Good morning, and welcome to Ser Educacional's conference call to discuss the company's results for the first quarter of 2019. With me today are Jânyo Diniz, Chief Executive Officer, João Aguiar, Chief Financial Officer, and Rodrigo Alves, Investor Relations Officer. We would like to inform you that this event is being recorded and that all participants will be in listen-only mode during the company's presentation. After the presentation, we will start the Q&A session for analysts and shareholders when further instructions will be provided. Should any participant need assistance during the call, please press star then zero to reach the operator. The event will also be broadcast live via the internet at ir.sereducacional.com. You can also access the webcast audio and slides through tablets and smartphones equipped with iOS or Android systems. The replay of this event will be available soon after its conclusion for a period of one week.
Before proceeding, we would like to make clear that forward-looking statements may be made during this conference call relating to the business prospects of Ser Educacional, as well as its operating and financial forecasts and targets. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions in the industry, and other operating factors may also affect the future performance of Ser Educacional and could lead the results to differ materially from those expressed in these forward-looking statements. I would now like to turn the call over to Mr. Jânyo Diniz, Chief Executive Officer, who will begin the presentation. You may begin, Mr. Jânyo.
Good morning, and thank you for meeting us again with you on our conference call this time to discuss the results for the first quarter of 2019. Let's make the presentation in two parts. The first, Aguiar and me will present the results of the quarter. In the second stage, we will make an update of the current stage of development of our business plan. Moving on to page three of the presentation, we have the main highlights of the quarter's results, which I consider having been positive, especially considering the Brazilian economic conditions and impacts for the higher education sector. We seem to grow our total student base, thanks to the growth of the enrollment of students in our segments of higher education.
A positive result since, in our vision, growing intakes again, especially in on-campus segment for the first time since 2017, is the first indication of student base recovery in our industry. The main highlights for quarters that ensured our total student base growth has been development of distance learning, which now represents approximately 17% of our total student base and has shown growth even above our internal estimates. Another highlight of the quarter was the growth of our adjusted EBITDA and net income, even with the reduction in net revenue in the quarter, which I believe we will recover throughout the year, and we will detail later. This result is mainly due to the efforts made since the second quarter of last year to adapt the company's operational structure to its student base, especially in the on-campus segment.
These adjustments are still ongoing during 2019 and should help support our results. In addition, as we performed our share buyback plan substantially last year, our earnings per share showed even more substantial growth, which shows that last year we made a good investment in our own business and now began to help improve shareholder return. Finally, we point out for another quarter cash flow for the quarters, which posted another growth due to our policy to give priority to focus on cash flow generation, keeping our student base with quality credit risk. Moving to slide four, we detail how the student intake season behaved in the first quarter, and as I mentioned earlier, we had growth in all segments of higher education.
The on-campus segment was, in our opinion, the most impacted by the competition in our markets, especially in the state capital, where there is still a pressured environment that combines plenty of capacity with a high level of unemployment in those cities. In addition, the behavior of the Brazilian middle class compared to five years ago is still afraid of losing their jobs and avoid financial leverage, what drives the competition to a more difficult scenario. In distance learning, we have different environment. We notice that the competition did not worsen as much as we imagined. Although competitive, the market was favorable, especially in cities where we have the combined effect of having a good structure and solid brand reputation. I believe that the positive intake for the quarter was due to the maturation of our activities, improvement of process throughout the combined effect of the brand and the structure.
On slide five, we analyze the evolution of our student base and average ticket. As you can see in the chart, our student base has shown growth again, mainly due to the growth of EAD, which grew more than 50% compared to last year. This trend was partially offset by a decrease in on-campus student base, since we maintained our policy of maintaining keeping credit risk under control, which has generated a greater dropout. In addition, the on-campus segment is undergoing a seasonal change due to the graduation of FIES students. As the FIES student base declines and today accounts for less than 20% of the total student base, the students who are replacing them are basically out-of-pocket students and come from this new medium class that today seeks to optimize their budget.
As a result, more students are enrolling and registering later, passing part of the revenue recognition for even quarters. Therefore, this is changing the profile of our student base. As we are in a competitive market, more first and second monthly discounts are needed to attract students, which also means that the average ticket of the odd quarters is also more pressured by discounts for new students and also for negotiations for enrollment as compared to the average ticket behavior now usually seen in even quarters. To demonstrate this effect more clearly, we put on slide six an analysis that demonstrates the evolution of our student base between March and April, and as it may be noted, the student base as a whole continued to rise and the effect at the base of students base is already in better condition.
Also, the average ticket for the second quarter tends to be less pressing as we enroll and late enroll with the recognition of the second quarter revenue end up generating revenues that comparing to what could happen in the past would be recognized in the first quarter. Since the students who negotiate their past tuitions, this movement has also been observed throughout 2018. In this sense, it is worth emphasizing that we believe that we are moving towards our expectations for 2019, and that we will maintain the same structural and strategic focus that we defined in 2018. Soon after Aguiar's comments on the financial results for the quarter, I will go back to further detail our planning with you. Thank you, I now turn to Aguiar for his analysis of the financial figures of the quarter.
