Good morning, ladies and gentlemen. Welcome to the web conference on Ser Educacional to discuss the fourth quarter of 2024. This web conference is being recorded and will be accessed on the website of the company, ai.sereducacional.com. The presentation is also available for download. We would like to inform that all the participants are going only to watch this web conference, and then we are going to have a Q&A session where more instructions will be given. Before we start, I would like to remind you that this information has the base, the beliefs, and of the Ser Educacional. And the information is available now for the company in the market. This information involves risks and uncertainties. The foreseeing forecast is not possible, and what may or may not happen.
Investors, analysts, and journalists will take into consideration that macroeconomic events, the segment, and other political facts can interfere their results and what we were going to say here. We have today Jânyo Diniz, CEO, João Aguiar, CFO, and Rodrigo Alves, Investor Relations Director. I would like to give the floor now to Jânyo Diniz, the CEO of, and we're going to start the presentation. Please, Jânyo, you can start.
Good morning, everybody. Thank you for attending to our 4Q 2024 Results Presentation Event. Let's move to slide four, where we highlight the main points of the quarter, which was very positive for our company. In this period, we managed to attract a certain number of students in the semester, especially in hybrid education, and achieved good numbers in terms of growth in the total student base and net revenue.
This enabled us to achieve significant double-digit growth in the adjusted EBITDA, crowning the year of 2024 performance in the same proportions. The main highlight of the quarter was the net operating cash generation, which grew by more than 200% compared to last year. This result allowed us to accelerate our goal of reducing financial debt by almost 10% on the same basis of comparison, as well as further reducing our financial leverage. These results are undoubtedly important for our strategy of maximizing asset utilization thanks to a solid operational optimization program that we have implemented over the last two years. This has allowed us to resume the distribution of dividends to shareholders after three years without any distribution, reflecting the confidence we have gained in cash generation for the coming years and our ability to reduce financial indebtedness even with the resumption of the distribution of these proceeds.
We are planning to pay out BRL 19.6 million in dividends in May, which represents BRL 0.15 per share, depending, of course, on shareholder approval at the next annual general meeting, which will be held in the end of April. On slide five, we highlight the significant improvement in results achieved over the last two years as a result of these various initiatives implemented since 2022 when we began our operational optimization plan. We have seen significant growth in both adjusted EBITDA and adjusted net income. However, the biggest highlight is undoubtedly the post-CAPEX operating cash generation in the notable increase in the conversion of adjusted EBITDA into cash. This increase in cash generation was fundamental in allowing us to reduce our net debt by 9% this year, and will certainly facilitate a further decrease in 2025.
The increase in the on-campus student base helped by the acquisition of new places on medical courses was important in this process. In addition, we noticed a sudden improvement in the punctuality of payments by our students, the result of a strategy of focusing on courses which are higher average tickets, such as health and law. This approach contributes to improved margins and cash generation. On slide six, we present an update of our expansion of places on the medicine course. Following the ADC 81 decision, new places are now approved by MEC ordinances of court decisions that have not yet become final. The graph shows that for the exams, we are offering 1,000 places per year, which represents an increase of more than 9% compared to the first semester of 2024.
Another thing since our last event, when we presented 881 annual places in operation, was the issuing of the decree for 120 places, half in São Luís, Maranhão, still 2024, and about 15 days ago in Maracanaú, in the metropolitan area of Fortaleza, Ceará, which, by the way, had strong demand on the opening of the entrance exam in March. With 480 new places in less than a year, we were the listed company that got more medical places through ADC 81 than all our listed peers put together. We were undoubtedly the big winner on this important issue, which will certainly help the Brazilian population to have more access to doctors, especially in the northeast and north region where we operate most.
