Fun, and thank you for waiting. Welcome to the Vitru Brasil earnings conference call for the third quarter and the first nine months of 2025. I'd like to highlight that simultaneous interpretation is available on the platform for those who need it. To access it, just click the interpretation button through the globe icon at the bottom of your screen and choose your preferred language, Portuguese or English. For those listening to the call in English, you can mute the original Portuguese audio by clicking on "Mute Original Audio." We inform you that this video conference is being recorded and will be made available on the company's investor relations website, investors.vitru.com.br. The full earnings release materials can also be found. You can also download the presentation through the chat icon, including the English version. During the company's presentation, all participants will be in listen-only mode.
Following the presentation, we'll begin the Q&A session. To submit your questions, please click on the Q&A icon at the bottom of your screen and type your question to enter the line. Once your name is called, a prompt to unmute your microphone will appear on your screen. You may turn your mic on to ask your question. We kindly request that you ask all your questions at once.
I'd like to emphasize that the information contained in this presentation and any statements made during the call regarding the business outlook, projections, and operation and financial goals of Vitru Brasil are based on the company's management beliefs, assumptions, and currently available information. Forward-looking statements are not guarantees of performance, as they involve risks, uncertainties, and assumptions related to future events, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operational factors may affect Vitru Brasil's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Today, we are joined by the company's executives, William Matos, CEO of Vitru, and Gabriel Lobo, CFO and Head of Investor Relations. I'll now turn the floor over to Mr. William Matos.
Good morning, everyone. Be very welcome. I hope everybody is great. I would like to start by saying that it is a pleasure to welcome you to our earnings conference call for our company, our Vitru Education. My name is William Matos. I am the CEO of the company, and I have the privilege of opening today's session by presenting the main highlights for the first nine months of 2025. As we move toward the end of the year, I want to reaffirm our confidence in a strategy that has guided Vitru so far, a strategy grounded in operational discipline, based on academic quality and the sustainability of our business. 2025 will be yet another step in that direction, consolidating what we have built with focus and resilience over the past few quarters. Let's get started.
I'd like to begin by presenting the main highlights for these first three quarters, and then our CFO, Gabriel, will go deeper into the performance and the detailed numbers for Q3 2025. As usual, I'll close with my final remark. I'd like to start with our total student base, which is the fundamental pillar of our growth. We reached 898,000 students, representing a growth of 7.4% year- over- year. This number is important to say that it reflects not only the growing demand for our education, but also the trust that students place in Vitru and in our brands, which have always stood for quality. Of course, this positive performance in our student base translates directly into our financial results. Our consolidated net revenue for the first nine months of 2025 reached BRL 1.7 billion, a growth of 5.5% compared to the same period in 2024.
Looking now a bit deeper into operational efficiency, our adjusted EBITDA grew 7.2%, reaching BRL 671 million. Even more importantly, our adjusted EBITDA margin expanded to 39.5%, an increase of 0.6 percentage points versus the first nine months of 2024. This margin expansion is a clear indication of our discipline in managing costs and also our operational leverage that we've been building throughout the year. We also saw an acceleration in adjusted net income, an expressive growth by 79.8% versus the first nine months of 2024, reaching BRL 366 million. It allowed an expansion of 8.9 pp s in the adjusted net margin. In terms of fresh free cash flow, we reported a 32.9% increase compared to the first nine months of 2024, reaching BRL 452 million.
Finally, in the management of our capital structure, the net debt was reduced by BRL 199 million, a decline of 10.7% versus the first nine months of 2024. Consequently, our financial leverage improved significantly, going from 2.4 times in Q3 2024 to 2.1 x in Q3 2025. Summarizing, the first nine months of 2025 were marked by a solid student base growth, a consistent revenue, margin expansion, and a financial management even stronger or robust. Moving on to slide number five, continuing our presentation, let's now take a deeper look at our distance learning undergraduate segment, EAD Education Portuguese, which is absolutely fundamental to Vitru. As you can see, our distance learning student base grew 9.6% in Q3 2025, reaching 816,900 students. This growth is a direct reflection of our persistent focus on the engagement. We prioritize a high-quality educational experience to ensure students stay with us throughout their entire journey.
The success of this strategic approach is clearly reflected in our dropout levels, the evasional levels, which remain under control. This consistent reduction in dropout rates shows that our retention and student support initiatives are working effectively, resulting gradually in a stronger and more committed student base. Regarding the average ticket, we observed a 4.1% decline in Q3 2025. It is important to highlight here that this variation is part of a very deliberate strategy to make our education more accessible, while at the same time attracting a growing number of students who are committed to engaging with completing the programs without compromising the sustainability of our base in general to come. Finally, the new enrollments recorded a 3.4% decline in Q3 2025. However, the 9.6% growth in the total student base demonstrates the effectiveness of our combined strategy.
