Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Cruzeiro do Sul's conference call to discuss the fourth quarter of 2020 results. Today with us, we have Mr. Mário Figueiredo, Fábio Figueiredo, Renato Padovese, Co-CEOs, Antônio Cavalcanti, CFO, Wilson Diniz, Commercial Officer, and Luis Felipe Bresaola, Investor Relations Officer. We would like to inform you that during the company's presentation, all participants will be able to listen only to the call.
We will then begin the Q&A session when further instructions will be given. Should you need assistance during the conference, please request the operator's help by pressing star zero. We would like to inform you as well that the conference call is in Portuguese and will be presented by the company's management in Portuguese and for the English conference, there will be simultaneous translation. This event is being broadcast simultaneously on the internet via webcast.
We would like to clarify that the conference call will contain forward-looking statements, and as such, they are subject to known and unknown risks and uncertainties, and this could cause the company's actual results to differ materially from those expressed in such forward-looking statements. Such statements speak only as of the date they are made, and the company is under no obligation to update them in light of new information or future developments that might occur. Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future results of the company and may lead to results that differ materially from those expressed in these statements. Now, I would like to turn the conference over to Mr. Fábio Figueiredo, who will start the presentation. Mr. Figueiredo, you may proceed.
Good afternoon, everybody, and thank you for participating in the first earnings call of Cruzeiro do Sul Educacional. I'm Fábio Figueiredo, Co-CEO of the company, and I have with me the other Co-CEO, Renato Padovese, [Wilson Cavalcante], Commercial Officer, Antônio Cavalcanti, our CFO, and Luis Felipe Bresaola, our Investor Relations Officer. Before getting into details about our results, I would like to thank all our staff who helped us build Cruzeiro do Sul Educacional and also thank our new shareholders who placed their trust in our company and were responsible for investing over BRL 1 billion in our cash, which will boost our expansion in the next few years. Cruzeiro do Sul Educacional presented first quarterly results to our stakeholders in an extremely unusual context, depicting the end of a hectic year and a tough one for everyone, companies and people alike.
Paradoxically, 2020 marked another important achievement in the long and successful journey of over 56 years of the company. The B3 filing for an IPO as the third largest in market cap in the sector, and which was concluded in February with a market cap over BRL 5 billion . This was thanks to the almost 350,000 students enrolled from K-12 to doctorate in all areas of knowledge in the on-campus modality, as well as in all variation of distance learning in about three dozen campuses and over 1,200 hubs in 900 cities in all states of the federation. Another important highlight, besides volumes, the consolidated position as a top quality education company with superior institutional indicators specific for undergraduate, graduate, and research, which make us all very proud. In this challenging environment, the company's winning strategy and execution have proven to be correct.
The strategy of operating only by means of regional leading brands has put in evidence the desires and aspirations of Brazilian students in the sense of trusting and wishing to be associated with strong institutions of renowned quality. Execution in its turn with its superior agility and efficiency in the sector, delivered revenue and EBITDA increases, margins improvement, and an indicator which is extremely important, the high and consistent cash generation. Even more important, we delivered increasingly better academic results, and the recent indicators show the company's medical courses as the best in Brazil, being the Unifran medical course in Franca, São Paulo, the best in CPC, the Preliminary Course Concept , among all public and private medical schools in the country. Besides, the production engineering course of Cesuca in Cachoeirinha, Rio Grande do Sul, is also the best in the country in the CPC evaluation.
This special moment in which we became a public company, together with the outstanding financial academic results delivered in spite of the adverse scenario, more than making us proud, they make us keenly aware of our responsibility over the future results and with the new investor base, whom we thank for the initial trust and to whom we reiterate our unwavering commitment to dedicate ourselves to guide the Cruzeiro do Sul Educacional journey into the future in the long run. On the next slide, I would like to talk about Renato's and my own appointment as co-CEOs of the company. Besides reinforcing the focus of the founding families on the business, this move is part of the planned succession process. It is important to mention that Renato and I have been working together for over 25 years.
