Good morning, ladies and gentlemen. Welcome to Ser Educacional's video conference results for the second quarter of 2022. This video conference is being recorded, and you can see it on the company's website, ri.sereducacional.com. The presentation is also available for download. We inform that all participants will only be watching the video conference during the presentation, and afterwards we will start the question-and-answer session when further instructions will be provided. Before proceeding, I'll take this opportunity to reinforce that the forward-looking statements are based on the beliefs and assumptions of Ser Educacional's management and current information available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore depend on circumstances that may or may not occur.
Investors, analysts, and journalists should be aware that events related to the macroeconomic environment, industry, and other factors could cause results to differ materially from those expressed in the forward-looking statements. We have here with us Jânyo Diniz, Chief Executive Officer, João Aguiar, Chief Financial Officer, Rodrigo Alves, Investor Relations Officer. Now I hand it over to Mr. Jânyo Diniz, Chief Executive Officer of the company, who will start the presentation. Please, Mr. Jânyo, you can continue.
Good morning, everyone. Welcome to our presentation to show Q2 2022 results. Let's start our presentation on slide 4, showing the main highlights of the second quarter, which showed that Ser Educacional is gradually returning to its growth path. With the first step coming from the increase in the total student base as a result of our strategy that combined organic growth and hybrid digital education with acquisition, mainly through UNIFAEL done in January.
Another important factor for organic growth was the massive decrease in dropout rates, because our students returned to their normal activities with the cooling of the pandemic effects, and also the great acceptance by Ubíqua, our learning system, launched this year. As a result, our net revenue is growing around 20% compared to last year, and our adjusted EBITDA has also grown again, even considering that in the first half of 2021, we did not have the return on all operating costs nor investment in expansion and new business, as we will detail below. On slide five, we detail the first investment, the implementation of Ubíqua, our hybrid and ubiquitous learning system, which allowed students from all over Brazil to access quality education supported by disrupted technologies and relying on creative strategies for connecting classroom with the outside world.
Ubíqua is entering the fourth enrollment process, gradually making our blended education innovative and transformational, which had important investments in content production, development of its academic concept, which already has wide acceptance in the market. On slide 6, we present our distribution network after the consolidation of UNIFAEL, leading Ser Educacional from this year to consolidate its network, increasing reach, achieving national capillarity. Now we expand our operations, creating small units and super poles to expand the reach of our mix of courses, especially for the health and engineering segments, generating revenue expansion vectors with the capacity to expand operating margins in both digital and hybrid education. By doing so, we'll raise our offer and we'll make Ser Educacional a complete omni-channel network in Brazil, generating synergies between units and poles.
On slide seven, you can see our new businesses, which has three verticals: health, EdTechs, and services related to continued education. These are the new companies in our continuing education ecosystem, creating educational assets and revenue streams. With the new businesses, we can serve the population through our multi-clinics, dental clinics, and veterinary hospitals through the CDM, CDO, and CDMV brands, all of which offer post-graduate and specialization course. This will happen across Ser Educacional's network and will be important both from the point of view of quality and the reputational perception of our campuses, as well as helping the local dilution of costs and occupancy of buildings. In EdTechs, we have GoKursos, our course marketplace, and the acquisitions of Delinea, Beduka, and Prova Fácil, which offer, along with the EdTech, a series of related services, such as certifications.
These companies have a lot of market to gain as they are positioned in segments with high growth potential, especially in the new markets that continuing education is joining, such as free online courses, tests, certifications, among others. Finally, we have b.Uni, the first digital account fintech that is on the final stages of the approval process with the central bank to start its operations independently. And Peixe 30, our professional social network, which is showing accelerated growth already with more than 100,000 users. On slide eight, we present our continuing education ecosystem that is gradually being implemented in transforming Ser Educacional into a company with a complete, scalable offer, with high academic quality of our students, capable of offering courses and following their development when they are looking for professional qualification or not. Now I hand it over to João Aguiar to present the operating and financial results.
Thank you, Jânyo. On slide 10, we present the funding results for the semester. We followed the same positive trend that we presented in May. The uptake of hybrid education had an important performance in the semester, with growth above 20%, while the uptake of digital education grew by around 5%, mainly due to the integration of UNIFAEL. On slide 11, we have the result of the student base that benefited from the combined effect of good enrollment with a reduction in dropout rates in blended learning, while digital learning student base grew 6% with a decrease in the dropout rates with the acquisition of UNIFAEL. On slide 12, we have the evolution of the mix of courses, and the health courses continue to gain space.
