Well, good morning. I am Rogério Tostes, Director. Welcome to our conference of results of the discussing of the third quarter of 2019. The presentation will be done by our CEO, Eduardo Parente, and CFO. The audios and the slides will be available at our website, www.yduqs.com.br. The teleconference is being transmitted simultaneously into English. To ensure the good corporate governance and avoid any misinformation to our stakeholders, if you have any questions, please request the help of an operator dialing asterisk two. This conference might have predictions about future events that might make those expectations to not be materialized and be substantially different from the expectations. These forecasts express the opinion only for the date for the company at the date that they were done, and the company does not undertake to update them in the light of new information. Well, now, Eduardo Parente.
Well, thank you, Tostes. Thank you for participating in our conference. Beforehand, I wanted to comment with you that we are very satisfied with the results. I think that shows consistency, and this is what we have been mentioning with you. It has been quite a while. It has been a very difficult year, a lot of initiatives, and we would like to keep the same leverages of growth and standards and margins. Well, now medicines, distance learning, and in the contribution for the results for the future perspective as well. Well, I wanted to start with the first part. Well, here, which is the projection of our new medicine campus in Barra da Tijuca. It is the first premium unit that is done in a different way, and we are seeking growth in a different segment.
This is a unit for 1,200 students. We want to get in there. The Dentistry unit as well.
For those of you that know it is the space where we had the old offices of Companhia Vale do Rio Doce in Barra da Tijuca. Slide number four. Now, we have an indication that we gave to you in regards to the capturing of 2019. We had records in the on-campus and distance learning. The on-campus, we had a perspective of 0% and 10%. We went to 20%. It overcame our expectation, and there is a lot of things that we are doing correctly. Some expectations for the improve in the market. We did better in all regions. A drop in the ticket than we expected, 4.9%. Actually, when we exclude the Fies effect, that number is about 0.8% only. In the distance learning, while we are capturing 62%, we are going full throttle in the first semester.
This generates an expectation that is significant in Estácio for the distance learning, and also an evaluation of tickets that is a bit negative. Now, what I reinforce here for the growth of all the regions, and that has been The pólos are still growing, the centers, and we are still working with the tactical issues for the first semester, where we had a different philosophy here in the expansion, and we needed to make a scheme of that, repeating in the second semester with success. This philosophy, this technology of success, of processes, of quick reacting to the market, and now the results are very good. It is important to mention that we had an increase in the year of 24% increase in intake, and this has been one of the greatest years. It was a very good leap. Slide four now.
Well, a great summary of the quarter in regards to EBITDA and the revenues. The base has been growing. As you can see the numbers, when we see a loss of over 20,000 students in comparison to last year because of the Fies, we could keep that. This is a result that we are talking to you. Well, this is, we commented, depending if you compare to the fourth quarter of last year, there was still teetering. We knew specifically that this was coming to keep the standard of margin of 30-some percent for this year. This is what happened. We have the intake, also a growth here in the student base, a lot of courses, and a lot of work in matrix operational research that we are advancing. We've gained a lot of success with that.
At the end of the day, we look at the right and we see an increase of 5% in the cash conversion, comparing the last nine months of 2019 compared to the last nine months of 2018. This is a healthy company in cash, and with a very positive result. Next page five. Once again, our pace. All the segments here with positive results. We have the on-campus growing, learning. We have over 40,000 students studying with us. Flex, which is very important because of the higher margin, an increase of 70%, and then postgraduates. 2020 is the year to really focus here because we have a lot of opportunities to grow. It is the biggest one in Brazil, but we need to focus more and more.
The total base of students, and even though we had the losses because of Fies, we had an increase in 8% in regards to the third quarter of 2018, better retention. The PAR student base, this is new. We need to improve. We improved the cash conversion, and we need to have an effect on the medium term. Now we are going to talk about the financial indicators.
Thank you, Eduardo. Let's start with the revenue. We had a revenue that was stable in the period, even with the challenge of the Fies. It is important to remember the Fies in 2019 is our biggest challenge. The base of 42,000 students, that is 15% campus base. If you compare it to 2017, that was 30% of the base.
For 2020, we expect that this number falls to about 20,000, and from 2020 on, we have a Fies that is very low. Now the performance of the net revenue per segment. We had a better performance in on-campus, excluding the impact of Fies, 3.8% in the same period of last year. Because we have new campuses, a great deal of our sites are in the first capturing in the first quarter. We have the first capturing with the opening of more of these sites. We have still ramping up some places, and we should keep a growth of revenue for the next periods for the on-campus. I think Eduardo already commented the ticket, the flat, excluding the impacts of Fies, that would just be an impact of 0.8% in the on-campus. Combining renewal, capturing, and distance learning, a slight drop of 1.3%.
