Cogna Educação S.A. (COGN3) Earnings Call Transcript & Summary

[Interpreted] Good morning, everyone, and thank you for waiting. Welcome to the conference for the results of the second quarter of '25. [Operator Instructions] This teleconference is being recorded and will be available on the website of the company at www.ri.na.com.br, where you can find the complete material available for this results disclosure. You can download the presentation in English [Operator Instructions] Before going on, we would like to tell that any declarations that may happen during the conference regarding the business perspective of Cogna, future perspectives and goals are the beliefs and premises of the company administration as well as information for Cogna. Future considerations are not a guarantee of performance involving risks, uncertainties and premises referring to future events, therefore, depending on the circumstances that may happen or not. Investors and analysts must understand that general conditions of the sector and other operational factors may affect the future results of Cogna and may lead to results different materially from those expressed in such future conditions. Now I'd like to pass on the floor to Mr. Roberto Valero, CEO of Cogna for his presentation. Please, Mr. Roberto, the floor is yours.

[Interpreted] Good morning, everyone. Thank you for participating on this conference to discuss Cogna's results in the second quarter of '25. Here with me, I have Frederico Villa, our Financial Vice President; and Guilherme Melega, Director of Vasta. The call will have about 40 minutes of presentation, followed by 20 minutes for the Q&A. Well, I'd like to start emphasizing that we've had one more quarter with wonderful results this time across the board with the 3 business units, Cogna ventures in double digit as in revenue, EBITDA and cash generation, which make us very happy. Obviously, each business has a different seasonality, but this quarter was wonderful with all the deals with a great performance in all the operational indicators. The results in the second quarter of '25 as well as the first quarter of '25 in the accumulated view show that what we are developing here in Cogna in a consistent way was not aim only to reach the guidance of '24. That was one of the challenges for last year. But what we are developing here also aims at developing a company able of developing values consistently over the years. I think this second quarter and the first semester show clearly that with all the evolution we are having. Obviously, during the journey of the next quarters and years, we will have wonderful quarters like this one, but also challenging ones after all, it is part of the game. However, I have no doubt that the strategic vision we are implementing with all the portfolio and the brands that we have as the ability of development of Cogna team is differentiated. I'm pretty happy to say that because over the years, we've been showing consistent growth. This is the 17th consecutive quarter that we grow the EBITDA, for example, and I'm pretty sure that the strategic view and the ability of working of the team is quite differentiated on the market. But well, let's go to the figures in the first slide. I'd like to start emphasizing the net revenue that we grew more than 15%, 15.5% in the second quarter and accumulated more than 10%, 10.5% in the accumulated growth in all the BUs, all of them with great performance, even Kroton in the second quarter that generally. Generally, the semester have a seasonality that is less intense, but Kroton also grew 13.5% in the quarter with more than 15% in the semester like Vasta and that had a wonderful performance in the revenue. In EBITDA, as I said, the 3 BUs are pushing the results of EBITDA in Cogna. The growth in the quarter was 14.5% and 13.5% in the semester. Our EBITDA margin despite the second quarter decreased a little 0.3%. It is important to analyze the semester because it is a little of the seasonality, especially in hiring and that is focused in the second and the third quarters in Kroton. But when we analyze the EBITDA -- the recurring EBITDA margin in the semester, we gained showing the ability of the company to keep generating efficiency and leading processes and systems and gaining profitability. From the point of view of net profit, we reached almost BRL 119 million with quite an important reversion. We are pretty happy an improvement of BRL 127 million compared to the BRL 8 million loss that we had in the second quarter '24. And in the fourth quarter '24, we opened the season for consistent net revenue over all the semesters we had in the fourth Q and the first Q and now in the second Q in '25. Accumulated, we have almost BRL 214 million in net profit with more than 7%. Now talking about cash generation post CapEx, we reached BRL 297 million, which is 20% more than the second semester of '24, which shows that our work not only to grow the revenue and improve the EBITDA are focused a lot in the ability to receive payments from students and all the work that Vasta team is doing with the schools with improvement of processes and the migration premium teaching systems that is more resilient, less and more receivables. So it shows clearly that 200% growth in GTO shows that the operation is quite well in the accumulated 78% above the first semester '24. Now talking about the free cash flow that is what Fred likes a lot is the free cash flow and net profit. We are very happy reaching BRL 134 million in free cash flow in the second semester '24 accumulated, we have 283 million of free cash flow with all the efforts and the results and the operational cash and all the liability management that we have here and the reduction of net debt of the company are making us pay less more financial expenses, which goes directly with the free cash flow, which makes us very happy. Now talking about the net debt in the last 12 months, we reduced more than BRL 526 million in the second by the way, in the year, comparing the second Q '24 and '25 and specifically in this Q, we reduced BRL 17 million, but we distributed dividend of BRL 127 million. If it were not for that, the net debt would be dropped BRL 137 million if we consider the BRL 17 million that we delivered in