By adopting the Co-CEO structure, Professor Herm, as one of the founders of the company, will now give his contribution on the Board of Directors. We have Luis Felipe Bresaola as our Investor Relations Officer, whereas Professor Dr. Luiz Henrique Amaral holds the position of Non-Statutory On-Campus Education Officer, and Professor Dr. Carlos Fernando de Araújo Junior becomes Non-Statutory Officer for Distance Learning Education. On the next slide, I would like to highlight some points of Cruzeiro do Sul Educacional. We are one of the largest quality-oriented education groups in Brazil, with 12 higher education institutions, 25 campuses with almost 136,000 students on campus, whereas in off-campus we have a total of 1,200 hubs with about 217,000 students. On slide four, we illustrate the importance of quality.
We have over 50% of our courses graded four and five in the General Course Index of the Ministry of Education, which contributes to our having the best Performance Difference Index or the IDD among listed companies. This index measures the value added to our students in the teaching/learning process. We understand this is the main role of a higher education institution. Still on this slide, we mention our distance learning brands with high accreditation scores, besides showing the academic autonomy of our institutions, the majority of which are universities or university centers. These were my opening remarks, and now I would like to give the floor over to Renato Padovese, who will tell you about 2020.
Thank you, Fabio. I would like to start with the main highlights of 2020, which was indeed a very tough year, the first year of the pandemic, and a very challenging one. Nevertheless, in spite of that, we delivered great achievements, which I want to share with you. Over 40,000 people benefited from our services to the community. We maintained the jobs of over 7,500 workers. We opened a new Universidade Cruzeiro do Sul campus. We acquired two leading institutions and integrated them in less than six months.
We had the largest intake of students in the history of the company. We reached over 135,000 students on campus. We grew consistently in distance learning with the opening of 333 new hubs, reaching 217,000 students. We further expanded our cash generation, reaching BRL 326 million, which means a conversion of almost 90% of the non-adjusted EBITDA. Now, I would like to turn the focus to our academic achievements. This is an aspect of fundamental importance to us at Cruzeiro do Sul.
After all, academic excellence is at the core of our strategy, besides contributing to the attractiveness of our courses and the resilience of our business. The main one was the first place in Brazil conquered by the medical course of Unifran and the production engineering course of Cesuca, according to Preliminary Course Concept, the CPC, which is together with Course Concept, the CC, the most important and complete indicator produced by the Ministry of Education. Most important and complete because it takes into account, beside the students' performance in national exams, the ENADE and ENEM, other indices as well, such as the percentage of faculty with a master's degree and a doctor's degree, a faculty regime, full-time or part-time, campuses infrastructure, and the evaluation of the pedagogical project of the courses.
Now opening a parenthesis and talking about Course Concept, which is the result of the in loco assessments carried out by expert commission of the Ministry of Education. In 2019, we received 91 visits, and 95% of the courses assessed were awarded concepts four and five. As a reminder, in 2020, these assessments were suspended due to the pandemic. Another highlight I would like to mention was the result of the last ENADE of our medical courses. Of the 232 medical courses in Brazil, only four maintained by private institutions obtained the maximum score in ENADE, and of these, two are ours, the Unifran and the Universidade Positivo medical courses. Another theme I would like to highlight is social responsibility.
In spite of an adverse year, the year of the pandemic, besides contributing to train our students, we helped over 40,000 people directly last year by means of community services. We had over 60,000 such interactions in our health and aesthetic clinics, 23,000 in health and education courses, 17,000 in the veterinary complex, and 8,000 in the legal practice junior company and fiscal assistant nucleus. On the next slide, before getting into the figures, I would like to talk about the year of 2020, namely the first half of this year. Due to the restrictions to on-campus classes, we made a fast transition to digital, enabled by technology and the knowhow that we already had due to the many years of distance learning.
We took a conservative approach and changed the criteria for provisions for past due monthly payments by provisioning 100% of past dues over 45 days. Our intake of new students grew approximately 9% year-on-year in spite of the adverse year, not only driven by the effective marketing actions, but mainly due to the digital admission tests and enrollment already consolidated in the company. We opened the Santo Amaro campus, the fifth in the Universidade Cruzeiro do Sul, and the first in the south area of São Paulo City. The projected potential is between 4,500 and 5,500 students on campus, plus 2,500- 3,000 off campus. In March, we announced the acquisition of Universidade Positivo with campuses in Curitiba and Londrina, Paraná, with almost 34,000 students, and Braz Cubas with almost 22,000 students in Mogi das Cruzes in São Paulo.