Hello, everyone, thanks again for attending our call. Please go to slide seven, where we present a summary of our results. Reminding that this year we have the implementation of IFRS 16 that leads us to treat real estate rents as financial leasing. For the results to be comparable, we have made a pro forma adjustment in the first quarter to 2018 results. As Jânyo said, as we can see in the 2018 results, all quarters tend to be more pressured in terms of revenue, average ticket, and student base. As we can see in the summary, this effect can be seen again in this quarter, with a decrease of approximately 4% in net revenue compared to last year. Even so, we had growth in the EBITDA and in the adjusted net income, especially per share, basically due two factors.
The first was the action plan that we implemented in 2018 that substantially reduced our operational structure in order to adapt, especially to the new reality of on-campus students, which we discussed in the last conference calls. In this specific quarter, we had an optimization round in our faculty as a result of the readjustment of the student base and implementation of Ser Digital that Jânyo will comment on its status later. The second effect was due to the reduction in bad debt provisions in this quarter due to a change in the estimate of losses due to a substantially higher rate of recovery of past due tuitions. This change occurred due to the recovery process of tuitions past due for over one year. That was implemented in the second half of 2017, which has been very positive.
But since it is a new process and without sufficient history, it was not considered in our bad debt estimates during 2018, the year in which we implemented IFRS 9 and we started provisioning bad debt by cohort. As the accounting rule says that changes in bad debt estimates need to be applied to the results immediately, we made this a snap adjustment of BRL 16 million in this quarter, and we will have a marginally lower provision index considering the same market conditions. On other hand, we had another one-off effect of IFRS 15 that we implemented last year when we began to recognize revenues with a value of day 13 instead of day 15 as we did previously, which led us to recognize a loss of BRL 8 million related to the renegotiations with those students who were in arrears.
This effect tends to not be repeated since this resulted from the implementation of the new IFRS, and there was no default history in the bad debt calculation. Combining the two effects, we had a net positive impact of BRL 8 million in the result of the quarter. In summary, we can say we had a positive quarter in terms of results, and even if we withdraw this bad debt effect, the result would be similar to last year. Even with the change in the seasonality of revenues, we are producing margin growth anyway. Turning to slide eight and nine, we have the reconciliation of the results analyzed by IFRS 16 so that everyone has an understanding of their impact on the results. In general terms, we had a reduction of net income of BRL 4 million in the quarter due to the implementation of the new rule.
This reduction is due to the calculation methodology of the IFRS 16, which leads us to calculate the present value of the lease contracts by the French system. In the year, we estimate that the impact on net income should be around BRL 17 million. This slide table shows where adjustments were made to the recognition of lease that were treated in a similar way to financial leasing. Please note that we added BRL 282 million in assets and liabilities. For a better understanding of the results, we choose to make the first quarter of 2018 using the same rules and the reconciliations for the two quarters are in the slide for reference. Turning to slide 10, we have new information provided for you. We are starting this quarter opening the results of our distance learned beyond the segregation we already made of the new units.
As can be seen, the distance learned is already starting to contribute to the results. We should see as quite positive since this segment of education historically had negative cash generation, and now we have a line of business that is contributing to revenue generation and bottom line. Because DL tends to have an adjusted EBITDA margin higher than on campus, the success of this segment will be relevant to our return to growth in operating margins and our strategy of maintaining a lean company to grow both in revenues and margins through the growth of the P&L or the combined effect P&L and on campus, especially when the economy recovers. Turning to slide 11, we have the analysis of our average maturity, which as can be seen, is quite controlled and has allowed the company to maintain solid operational cash generation.
Note that the average term of FIES payments fell substantially, mainly because of the payment of PN 23 received last year and was primarily responsible for the reduction in the general medium term. On slide 12, we have the analysis of our CapEx, which as I said in the last call, continues to decline nominally. This reduction is due to the fact that most investments for the future have already been contracted, and today we are working mainly with the remodeling of our Campus 2.0, which have a lower CapEx volume than the campi that we invested in previous years, and that are already prepared to grow.
Turning to slide 13, we have the analysis of our post CapEx operating cash generation, which as you can see, rose considerably due to the combined effect of the higher volume of non-FIES students who similarly pay more than FIES students in this quarter. In addition to good quality of credit that we have maintained for these students, as well as the reduction of CapEx that generated a positive impact in this analysis. The balance of cash and cash equivalents remained fairly solid at 70% of revenue, which includes all the moves we are making in acquisition, dividend, and keeps us competitive so we can continue to evaluate future opportunities.
Turning to slide 14, we have an analysis of our gross and net debt, which as we can see, had the greatest variation in the reduction of gross debt due to the payment of the second last portion of the acquisition of Universidade Guarulhos. These were my comments on the results, and I will turn the word back to Jânyo, which will present a summary view of our next steps in our business plan.