net debt. So with a huge ability of generating cash in the company. The leverage reached 1.22. It's not a point of attention anymore. We basically don't have questions or doubts regarding leverage. But we had an important reduction of almost 5 in '24. We reduced compared to the first quarter. And it's nice to emphasize that this is the lowest leverage in the 6 years of the company. Now going to the next slide to talk about the operational performance of Pro. We have the first graph emphasizing the growth of intake in the first semester of '25. The intake in terms of volume grew 0.9%. Remember that what we focus is not the growth in volume, but in revenue, but this 9% of revenue of newcomers generated us in revenue in 17%, which is quite positive because -- we have a lot of students. So it brings not cost but revenue. And obviously, it's favored by the mix that was more concentrated in presential on-site courses [indiscernible]. We are quite happy about this item. We had a little increase in the dropout rate, 0.4% with an improving in comparing on-site and in the intake previously, it was strong in terms of volume. When we grow in volume, this effect next semester, we have impact on the dropout, but it's quite small. And I would say that from the point of view of underpayment, we are quite well with controlled nonpayment and enrollment growing -- so no point of attention here regarding the dropout rate. Obviously, we are working on academic engagement so that we improve the number of students. Our student base reached 1.2 million students with a growth of 5.4% if we include the students in and 7% if we count only the students paying that generate revenue, which is quite nice to say that this is the 16th quarter consecutively that we grow. We are diligent in which we consider students. We didn't have to adjust base. There is no disconnections. They are paying. They are active for the semester. Now going to the next slide, talking about net revenue, it grew 2 digits both in the quarter and semester, growing 13% in the second semester of the '25. And if we consider the replacement of discounts for active students with the renegotiation that we now have in TD, we have on the same base, and we would then grow 11% of the revenue in the quarter in the semester grew 15.8%. If we consider the same thing, we would grow 12.6%, which is quite robust for the revenue. It's an effect of what we talk a lot is important that the newcomers bring the reset and old ones have engagement financially so that the base and the average ticket grow so that we can evolve the revenue. I think the last point here is the average ticket of the base that had 6.5% compared to the first semester. I think it's important to emphasize the growth on on-site and DL with 2 effects, and this is what we are doing for all students, especially as I mentioned in the previous slide, we have a mix with a lifetime value that is a little greater in helping the average ticket. Now going to the next slide, we have the profit growing 13.6% in the semester 17. Even with gain in the growth margins we gain lets stay stable 0.2% in the quarter, but in the semester specifically because this is the way we like to see we grew 0.8% if we see the third column, the third graph, we see that we lost a little. We are basically stable in the margin of 0.1%, but we gained on site due to the average ticket and the greater percentage of students in greater [indiscernible] and in the end to gain 0.8% of gross margin. Therefore, a lot of efficiency here. Now going to the next slide of costs and expenses. I think here, we are presenting the two views of the quarter and the semester with corporate expenses with an increase of 0.8% due to the update of social payments due to the long-term program. When we analyze the semester that is in the next slide, you see that the corporate expenses are stable. We had only this difference in the second quarter of '25. The PDA despite showing the growth of 10.4% to 12.6% we have to remember the reclassification. So it is in the previous method, the 10.5% and 12.6% in the current method if we were in the same base, especially with our lease that we have a table explaining that the PDA would be stable. So no point of attention here, this increase of 2.2% is due to the change of the discount for students. Operational loss, then we have some effects like replacing some things of Kroton working only for Kroton -- and I'll give an example like that we would work intensively for Agua brand and now they are working in all of business. So this is just an example of replacement leaving Kroton and going to the corporate with some projects also related to the consolidation of the academic. And also we have gain on efficiency processes, investments in AI that we are talking a lot here. Now going to the next slide, that is the cost and expenses of the semester. Basically, the same explanations are valid. Here, you can see clearly that we gained 1.3% in efficiency and where does it come? Well, the PDA is stable, 2.6% here in this graph, but stable if we consider the same basis. We gained efficiency in operational expenses and marketing as well, showing what we have seen before that we are searching for efficiency, concentrating more the marketing expenses where seasonality is more favorable. And we are also able to improve our conversion rate, which doesn't demand so many investments in market to do that in. The total cost also dropped that is 0.8% that I mentioned in the previous slides. So in general, Kroton is quite efficient with this 1.3% of gain that I mentioned. And the last slide of Kroton now talks about the recurring EBITDA and EBITDA margin. So the quarter specifically had a reduction in EBITDA margin of 2.1%. Obviously, this is pressured by the reversion that we had of BRL 35 million in the second quarter of '24 related to the system. So we did that in the second quarter of '24, which pressured a little. So that's why in the quarter, we are losing 1.1% in margin. But it's important that in the semester, we don't have this effect. We see clearly that the Kroton semester was good, and we are gaining 0.8 points due to the efficiency that I emphasized. With that, now I pass on the floor to Guilherme Melega so that he comments on Vast –