Even with a slightly lower new intake in the period, the retention of our existing students allows for strong, qualified net growth. In short, Vitru's distance learning program continues on a trajectory of consistent growth driven by our commitment with engaged students, reflecting controlled dropout rates, and an increasingly solid and sustainable student base. Now, to go over the specific results for the third quarter, I'll hand the floor over to Gabriel.
Thank you, William, and good morning, everyone. Moving on to slide six, let's take a look at our consolidated net revenue and the performance of each of our business units. In Q3, we delivered a consolidated net revenue of BRL 549.1 million, representing a 3.5% increase compared to Q3 2024. The first nine months of the year, we reached a milestone of BRL 1.7 billion, up 5.5% versus the same period in 2024.
Breaking down by business units, looking at distance learning and hybrid programs, together they account for 71% of our total revenue. That's our core segment. We delivered consistent results in the segment, growing 8.3% versus Q3 2024, reaching a revenue of BRL 397 million. Here, we were able to advance even in a scenario of stronger competition and pressure on the average ticket, as William has said, which reinforces the strength of the value proposition for our student base. Our medicine segment, medical school segment, once again delivered a solid performance. It grew nearly 5%, reaching net revenue of BRL 75 million. Bonobá already accounts for roughly 15% of total revenue in the first nine months of 2025, and it still has room for a course maturation over the coming quarters. Finally, in continuing education, we recorded BRL 25.7 million in net revenue in Q3 2024, BRL 109.5 million for the nine-month period.
Here, it's important to emphasize that we had an accounting reclassification this quarter of BRL 11 million aimed at improving revenue segregation and ensuring greater accuracy in the allocation across business units. Although it shows initially a 2.6% growth in the comparative of the accumulated first nine months, it's crucial to understand that when we adjust for the same comparable basis, the real growth would be 12.6% in the first nine months. We keep a positive outlook for continuing education and the value it can bring to the company over the medium and long term, and we remain active in the pursuit of the opportunities in the segment. Moving on to slide number seven, we present a breakdown of our gross profit and gross margin. The indicators to our operational efficiency agenda. Our gross margin remained at very healthy levels.
It's important to highlight here that this year we operated in a revenue environment below what we had planned, thinking about our budget that was completed at the end of last year and the beginning of this year, which would bring naturally a pressure for operational delivery given the high level of fixed costs inherent to our business model. Education is a business that is primarily composed of fixed costs, fixed expenses. Even in the face of these challenges, this challenging scenario, we're able to maintain gross margin at a solid level and demonstrated our ability to adapt in periods with less favorable winds. We wouldn't say that the wind is against; it's a tailwind, but it's certainly less favorable. It shows that the company is capable of adjusting and adapting quickly. In Q3, adjusted gross profit grew 2.6%, reaching BRL 367.5 million.
Gross margin, in its turn, registered a slight decline of only 50 bp , closing at 66.9%, which is a very healthy level. When we look at the first nine months of the year, performance remains solid, with adjusted gross profit expanding 5.1% above 5%, totaling BRL 1.192 billion in a stable gross margin, very stable, with a variation of just 0.3 percentage points, closing the year on the accumulated basis at 70.1%. Moving on to our operating expenses on slide eight, I'd like to highlight how we've been able to maintain a strict cost discipline, as I commented before, in a period of less favorable conditions. We presented efficiency gains in every category: G&A, sales and market. Our efforts are focused on optimization and structure review in structures that have been translating into concrete results for our EBITDA, which we'll address later, even in a more challenging macroeconomic environment.
Looking more closely at the micro analysis in two categories, I'd like first to begin with sales and market expenses, which totaled BRL 73.7 million in Q3, which represents a 2.3% reduction compared to the period of last year. When we look at it as a percentage of net revenue, this line fell 0.8 pp compared to at this Q3, reflecting smarter decision-making and a more efficient management when it comes to media investment allocation, both online and offline. [Foreign language ] The nine months of the year, even with a 3.8% increase in absolute value, totaling BRL 267.6 million, its share as a percentage of net revenue fell from 16%- 15.7%, a reduction of percentage points year- over -year.
