sir.
Thank you so much for joining us today in our third quarter earnings release call. I would just like to emphasize a few bullet points. I think the changes that we announced in terms of our Executive Boards are important for us and for the company, and this gives a good direction in terms of our digital transformation, the fact that we want to expedite and move forward with our plans. We are also very careful with our employees, the faculty members, tutors, and coordinators, because after all, they are the ones who run that show.
They are the ones who make things happen, and they are the ones who give the look and feel and provide the good quality of our education at the end of the day. So we have to take extra care of these people because in the long run, they will be able to bring more consistent results for the company. I would also like to say one more thing, because I've learned a lot in these past two and a half months.
Because, in fact, the strength of our brand, especially with on-campus education, I mean, the fact that we've navigated through the pandemic, but we were able to open three new units this year, a brownfield in Paraná and two greenfields in São Paulo, and they are performing quite well. They were open early this year. Still under pressure because of all of the heavy restrictions that they encountered this year and last year.
But even then, we were able to post good intake results in these three new units. This just proves that our brands are very strong and resilient. The initiatives of distance learning, I mean, semi on campus or hybrid education has brought some very good results, especially when we look towards the future. In terms of new seats this year, we launched, and it will pick up further on, we launched 2,000 new seats for nursing courses, and we have about 4,000 law school seats, and we do have a pipeline of orders of about 60,000 seats in all of our regulated courses.
Therefore, the future outlook is quite interesting. I am pleased to be here because no matter what happens, I mean, despite the pandemic, we have a very good line of defense with our brands, and if life finally goes back to normal, we have a very good growth leverage, which is the strength of our brands stemming from 55 years of very hard work of all of the ones who preceded me. So thank you. With that, I would like to thank you very much for joining us.
Thank you. Cruzeiro do Sul earnings release call is now concluded. Please dis-