In this way, we entered 2025 with a significant increase in the numbers of medical vacancies, which will be an essential pillar for generating results in the coming years as we consolidate the provision of these new vacancies. Moving to slide eight, we present the operating results for the period, highlighting the 16.7% growth in undergraduate enrollment in hybrid education and 9.2% growth in digital education. This result is especially significant considering the strong comparative base of last year, where we also had a favorable performance. The solid performance in attracting students coupled with a positive performance in re-enrollment allowed for considerable growth in our regulated education student base, especially in hybrid education, which grew by almost 10%, as illustrated by the graph on slide nine.
Moving on to slide 10, we present our average ticket, which also had a solid performance in this quarter due to the reduction in commercial discounts for fundraising, the increase in the participation of medical students based on the implementation of the Ser Solidário Program, as mentioned earlier. On slide 11, we present the distribution of students based by subject area, highlighting a significant growth in students' participation in health courses. Today, these courses account for 64% of our total hybrid teaching base and 45% of our students. This strategic move is the result of careful planning in recent years, especially with the reorganization of our course portfolio. We took advantage of our depreciated infrastructure of laboratories and clinics to expand our offer in this area, creating an environment conducive to increase our average ticket.
It's important to note that health courses have a structurally higher price profile, which boosts our results and generates greater resilience in the students' base to face possible adverse scenarios in the coming years. Those were my initial comments. Now I invite João Aguiar to share his vision of the final results.
Thank you, Jânyo, and hello to everyone present at our results presentation event. We now turn to slide 13, where we present our traditional summary of the course's financial results. The figures present show that this quarter represents the consolidation of a very significant 2024 for us. We saw a combined effect of increases in revenue together with the expansion of operating and financial margins, resulting in a significant improvement in results or better results for this period.
It's important to note that the expansion of margins seen through the year is less related to the increase in medical vacancies and more linked to the results of the operational optimization plans we implemented over the last two years. Another relevant point is that this year, we are not only substantially improving our DRE results, but also managed to significantly improve our cash generation, as well as reducing financial leverage for the eighth consecutive quarter and nominal financial debt by almost 10% compared to Q4 last year. Moving on to slide 14, we present two graphs detailing the known recurring impacts that occurred in the quarter, which were higher than those recorded in the recent earnings release. It is worth noting that it was a typical quarter in this sense.
The total of non-recurring items in this quarter was approximately BRL 70 million, but it is important to note that only 25% of these impacts had a cash effect during the period or is expected in 2025. Among the known recurring impacts, we can highlight three relevant adjustments. Recalculation of return of leases. These adjustments in the amount of BRL 17.4 million was made to better adapt the IFRS 16, as well as mainly due to the write-off of properties returned in the period. In the amount of BRL 17.4, according to the account status, although it has affected relative previous periods. Adjustment related to the actuarial loss of PDD of the FIES.
We increased the amount to provision by around BRL 17 million due to the failure to improve compatible statements, so we can keep track of the deposit controls on contribution to the fund, as we have done until this year, keeping this information, making these improvements. Considering the PDD of the FIES, we increased the amount and the assets of acquisitions. This year, as a precaution, we increased this provision by around the discounts on the acquisition we made on the last 10 years. As a result, we lowered the BRL 20.4 millions of a goodwill from several of the acquisitions, such as ABES, which were made before the IPO, as well. UNI7 and CDMV. It's important to note that although these adjustments had an impact on accounting net income, they had no cash effect during the period.
For this reason, the board of directors have decided to resume paying dividends to shareholders based on the net income adjustments by part of these non-recurring adjustments. This decision reflects our understanding that our cash generation capacity already allows us to allocate part of the capital that was previously earmarked for servicing debt and reducing financial leverage, and that as of 2025, it will be a portion of the adjusted net income for shareholders' remuneration. This is exactly what we illustrate on slide 15, which shows that our operating cash generation this year was significantly higher than 2024. This shows that we have a company which has a student base whose credit profile is much more consistent, which has allowed us to increase our cash generation.