Now, talking about OpEx, more cost and expenses. We have a lot of initiatives in regards to cost efficiency. We had a growth of EBITDA and margins. In this quarter, we had three here, non-recurrent, one of restructuring staff, impact of BRL 20 million. M&A expenses, BRL 6 million, and an issue of reviewing a rental agreement that is still from 2017, about BRL 16 million, which is BRL 41 million in non-recurrent items. If we exclude the non-recurrent items from the base, we had a decrease in the total expenses of 3%, from BRL 565 million to BRL 547 million. This displays our capacity to manage expenses. In the slides, we have the accumulation in nine months. I highlight the good control in personnel, the main line of expenses in the company, while PDD and third parties. The performance of these three lines neutralize the advertising and bad debt.
This is associated to the growth of the business. In regards to PDD, we are very happy with the expenses. We have the results here, and we have throughout the semester, a lot of agreements, an increase in assets and liabilities. This allowed for a better renewal, but also a good cash conversion. Let's go to the next slide. EBITDA and cash conversion. I highlight the- I have the comparison of our performance with the previous period. We still have results for the IFRS 16. The EBITDA grew 2% and we had 35% above 33% in the same period of last year. This is due to the resilience of the revenue and the strong control of expenses. The cash flow analysis and conversion. In the top right, we had an increase of 6%. Here, the cash flow and cash conversion for 2019.
Now, the CapEx, we had the margin of 60% versus the 63% over the same period last year. CapEx. Here, we have an estimation of growth of CapEx in 2019 of BRL 230 million. The CapEx that is presented here is very much aligned with our expectations, and we should be very close to what we presented in the last quarter. Now, I give the word to Eduardo Parente.
Thank you. I'm going to talk about the growth once again. I think the medicine and distance learning, everybody is following up on the news. You've seen the fantastic step that we took with the M&A. Now looking at distance learning. It's more of the same. We are growing at full speed, generating a growth of 25% in regards to the previous year. We can see a very strong growth in Flex.
Over the last two years, we had here the growth, and we are talking about a growth with a very big base. Now, when we look at the number of centers, we got to 787. If we looked at it last year, we had 500 centers, which was 380 centers that are at the beginning of capturing students. So there is an expansion that we are really working with, but also the maturing of these centers are going to bring more fantastic results. To the right, you can see revenues. Revenues are growing more than the number of students. With the issue of the mix and the flags contributing in here, generating an EBITDA of BRL 137 million with 78% margin. Up until a little bit below, we have 350 poles, centers opening per year. We had the biggest number at UNESA here in Rio de Janeiro.
We are increasing to 450. When we bring the expectation that we are going to get from UniToledo 250, it is a fact we already acquired. Now with Adtalem, we are talking about 550 pole centers. Our prediction of growth with distance learning is based on our capacity to evolve and growing the number of centers. Let us talk about the next page, medicine. Once again, consistency. The four units, Mais Médicos, that were authorized by the Ministry of Education. Four are still on the works. We are going to capture next year the first expansion in regards to Mais Médicos one. We have another 100 seats in the new campus. That will bring a clear view that we have the differentiation with medicine. We have here in Rio de Janeiro, and we are the number one university in the state of Rio de Janeiro.
We are the biggest school of medicine in Brazil. In this meantime, about medicine, we increased 37% our number of slots. We have here a very aggressive scenario. We can see 1,400 with the addition of Adtalem. As the addition of the base, we will get to the 1,400 seats open for the students. This is the base for students for 2024. The revenues are growing and the average ticket is growing as well. Now, let us talk about the next page, the M&A. You can see here the last quarter, and in fact, we know that we have done great deals, and we looked at this well. We prefer to buy more. We were trying to find the two businesses that since the inception in our plan, we saw two fantastic business that could bring something different.
Starting with UniToledo, that was authorized by the CADE, which would be the Brazilian SEC. This is a fantastic teaching university. We have our wonderful students and professors, and they are going to work in the state of São Paulo, and we have the possibility of working, of helping even in Rio de Janeiro and the other units. As I mentioned, 5,000 students, and our expectation is something different than what we did. The expectation is to keep their brand because of the quality, because of the recognition in using that brand for the expansion in the state of São Paulo, in the on-campus and distance learning at Adtalem, as it was mentioned. They had a view of bringing more of a vision of bringing 100,000 students, but also bringing people of all the levels from on-campus and distance learning, from management, and to think differently from us.