While the opposite in hybrid education, while an opposite movement in digital education with a growth of 100% on online humanity courses due to integration of UNIFAEL. The expansion of health courses in our total student base has been relevant to protect our average ticket, improve our market differentials, and that is why the expansion of units and super centers with health laboratories and service network that allowed expansions of this courses base. On slide 13, we show our average ticket, which is growing again comparing to last year because of the seasonality effects that we mentioned in the previous quarter. While in Q1 and Q3, we fully recognize promotional discounts for students enrollment and re-enrollment. In the second half of the year, this effect is already almost completely diluted and should continue to have a positive effect throughout the year.
On slide 15, we present the summary of the results for the quarter with a 20% growth in net revenue and almost 40% adjusted EBITDA compared to last year, which shows that Ser Educacional is growing again. Our adjusted EBITDA margin contracted compared to last year because of two factors. The first, operational releveraging processes, which is gradually recovering as the student base, especially in blended learning, starts to grow again, increasing the occupancy of buildings and the number of students per class. The second is the return to normal operations with the cooling of the pandemic, which increased operating costs and the investments we are making in the opening of new units and new business, especially compared to the past year, that we still didn't have the full return of activities due to the pandemic.
In my opinion, these are temporary effects that tend to evolve considerably as we resume our operations, new business and units start generating revenues as we absorb the operation synergies from acquisitions we made in the 18 months. However, net income decreased in this quarter due to financial leverage. Because of this maturation phase that we are still going on, we created continuing education ecosystem to grow, to repay these loans, and increase our profitability. To wrap it up on the consolidated income statement, this quarter, we made an impairment of BRL 65 million with the acquisition of UNG, which was made at the end of 2014 when FIES, the Brazilian program that funds education was in full growth already. It's worth noting that this provision has no cash effect.
On slide 16, we break down our income statement into segments, and as you can see, we have a solid share of medicine and digital education in our results, which combined represents 75% of total adjusted EBITDA. Another important factor is about the new business consumed part of the result, which represents the investments in the future of the company that we are making now. On slide 17, we show the evolution of these segments in relation to last year, showing that we have an increasingly diversified assets portfolio. Blended learning is still with small margins in relation to its history because of the low operating leverage. This is an opportunity to expand operating margins when we consolidate base growth processes started this year.
On slide 18, we show how IFRS 16 has an accounting impact on our results and a view of adjusted EBITDA without the cost of rents. On slide 19, we show that our average term of accounts receivable followed the trend already shown in the previous quarter and had a significant improvement in this quarter, reflecting the reduction in the evasion rate and dropout rate. On slide 20, we show our operating cash generating that reduced compared to last year, mainly because of the increase in interest expenses and low ones, in which we understand are being addressed over 2022 and 2023 as the company continues to generate cash to amortize its debts and is still at the beginning of the process of generating synergies from its acquisitions and maturation of recent investments in the ecosystem expansion.
On slide 21, we have CapEx, which aligned to what we said before, shows that we are gradually resuming investments in new units and expanding our ecosystem. As a result, we resumed growth in investments, which went from 4.8%- 5.8% of net revenue of the quarter. On slide 22, we present our indebtedness. As I mentioned earlier, is higher due to the financing for the acquisitions we made. We have a well-controlled leverage level and below to the market average. Now I turn the floor back to Jânyo so that he can make his final remarks before we open the question-and-answer session.
Thank you so much. Now we will talk about the main goals. Finalize the integration of UNIFAEL that we started this year, and it is an important strategy which position us as a relevant player in digital education. It allows national reach and opportunities to expand the mix of different courses for the health area. The second goal is to focus the return of growth and profitability of hybrid education, which will have, in the second semester, another important round of increased enrollment and occupation of buildings. Ubíqua has also been important in its process because it is creating differentials increasingly recognized by the market, helping in quality control, increasing student satisfaction, and of course, reducing dropout.
The evolution of our continuing education ecosystem with, as I commented earlier, we are planting the first seeds that are creating sources of scalable revenue generation and allowing us to go beyond offering courses to students. Another key aspect is the generation of synergies from recent acquisitions to ensure that the companies we brought to Ser Educacional can not only have DNA synergies, but also create value by growing the revenue base and generating new businesses. Last but not least, maintaining our financial stability that has always been and should continue to be a focus in our company with operational cash generation and shareholder returns.
Now we will open the floor to a question-and-answer for investors. If you want to ask something, you can click on reaction and raise your hand. If they answered your questions, you can leave the queue.
The first question is from Lucca Marquezini from Itaú BBA.