Both are leading brands in the specific regions, and we finalized the integration of both institutions on schedule. We aligned two important fronts, quality education and technology, in line with the regulatory change occurred in December 2019, which ratified the importance of the use of new technologies in education. On the next slide, we will go over the second half of 2020. We started 2021 enrollment process for Cruzeiro do Sul Guarulhos campus with a potential to have up to 7,000 on-site students and up to 3,000 in DL. We had the approval to turn Cesuca College into a university center. With that, the center will be independent to open courses and increase seats without previous authorization from the Ministry of Education. Accreditation received top score, further strengthening the quality position of our group.
We launched Vila Lobos campus, also under Cruzeiro do Sul University for 2021, with the same students potential as Guarulhos, up to 7,000 on campus and 3,000 in distance learning. In October, we filed an IPO request at B3 in order to accelerate and continue the consistent expansion via acquisitions. There were 11 in the last 14 years, and also to open new campuses in already mapped areas. There was a slight improvement in our delinquency rate when compared to the first half of 2020, and even considering a conservative standard, there was a reduction in the margin impact of 150 basis points. In December, we reached the 12% of total distance learning enrollment in hybrid courses with more on-site activities in the hub and/or simultaneous activities live. The model contributes to an increase in the average ticket and addresses all students' aspirations, quality on-site classes and digital content.
At the year-end, we had a total of 1,214 distance learning centers with a total of 333 new hubs added to our network, and 86% of those hubs have less than 18 months of operation. There is a great growth potential to be tapped into in this line of business. I now end my presentation and turn the floor to Luis Felipe Bresaola, who will talk about the numbers of the quarter and the year.
Thank you, Renato. On slide 13, we highlight our student base for the quarter and 2020. For 4Q 2020 and on-campus education, the lack of intake cycle in the period and the adverse scenario caused a slight drop in our student base vis-à-vis 3Q 2020. In DL, the number of enrollments was up 6.2% thanks to an intake process of over 17,000 students in the period. For 2020, students base net of acquisitions grew 10.2% vis-à-vis 2019, and despite the pandemic, considering the acquired companies, the growth was 28.9%.
For on-campus, there was a drop of 4% in the student base net of acquisitions, and we expanded 13.9% considering the acquired companies. Although the number of freshmen for the year is 3.8% higher than 2019, dropout rate was slightly over last year's because of the pandemic. In DL, there was 31.2% growth in the student base net of acquisitions, reaching 40.6% with Positivo and Braz Cubas. On slide 14, we have the average ticket for operations. In the on-campus education, we see the company's resilience in maintaining its pricing strategy and its student base in premium courses around 68% in 4Q 2020. We also have the acquired company's impact from Positivo, which has a premium position in its area.
In DL, the ticket was down because of a greater number of freshmen in the base. On the next slide, the net revenue in the quarter was 28.7% higher than the prior year, thanks to the acquisitions of Positivo and Braz Cubas. Net of the acquired company's revenue would grow 1.5%, affected by the strong DL expansion. In on-campus learning, pricing strategy and focus on premium courses, which represented 68% of the student base in 4Q 2020, allowed a positive contribution to our revenue. But in the quarter, we had a negative impact because of the mandatory discount injunction at UNIP. If we were to disregard this effect and consider net of acquisitions, the revenue would have been stable year-on-year. For the whole year, revenue grew 22.2% thanks to the acquisitions.
Not considering the acquired company's revenue would fall 4.4%, a consequence of the pandemic in our on-campus education that mitigated the strong distance learning expansion, which in turn grew almost 14%. On slide 16, our gross margin was up 11.4 percentage points in the quarter, up to 54.1%, in addition to greater share in DL in the operation and scale gains. The new academic model with more digital content in the on-campus classes contributed to the gross margin expansion. For the whole year, the margin was up 4.3 percentage points to 47.9%.