[Interpreted] Thank you, Roberto. I'll start in Slide 12 with the operational performance in the B2B of summers that is the units providing services to schools. I start with the graph on the right -- the left, I'm sorry, that we had a growth of 4% in the system with 1.49 million students and the segment of complementary that is the fact of bilingual material and so on, we grew 16.8% in student body, reaching 56400 students. So the complementary and the penetration that we are getting in schools that we already have content is good. When we translate in number of schools on the right, we can see 5,000 schools, 5,025 schools in the second of '25 and in complementary 2,149 schools. So it's quite a robust growth and emphasize the emphasis is complementary with 24.8% growth. And also the start unit that is of franchising, we have 7 under operation, the flagships in -- so Jose Roast in Sao Paulo, and we grew 30 contracts compared to '24 considering the second quarter. So now we have 5 signed contracts in units. Now going to Slide 13 to mention the revenue in the quarter, we grew 21.8%, reaching BRL 358 million. The highlight is the conversion into revenue of our subscription contracts, reaching BRL 320 million with a growth of 14.7%. When we analyze the cycle that is, in fact, the proper way of seeing the business performance, we reached maturity in the cycle. We only have the next semester for the cycle when it's seasonally lower. So we have a good idea of the growth that we had in the revenue. We reached BRL 1.487 billion revenue with a growth of 13.7%. In subscription, we reached BRL 1.340 billion with a growth of 16%. The expectation is that the expectation of the cycle is close to what we are performing so far. And now the non-subscription segment that we had a growth of 11% that is a reflect of our operation business in the schools and flagships that I mentioned. And we now have a more significant volume of payment here, which represents a growth comparing year per year, reaching almost BRL 98 million. I also emphasize the B2G segment that we reached BRL 50 million here in the cycle. Remember that this number is only the first semester. In the contract of Pará when we compare to the cycle last year, we would have the contract in Para with BRL 69 million. The good news in B2B is that we have besides the contract in the first semester in Para, we have BRL 5 million of revenue of new contracts. So we are now dealing with the municipality -- it's a segment that is growing, gaining capillarity and the expectation for the second semester is quite positive. When we go to the expenses in Slide 14, I'll be brief here because I want to emphasize the expenses of the cycle so far, but I emphasize the total growth of expenses with the growth of 16.1% compared to revenue that grew 21.8%. So you can see the results on the right with a growth of 3.6% of margin in this quarter. So our growing volume is above the cost growth, so which makes us increase our margin here in the business. Now let me talk about costs in Slide 15, cost and expenses, which is more clear. I'll focus on the table on the right. We can see here all the efforts that we've been making to reduce costs and efficiency. And I'll emphasize the PDA that we are 1% lower than last year, reflecting not only the good practices of charging, but also our movement for the premium segment working with schools of better quality of credit. Operational expenses, we reduced 1.5%. This is a continuous search of efficiency for us to be more and more efficient with new technology so that we, in fact, can invest in marketing and sales to ensure our growth. And here, you can see 0.6% of growth, which is a reflect of investment for our growth and the benefit of this growth that is seen in the fourth quarter when we start having the new contracts. So now let's go to the EBITDA in Slide 16. So the EBITDA of the quarter is BRL 40.5 million with a growth of 31%. So it's a weak semester compared to the previous semesters. So it is important in the growth, we are reaching the growth of 26%. So despite the investments with the growth, we see the margin of more than 3 points, reaching BRL 40.5 million, 80% in the EBITDA of previous year. When we analyze the cycle, we see BRL 458 million of EBITDA, the greatest one so far with a growth of 10% compared to the previous semester, and we reached 30.8% of margin. This margin, we hope to grow with the growth in the fourth quarter, making the company grow not only in absolute values of EBITDA, but also in margin. Now I pass on the floor to Fred to talk about Tab.