Good morning, everyone. Can you hear me?
Yes, we can.
Okay, great. Thank you. I was going to talk about expenses, because if we compare that to the revenue and the activities going back to normal after the pandemic, can we consider that this situation is back to normal again? As for health, 60% of the hybrid base was presented and considered the maturity of health processes. What is the importance on the long term?
Okay, as for the first question, the trend on the market is reducing the expenses on rent, and the process is being hybrid now. The teaching process is being hybrid. If we talk about the rent cost, the market is being more mature if we consider the distance and we consider that now the intake is being done in person.
So now I think that this is reasonable and as expected. If we think about health, I think that we need to think about two environments. Medicine that is on a ramp-up process, and we are in 70% of the opportunities open. So in medicine, we have many positions and the health on ex medicine, which is the base in Ser Educacional. This is a difference in the market because it is one of the companies with a huge participation on health, and it needs to keep going like this because we are still investing and this is part of our business plan. We want to have more health offerings, and this should be digital as well, online as well. Students from the human careers are migrating to the digital environment. So this is making the hybrid teaching is focused on practical courses.
Engineering could be another option, but what we figured out is that engineering doesn't have a huge demand for now.
Okay, thank you so much.
Next question is from Marcelo Peev Santos from JP Morgan.
Good morning, João, Rodrigo, Daniel. First of all, I wanted to understand your points of view of digital education, because if we think about the intake that you had, it decreased, but you had a strong year last year. So how do you see the future, and how do you see the growth potential, how the hybrid scenario is going to be? The second question is that your PMT had a decrease. The financial discounts were low, I think that receivable as well. So how do you see the sustainability of this in the future? Can you explain this a little bit more? Thank you.
Well, first of all, I'll talk about online teaching, and then we are going to talk about receivables. What we see for online teaching is that it had an increase during the pandemic, especially on the online courses. They had an average ticket that was considerable, but right now, we consider that this have an intake for 100% online doesn't make sense, because now our cost structure in the segment 100% online is changing. Now the cost of the intake is more expensive. So our strategic planning is focusing more and more on improving the average. We want to increase our capability on engineering and bring in more profitability for our front. The student base is changing, and now our focus is not on the market and on more profitable markets.
Of course, we can't stop participating on the 100% online courses, but in order to create cash and return on the investment, we think that it's more attractive to invest on segments that have practical courses, and this is being done through more popularity.
Okay. Hello, Marcelo. Talking about PMT and the financial discount. On the pre-pandemic, we were having old tickets because of what we did on the company. But with the pandemic and the receivables changing, we had a negative impact. But then if we think about the two years, we have this recovery phase. Another return in PMT, with this, you can't have a normal recovery. There were more evasion. So we had more dropouts, and this has an impact on PMT. But after the pandemic, we started to recover tickets, newer tickets, but we still have difficulties on recovering older tickets.
The financial discount is increasing because of the dropout. With the new tickets, we can recover some of them, and we register this as a reduction of the net revenue. With this scenario, it takes a while to translate this, the new figures. But if we keep working like this, and if we still get new tickets with less dropout, then the PMT is going to recover if we think about previous quarters or if we compare this with the pandemic. I think we can think about a more normal PMT without considering these two years because of the pandemic.
Okay. Thank you.
Remember that if you want to ask questions, you can raise your hand. The next one is from Vitor Tomita of Goldman Sachs.
Good morning, everyone. I am Rodrigo. Thank you so much for answering the questions. We have two questions. First of all, can you give an overview of how you are doing the intake now? The second question is if you can provide more context on the margins for the second quarter for the second half of the year. About the impact. Thank you so much.
Okay, this is an interesting question. As you know, our intake process is on 50% right now, so it is earlier to have a proper answer, but it is similar to what we expected, because the intake process now is extended and we are going until September or October with this process. I think that we are going to finish as expected, both for in-person and online. As Rodrigo explained, now the online process is different, but we are trying to hold the price for now.
We are not changing many prices on the intake, thinking about the dynamic and the profile of the online courses. Generally, the intake is going as expected if we consider the last half year of last year. Thinking about the margins on the second half of this year, I think that the sector is trying to recover the occupancy rate. We suffered this in the past during the pandemic, and we had to make many adjustments and have a good occupancy rate on the buildings, and this is a trend that is still going on.