It reflects a greater efficiency in our online campaigns, mainly with one of our brands that is combined with a smart strategy, more intelligent, more rational, and more sharper of shifting our investment mix, allowing us to reduce offline media expenses. It, of course, contributed to improving our performance in sales and marketing. Now, looking at G&A in Q3, it totaled BRL 33.4 million, a 4.2% reduction compared to Q3 2024. When we look at it as a percentage of net revenue, this line fell 0.5 pp with reinforcing our ongoing agenda of efficiency and internal control, supported by careful reallocation of resources, like repositioning where we allocate capital across our brands, as well as some other movements that we have made this year, like hiring trees, prioritizing the rationalization of costs and expenses.
For the first nine months of the year, G&A expenses totaled 99.6%, that's a 4.6% increase year- over- year. However, it's important to note that as a percentage of net revenue in the first nine months of 2025, these expenses remained in line. It's a result even more significant when you consider the annualization costs. We expected that in 2025, when we talk about budget, because when you annualize the investments that we have made, especially when it comes to staff in 2024. When we look at the accumulated over the year, we could rationalize that importantly for not having the Z-factor of annualization when the revenue navigates under what we have planned. Lastly, and as a positive highlight of the quarter, we reversed part of the pressure in PCLD, as we showed you in Q2 2025.
I have to remember that we had a systemic change that we implemented in Q2 2025. The PCLD line totaled BRL 50.7 million in Q3, practically flat in nominal terms compared to last year. For the year-end, we are conducting an in-depth review of our historical loss curve, which determines the ideal coverage level for provision. This analysis considers non-recurring events that we observed throughout the year. Of course, the aging of the transfer receivable that we built in the second and third quarter indicates a different dynamic for PCLD in Q4 and the consolidated for the whole year. It may not reflect necessarily this quarter improvement in a linear way going forward. We believe that with our ongoing efforts, PCLD for the year will remain within super manageable levels.
Our efforts are focused on precisely calibrating the historical loss curve and the aging of our accounts receivable to ensure the most accurate provisioning, suitable provisioning, and mitigating your potential impacts on future results. It is paramount to highlight that this whole discussion that I am talking about, the full year refers strictly to the accounting provision scenario. Our fundamental metric, that is cash, shows excellent performance in working capital, with improvements in days sales outstanding and all our metrics of collecting that is working effectively. Of course, they will show improvements in liquidity as well. It is very important to contextualize that. Moving on to slide number nine, we present the bridge of our adjusted EBITDA, which totaled BRL 214.2 million, representing a 5.8% increase compared to Q3 2024, even with a slight pressure on gross margin, as we showed two slides before.
Due to lower revenue in the quarter, we were able to recover operational margin and translate our cost control in SG&A into operational leverage. Thus, our adjusted EBITDA margin reached 39%, representing an expansion of 0.9 pp s, reinforcing in a certain way one of our Vitru's strongest qualities. A differentiating point of the company is that we have a lean and adaptable company with solid operating margins. Looking at the first nine months of 2025, our adjusted EBITDA totaled BRL 671.3 million, which represents a consistent growth of 7.2% compared to the same period of the year. We reached an adjusted EBITDA margin of 39.5%, which translates into a 0.6 pp increase, reinforcing once again everything we've been highlighting regarding internal opportunities.
That means if we had a different scenario with higher revenue, our EBITDA would be growing double digits that were part of our perspectives for the beginning of the year. Moving to slide number 10 and looking at the adjusted net income for the company for the period, we see that the adjusted net income is important to emphasize, reached BRL 121.1 million, an impressive growth of 89% compared to Q3 2024. Adjusted net margin expanded once again significantly, reaching 22.1%, which represents an almost 10 pps improvement year- over- year. For the first nine months of 2025, adjusted net income totaled BRL 366.3 million, reflecting a growth of almost 80% versus the first nine months in the same period of last year. The adjusted net margin for the accumulated in the year reached 21.5%, an expansion of 89 pps .
The strong performance we've been talking a lot about, profit and cash generation, in a way that it translates a consistent margin expansion. That are direct results of our ongoing effort. We've been putting into managing all lines of our financial results, like above EBITDA, below EBITDA, our financial results in our income tax position. Our focus is not only limited to the immediate accounting impact of those lines, but naturally extends strategically to improving the future conversion of our bottom line with the goal of optimizing the company cash generation. The net financial result was negative BRL 81 million, a reduction of 20.2% compared to what we reported in Q3 2024.
It naturally reflects a positive performance, a reduction in banking spread, as we have noticed with all the renegotiations, a lower interest accrual on our debentures, demonstrating our management capability, showing our capacity to drive in this higher interest rate environment in Brazil. In the income tax line, it is important to highlight the effect of the deferred tax recognition that began at the end of last year, Q4 2024. This recognition stems from the project which we discussed before. We discussed it extensively, related to reorganization and simplification of the structure of the corporate structure. It will allow us to use the tax sheet generated by financial expenses allocated to Vitru Brasil, resulting in an immediate cash effect once it is completed.