[Interpreted] Thank you, Melega. I'll start my presentation with Tab. Just to remind you, we have the business of the PDA solutions for Gal. And we had a growth in net revenue in the third quarter of 13.6% reaching the net revenue of about BRL 84 million. And here, I have to mention that until the second quarter of '24, we had a business that we sold last year. So it's not comparable to this business. In the second quarter of '24, it represented BRL 10.2 million in our revenues. The highlights here are the other solutions for government and a product that we have inside Brasil with a growth of 82%, reaching BRL 48 million -- from the left to the right, talking about the semester, we had in the semester a revenue of BRL 217 million. The highlight is positive in revenue also with the solutions for government and others with a 57% growth reaching BRL 85.7 million to BRL 134.7 million. And the negative aspect here that is mainly in the PDA is seasonal. So I have the seasonality of the program of purchase and repurchase. So remember that the year '25 is the year for purchase of high school and elementary school 1 and 2, and this is the year that we mentioned to grow the revenue but with a neutral EBITDA comparing 1 year to the other. Now leaving the revenue and going to EBITDA of Tab, the recurring EBITDA and the EBITDA margin, you see that in the third quarter, we reached an EBITDA of BRL 2.4 million with an expansion, a growth of 124%. In the same period last year, we had a negative EBITDA of about BRL 10 million with a growth in margin of 2.4% and last year, a negative margin. So here, when we look to the right to the semester, we had a growth in EBITDA of 36%, reaching BRL 51 million, and we had a margin of 23.5% with a growth of margin of about 9.4%. With that, I finish the presentation of Sabre and I start the last part of presentation showing the numbers of Cogna as a whole consolidated -- in Slide 21, I start the presentation talking about the quarter. In the quarter, we grew the net revenue in 15.5%, reaching BRL 1.66 billion. We grew in the 3 business units. So we had a group of Kroton, 21.8% in Vast and 14.6% in Sabre. As we had the first -- the quarter that was quite strong, we had a growth of 10.5% of revenue, reaching a revenue of BRL 3.2 billion. In the next slide, Slide 22, leaving the revenue and talking to the EBITDA, we had a growth in EBITDA for the second quarter of '22 of 14.4%. We had -- we reached here in the semester, a growth in EBITDA of 13.4%, reaching BRL 1.8 billion with an expansion in margin of 0.8%, showing the strength of our businesses. We grew in revenue, in EBITDA in all the 3 businesses. And here in the consolidated, it only shows the whole situation. In Slide 23. In the end of last year, we presented the net profit that last year in '24, we had an effect of reversion of contingencies that helped our net profit, but we had a net profit reversion in the fourth quarter of '24, we had a net profit of about BRL 95 billion, BRL 96 billion in the first quarter of '25. And now in this quarter, we had a net profit of BRL 119 million. So we have a margin of 7.1% compared to the same period last year, it was negative in about 0.6%. And in the semester, we have a net profit here in BRL 215 with a growth of more than 1,000% compared to the same period in the previous year. So it in fact, is something that we launched in the fourth quarter last year with this virtual cycle and this virtual cycle of net profit is now in the next slide to talk about the cash generation for the company. That since '24, we were talking about the cash generation, the operational and the free cash and the cash after CapEx and the free cash and the generation of operational cash after CapEx and debt service, all the interest that we paid the debt. And last year, we finished the operational cash generation with BRL 1.44 billion, reaching the guidance of BRL 1 billion. And the free cash generation last year was BRL 395 million in the year. So in the semester quarter, now we have BRL 297 million and the growth in the quarter of 206% and the free cash in the second quarter '25 reached BRL 135 million. And remember that last year, the free cash generation was negative. Now talking about the quarter. As we also generated positively both operational and free in the first quarter of '25, our semester delivered an operational cash generation of BRL 547 million with a growth of 78% and the free cash generation of BRL 284 million. And in the first semester of '25, our free cash generation was BRL 95 million negative. So it shows that the company is on the right pathway, growing revenue in all units, EBITDA. No other payments are under control and everything is under control. I'm sorry, I got lost in the slide. So now going to Slide 25, talking about the position of cash and debt in the end of the second semester of quarter of '25, we have a debt in the position in the gross debt of BRL 37 million and availability of BRL 944 million and activity of BRL 697 million and our age of amortization. You have to remember that in '26, we only have one amortization of about BRL 500 million in Cogna19. So it's not a point of concern to us in the company. And we are here still working in one more operation of liability management to reduce our cost of capital, not to have this indebtedness for the first quarter of '26. Now going to the last slide, Slide 26 in the company in the second quarter of '24, we had the leverage on EBITDA of the last 20 months of 1.6x. And here, we reached 1.22x with a reduction of 0.257 the EBITDA and the leverage of this year in the company additionally, we also reduced the net debt compared to the last quarter and the first one in '25. And remember that in the first semester of ' 25, besides reducing the net debt, we also have of the payment of dividends of BRL 121 million. With that, I finish my presentation of Cogna and the leverage of the company and pass on the floor to Roberto again.