What we think is that if we can have a reasonable intake, and we can have new tickets on this half of the year with a significant intake rate, what is going to happen is that now this new intake, and the courses that were created on the first half of the year, there is a good possibility of a financial recovery, and this way we can have more margin. We still do not know how the intake behavior is going to be, but this is a trend. We went through the difficult years of pandemic and operations, and we had a beginning of the recovery, and what we think right now, and the rest of the sector, is to keep going like this, mixing good dropout rates and a big intake. We need to grow. It does not need to be a huge change.
You just need to use the buildings and have some courses. We are re-adequating ourselves to the market. This is really interesting right now for the market, because the demand is back because of the end of the pandemic, and now we are going to make adjustments, and the economic scenario is still a challenge for us. But what we see, as they said before about the PDD dynamic, is that now we have a better scenario if we compare it to last year. Now we have a better scenario, and we had a huge work of doing our homework, working on our cost structure, so we are preparing ourselves for this recovery.
Okay. Thank you so much. It was really clear.
Now remember again, that if you want to ask questions, you can raise your hands. The next one is from Renan Prata of Citi.
Good morning, everyone. I had a fast question just to understand what the CapEx rate for this year is, because you were talking about investments and some things were freezed or kind of freezed during the pandemic. What would be a good CapEx rate for this year? Thank you.
Hello. We understand that the CapEx rate, a reasonable one for us to keep having a good operation rate and keeping our business, we are talking about 5% of our net revenue. This year we are getting there because of the investments that we are doing. Some things were not in a good position during the pandemic, but it was because we were not prioritizing the investments. But I think that 5% or 6% would be a good figure to keep the buildings, and in some buildings, we may need to do some retrofit work.
But we think that 5% or 6% is a reasonable figure on the investment in CapEx.
Thank you so much.
The next one is from Caio Moscardini from Banco Santander.
Good morning, everyone. Can you hear me? Yes. Yes, we can. Great. I would like to ask about how you see the new business. Are you thinking about a break even on the margins? What's the revenue potential that new businesses can have in Ser Educacional? If you could share something about this, it will be really helpful. Thank you.
The new businesses are trying to get to the market as auxiliary revenue, and we have a good expectation. They're going to have more participation, and part of our strategy is that additional or complementary revenues are going to have a good result on the figures.
But of course, we can't open 100% to the market, but it's an investment that we have been doing, thinking about acquisitions of more than BRL 100,000. This is something that we think for the future. We want to be on the markets that are starting to develop, because in many cases, the markets are not on the competition radar.
Okay, I understood. Do you have an indicator on the margin for new businesses? If it's going to be bigger or less than what you have now?
They are companies that have a standalone margin that is not high, but if you consider that we're talking about margins on the operations, the margin is going to be big, because they're using a structure without creating new structures.
Okay. Thank you so much. Have a nice day. Thank you.
The next question is from Pedro Caravina.
Good morning, everyone. I have a simple question about your camp, the hybrid versus in-person. What is your expectation to have a regular intake? Also, if you can share in which fronts you are working to have a good stream.
This question is really complex. We will try to do it the other way around. We will think about what has been done. First of all, we had to go back to the buildings. This year, for example, we had a huge rate in Belém, and now we have more occupation on the buildings. If we think about how many students we are going to have in each course, it depends on many scenarios. Some things need to happen in order to have a good return, and the reoccupation of the buildings that can happen on a healthy way compared to the previous two years.
If we think about the medium term, we have the advantage that it started last year or in January with a good intake. This process and when we are going to have the regular margins, it is difficult to answer right now. But it is important to assess the hopes on the trends, because last year, at the end of the year, we had a positive intake from the pandemic.
Okay. Thank you so much.
The next question is from Mirela Oliveira from Bank of America.
Good morning, everyone. Can you hear me? Thank you so much. I have a quick question about intake. You were talking about investments, and in which streams should we expect having more investments? In medicine, for example?
Mirela, right now our focus is to integrate our intake and reduce the negative financial impacts, because we had a big investment, more than BRL 1 million on the last month. Now we have some lessons learned. We need to transform the companies that they bought. If we consider the dropout and our taxes, the taxes are really high. Right now we want to generate cash, pay the debts, have more cash, and keep integrating things. We are going to keep flourishing the seeds that were there because we need to keep working on this and consider medicine as well.
Perfect. Thank you so much.
The next question is from Renan Prata from Citi. I think he had a problem. I think we already answered his question. This is it for the question-and-answer. Now Jânyo Diniz can give his final speech.
Thank you so much for participating in our earnings release and our investor relation areas available to help with further clarifications. Thank you so much and good afternoon. We thank you for your participation. Ser Educacional's video conference is closed. We appreciate everyone's participation, and have a nice day.