That they would have a rigor, an obsession with quality, and they can help us with our digital teaching. The idea is to keep Ibmec completely independent as it is, even getting people that today are at Adtalem, and they can work with our medicine as a whole. I have a big transformation that should be done. In the YDUQS world, that they will be a part. These numbers, once we get them together, we will get 137,000 campus. We see bringing them together, if we see the EBITDA from the past to the future, over BRL 200 million of additional EBITDA to YDUQS. So, to the conclusion. We were just mentioned. We are building a very solid base for 2021 to really go full throttle. There will be no losses.
There will be no looking back, only growth, and we are building that based on these three leverages on the on-campus distance learning. Once we remove the Fies issue, this is very solid growth. Looking at the conclusion, we have operational gains that are very significant with our intake that is historical, 320 students. Student-based growth, with all segments, including former Fies, focus on retention, 86% on campus, generating BRL 270 million of EBITDA in these nine months. The cost is stable. The EBITDA is adjusted while growing cash conversion that we are very proud of the 68%. Looking up ahead, the distance learning on campus is growing and the M&A, the acquisitions, we are working with the integration within the limits that the authorities allow, and also Mais Médicos, so that everything is working out together. But we are not going to stop here.
We have cash, we have a good balance, and we continue to look outside. We want to take our impact to more people throughout Brazil. I am going to give it back to Tostes.
Thank you, Eduardo. Now we can do the Q&A. Remembering, two questions per participant, please. We will start the Q&A. If you have any questions, type asterisk nine. To remove the question, type asterisk nine once again. Please wait while we collect the questions. First question, Mr. Roberto.
Thank you. The first question, volume and price. What happened with the strategy of gaining with tickets and volume? I wanted you to comment a little bit on that. The second question is in regards to expenses, the organizational restructuring. What else do you have along those lines? With the restructuring of the teaching.
Thank you, Roberto. This is not a trade-off with the price. You get a record, and you go 20% better than in the best year. In the end of the day, on the medium term, you have a healthy company. Obviously, there is a trade-off that we are doing, and we are working strongly with our position in all the markets that we work. There were places that we were not working very well, and we waited too long. That doesn't happen anymore. I think we are certain that we are doing the right thing with this expansion movement, delivering what we consider to be something marginal in price, but working with the retention mainly. In regards to non-recurring expenses, there is the teaching issue. We saw an opportunity working specifically with operational research, optimizing the classrooms. Operational research is very enriching, and we are not withholding anything.
We are bringing people with a lot of experience, and we saw the opportunity of eliminating waste. This is our big focus. We need to work with the students, taking to them what is necessary. Otherwise, we are going to limit and not working with the very strong issues. We are specifically in a world where we have a lot of difficulties with distance, and we are working with this, with an impact for the second semester.
Thank you. The next question from Ms. Susana, Itaú.
Good morning. We have two questions, two connected to distance learning. First, ramp-up of the centers. You are growing very strongly. If you can tell us, when do you expect that you will have the maturation curve? Also, if you can talk about the number of cities that you wanted to cover with the new centers. Are you reaching the places that you thought that was the most promising places?
Well, thank you. I'm going to give the word to [Aroldo]. He's going to give the answers.
Hi. About the ramp-up, it's following what we've seen. So the rhythm of increase of costs are a predicted and natural growth. We are structuring, so we will keep the accelerator rhythm. In general, it takes about two years to reach the full ramp-up. So this ramp-up is when it becomes positive. For whom? For the owner of the center. Well, the issue of centers varies. We are getting the ramp-up once we get to a base of students that we think that is healthy for the distance learning. In regards to the cities, we are keeping with the cities that we announced, 1,500 cities. Obviously, we have a list that prioritizes those lists, and we follow with that throughout the day. Well, we are giving the incentives to continue with that internally.
Thank you. Our next question is from Leandro, Citibank.
Two questions. Well, about the reversion with the quarters. I wanted to know the renegotiation of debt, the campaign. How was it working? And if you can talk about the nature of the financial expenses, and what would be the normal numbers that would help with the modeling of the quarter numbers. And also, the second question in regards to the institutional restructuring. Well, there is the effect on the teachers. We had several efficiency tests, and this is an opportunity to do a balance of what the last year was in regards to the previous two years.
Well, thank you for your participation. You speak a little bit fast, and I think that it was 15 questions in two. You were talking about the renegotiation campaign, how much it was, and then we couldn't understand what you mentioned. In the second half. No. Here is the following. We had the renewal with the PDD, with the monthly fees and the renegotiation, just to understand how much it was. And there was another reversal in the expenses. I wanted to get your comments with the leasing, how much it was and what is normal. I'm talking about these reversions specifically. It's clear. People are going to answer. I'm going to start with the second one. And I understand about the restructuring, if we expect a big one by the end of the year.