[Interpreted] Thank you, Fred. Going to the next slide, when we talk about the 6 pillars, we talk specifically about the growth, and it's clear the growth in double digits in the unit in the second quarter. We are quite optimistic to the year, analyzing all the businesses, the titles that is positive in on-site and distance learning Kroton in the first semester, it was good and intake was good. So we have everything to have a wonderful year in Kroton, Vast as well progressing a lot in the ACV cycle for '26. The team is thrilled growing. The started [indiscernible] that we have 30 contracts more than last year. So 50 contracts, solutions, also complementary, progressing well. The next growth line, especially in Saber. In PA, we are having contracts. So we had some discussions last week, some news saying that the government wouldn't buy the books. I see that as a speculation, we are receiving the contracts for repurchase of -- we have a perspective of having obviously high school now with the fourth quarter, everything progressing an important part of our growth is progressing with -- as Fred mentioned, EBITDA is stable and solutions for Vasta and Saber. We have serving to the city halls and the state government with discussions and processes in the pipeline. So we are quite optimistic in this front. So from the point of view of growth, we are okay for '25. Obviously, the greatest question mark on the market is the impact of the regulatory framework for higher education. We reinforce the point that we see positively the clear criteria, the interpretation, less spread making all teaching institutions working similarly, which is easier for the student to teach -- to choose, I'm sorry, and I understand the needs of on-site education increase the cost, but we know how to operate same presential-ly. This is our origin. Ours are quite experienced, most of them with more than 20 years of experience with us. So it's more cost, but we understand that the price repair, we gave an estimate to the market saying that we have an estimate of BRL 105 for DL. It should be BRL 150, and we understand that this price increase won't prevent us from growing as well as in present on-site education that is a growth estimated, but to say BRL 800. So we don't believe it's a big problem. We need to live with this adjustment, but everything going well and the cycle of intake is good. So analyzing the growth, we are quite optimistic from the point of view of experience, we keep growing in all senses in experience of clients, students and clients like schools and governments. I emphasize two awards we had this semester, M25 in best companies for client satisfaction and customer 25 as well, specifically for the use of AI. We are investing a lot as well. So it's us talking about us, but it's the market acknowledging our progress from the point of view of efficiency. It is in the culture of the company. We've been progressing, especially in engagement and reenrollment in Kroton with all the performance of ACV that is developed -- delivered by Vasta and also advancing in B2B in SA. So you can see that in the margins that we are showing in all businesses. So here, we have a lot ahead of us, and we understand we still have opportunities to gain on efficiency. In people and culture, we are investing a lot. in improving and having the best talent and creating an environment for them to develop. I emphasize here the awards of Great Place to Work that we've been receiving every year in Cogna and Somos and Vasta and emphasize specifically two awards that we received in '25. That is the Great Place to Work from the point of view of diversity in two categories, both to women and in ethnic and race. It reinforces the importance we give to diversity. In innovation, we keep going on in Cogna, and we are responsible for corporate building. We are working intensively close to the with new projects progressing, starting and progressing. So in terms of innovation, it is present. So we are quite optimistic with what we can develop over the years. And to finish from the point of view of ESG for the third year consecutively, we are in the sustainability portfolio of B3 in ISE. We recently presented an integrated report that is quite complete for the first time being independently audited by KPMG with a complete material that you can Cogna, you can read the material, you have a lot of information. With that, I finish by saying that we are pretty happy with the second quarter, thrilled with what is about positive perspective. The team is quite optimistic. We have a lot of work, but obviously, we are quite thrilled. With that, I finish the presentation, and now we go to the Q&A session.