In addition to the change in mix and with the acceleration of DL, the new academic model also contributed to the expansion starting in the second half of 2020. In the first half of 2020, there was the integration of two learning institutions, which at the time of acquisition had lower margins when compared to the companies. On the next slide, adjusted EBITDA reached BRL 171 million in the quarter, 76.5% higher than for 4Q 2019, with a margin of 36.4%, almost 10 percentage points higher than the prior year. Despite the PDA impacts and with greater share of DL in our revenue, it is important to highlight the digital progress in the on-campus education and also the integration speed for acquired companies. In the year, adjusted EBITDA was up 19%, reaching BRL 515 million, with a margin of 28.6%, 76 basis points lower than 2019.
The pandemic affected our revenue and increased our PDA in over 3x , which was 5.4 percentage points higher than the prior year when compared to the revenue. We also held the full integration process for acquired companies over the first half of 2020. On slide 19, the performance of our adjusted net profit up almost 73%, reaching BRL 91 million in the quarter, affected mainly by the margin gains in the operation. In the year, the adjusted net profit was BRL 175 million, approximately 3% higher than 2019. On the next slide, our receivables performance was stable from 42 to 43 days to 2019. We maintained our strategy for fewer students under the student loan program, which was 5.4% of the base at the year-end in 2020 in limited agreements. Also, because of the pandemic, we wrote off all 45 days overdue credits in the first half of 2020.
On the next slide, our CapEx in the quarter totaled BRL 15 million. Maintenance investments will continue and expansion investments were lower thanks to the conclusion of works started in 2018 and 2019. In the year, total investment was BRL 382 million, including acquisitions of Braz Cubas and Positivo. At last, on the next slide, we highlight our managerial operating cash flow, which reached in the year BRL 326 million, or 89.5% of the unadjusted EBITDA. Not a non-recurring impact in the year.
Managerial operating cash generation would be almost BRL 475 million. We ended the year with a net debt of BRL 1.5 billion, 3x the adjusted EBITDA. In the year, the figure does not reflect our IPO in February of 2021 when we added BRL 1 billion to our cash. Also important is that our debt has extended maturity dates. I end here my presentation and turn the floor to Wilson to comment a little more on 2021. Thank you.
Hello and thank you. Turning to slide 22, I would like to talk about our enrollment performance and growth plan for our different areas. About enrollment performance, starting by distance learning, we see strong growth in the students intake, consolidated tickets in the segment with a slight growth and re-enrollment in line with historical levels. For on-campus education intake is challenging considering the pandemic and the delays in ENEM's calendar. To mitigate these effects, we extended intake and re-enrollment up to the end of April. For re-enrollment, we see so far a slight drop vis-a-vis our historical levels. In spite of that, the segment's consolidated ticket is slightly higher than last year's.
Now about the growth agenda. In the on-campus education, we have four out of the 25 campuses are in maturing process. Of those four, two were successfully launched now in 2021. We increased the portfolio of three units, Cesuca by turning it into an university center, and Positivo in Londrina and Braz Cubas in Mogi das Cruzes, both of them brands we acquired last year, which improved our portfolio after the acquisition. In our medical courses, we now have 685 annual seats for our four existing operations, with around 3,500 students by the end of 2020. We are still in a maturation process and will have 71% of enrollments at your full maturity in the next years. Finally, we must highlight our special expansion by the means of new greenfields according to our strategic planning.
In distance learning agenda, we have 86% of our network in maturing hubs that is relevant contracted growth for the next years. Hubs expansion, we now have 1,200 active hubs and will continue expanding. We will continue rolling out our premium hybrid courses, that is healthcare and engineering courses, in our partner hubs network. So we will increase our addressable market, generating growth in the student base and in revenue. I end here my remarks, and I will turn the floor to the operator to start the Q&A session.
Now, we would like to open for your questions. Should you have a question, please press star one. In case your question has already been answered, please remove it from the queue by pressing star two. Questions will be answered in the order that they are received. Please do not use the speaker phone when you ask a question so that we may have the best possible sound connection. Please stand by while we wait for questions. Our first question comes from Samuel Alves from BTG Pactual.
Good afternoon, Fabio, Renato, Antonio, everybody, good afternoon. I have two quick questions. The first one has to do with the cost of rental cash. We saw an important reduction between the third and the fourth quarters. I think it was about BRL 3 million or BRL 22 million. And this is the first question. Perspectives for 2021. You talked about re-enrollment a little bit lower than the history of the company with a higher price. Could you talk about your intake? What about the trade-off between prices and intake for the on-campus? Do you believe that the price could be under pressure, or do you intend to keep the prices to the detriment of volume?