Thanks, Aguiar. Let us go to slide 15, where we will discuss about Ser Digital, an important project we have been working on since last year. The digital transformation of the company that we are doing in partnership with Accenture. Ser Digital consists to take the company in a new level of digitalization. It is not just focused on automating process. It is about enhancing our way to think the business, aiming at integration and increasing convergence of on-campus teaching and distance learning, focusing on improvement of the student experience in their academic life. We are indeed developing a growing automation on the cost in several segments that aim precisely to accelerate and improve the relationship of the students with the educational institution, as well as their day-to-day experience.
We have now a fully renovated portal, much more intuitive for students and teachers that can perform their activities and requests in a much more practical way, with much more productivity for them and for our operations. We also have the Overdrives launch we did last August. The Overdrives is built a startup accelerator, which has space to house new companies and discover new technologies and new business. A place of innovation also for our employees who receive recurrent training on the talks and workshops that generated about 90% of ideas improved in our activities. This demonstrates that digital transformation is not only a desire of corporate managers, but a cultural evolution of the company as a whole. Moving to slide 17, we have the most relevant unfolding of the concept of Ser Digital, what we are calling Campus 2.0.
This is a rethinking of how we are treating the new units and how the existing units have been transforming since last year. For better understanding, this new Campus concept, this slide explains how tomorrow the Campus 2.0 possibly impacts a new unit through a much broader portfolio and flexible course to be offered to students. Since new units are being launched with a greater number of face-to-face course and at the same time with the entire distance learning platform available, generating greater marketing efficiency since we have more course to offer with the same effort, providing solutions for each student's profile or vocational choice. But also for each type of pocket generating some interesting benefits such as increased chance of success in the deployment of the new unit, greater operational leverage in the actual classroom teaching, including greater flexibility in the formation of new classes.
Increased dilution of CapEx from laboratories, since these are shared between on-campus and distance learning. Higher student retention capacity since distance learning and on-campus course are increasingly integrated into the institution. With this concept, we have three pilot operations that are running with their positive performance in the cities of Fortaleza, Olinda, and Ananindeua. In parallel, the same concept is being applied in the more mature units since these naturally already have the necessary attributes for greater convergence between products and are being the main attractors of distance learning students. Finally, a slide that summarizes how we are looking at the development of Ser Educacional for the next years, a company that has a consistent expansion plan with solid growth avenues.
A solid capital structure that can sustain a business plan with adequate potential for development, and from that year also with a better distribution of good dividends to shareholders. Our organic growth plans follow developing consistently with 13 new units in ramp-up process now entering Campus 2.0 project rollout, and therefore gain increasing maturation capacity in the coming years, especially as we are entering between third and fourth years of opening, which usually are the years of further development of a new unit. We also have campuses in Fortaleza, Aracaju, and Natal about to turn university center, which will generate new avenues to growth in these cities. Our distance learning, in turn, is in full ramp-up, and at the moment we see no reason not to continue to generate results, especially start contributing to the cash generated in the coming semesters.
We also have our latest acquisition, Centro Universitário do Norte of Manaus, a very solid company in this market with the most respected brand in the city with great potential for organic development and capture of operational synergies since it operates in substantially lower operating margin than ours. Moreover, our team is strongly minded to remain focused on the profitability of each unit, adjusting our structure according to the base reality of students of each city who are dedicating efforts in our digital transformation that, as you can see, had very important development in the last 12 months and will certainly lead our company to a more consistent operating level and will be a key differentiator for our growth in Brazilian higher education sector. Finally, we have a company with substantial cash generation that already has a good part of its future growth already contracted.
In this scenario, our board of directors decided that it would be important to improve our ability to distribute dividends in a combination of two measures: carry out an extraordinary dividend distribution of BRL 250 million based on the generation of surplus cash generated in recent years. Change the dividend policy that historically paid about 70% of net income to at least 30% with semiannual distribution. As a result, we will have a cash position more in line with our current capital needs, keeping us prepared to continue investing in our organic growth path. With a structure that continues unlevered even after the payment of the acquisition of Centro Universitário do Norte, and therefore attentive to new opportunities in M&A as well with the stock repurchase plan, depending on the opportunities that arise in the market as we have been acting since we adjusted our business plan last year.
As a result, we expect to continue delivering our business plan that has significant growth avenues to be consolidated in the short and medium term. Now with a structure more in line with the need for capital and greater dividend yield for our shareholders. Thank you very much, and we are now available for the questions in this section.
Thank you. We will now begin the question-and-answer session for investors and analysts. If you have a question, please press star then one on your telephone. If your question is answered during the session, you may remove yourself by pressing star then two. The questions will be answered in the order that they are received. We ask that you use your handset when asking a question and in order to maintain excellent sound quality. Please stand by while we collect the questions. We look to have no questions, so this will conclude our question-and-answer session for investors and analysts. I would like to pass the word to Mr. Jânyo Diniz for the final considerations. Mr. Jânyo, you may proceed.
Okay. Thank you all for participating in our conference call. Should you need further information about our company, please contact our investor relations department.
The conference has now concluded. Thank you all for attending today's presentation, and you may now disconnect your lines.