We are going to start the earnings presentation from Yduqs [Estácio] . Mr. [Seeker] the floor is yours.
Well, once again, welcome to our earnings presentation for the fourth quarter of 2019. The presentation will be done by our CEO, Eduardo Parente, and the CFO, Eduardo Haiama. The slides are being transmitted online through our website, www.yduqs.com.br. This earning presentation is being translated into English in compliance to our corporate governance and to promote our information for the stakeholders.
Should you need any assistance, please let us know by typing asterisk two. These are predictions about the future that are subjected to uncertainties from the market, and the expectations might not come true, and the outcomes might be different from what expected. These are only our opinions from Yduqs. Should we get any new information, we will update you. Now we give the word to Eduardo Parente, our CEO, who will start the presentation.
Thank you very much, [Tasis] Thank you for participating in our earnings presentation. We are closing 2019 with a lot of pride and optimism, even though we are being hit hard, and we want to do something different. I want to start on page three, talking about the main achievements, qualitative achievements for 2019. It was a year that you can see the numbers. We had an expectation of an aggressive plan. Nonetheless, we went beyond the numbers.
We, as at issue of having launched Yduqs, which is not only a brand, but it is a new way of working and unlocking our growth potential. This is a great success, great expectation. We sat down, we organized our plan until 2023, and we presented to you, in November. Those of you that were not in the presentation, you should take a look at the website, and you can see our overview for the next few years. We had two main issues.
We started to look at NPS very closely. We had an increase of 6 percentage points, and we had a consolidation on the first tier of the management team while gathering people that you know for a long time with new people. Myself, Haiama, we assembled a team that we consider 100% capable to fulfill the objectives and take us on with this plan. Medicine, four new authorizations for Mais Médicos II. We had the first seats. Well, now we are moving along, and we are very optimistic. On the digital revolution, the app of the faculty and the students are very good, and we have had good results.
Well, the invoicing, we reduced in a third the financial complaints. Operational. We move along. We try to eliminate the waste that do not add to the graduation, to the training of the students. Well, a great success that we introduced, we brought more technology in the process for pricing, and we still get very relevant results. We had record intake and a great advancement. We are certain that we had the best DL platform and how to bring the attention, and we want to change the standard of our content. Changing to page four.
Here is our quantitative summary. Well, we have a base for the new cycle of growth that we just talked about. From left to right, left, we can see the new student base and expansion for Yduqs. CS is still decreasing. Nonetheless, we had a strong growth in all the other areas. On campus last year, we had a slight improvement for revenue per segment. You can see that the numbers are good, but we had a loss NPS and a gain in the addition of DL and medicine, and really that is what we are talking about.
Here are the results here on the right, adjusted EBITDA. We had the expectation, we are fulfilling our expectation, and it is in accordance to the market movements. Trying to leverage our growth in the lower part of the slide, we had a growth in the DL. We had growth 28% more students, around 161,000. We have a two-digit growth in a big base. The polls here, 933 centers, I am sorry. Medicine, we had the average ticket, a growth, and more than 4,000 students.
Now, to close and to show the robustness of the numbers, we had a cash conversion that is very strong, 75%. This talks about our financial solidity. We are going to get into the details for the moment of growth. From the qualitative but quantitative standpoint, we believe that this was a great year. Page five, let us talk about the student base. On the left, once again, I repeat myself, a strong growth in, well, the on-campus and DL. The previous year, 2019, we had a growth in 24% in the intake of students and reducing our financing here.
This allows us to improve the cash that I just mentioned in the previous slide. The average ticket, we are adjusting the market that we think that is temporary. We have a marginal drop of 2% on on-campus and DL. We have a drop of 1%. Now, let us go to page six, since we are talking about on-campus. All the indicators, really, we have a gain in efficiency. Our structure is more robust. Here on the right, retention is growing.
This has a great impact on the revenues, and we are evolving here. We still have a space to evolve, and the result of the cost per student is dropping. On the next page, on the right side, we are showing that four years ago, we had about half of our base coming from the FIES financing. Now we have 15%. We should get at the end of the year with one digit, which is what we interpret as a stability for the future. On the revenues, we had a reduction of BRL 753 million over the last four years with the FIES financing, and this is very important.
Now, page seven, digital learning. Once again, we have a growth in the intake of the undergraduate students, the flex is more relevant here in terms of ticketing. Here on the left bottom, we have had a growth in the investment in developing the content and the experience of the students with the digital learning. That is proving very efficient for retention. The retention is growing in a very important way. Once again, the number of centers, we are getting to 1,000 centers in 2020.