Another further aspect in that the trend of 2024 so far is to maintain the levels of those of last year compared to previous years. This is due to the increased participation of medical students in our base, as well as the fact that we have a higher proportion of students on course, which high average ticket we have now adopted strict approach or grant agreements. These measures have on the improvement. These measures have been reflected positively in our PMR, as we can see on slide 16, which shows a substantial improvement each quarter in the PMR ex-FIES. This indicates that our payment cycle is improving as a result of our working capital has also responded positively, supporting our cash generation process after CapEx. This has allowed us to reduce net debt by 9% year on year. Now we can move to slide 17.
We can see now these factors have a positive effect on our debt, which continues to fall. This applies to our financial leverage ratio, a topic we believe we have addressed well. We are generating enough cash to reduce our debt organically through the results of the operations. This will allow us to adjust our capital structure to face the current high interest rate scenario in Brazil. To conclude my comments on this quarter results and hand the floor back to Jânyo for his final remarks, I would like to highlight the slide on CapEx. We saw an increase compared to the same period last year as a result of completing work on buildings that will have greater use rate to enable the return of other properties, which are the part of optimization plan.
Thank you, João.
Before we close this presentation and move on to the Q&A session, I'd like to share with you our objectives for 2025. At the end of 2024, we completed an extensive operational optimization project, which required a significant effort from our team. We are now ready to start a new cycle focused on maximizing the use of our assets, going to adopt a conservative expansion process, valuing our brand and concentrating our efforts on courses which create a market appeal, such as those in the areas of health and law. We are committed to continuously improving our academic quality and strengthening our brand attributes in the cities and regions we operate. This will allow us to optimize our average ticket and the occurrence of our campuses of our buildings. In addition, we are gradually resuming the opening of new units, our ways in strategic locations, preferably in shopping centers.
These units will offer an integrated omnichannel approach to hybrid and e-learning courses with a modern learning structure. The aim is to ensure that these operations have the shortest possible payback time, prioritizing regions where our brands are already recognized. Examples of these are the new units we are opening from 2025, the first in the east of Manaus, using the UNINORTE brand, especially in Bragança, Pará, with the UNAMA brand, and the third in Florianópolis, where the UNIFAEL brand is well established. These units join the operations we started last year in Curitiba and Porto Alegre, which shows that we are carrying out well-controlled expansion of capacities in place with good potential, where we have brand recognition and therefore do not need to invest so much in marketing, but we did not previously operate.
This process is already bringing positive results and is supporting us in attracting customers for 2025, for the first quarter. With the progress so far, we can consider that we will have a successful cycle, providing another solid year in terms of growth in the students' base since we are achieving robust indicators for enrollment and re-enrollment. This new round of great success reminds us of the importance of maintaining our efficiency, which is key to ensuring continued growth in our operating and financial margins for the third year running. We expect another significant cash generation, this time supported by the growth in our student base and the new medical place we have won, as mentioned, Maracanaú.
By the way, we will continue our search for more medical places, either through the injunctions that we are being proceeded by with the MEC or through our participation in the Mais Médicos 3 program. Thus, we will continue to expand our students' base in the course with the highest average ticket in Brazil. We are therefore starting a new operating cycle, activating our organic growth initiatives combined with a firm commitment to operational efficiency. Our goal is to continue generating cash, reducing our indebtedness, and making room for a greater distribution of dividends from 2026. Finally, before we open for questions, let's go to slide 21, where we present the update on our mission, vision, and values. We created this update in order to align all of the company's employees with our long-term objectives.
Our focus is to intensify our commitment to offering an educational that trains entrepreneurial professionals centered on innovation, promoting prosperity and social transformation for the students who attend our institutions. With this initiative, we aim to fund increasingly recognized a benchmark in higher education in Brazil, especially in the areas in which we operate, while maintaining our commitment to teaching quality and our social responsibility. This update is a significant step in the development of our strategy for the incoming years, especially for 2025, which we will mark a new stage of growth and success for our shareholders. We now open for the floor for questions.
We would like to start out the Q&A session. Please to ask, use the button raise your hand. If your question is answered, you can leave the queue clicking on the same button again. Wait while we connect the questions.
Our first question comes from Mr. Lucas Nagano from Morgan Stanley. Please, Mr. Nagano, open your mic.