[Operator Instructions] [Interpreted] So now let's go to the first question from Luca Marquezini, sell-side analyst from Itaú.

[Interpreted] I have two questions here. First, you can update the intake for the third quarter so far, especially considering this transition period that finishes in August and the impact of that, if it is speeding up the new enrollment, if the company is more promotional facing that. I mean if you can give a glimpse on intake considering this transition period, it helps. And the second point regarding the medicine ticket that was stable annually, obviously, with the impact of calendar, but if we exclude this effect and if you could comment on how it evolved comparing the years and a little bit of the competition scenario in medicine, if you feel any resistance in price readjustments, it will help us.

[Interpreted] Well, Luca, thank you for the questions. I'll answer, but then Fred, if you have anything to mention, please complement. From the point of view of intake, Luca -- we are, let's say, optimistic because intake is good. It's growing a lot presential and semi. Somehow it is surprising to us. I don't know if it was a repressed demand due to all the discussions of the regulatory framework that made students move later for the enrollment. So I cannot say if it's structural. So the intake is growing, and we gained efficiency from the point of view of funnel with a lot of changes that we had in the process of converting leads, and it is helping us improve the growth. But yes, we see growing intake and understand this is part of the market. We are benefiting from this market and maybe evolving a little more due to this. Regarding the transition period, I don't know if you have access to the information, but recently, I guess, on Tuesday, the Ministry of Education launched a saying that the transition period due to some systemic adjustments they have to do is extended to the first 2 weeks of September. So we don't know exactly if there is a specific date. We had the 19th as the onset of the new framework. But due to the systems and adjustments, it extended. So maybe we'll gain 15, 20, maybe 30 days of intake so that we can progress more and get closer to the transition happening in the cycle of 26.1, which would be positive for us not to get a drop in the beginning. So many players have some discounts considering this window of debate. We followed some offers. I emphasize the point of the strategy not being focused on the volume, but in the intake period. So we are following some prices, but we are focused on making this cycle having more revenue than necessarily the amount of volume -- the volume of students compared to last year. I think I answered all the points. The second question about the dynamic of the average ticket in medicine. So I'll consider here, and thank you for your question. So the average ticket in medicine has a dynamic with a more consolidated school can be possible to repass inflation better and less consolidated ones only for old students and for new students, in fact, the ticket is stable regardless of the place, okay?