We had really good accreditations in UNESA, Santa Catarina, Ribeirão Preto. The recent evaluation metrics, we start to have about 2,000 authorizations to open new centers, and this is no longer a bottleneck for a process. Page eight. About our other important advancement in growth, we have medicine. We increased the number of seats. When we look at 2020, we have four Mais Médicos II getting into operation.
We also have an expectation, and we are very optimistic that we have an increase with Mais Médicos one. With Athenas, with the acquisition, we are adding more seats. I think that this is very important for us to celebrate. With our 12 operations, nine are still not mature. Three of the Athenas operations, two are still not mature yet. We have the expectation of getting to 8,000- 10,000 students by 2024. This is a number based on the organic growth of the seats that we already provide. In regards to last year, we grew 13% in the average ticket out of pocket, and we are growing stronger than ever than what we did over the last 20 years with the offering of continuous learning.
This is ever more important, but for 2020, we are getting 40 more graduate programs in medicine and dentistry. We are working strongly in the model for medical specialization residence courses of two to three years. We want to increase the offerings due to the demand that is ever-growing in Brazil for medicine. We are the pioneers in Brazil with Medicine 4.0. The incorporation of artificial intelligence, robotics, and IoT, as you could see in the Yduqs Day last year. I am going to give the word to Eduardo Haiama so he can talk about our financial performance in 2019.
Well, thank you, Eduardo. Good morning, everyone. As Eduardo commented-
Due to technical issues, we request that you wait just a few minutes and the speaker will return. Dear guests, the speaker returned. Please continue.
We apologize. We had a technical interference. We will return with the CFO to talk about the revenue. We can continue.
Well, let me just repeat once again, we had a technical issue with our telephones. I am going to start on slide nine. Basically, I am going to comment the impact of 2019 and everything that Eduardo just commented from the operational standpoint and the growth that we had, and we are going to try and translate that into numbers for 2019. Slide nine. Basically, our revenue is aligned with 2018. If we are going to do an adjustment over the drop of FIES financing, actually, it would have been 8% in growth. What was the effect of FIES in our bases?
Looking at the right of the slide, in the graph above, we lost about BRL 300 million from the FIES revenue in a year, compensating that basically by the increase in medicine, BRL 67 million, and digital learning, distance learning, BRL 152 million. Deal. These are the two levers for growth that we have commented. Now, what was that growth? Digital learning, we have grown 28%, and medicine 24%. In such way that today, these two segments represent about 30% of our revenues. In terms of cost, slide 10. Cost and expenses.
As Eduardo has commented, we have the positive effect of all the improvements that we have implemented for some time. Our operational research and other improvements. Here, the highlight. I would like to highlight two items. Here from the middle table, which is PDD, and G&A, which grew here. Well, marketing. We had an increase in capitals, and for 2020, we want that number to be stable. In the case of PDD, that reduction of about BRL 30 million, it had a counterpart in the increase in financial discounts. However, the counterpart of these two movements was an improvement in our revenue as a whole.
Slide 12. How can we translate the EBITDA and the revenue? Our EBITDA was 2018- 2019 in IFRS. Well, without taking a look at IFRS, obviously, the EBITDA was above. In terms of margin of EBITDA, the adjusted we had, as we have mentioned, in the 32%, in IFRS, it would be 38%, and in the revenue, we are growing 6% year-over-year. Well, reported net income. It is important to mention that our non-recurring items in the EBITDA are lower, but they are still based in the operational improvements that we are implementing in the operation and also the M&As that we have done play a great part in this. Now, once again, slide 12.
We were on 11. It is important to mention that the EBITDA is healthy. It is generating cash flow. Our cash conversion was 70%. If we are going to take a look at a cash conversion adjustment, it would be 75%. Here is an item which is BRL 136 million, which is a delay in receivables from FIES at the end of December. We should have gotten that FIES transfer by December. There was a problem with the receivable, and we only got that PN23 in January 2020. In regards to investment, there was an increment of 47%, but it is very based in the expansion. The expansion is with the growth of Mais Médicos.
Well, and the maturation of our courses. All of this results in, well, we can see here the dividends on the right that are very healthy throughout the years, which is BRL 153 million in this year, 2019. Considering the dividends of last year and all the operations that we have had with the drop of FIES, we ended up, DCF, with a leverage of, which is the healthier that we can have in this sector, which is basically zero with net debt. With that, I will give the word to Eduardo, and he can do the final thoughts, and then we can do the Q&A.