Our expectation, a little more clear now, is that to complete this crucial phase at the turn of Q4 2025 to Q1 2026, we are planning to do that at the turn of the year for us to be able to open 2026 in a clean way, capturing the cash effects for next year. Moving to slide number 11, free cash flow reached, and this line is like one of our main management lines. The free cash flow reached BRL 452 million year- to- date, a 32.9% increase. This is maybe the most fundamental metric, that is conversion rates, that improved significantly and reached 58% this quarter in the accumulated of the year revenue. This is the result of an intense work focused on companies' working capital, including improvements in collection processes and internal collection processes.
Of course, pursuing in a similar effect, like extending the terms for suppliers, we were able to reduce our days sales outstanding by four days from 54days- 48 days, and four days versus the Q2 2025 earning in Q3 2024. It is important to highlight that this improvement did not involve any use of, like, use of receivables, noise. I mean, the use of receivables anticipations. Since my arrival in the company, we have made it a point to disclose this line clearly because the costs were higher than our debt with a higher maturity. We do not do that. We do not anticipate receivables. Looking at the past, we want to be clear how we anticipated that up to Q2 2024, differently from what is naturally done in a sector in which this transparency is not as it should be.
Looking at shareholder cash flow, a fundamental metric in a high interest rate environment, at the high levels, and it grew robustly at 82.9% year- over- year, reaching BRL 338.2 million in the first nine months of 2025. Naturally, it reflects both the strong free cash flow that grew a lot and the progress in our liability agenda as well. For Q4, in a little perspective, we know that there are seasonality effects, and we expect that growth levels to become a little more moderate. We do not expect to keep the same levels even due to the baseline. However, for the full year, we remain optimistic about delivering solid and robust cash duration in line with our original planning, maybe a little higher than what we planned before, which may open room for future shareholder-related actions.
Moving on to slide 12, where we present the company's leverage rate here and the debt profile of the company. As you can see, we continue on a consistent downward trajectory of our debt, our leverage level, fully aligned with our strategic plan. It is for sure one of our main health indicators of the company. Vitru ended Q3 with a net debt ex IFRS of BRL 1.7 billion. As a result, our net debt to adjusted EBITDA ratio ended the period at 2.1x , a reduction of 0.3x versus Q3 2024, and a reduction versus the previous quarter of 0.2x . This consistent reduction of our leverage will remain one of our major strategic priorities. 2026, with the focus on moving quickly below two times and approaching our medium-term target goal of 1.5x .
In line with our liability management strategy, which we've been executing consistently over the past quarters, we tell you that we completed this quarter, like along the fourth quarter as a subsequent event, but it's important to tell you we completed our sixth debenture issuance, totaling BRL 850 million. This transaction issued in a single series that was concluded at the end of October this year, allocated all net receipts to the prepayment of the fourth debenture issuance. Our goal with this move was very clear: to extend the duration of our debt, removing any pressure over the next three years in terms of TMT, and consequently, at the same time, slightly reducing our cost of debt. It was a small reduction. It was not a bid to the market. We kept the same union, but we reduced the cost of the debt, intelligently optimizing the company's capture structure.
The amortization schedule at the bottom of the slide shows a longer-term debt profile we have been building, with virtually no significant commitments in the short term, providing us with even greater financial flexibility and security, which brings some comfort for wise decision-making for capital allocation for the next years. With that, I conclude my presentation and hand the floor back over to William, and I will be back in the Q&A session. Thank you.
Thank you, Gabriel. Moving to slide 13, as you can see here on your screen, I believe it is essential for understanding our performance in 2025. Here, I would like to emphasize that we are not talking about isolated results, but about a management philosophy that is throughout the entire company.
As the title above well suggests, our financial highlights, which include sustainable profitability, capital efficiency, a robust control of leverage, all of that are strengthened and driven by an excellent team and an empowered leadership. This is our engine and the foundation that supports our entire strategy. Here, let me briefly explain and break down what each of these pillars means. First, sustainable profitability. We focus here on healthy margins and continuous value generation, staying resilient even in challenging environments as this one we've been living on. Second, capital efficiency. We prioritize long-term returns and firm commitment and solid commitment to maximizing shareholder value. This commitment, which I have reinforced since my arrival at the company, remains a foundation in our decisions and the strategies we discuss. Third, a robust control of our leverage.