This is Cavalcanti. Good afternoon, Samuel. I am going to answer the first question. In fact, during the fourth quarter, we have about BRL 5 million referring to negotiations carried out because of the pandemic, and they have already been settled in the third quarter of 2021. Additionally, there was a slight change in the provision for rent by recommendation from our audit people. We usually did that on the last day of the month, and our auditors asked us to carry out a direct adjustment in the lease account. So it is because of the guidance of our auditors. So this was what happened in the third and the fourth quarters. This does not affect the bottom line, and this does not affect anything regarding the next two periods. Now Wilson is going to answer your other question.
Good afternoon, Samuel. Thank you for the question. We gave you some information already about the intake and the enrollment for on-campus, and as we said, intake is going up, and also the consolidated ticket is going up in this segment. On-campus, our intake is still on as well as the re-enrollment because of the challenging scenario. We moved the academic calendar so that we could have enrollments until the end of April. So we have a very good perspective ahead of us.
We trust April will have a very good performance in terms of enrollment in the last stretch and also in re-enrollment. As I said, a slight decrease vis-à-vis the history of the last couple of years regarding the on-campus because of the economic depression brought about because of the pandemic, especially the second wave. Overall, just reiterating, we are bullish about intake in this last stretch and also for the next half year because of the inventory of students that did not make their decisions because of the pandemic. So we trust the recovery and also for the next cycle.
In terms of the ticket, as we said before, right now, there is a slight increase in this ticket in on-campus, and we are working with the same commercial conditions of pricing history and reaching a balance in this trade-off between volume and ticket. This is what we do very well and in a very intelligent fashion. Each market has a different characteristic. Each market has a different competition. This is the way we do it here.
Thank you very much.
Our next question is from Fred Mendes from Bradesco BBI.
Good afternoon, everyone. Thank you for the call, and congratulations on the IPO process. I have two questions here. The first one, if you can tell us more about the last M&As, and I think Positivo already tapped into a lot of the synergy and strong margin as well. What else can you tap into in 2021? That's my first question. My second question, in line with intake. You have three different modes in distance learning. I just want to understand if the behavior is more or less the same there, or you have more online courses and lower tickets if that is stronger than the other ones. I would like to understand this trend on these three fronts. Thank you.
Hello, Fred. Good afternoon. So we still have synergies to tap into in Positivo. The academic, which is the integration of all the curriculums to be 100% digital. In the last half of the year, we have done that for all the other matrices except for Positivo, so we'll be tapping into the synergy for the curriculum for 2021.
Fred, thank you for your question. This is Wilson. I will answer the second question about our format. Our portfolio in distance learning, we have three different formats, as you said. We have 100% digital, the hybrid, which is distance learning with some on-campus classes, and on-campus, and that's how we address higher education, and we have a very good position there. The growth in the distance learning a rea in these three formats. The growth is strong in all three formats, both in the fully digital and in the hybrid.
We are moving forward a little bit more in the hybrid, but as we have in the growth agenda for the segment is to populate the hubs of DL with offering the hybrid courses, that is with some on-campus classes. We are already doing that, and this is in line with our planning. DL growth is robust in all the lines, and it is even stronger in the premium DL segment, engineering, healthcare courses, as we call them here.
Perfect. Very clear. Thank you very much to both of you.
Javier Martínez from Morgan Stanley.
Good afternoon, everybody. I would like to ask about the EBITDA margin, which was, as far as I am concerned, the big highlight. A spectacular recovery of margin and that you have delivered with a very good growth year-on-year as well. How can we use this data to understand the future? Do you think this is a good reference for 2021? How does it impact the integration of Braz Cubas and Positivo, the academic model? How long will it take for you to get all the synergies of Braz Cubas and Positivo to convert them into margin increases? We would like to know about the margins for 2021, please.
This is Antônio speaking. Javier, what I can tell you is that the capture of synergies occurs in an accelerated fashion over 2021. We have already implemented the curricula, as Renato has already mentioned. Therefore, the results already start to appear. In terms of the percentage of the margin increase that we had since the second half of last year, this is consistent, as we have already said, and it is sustainable for 2021. However, we cannot tell you a specific indicator in terms of a figure or a number. But the positive message is that we are on schedule, on plan for 2021 in terms of costs. So it is according to our plan.