Good morning, Jânyo, João, Rodrigo. Thanks for this presentation. We have two questions. First, it's about the intake on the first quarter. The on-site courses have different results, but they have a rate of development. Very nice. The second question is about the PDD. If you could explain a little bit better how this impacts the ex-FIES, because we had a ceiling of 25%, but as you said, there is a consistent cash generation process, excluding. I would like the PDD could decrease on 2025 to a level of converging. Thank you.
Thank you, Lucas. Thank you for your question. I'm going to answer the capitation of new students, and then I'm going to give the floor to Aguiar.
The capitation of on-site students is very robust, much above what we thought. We are trusting that we're going to be a very successful year on getting new students. Online courses are suffering after this huge growth after the pandemic established itself and stayed flat. The on-site courses are still growing, and I think there's going to be generated lots of cash flow. That's an important detail. As João said, we are still in the middle of the process. We didn't finish the process. The information is trustworthy, but we still need to conclude this process to understand this student enrollment.
Hello, Lucas. It's important to talk about the PDD, those who pay, and those who use the financial support. We have a cap on the student loans where operators on the market finish decisions.
Who does it has to control and charge the students, those who finish the education process. The new help, financial help for students is still working since last year. The student loans, what we can see here, it's a marriage between the information that the cash fund of the bank was given to us to our control we do.
Yes, we had a very effective workflow, and the rule here enabled us to receive these contributions. The contributions, the fund, there is governance, and there is control on these contributions. We control those loans, but we're doing that by ourselves. This CapEx is for hard moments, and that's what's not happening on these student loans. They are very well managed. What we can see here, we have this protection of 20%.
Understanding this makes sense in the context of 37%, making sense on what we had happening with those banks, but we were able to see some inconsistencies. We have to prevent some facts. We had conversations with the bank, understanding that what was happening, control, the manager of these values, and we improved this provision to 27.5% because of these inconsistencies. We are following this up with the bank, being very diligent with the bank to see how much of this provision is part of the fund that pays these loans. If there is default of a group of students that we did not finish the first cycle, this is not part of what we want to have. We want to have follow-up of this very closely, but this PDD is going to structure this in a better level.
On PDD of those who pay well, pay normally without loans, it's the same what we reported. Lucas, here there is a, I would like to complement this answer. The PDD, recurring PDD coming from the student loans was 3 million and was addressed on the PDD on the fourth quarter, showing us what is the impact of these student loans on us. On the 70 million we were able to make, it's different than what we did years before. Following up the 3 million at what is the part of these student loans.
Thank you very much.
Our next question comes from Lucca Marquezini from Itaú BBA. Please, Mr. Marquezini, your microphone is open.
Good morning, everybody. Thank you for being here. First question. I'd like to talk about the student enrollment.
It's clear that they have a higher volume, but could you comment on the dynamic with your competitors and what's happening with tickets on-site and online students? About the tickets on hybrid students. We have impact with students with discounts. I would like to understand what is the strategy the company is going to use on 2025 or are going to see the impact of what is happening along the year?
About the average ticket on our competitors on new enrollment, what we were able to see is that we see a market that is improving on-site.
The market is improving in the in-person students, and we have the participation of our district work to give back some real estate and have a better use of those real estate locations so we could be more conservative, not incurring the risk of having a worse enrollment on not participating in a movement, participating in some city or another city. We are able to see this summer until now, not finished the process yet, we see a very healthy market, which is going to help us in generating revenue, which is our main goal.
Talking about it, the increase of cash generation that we were able to see in 2024, which seems to, as we see here, low unemployment and zero development on the higher education, the punctuality on the payment is reflecting on recognition of revenue because the student who pays on time has a discount of 10% in comparison to the student that pays on the last day. This one on one side pressures the average ticket, but on the other side, increased the cash flow generation positively, which is the main highlight of this quarter, having seen that we were able to not only generate very good cash after interest of BRL 7 million a year, but in a period where we pay vacation and we can reduce the debt in almost BRL 20 million. This impact very well on average ticket. It's very positively.