We are committed to reducing debt and strengthening our capture structure, ensuring the solidity and flexibility necessary. Now, in order to see how those commitments translate into tangible results throughout 2025, let's move on to slide 14. Here, you'll be able to see everything we have just discussed. Each one of those conceptual pillars translates into concrete figures that reflect our evolution in our financial performance throughout 2025. As Gabriel already detailed, the results of Q3 2025 and the first nine months of 2025 show significant improvement in profitability, with adjusted net income growing 89% in Q3 2025. There was also a significant advance in capital efficiency, with free cash flow increasing by 63.3% in Q2 2025, aiding clear evolution in financial leveraging with a net debt to EBITDA ratio at 2.1x . How does all of this actually come together?
This is where the fundamental strength of our excellent team and strong leadership comes into play. They are hands down the engine and the foundation that sustain our entire strategy for a sustainable growth cycle. In this scenario, especially with this new arrival, the arrival of this new regulatory framework, we see not an obstacle, but a unique opportunity to consolidate and expand our leadership in the sector. Vitru is proactively prepared. Our previous investments in infrastructure made over the last years give us a significant competitive advantage. The required adjustments will be managed efficiently without compromising our already strict capital discipline. Let me repeat that to you. We see, yes, a unique opportunity to Vitru Education. We have a significant competitive advantage due to previous investments, and all the adjustments will be managed efficiently without compromising our capital discipline.
Lastly, our strong ability to adapt is clearly reflected in the leadership, the team we have built. The arrival of excellent strategic executives such as Aroldo, our VP of Operations, is a witness to our commitment to attracting talent with exact expertise needed to navigate and capitalize on the opportunities in the environment. This management team approach prioritizes profitability over volume, continuous improvement in student retention, and optimization of acquisition costs, all which directly drive our strong operation and financial leverage. I cannot say that the recognition of our high-performance culture does not stop there. Our Great Place to Work certification, which positioned us among the best in the large company category, awarded as a trophy, an award in emotional health, reinforces the engagement and the quality of our human capital, which is undoubtedly essential to driving our path of sustainable growth.
For this reason, I close this moment, I finish this moment by thanking all our employees, investors, and partners for their trust. This continued trust is what allows us to turn results into impact and consolidate each cycle, cycle after cycle, the purpose that brought us here. Now, I'd like to open the Q&A session, where we'll be available to clarify and give some color in any points and dive deeper into the topics.
We'll now begin the Q&A session. Please remember that to ask questions, you should click the Q&A icon at the bottom of the screen and type your question to join the line. Once your name is announced, a prompt to unmute your microphone will appear on your screen, and then you may turn on your mic to ask your questions. We kindly request that you ask all your questions at once.
[Foreign language]. Our first question is from Igor Kaliman, analyst of EF Invest.
Good morning, everyone. Congratulations on the solid results. I'd like to approach working capital and cash flow. The company has showed consistent advancements in PMR management and other operational fronts, what has contributed to a stronger conversion and free cash flow. Thinking on the next quarters, what level of working capital do you consider sustainable? Is there space for additional gains that may strengthen the cash flow generation? I ask that thinking about the level of leverage as well. [Foreign language ], Igor.
Good morning, Igor. Let me reply to this one. Answering, it's a very, very important question.
Speaking about everything we have said here, it's an agenda that we have been working as fundamental, but in a moment like that, in which our numbers mirror what we've been building, it's very important to reinforce that. Working capital, let's say that we are very clear when we look at the reduction of PMR. This agenda is working. Everything we've been putting in place has been captured, but we understand that we had the first level of capture. We got low-hanging fruits. The bush was a little taller, so we trimmed it to our shin level, let's say. Now we have to put a little more effort to bring it to grass. We have a work, and the work we've been doing connects to what we talked about, PDD. It's a deep work in the accounts receivables.
We have been plugging new payment methods, accelerating the churn agenda of the company, connecting the financial agenda with the commercial agenda. It is not an exclusively financial agenda. It belongs to the business. When we do that in a combined way, we can see the results. This is the first point. We look at that. Of course, there is room for improvement in working capital management, but it will be captured throughout the following quarters. There is no silver bullet to solve that. There are just a few small elements working in sync with the company. It will eventually happen. Talking about opportunities for cash flow, beyond working capital, we have one that is very obvious, and we have the knowledge in the market, is when we talk about income tax from next year on.
This year, in the first nine months of 2025, we paid BRL 62 million in tax payment, and next year, it will be significantly reduced. Once we incorporate that, we have all the elements, and the first one is a simplification of our corporate structure to use a tax shield. We have a debt that is going down, but it's still considerable, and this debt has no effect on the financial. We can't use that debt as a tax shield. Now we're going to start using the tax shield. Of course, we have other opportunities and incorporating some other elements, but they're not primordial, but they will be incorporated into this future agenda. This tax line is, we will look at BRL 40 million-BRL 50 million reduction year- over- year, and of course, it will become free cash flow and become a cash conversion.