Just to close this summary here. We continued with our efficiency gains that allowed us to do a cost reduction and an EBITDA that we consider that is very healthy, 38%, with EBITDA margin improvement. The accelerated growth in DL and medicine and M&A were still accelerating. I think it is not perceived as big as it should because of the movement that we had in CS, but 2020, 2021, we should see more transparency. Haiama talked about the numbers.
We see a positioning of Yduqs that is very privileged in the market, and we have a lot of opportunities. We start to have a regrowth in our balance sheet, our capacity for the net debt and the cash conversion. We consider that these, in fact, we have a unique position in the market that allows us to have a reasonable optimism over the next three, four, five years.
On the right of slide 13, we have 82% of intake concluded. We have an expectation of growth on campus of 5%-10% of growth in the net revenues, net revenues former FIES 0%-5%, and strong growth in digital learning from the volume intake with over 10% comparing to last year, and the net revenues still with a growth of over 10% if you compare it to the same quarter last year. Well, thank you very much to all of you. We are open for Q&A.
We can start the Q&A. We have all the Directors here, [Jose Dos Tosches] Pedro, [Jose Meire] Milena. Well. Dear guests, we are going to have now the Q&A session.
Should you want to ask a question, please type asterisk nine on your telephone. First question is from Leandro from Citi.
Good morning. Thank you, guys. Two questions. First, talking about the policy for renegotiation of bad debt. I think that for the second quarter, we had a very strong impact in your results, financial discounts and less PDD. Just to understand if you still see opportunities for the general and administrative expenses, what is the standard that we can expect for the next quarter, the provisions? The second quarter is, well, with the intake. I still want to understand if on this last cycle, are you working for the intake of on-campus with more content that is digital learning, distance learning, that is getting to 40% still with the on-campus context. What are your thoughts?
Thank you, Leandro. Here's Haiama. Well, your first question, PDD and financial discount. Remember that we implemented a program for improving the charging for last year, and it's an increase. We have an improve in the receivables bump, and these have been stable. PDD is stable, the debt recovery. So it's expected that for bad debt, we are still going to have the same standard. If we are getting more of an improvement in the receivables, we're going to have a reduction in the bad debt. But we still need to see consistency in the long term to change anything in that sense.
Well, thank you.
Well, yes. On-campus, the intake, yes, we are capturing it in the new framework with more digital learning in the on-campus, and it still takes a little bit of time to get there, but we're improving.
Okay, thank you. Just a last question. I just want to understand the commercial strategy of this product with on-campus plus DL. The idea is to center the DL content in a few disciplines or fraction that throughout several disciplines?
We have both. We have disciplines that have an on-campus part and a digital part, and disciplines that we are going to substitute the on-campus by the digital.
Thank you very much.
Very good. The next question will be Susana Salaru from Itaú.
Well, good morning, everyone. Thank you for the opportunity. I want to know a little bit more about the distance learning, DL. You identified 17 areas that you have to improve to have a better performance in digital learning with the M&As, with the acquisitions. What do you foresee for the future? That strategy. Second point, how are you seeing the opening of centers this year, getting to 1,000 centers? Well, how many do you expect to have by the end of the year? Do you have any difficulties in finding people to be the ones responsible for these centers?
Susana, thank you very much for your question. In regards to the 17 areas, which are 15, we're still discussing this. The M&A process in Brazil is never linear. You have the history involved, and sometimes you're close, but you're yet far away. We learned a lot with Yduqs in last year. We are very excited with the success, the integration that we had, things that we expected that were more difficult. A lot of learnings in-house and in our process itself. We can replicate that very easily in a smaller universe with M&A. We are still excited, focused. We have those 15 that we are searching.
We are still looking at opportunities when we want to create value, and we have strong work in that sense. In regards to the financial, no. The finance, we see that the health of our partners, they have a financial health that is very robust. They are growing. We see a lot of partners requesting more in different regions of Brazil. Our challenge is that we are looking for smaller cities. We are in 200 additional cities, as we have mentioned. We are going towards the back door, well, the interior of the country. We have a lot of partners that are very excited about this.
Thank you.
Next question is from [Thiago] from Goldman Sachs.
Good morning, everyone. Thank you for receiving our questions. We wanted to explore two themes. First is ticket. You are mentioning the discount throughout the last quarter, but you are using that as a tool, to balance this intake and the cycle. How are you seeing the grants and the scholarships and the competition? The other question is regard cost. You talked about the cost of teachers and margins, and you see the restructuring of the teachers. For 2020, do you still have improvements and consequently, a gain of margins and EBITDA? These are the questions.