Actually, we're waiting for one thing at the end of the year, but not in the same volume that it was the same as the last year. We could get, well, Adriano and his team, we could anticipate something that we were looking. Something for the end of the year, but not in the magnitude of the last years.
I'm going to start answering the first question, and I think that there is a discussion here, very strong. And we were sitting down and looking at a lot of people, and we decided to transform the distance learning and cash flow. We hired a consultancy. We did a cluster analysis, the type of student that were outside, the ones that were in debt, and I think that this was a scored goal, the transformation of the debt that was stopped, and we could actually cash it.
Well, complementing what Eduardo said. The discount that we conceded, this is not operational, and this is part of the EBITDA. Second point, we had an increase in the quarter. Here, if you see the accounts receivable, the number of agreements do not vary a lot. A great deal of our negotiations, they became cash at the end of the day. Another evidence of that would be the cash conversion of 68%. This is translated with the success of our initiative. Second point, about contingencies. With the reversal of the interest rate and the correction of the indexes, we see that the correction of our processes, the financial correction, they are corrected due to certain indexes. We were very conservative. We were doing it wrong. Once we did that, we did reversal.
What is the standard for the monetary adjustment and the contingencies?
Well, let's wait for the end of the year, but I think that given the improvement of the controls, I see that this line should be a line that is going to be very shy. It's not going to be in the spotlight. Talk about this, once again, in the fourth quarter.
Thank you. Next question will come from Mr. Samuel from BTG Pactual.
Good morning, Eduardo, Zeno, Tostes. Just a question. If you can tell us a little bit about the PAR side. It was only 2.5% of the intake. In last year, it was 11%. To understand if this is the new standard that you wait to work with the product, does it generate a message that you do not need to give so much incentives to capture here?
Well, thank you. The answer is yes and no. I think that we live in a world that financing is important. We've been working to try and find alternatives and having a trust up ahead. I think that the moment is where the public financing will help. PAR, what happens is that we have a product that once we started to look at our side and the side of the student, you have a chunk of the capturing that is extremely advantageous on one side and is extremely advantageous to the other side. We have a short window of. Once we looked at that deep and we started to communicate that directly, the volume dropped naturally. What happens here with this model that we have now, this is the standard. We are redesigning this up ahead. An overview of the life cycle of the student.
While the guy has been here for one, two years, this is a smaller risk, but they need help to conclude their studies. We are also maybe bringing an outside financer. We can do a risk analysis. This is the standard you are seeing. But up ahead, we want to work with the predictability for the student. While there is certain other things, there is another group working with the renewal. I just wanted to highlight that we always talk about the market. While installments, it's something that we need to have, but in a very limited way. This is a teaching institution. It's not a bank. We want to improve the product, support the student without damaging our balance sheet, but we're not going to have any other financial product within the portfolio of our business.
This is going to be the standard that you are going to see, maybe going a little bit up ahead, but you shouldn't be concerned for the market and the rest.
Well, thank you, Eduardo. Zeno. Our next question is from Mr. Marcelo from JPMorgan.
Is expected for the next few years for the medicine units. Well, some start next year. We are talking about the four units that are getting the students from the first semester, when the first 100 seats are going to be filled in Bahia, São José do Norte. How are you going to work with the units? That's the first question. Second question, nature of the points that were given to attract the students with the intake. We are talking about points that are the full semester. How the ticket should behave, specifically in the quarters. This is because something that was more aggressive, it should persist for the next year. If you can tell us more about that behavior.
Marcelo, thank you. Ramp-up Mais Médicos, School of Medicine. We have two in the first semester, two capturing in the second. José, we already captured 80 students. It was in the 100. The 100 will come next year. We will have discounts for the first semester. So in December, it continues, but next year, we will have an uplift.
Okay. Thank you.
The next question will come from Vinicius Ubias.
Thank you. I just wanted to talk about the dynamics of the on-site. Obviously, 2019 was very good because of all the reasons you commented, but I wanted to explore what do you expect for 2020? What is the trend of volume that you see, and what is the monthly mob? The second question is also along those lines. The concern that there was in the market before, it was about the quality of the intake. Sometimes this was due to the nature of the discount. I wanted to understand how you are controlling that, specifically with the base of students you just captured.