Of the 36%, how much would be from Braz Cubas and Positivo? Are you talking about 10%, 15% for these two? I would like to understand the upside.
Unfortunately, I cannot give you any precise figures. I would say that they should reach the same level that we have in our history of all our acquirees. All our institutions have the same level of contribution to the group.
Perfect. Thank you very much.
Ladies and gentlemen, to ask a question, please press star one. Next question is from Caio Moscardini from Morgan Stanley.
Hello, everyone. Thank you very much for taking my questions. I have two quick ones. The first is about the provision criteria that you have changed because of the pandemic. I would like to understand if this new criteria will remain after everything goes back to normal after the pandemic, or if we are going to go back to the prior methodology. Second question is about the level of receivables that went from 41 to 43 days. This should be the new level from now on or do you see opportunities to improve and to bring back that level to 41 days? Thank you.
Good afternoon. This is Antônio again. The criteria was adopted during the pandemic. We have a historical criteria of 100% of overdue of 180 days. This is our criteria and will remain as it is. But still in the second half of last year and this first quarter, we adopted. We chose to have a more strict criteria of 45 days.
We are looking, we are observing now the first quarter and to see that there's an alignment with the first quarters of the company objectively speaking. This is what we are going to adopt for the first quarter. The same criteria we chose to work with in the fourth quarter. About the days, we tend to go back to 41 days. We have a slight expansion because of the acquired companies that had different conditions from the group's metric. Once they are fully integrated, they should follow the group's criteria, and I'm sure that we'll go back to the 41 days.
Great. Thank you very much.
Marcio Osako from Santander.
Good afternoon, everybody. I have two questions, one about M&As. What about the talk that you had at the time of the IPO, and do you have any further talks about acquisitions after the IPO? The second has to do with organic expansion. Maybe you could share about intake in Guarulhos and the other new ones. For next year, have you decided about the location of the new units for 2022? Thank you very much.
I am wearing a mask, so I apologize. Good afternoon. Based on the general picture that we showed you and the prospect that we had on our radar screen, I would like to say that most of them remain. They are alive, and they are going forward on regular pace for M&As. That is to say, it is not so fast. Only a handful were terminated. We also had, on the other hand, very important new ones. Our expectation is quite bullish for 2021, with some important things in this arena. This is all I can tell you, and Wilson will talk about organic expansion.
This is Wilson speaking, Marcio. As we always do, we have a differentiated organic expansion from Greenfield, and we have been doing this recently. We had two important launches of campuses with about 7,000 potential students on campus and in Guarulhos, 3.5 in DL. We started intake now and very successfully. The second campus, the Vila Lobos campus in the west region of São Paulo, this is a location where we did not have our footprint yet. There is a very important campus there now with a very relevant structure in the region. Quite successfully, they have already started our intake.
We are still having the intake process that was extended up to the end of April, but we have been very successful in both ones. Last year, we launched in Santo Amaro in the south region, and two years ago, the Paulista in the central region of São Paulo. All of them very successful. We have a very differentiated strategy for Greenfields. We have been analyzing about 12 locations that could or that might receive relevant university facilities with our very strong brand. This would allow us to advance in important locations and being very relevant in these locations for the students that are considering the possibility of coming to university. Every single year, we try to include new units in the group in order to be able to offer on-campus and distance learning courses. This is all I can tell you for the time being.
Thank you very much. When you talk about 12 locations, are you talking about 12 different cities, municipalities? Okay, thank you very much.
We end now the Q&A session. I would like to turn the floor to Mr. Fábio Figueiredo for his final remarks.
Well, basically, we would like to thank you very much for your attention. We are starting now a journey of bringing to you our results. We are working hard, and we are very optimistic, despite the context and the microeconomy and other circumstances. But we will keep on working on our planning with our strategy and bringing you results. We know that we are just starting a journey of good results that we will be bringing to you in the next quarters. Thank you all very much, and we will be available to take further questions you might have in the future. The conference call of Cruzeiro do Sul.