Well, [Thiago] thank you for your questions. In regards to the ticket, well, we come from a moment that is, well, there was a lot of dependency from CS, so there is a growth and aggressiveness in regards to last year. We made it different, and the robustness for the balance sheet always, this helps. The oscillation that we had was very healthy. I think that our pricing system really helped us with this in regards to digital learning. That is, the margins were charged very healthy. We had an oscillation. What we see for 2021 is an improvement in the market.
We can see the aggressiveness, that is lower, specifically in the Northeast, in regards to ticket. I think that this is going to be reflected in volume for everyone ticket. We are still going to have to wait a little bit for the regrowth, but we are certain that it is going to come. Well, the cost of faculty, it is going to evolve. We have a new matrix arriving. We are consolidating the classes. For those of you that are seeing, you have a class of five students in one semester.
We have evolved since last year with a cost reduction that is important in here. We have an expectation, yes, of generating results, maybe not as strong as they were in 2018. 2019, you see that the standard for the reduction at the end of the year was lower. We have a lot of opportunities up ahead, not only with us as we see this in the integration that we have done with the acquisition of UniToledo. And we realized that any bias that we have in Brazil, there's still low utilization of this digital learning in regards to on-campus, and this is a source of synergy that is very important for any of our acquisitions.
Well, a last question. Do you have any directives or any talks with the Ministry of Education in regards to behavior or suggestions in regards to coronavirus?
Let me break down your question in two. We are all talking. Well, just to remind you, we have different realities in different states of the union here in Brazil. So we have a strong contact with the Ministry of Education, more than once a day, where we are seeing what's taking place, specifically at the state level. But I wanted to ask Adriano to tell us a little bit more, to get into details, which is very relevant, of what are we doing in terms of facing the situation.
Thiago, in regards to coronavirus, I think it's important to mention I participated in an experience about 10 years ago when we had the H1N1 virus outbreak. I worked with this team that was very critical at the time, and we had two concerns. One is keeping the continuity of the operations, and of course, the other is the healthcare of our collaborators and our students. So we developed at that time a series of alternatives so we can meet those two requirements. Here today at Yduqs, we also have a plan, contingency plan, for diverse scenarios, depending as the outbreak of coronavirus affects our units.
With the adjustment of our academic calendar, specifically the break in the middle of the year and the digital content, and for the on-campus students so they can finish their studies in the most correct way possible. This is very important, and this is a point that we highlight. We have two-day coverage of content that is digital learning that is very large at Yduqs, very similar to on-campus, and we are developing content in a very agile, very quick way. We are following up all the developments, and we have a communication with the Ministry of Health and Education, and we are working with the Secretariat of the State, and we are following their requirements with a very structured plan and very rigorous control for the next few weeks.
Thank you very much.
Next question, Marcelo Santos from JP Morgan.
First question. Well, the outlook of M&A, we've seen a few assets that are very big arriving at the market. And I wanted to understand up until when, first of all, the appetite of Yduqs could get to doing the M&As. Is there any size? What would be the capacity of the company of leveraging of the company, and what is the capacity for integration of the company? That's the first question in regards to M&A. The second question is to talk about the medical residency. How is that model comparing to the traditional residency? When is it going to be launched? What are the characteristics here of this model? These are the two questions.
Thank you, Marcelo. This is Haiama. In the issue of M&A, I think it's important. If you look at M&A, two points. Three points. First of all, our focus is for the priority issues. Any M&A from us, we are focused on everything that is on sale. The second and third point, size and operational capacity. Size. Obviously, if you ask me yesterday at the height of the crisis. But whenever we're looking at the M&A, we're looking at a horizon of a few months or even the next year. In this case, we have a big advantage.
We are a corporation, so keeping the operations and having interesting things to do. Size, well, if you understand that it generates value, we know that there is a restriction in terms of size. But from the operational standpoint, we have to be very careful. Because, well, it's joking around, but executing the Excel sheet is complicated. I would like to say that today, even if we have the positive approval, it would be a restriction to do any movement. No, I understand that, no. In operational terms, we're not talking about anything big right now. I'm not speaking about in the context of financial issues. For now, we're not going to do anything. Now, I'm going to give the word to Eduardo to comment a little bit more on this.
Well, I'm going to be more direct. I think he talked about the size. Well, we don't see any restrictions about doing another M&A, big M&A. Of course, we need to understand if the business is good, what is the price, and then you know us, and you know that we are very conservative with our business. We don't like crazy business. But we are very happy with the integration that we've done, that we are implementing, and there's never a fish that is too big to digest. Of course, up ahead, things change 2022, 2023. But a small acquisition, easy, but a big one, we could be sure that we can do it. I'm going to put Silvio on the line, our Medical Director, and he can give you more details.