Bringing those two elements, it's a very important question. Our greatest target, as William said, is the leveraging and open some room for thinking about the new movements of the company as a whole.
[Foreign language]
Let's move on to the next question from Mirela Oliveira, analyst of Bank of America. Open your audio, Mirela, for you to ask your question. You may proceed, Mirela.
Good morning, everyone. William and Gabriel, thanks for the opportunity. I have two questions. We're going to talk about the first. If you could make it tangible, the initiatives that are improving the working capital structure, if you could give us some tangible examples, and do you see any other opportunities ahead? The second is under the marketing line, drew my attention in this more competitive marketing. You could deliver a reduction in this quarter.
Do you see more room for a reduction in marketing for the Q1 2026 for the next cycle, given the new regulatory framework and all those changes? If you could put some color into those two topics.
Good morning, Mirela. How are you doing? Let me start with the first one and willing with marketing. Make some initiatives, make some initiatives tangible. The first big initiative is a strategic initiative. We are prioritizing, beginning at the quality of the student. The median, the average term of receiving the receivables is connected to the students that we bring to our basis. We've been focusing a lot into intake. It's not what we wanted, but talking about engagement is a better quality intake. We can see that in recurring enrollments. We are prioritizing a better quality student in a scenario in which the market is extremely competitive.
When we look at the average ticket that we've been delivering, even being a little reduced, when we look at the picture of the quarter, when we look at nominal terms, it's important for the market to look at that because the market doesn't look at that. Our ticket was BRL 290, and when we see players at the same segment, large companies as us, operating closer to BRL 200-BRL 250. We are equalizing in a broader way. Making financial issues tangible. Financial is not separated from the business. Every decision that we've operated into accounts receivables, it comes from the business working more efficiently. We're talking a lot in retention and collection. We segmented our collection team to look at the aging in a segregated way.
When you see a shorter aging for the student, they are easier to collect, to be received. We collected that. We opted to this shorter term. We did the same way for shorter-term students and longer-term aging students. We need different profiles. This segmentation and customization is one of our most important pillars to that moment. A different element we've been working a lot is the profile of the payment methods. Just for you to understand, we had an invoice rate of about 70%-80%. We know that invoice is not the best method of payment. It's very complex, that generates noise in checkout if you want to pay. We are trying to plug a series of initiatives regarding payment methods, and we've been very successful.
Some good elements that combine, there's no silver bullet, like a lot of small initiatives that we stack, and at the end of the day, reverberates and generates a solid cash generation.
Mirela, thank you for the question. Let me talk about investment in marketing. In a scenario that we know, we know it's a little more challenging because we closed some courses and some institutions took some paths, and Vitru is very solid in delivering. We have been very careful in actually investing to bring a qualified student and engaged student, a student that effectively wants to study. Vitru is sure about its trajectories. When we see a hardship or a tough moment, we want to have security, not only with having investment in marketing. It's not a unique way to bring good students.
We have a different work, like academic quality, the structure of our hubs, and everything is very important to capture for students' intake. Of course, when we talk about that, looking to the future for the beginning of 2026, of course, it's time for us to build our base and bring this student that will sustain 2026. Maybe we don't see that room for reducing investment in marketing for the beginning of the year, but it's the moment for us to build the base. Of course, we don't have time to explain that here now, but we've been working in the VP of Marketing. We've been investing in technology to bring more efficiency and intelligence to be able to bring this higher quality student.
[Foreign language]
Thank you for your answers.
[ Foreign language] . Next question comes from Maria Eduarda Rezende, sell-side analyst of BTG. Maria, we'll open your audio for you to ask your question. Please, you may proceed.
[ Foreign language ] Hi everyone, how are you doing? Thank you for the opportunity. Just a follow-up for this reduction of 4% in the average ticket. I understood perfectly. The comparison of 290 compared to 200, the average market, but thinking about the next intake in 2026 with a new regulatory framework, is there any internal study regarding pricing? And a second question is a little similar to the first. You talked about that in the last call, levels of adjustment to the new framework, like adjusting alignment and then adjusting the curriculum.
I believe you are working on that, but if you could detail a little more the main initiatives in this phase and how are you preparing for the regulatory framework before the intake cycle? [ Foreign language ] In this repricing strategy. Thank you so much.
Thank you, Maria Eduarda, for your question. Let me answer that. Undoubtedly, when we look ahead and everyone understands that we have a time of transition, and when we look at tickets, especially in this new intake cycle, it will be the main point of concern. Vitru has it solid. We keep our strategy. Sometimes we see some players, as Gabriel has mentioned, looking for bringing better results, but Vitru has always thought about that.