To complete this answer, comparing to what we're going to see in 2024, the tendency is that to be established. On one side, we don't see a great improvement on payment timing. What we have as payment flow in 2024 was good. It is going to improve in 2025, coming from the medical courses. In 2024, the medical course generated little results because it was the first courses on the offering of 240 student places. Now we're going to have 2025, these 240 going to the second year. Students, but we're offering the first class, we have 400 students more. We are able to have these new student places in Maracanaú, which we launched these tests for enrollment, and we're able to fulfill these new student places 100%.
We'll complement this answer, as Rodrigo said, this movement on the improvement of the payment, which shows we're not giving big discounts. We still have some capitation of students. Having the new students' enrollments, we have a very important movement for the company, which shows this movement is very healthy for the company.
Thank you.
Now, Samuel Alves from BTG Pactual. Your microphone is open.
Good morning, Jânyo, Rodrigo, Aguiar. I have two questions. First, on medical courses, I would like to know if you could talk about the performance in the fourth quarter. What was the revenue consolidated compared to year to year to understand how is the performance in the segment, in this industry, and some information about the ticket. This is the first question.
The second question is about, on the same segment of Rodrigo, we have a better occupation of real estate. What is the occupation that you have now in your company?
Yes, Samuel. The quality of medicine on medical courses, we have a high involvement. The 140 student places were offered in September. The courses of all courses by liminares, by judicial decision, they were delayed. We did enrollment in February. What do we have now to comment related to, sorry, I forget the other question. The occupation on real estate, we had occupation today on these units on 80% of occupation, 85%. We launched new units, new student places, new colleges, and they have lots of space to occupy. Complementing, the majority of students is still on our cohort. We are getting close to the limit of occupation.
Something that's very nice, as Rodrigo said, there's no pressure for discounts. We can do this by substitution. We can change the quantity of students by the quality of the ticket, the better prices. This has a direct impact on the revenue. Thank you.
Next question from Mirela Oliveira from Bank of America. Your microphone is open.
Good morning, Rodrigo, João, and Aguiar. I have a follow-up on the question on medical courses. I would like for you to comment if you see a difference on the ticket among those placed by judicial decision and the ones you had before on your base. The second question is the costs. We see there was an increase of costs on personnel. You commented on the reason and impact of the increase on-site in-person courses. What do you expect on gross margin seeing this growth on in-person courses?
Related to this, we did not see all this potential. We have very similar tickets, but we have a very high capillarity. We are present in Bahia, Pernambuco. All of those sites follow the same ticket we had before. There is no pressure yet on the medical courses yet, on the price of the medical courses. We are not worried about it.
As Rodrigo said, medical courses in Maracanaú, we opened this three days ago, and it was a very high rate of enrollment. We are going to fill the student places very soon.
Hello, Mirela. Thank you for your question. This point that happens on these in-person courses, in 2023, we launched the we went on the stock market. We did not know what was the provision that were on the policies of the company.
When we see this bonus, we were adjusting the payment of this bonus, seeing this indicator, these goals were being reached on the goals we established. The biggest impact was the increment of new businesses, which were contributing to our appetite and revenue. Consequently, with this increase of these operations, we were able to increase our personnel cost to give support to that, even if the revenue was not there yet. This was one of the first points we had here in 2024. Thinking on the costs, this margin is going to be very similar to what we saw in 2024. We're going to be a very big margin, even with the operational improvements we did with these investments, which tend to be very normal now.
Mirela, to give a historical perspective, what we were able to see after the FIES period, this less leverage on the students, less debt, where we had a higher discount on the enrollment of students. What you can see now, you can see now in 2023 and 2024, is the opposite effect. We have financial leverage, less leverage, with more occupation by students. The discount on the enrollment, we are using less, even seeing the numbers. This does not still show the final picture on the discounts of the on-time payments generating revenue and the new medical courses enrollment. We have two effects happening. The financial leverage with our own capital and the new student placed on medical courses where we have a better ticket. We are now in the third and fourth cycle, and we have the total occupation of the student places.