Marcelo, in regards to medical residency, we are thinking about this product, and we understand that half of the medical schools for the next two to three years, we have an expectation of a big increase in the intake. We are going to see a lot of physicians with the medical specialization and the medical residency. This is growing, and we understand that a lot of these new physicians are going to need alternatives to specialize.
I've been working for a few years in the elaboration of programs with a workload that is compatible with the medical residency, where the students can get into the program, where we are designing a center with the hospitals that are referenced as an option so they can specialize and continue their medical activity.
The work for the next years is that for the post-graduate programs in medicine that are being offered in the market, the students, once they finish their course, when they enter the job market, they need to associate their professional activity to the medical specialization. We're very optimistic that the programs that are being implemented now, they're being developed, and they're being improved, and we are going to have better programs in the future.
Thank you very much.
Next question. From [Ian Sisking] from BTG Pactual.
Good morning. I wanted to do two follow-ups on the questions that were already done. First, I wanted to know more about the digital learning pulse, the distance learning centers. You are getting to the numbers that we expect for 2020. What are the numbers for the next quarters, facing what we have seen recently? Secondly, the question of coronavirus and impacts. You mentioned that you are working with a contingency plan and also with the digital distance learning to provision this impact. I wanted to know if there is a possibility of having an operational deficiency. Even in this situation of crisis, are you going to cut costs? I wanted to know more about this.
Hi, Ian, this is Eduardo. Good question about the growth of centers. We are still growing. We commented in the Yduqs Day that our objective is to get to 2,000 centers next year. I think that it is very clear that we have learned to grow. We have learned to open centers, and we got to over 200 cities, and the rhythm is to grow more. We want to double the amount of centers that we have grown over the last year.
Eduardo, this is Eduardo about the coronavirus. The concern is 100% with the student and their health and their learning, of course. We have not stopped to think about we as your companies. We have a lot of people in our units, and we are spending a lot of time in this. Right now, everything that we are thinking is to ensure the health of our students. We have not done any math on economic efficiency.
Thank you.
Next question will be from Vinicius Ribeiro from UBS. Vinicius.
Two questions. First, the expectation for the intake for the first quarter, how can you open that volume more than 10%? How do you subdivide it between the new centers and the ones that were open in 2019 and the more mature centers? I just want to know how is the ramp-up of your distance learning. Second, looking at the financing of students, Haiama, he commented that you were going to study other alternatives, not only for other products, but an alternative for your policies. Do you have any update in that sense?
Vinicius, thank you for your question. Intake 2020.1, where we have naturally a growth that is very strong in partnerships. If you have a situation that less than 10% of our centers are in-house, this is what is allowing for a strong evolution, and we have a growth with our centers, with the partners that is very relevant, and this is very important for us because we want them to be healthy, and we want them to grow alongside us. Yes, there is a relevant participation with the partner centers more than the period of last year. We are not going to give you the number. I am going to let Haiama talk about the financing.
Thank you, Vinicius. In terms of financing, we are studying products that can contribute with the training of the student, but we still have not had anything defined. Now, we commented that we are evolving with our accounts receivable. Our revenue was improving, and probably we would be seeing a decrease in the provision that we were doing, but this is still early. We had a program for improvement of implementing the charges for the students, the second semester of last year.
We concluded it. The effects are positive. We can see this in our results. Nonetheless, it is still very early for us to get to a conclusion as to what will be the level from now on, and if eventually we are going to have to revert something that was done as a provision that we have done last year as something that we can recover in time. What I can tell you is that in the results that we had, there was an improvement.
Thank you, Haiama. If you can just go back here, Parente. I remember that in the first quarter of 2019, at least 40% of the centers were in the first intake. Now, starting with the premise that a great deal of the survival of these centers is aligned with what you expect, can you give us at least a qualitative idea on how is the mix or on the waves of opening the centers?
I can give you, but I am not going to give you. What is being good is the 40% that a year ago they were in the first intake, and now they are in the third wave, and we are learning with the process. A great deal of them with an investment here.
The payback. Well, this is what is exciting, the new people to open the new finance. Of course, that if they are older, the older finance are still very relevant. But from the standpoint of growth, we have a strong growth from the people that were in the first intake, and now they are in the third.
Thank you.
Now we close the Q&A session. In this way, we return the word to the speakers for the final thoughts.
Once again, thank you for your participation here, not only today, but in our journey. An incredible year of improvements, qualitative and quantitative improvements, and it was a very solid preparation for the future. And what we are expecting is that 2021 will be even more transparent, the evolution and solidity of everything that we are building right now. Thank you very much.
Now the earnings conference is closed. Thank you for your participation and have an excellent day.