Vinicius, thank you. 2019.2 and 2019.1 were very good. We are very satisfied. 2020, we expect to move forward. It's difficult to estimate the number. We are working with our projections for budget. This is a very dynamic market, and I'm very thrilled to see good results in the components. Our feeling is that there is a good improvement in the market, and I think that once again, the perspective is good. But I don't have a good number to tell you. The quality of the intake, it appears clearly once we can improve the indexes of renewal and retention. I think that we had a very strong work with the capturing. We had a history of that the student had a biggest persistence, let's just say. So we expect that these numbers show that they are improving.
Just a follow-up question. How do you select to whom you are going to give the discount for the intake? I know this is marginal, but I just wanted to understand what is the policy of deciding this discount to giving incentive for the students to get in?
It's more from the outside in than inside out. We don't have a standard student. It all depends on the market. I think that the biggest leap that we gave over the last year is being able to look at each course, shift, place, and trying to understand what we need to do and what we are doing, and understanding our attributes, and having a competitiveness that is right wherever we want. Of course, we need to work after a certain period. You work with the students that. You have 20 students in a class, you can get 10 more. I think that we have a lot of gains. We have technology and good processes and also the speed of reaction.
There are places that we can see the competition moving in, and we have a good notion that we have more quality and a better name. It is very granular. Here, the number of students that we are looking at is very big. What we try to get always is to work. We bring the student, that they stay good quality and good profitability for us as well.
Thank you. Next question comes from Mr. Thiago, Goldman Sachs.
Well, thank you for getting our questions. We have two. The first question is regarding PDD. The nature was very clear with the Q&A. We just wanted to understand why that line is in the non-recurring profits, the provision for that debt. What do you expect the future, given that the average deadline for the accounts receivable is not improving, while the non-recurrent, 40% in this quarter, is regarding to a leasing contract. Can you comment a little bit more on those lines? From up ahead, should we expect non-recurrent expenses due to the acquisition of Atenas?
Thiago. Well, first, about the PDD. Here, I do not see any non-recurrent. This of the financial numbers of the company. At each moment, we will give discounts to renegotiate debt of active and inactive students. Remembering that every renegotiation, we have part of the payment, cash. We have the deferral of the installments that are late and another discount installment. This is part of the discount. You should not see this as non-recurrent. I think that your second question was about the issue of the real estate. Well, looking at the going forward, our average deadline for receiving, 98 days. If you look at the previous quarter, it was above 90. That was expected. The insertion of the financial products, we are talking about that since 2018.
Our cash conversion already considers this increase in deadline. I do not see anything that concerns us with the maintenance of a good cash conversion. I do not see any pressure looking up ahead.
Looking at PDD, we are looking at something about 10%-12% looking up ahead, and we are very close to getting the maturity of that indicator due to the students. Well, as G&A, the real estate non-recurrent, this is an issue from 2017. It is very pinpoint, and given the probability for the negotiations, we are bringing the results. This is the first time that we bring non-recurrent items. It is not a practice of the company to talk about this. We do not like this, but we understand that it is important for the market to know that this is something that should not happen again.
Another addition here. Well, Atenas is going to generate costs. The results are going to be non-recurrent. With the M&A, even consulting, there are things that are going to appear. Our expectation for the year is not getting to the centers that we got last year.
Okay, thank you.
Our next question comes from Mr. Bruno of Bank of America.
Hi, good morning. What is your expectation for capturing the benefit of the operational research for the teaching costs? Can you tell us a little bit about that? I am sorry about insisting about the second, but can you give us the evaluation of the first-year student and the last-year student?
We are not going to answer the second one. That is strategic. There must be a lot of people listening, knowing that as well. They want to know that as well. In regards to the first, there is still a lot of things to do. There is still a process. It has an impact from the cost side. It has a big impact in the retention and the quality of people. You have a predictability that is very big with what is going to happen.
You can give a better life to the teacher, the good teacher, the ones that we. And the ones that the students admire, and they have good results. They have more of a medium-term life cycle. But we got squeezed this semester. We went beyond our initial projection. We have things for next year and for the next year. There is still a year and a half of work with this. And we would rather not talk about this because we are still testing. So I am sorry that we are not going to answer your two questions, but no problem.
If there are no more questions, I would like to give the word to Mr. Eduardo Parente for the final thoughts. Once again, thank you very much to everybody that is here.
We are in a journey that is very interesting. A lot of changes. I am very satisfied of being able to have this dialogue with you and showing consistency. I have said in the past, this is the standard, and I believe that medicine and distance learning and the growth with the M&As, with objectives. I wanted to highlight the invitation to you to be in November 26th with us, with our YDUQS Day. I think that it will be very clear on how we are thinking about the future and the opportunities that we are foreseeing for the future. Thank you very much. Have a nice day.
The teleconference is closed. Thank you for participating.