We have a higher average ticket compared to the other players, and we understand that even with the changes that are coming and that we have this transition period, the internal alignment is ready not to leave the security. That is our advantage. That is the competitive advantage of our brands throughout our history. Ticket is a competitive advantage. Regarding the second topic, the regulatory framework, we talked more about that last call, but sure, we have been adjusting. We designed a very integrated and directed strategy to optimize all the changes that will come throughout the time of the year. We have a strategy to optimize our operation, looking at the academic, the construction of our portfolio, all the opportunities we have.
When we look at this new construction, this new building of the hybrid courses, lately, our biggest effort has been on focusing on this restructuring of our hub network. We have been clear about that. We have been investing in that for a long time. We have qualified hubs, just solid structure with big facilities, bigger than the average in the market. We have, of course, put in efforts into understanding in this transition period, all the changes that will be necessary, all the hubs that need to suffer some changes in layout, physical layout. Undoubtedly, we are looking for understanding how the student will behave from now on.
This is a big challenge, and all the institutions face this challenge for the student to understand the value and the deliverable that they can see in the hybrid program and the importance of that, like good laboratories, good physical structure to serve the student in the period it is there presentially.
Maria, hi, just to complement briefly two points in relation to what William said. Regarding average ticket, we talked a little. We simplified that in the call, but let me qualify financially. Effect on ticket, it has a component that is a big component of. We have students that bring a higher ticket, like back there, that was like a priority that has always been a priority, as William said. Even the competitive scenario of recent years, some students have a lower initial ticket. There is a mixed component of different, like let us say, intakes.
We are going to prioritize tickets in 2026. This is a very important agenda. We have started the intake in our brands because the other brand has just started the intake for next year. We can see a scenario in an average ticket of intake that is a very important goal. We will not exclude that. It's one of our metrics about some incentives of our network. We're not talking about quantity of students, but we're talking about quantity, amount of students combined with the ticket they bring. This is a combined component. At the end of the day, it's what's the price of the tuition, the monthly fee that we are carrying. Of course, this is related to our accounts receivable. We're not going to reprice.
We're not going to change the pricing strategy, but we want to make our ticket agenda a little more local and geographic. Talking about the regulatory framework, in a simplified way, there is a very important point here regarding everything that has been happening. We've matured since the last call. The effect will be divided over time. We will not have a one-shot effect in 2026 like a big change in the year. No. We're going to have gradual effects. We will feel the impact, but we'll use this transition period to restructure and to prepare. I'll talk about 2026 because our next earnings call will be in March next year. We're concluding our budget now, but it doesn't have a very big impact in our revenue because of the new rules on the financial regulations. It's only like 0.9% of our revenue.
We're going to start lower dropout rates, better enrollments. We have many things, many ways to offset that. The main message here, combined with what William said, this is going to be divided in phases, three to four years, for us to see the sector in a different way. Of course, we have a bigger capacity of adaptation in this scenario. Thank you, guys. It was clear. Thank you so much.
[ Foreign language ] Next question. Thomas Peredo, analyst of F8 Capital.
Good morning. Congratulations on the results. How are you looking at the dynamics of intake and the competitive environment for Q4, Q5, and Q6? How much room do you have to keep delivering a growth of expenses growth lower, especially in an inflation scenario, with an additional expansion of margin, EBITDA margin?
Talking about these intake dynamics, we have six months reading.
We saw that it was a little more challenging in intake. This is what we saw in the third quarter. In the fourth quarter, we expect a slight improvement. It's not going to be substantially better, but a little better in terms of intake. It's not relevant in nominal terms in number of students, but it's going to be a little better than Q3. When it comes to ticket dynamics, it's very similar. No, nothing different. In 2026, we are changing the strategy. There's a different target. When we talk about SG&A, how much room do we have in our EBITDA margin? We have room for optimization when we think about rationalization, use of technology embedded in our business. We've been working a lot in a series of fronts connected to AI. Our back office is plugged into technology.
We've been putting efforts in CapEx levels and internal projects to improve internally our processes. There are opportunities we can see, but it's going to be captured in phases. There is no big quick solution, no silver bullet, but we have space, we have room as far as we can see the revenue growing naturally. Because if the revenue does not grow, we do not have margin. Given the growth of revenue as we expect, we are going to have some capacity to leverage operation thinking about 2026 and 2027.
[ Foreign language ] Our next question comes from Luca Marchesini, IPO analyst. Luca, [ Foreign language ] . Luca, you may proceed.