This helps us on this expansion. Thank you very much.
Next question from Marcelo Santos from JP Morgan. Please, Mr. Santos, your microphone is open.
Good morning, Jânyo, Aguiar, and Rodrigo. Thank you for the opportunity. I have two questions. First question, I would like to know more about the average ticket. We had the increase of punctuality on the payment. This is we were doing that already in 2024. We are now in a moment where everybody's paying on time. In 2025, this headwind should not be there. The results of 2025, I would like to understand where we are. Now, 2025 is a very benign year where we do not have this effect of debt and default. I am talking about the ticket. I know the cash generation is very positive, but I am talking about the ticket, the average ticket.
I'm talking about leverage, as you said before, generating cash and reducing the debt. How the company see what we accept of financial leverage, and which we should not go on the lower this level.
Marcelo, first question. Great question. Those who look at the cash flow are going to say that the tendency is to have the established on these punctuality discounts. If the financial panorama in Brazil improves a lot, we are getting to a level that's very interesting now, working with these discounts. When we see the new medical courses, this generates a better cash flow, better revenue. This punctuality improves a lot. We have it's not going to improve more with the punctuality, but we have more student places. The tendency is now to have the increase of tickets, not because of the establishment of the punctuality. We have the capitation of Ser Solidário.
Ser Solidário do not recognize these discounts. We were doing seasonally, and this might help us recognize and improving our tickets. We have also the commercial aspect of that, where we successfully, in a very conservative way, have less impact on P&L. This helps us a lot.
Complimenting this answer. Marcelo, thank you for your question. This improvement of the punctuality, you were able to observe this now, because if this improvement, we have a very low impact throughout the year. We gain, but it's a little impact. We don't see the visibility of that on the average ticket. We'd be able to generate more revenue. This leverage is going to be to a better level compared to EBITDA, not yet this year, maybe next year or the year following. With less leverage, we can work on our financial investments better.
Growing with opportunities and less leverage. I believe this level, compared to EBITDA, is what we are looking for. It is very possible to keep the same levels.
Thank you very much.
I would like to remind, for making questions, please raise your hand. Wait while we collect more questions. Next question from Renan Prata from Citi. Please, Mr. Prata, your microphone is open.
Good morning, my colleagues. Thank you. I have a few questions. On FIES, the student loan, we have the provision of BRL 70 million recurring because of the other years. Then we have this BRL 3 million is already part of the 17%. How should we see that in the future? What are going to be the updates from the bank? I see that you are here for me.
The other one is that I would like to understand what's the level of students, evasion of students in this semester on online courses. What is that? What are you expecting for these indicators for the future on online education, on the evasion, on what kind of adjustments you have to do? That's the question. Thank you.
As Aguiar said, confirm that you're right, but I would like to remember that FIES is more and more irrelevant on our results. The increase of PDD that we had this semester is going to have a low impact because we have less impact on the revenue of FIES as the program got smaller and smaller. How about the evasion? We have some strategic changes on the way we teach online, enroll students online. We reduced the offering of 100% online courses.
This showed to us the resilience of the student base. We were able to bring students with less discounts. When we look at the result of online education this year, the average ticket is increasing. That is the growth of participation of students, medical courses on this participation. We are able to say that they have the same behavior on the online students and the in-person students. That is why we have a lower evasion. We did the same with post-graduation. We stopped offering courses with low average ticket and without in-person lessons. We focus on having less students on post-graduation online with a better ticket and more resilient. This has a very positive impact. Thank you.
Thank you. This Q&A session is closed. We would like to give the floor now to Mr. Jânyo Diniz to make the final remarks. Please, Mr. Jânyo, you can continue.
Thank you all for participating in our results release. Our investor relations department is available to provide further clarification. Thank you very much. Have a good day.
This web conference from Ser Educacional is closed. Thank you for participating and have a great day.