[ Foreign language ] Good morning, everyone. Thanks for taking my question. The first is a follow-up regarding tickets. Gabriel commented that really well. This quarter, we had an impact of like old classes, let's say.
Excluding this effect, talking about the competitive dynamics and how you analyze that in Q3, it would be nice. The second point is regarding PDD. Looking forward to 2026, talking about budget, what makes sense in a more recurring dynamic? What makes sense in terms of PDD line for next year? Thank you.
[ Foreign language ] , Luca. Thank you, Luca. Thanks for your question. Let me answer that. It is very clear that the competitive dynamics in this quarter, it was a little more aggressive. Not because of the big players, but due to smaller players, medium players that this new regulatory framework movement and the closing of the nursing school, many players tried to seize the moment. They exaggerated, if I may say, and offered a little too much. The competitive dynamics in our sector has always existed regarding ticket.
We reinforce here that we've been paying attention and looking to understand the scenario. This scenario, in our reality in Brazil, is very big with many towns. We have a very complex effort to be assertive because a ticket in a geographic region does not translate into another region. We try, using technology and strategy, to understand these dynamics and look for the important sustainability that we need because this is the role of the ticket. When we acknowledge which student wants to study, because there are students that enter impulsively because of the lower ticket, and then leave the institution and it comes to drop out. We believe that, as Gabriel has said, we will keep the same strategy that has brought us here.
Answering the second part of the question regarding PDD, we had a big effort.
We talked about that since the beginning of the year. We had slight gains in PDD throughout 2025. We see a few room as we improve the quality of accounts receivable and some questions. Talked about that. It reverberates into PDD. When the quality of the student is higher, of course, we have a smaller provision. Everything is aligned and moving in the same direction. We do not want to foresee relevant gains for 2026. We have to wait for things to happen. We think that the first, the big delivery that we can give is to bring better students that will not drop out, that will keep with our basis to expand the LTV of the company in time. It will bring consequences to P&L, and the most important of them is PDD.
We believe that for next year, there are no big mechanisms of improvement in PDD. Our EBITDA margin will not grow through PDD. This is the main message. We see that there are opportunities here, like regarding cash and better receivable. We're reverberating to a better PDD in the future.
It was very clear, guys. Thank you.
[ Foreign language ] Next question comes from Jair Matuso, investor, and in writing. He says, "Good morning and congratulations on the solid results. I'd like to ask the level of leverage that you have as a goal for the payout to be high." Thank you.
[ Foreign language ] Thank you, Jair, for your question. This is the million-dollar question. We will not escape from that. We have talked a lot of leverage. This is a fundamental indicator for us to monitor. It's a health indicator.
It shows our resilience, the resilience of our cash flow, how we've been leveraging over time consistently. We prospected something between 2x-2.2x. It tends to happen. This range will happen. We closed the third quarter with 2.1x. That is very close to what we expected. When we look at the future, certainly next year, if we keep executing this agenda with everything we have done, with all the opportunities, we'll keep generating a robust cash, and it will take our net debt to a range of 1.6x-1.9x. It will reduce a lot depending on what we can carry out in investment projects. It will get closer to 1.6x, 1.5x. That is our big target. If we get closer to 1.5x, we have clarity of everything that involves this new regulatory framework investments.
It's very clear because it's been six months, six since we know that. How much will be necessary regarding investments along the time? We're not worried because when we look at a three-year scenario of investments, it's very reasonable for what we've been doing as recurring investments. There's no disruption in our investment agenda. When we see the CDI falling, that's something that we cannot control, but we can see the market going there. It's a guideline for the market for next year. For sure, it would make room for us to get into an effective payout. If we look at our wheel and free cash flow, it's one of the biggest in the industry. It makes room for agendas.
When we do not have investment projects that make sense for us to keep capital, we are going to give it back to the shareholders as part of our structural agenda. This is certainly something on our radar. Thinking about 12months-18 months, we are going to make everything for it to happen within this window of time.
[ Foreign language ] This Q&A session is now closed. Now we would like to turn the floor over to the company for the closing remarks.
Once again, I would like to thank the participation of everybody. I would like to finish emphasizing that this quarter confirms and ratifies our solid trajectory. So far, we have been growing with discipline. We have been expanding our profitability, strengthened our cash, and reduced our leverage even into this very challenging scenario. At last, I thank all the collaborators, employees, investors, and shareholders.
We're firm here executing and capturing the opportunities for the next cycle. Thank you so much, everybody.
The earnings call for Vitru Brasil's third quarter and first nine months of 2025 is now concluded. The investor relations team remains available to address any further questions you may have. Thank you all for joining us, and have you all a great day.