[Interpreted] The next question is from Marcelo sell-side analyst from JPMorgan.

[Interpreted] You were talking about leverage and reverting you see as a healthy goal for Cogna. And what to do when you reach this goal? And how is the M&A mind now that we are reaching this leverage? These are my questions.

[Interpreted] Well, Marcelo, thank you for your question. From the point of view of allocating the capital, our mindset is the same. We are focusing primarily using the cash to reduce the debt, therefore, having less financial debt obviously, one or other strategic M&A, a lower one, we may work -- we are, in fact, analyzing some small things, but nothing to consume our cash. And I'll let Fred talk more, and we also discuss on how to return part of this capital to the shareholders. We distribute dividends on May, but we are also discussing potentially using other instruments to give back the money to the shareholders. But from the point of view of mindset, this is what we have spending less in financial expenses is the primary intention. Fred? Well, additionally, basically, Fred said everything, but the leverage for the future. Marcelo how we analyze that? Well, we have this leverage of 1.22x. And we understand that without guidance, this leverage should be closer to 1x for the year of '26 and '27. And later on for the structure of the company starting on '27, I reduce the amortization and I can have a new leverage.

[Interpreted] Our next question is from Mirela, cell side analyst of Bank of America. The next question comes from Eduardo Resende sell-side analyst of UBS.

[Interpreted] We have 2 questions here. The first is regarding regulation. You mentioned the deadline for the restriction of tradition was extended. I'd like to understand what is the greatest concern in the very short term considering the intake for the beginning of next year. What are the main operational adjustments to be carried out in your operation? If you can give an idea of that, it would be interesting to us. And the second question is about the B2G revenue in. I'd like to understand your mindset on what to expect to the second semester, what you expect for the year in this sense.

[Interpreted] Well, Eduardo, thank you for the questions. Point of view of the very short term, we had good news of extending the term, which allows us to deal with the intake in the current modality and more important than extending the deadline considering we have to face the transition. But better than that is to improve this movement of growth in the intake. Obviously, there is a change. We have to change it in the website and explain the new model that was DL now with semi, it can bring disruption. So to us, it's better not to have changes in the middle of the cycle. It's better when we close one cycle and start the other one. And despite the deadline is extended, although we don't know the future date, we need to wait for the information of the ministry, but this is positive. And I think what is still missing on the ordinance is to be clear on how we carry out the transition in nursing, but it will be for 26.1. So it's not in the very short term. We have time for this transition. In the B2G, I guess Melega can comment on that.

[Interpreted] Thank you, Eduardo. Now let me talk about the B2G here. The perspectives of B2G are quite positive. Looking at the cycle so far, we can see BRL 5 million of revenue in B2G, and this is the first semester and the first contract that we have to compare. So in the first semester, we acknowledge BRL 50 million. The novel is BRL 15 million acknowledge new contract -- so in fact, we increased the capillarity of the business. We reduced the dependence of the business on big contracts. We keep prospecting new contracts in states and retail gets stronger as well. So looking at the next semester and the future performance, our expectation is to grow in the cities. We have 15, we can grow more. And the fourth quarter is the one where, in fact, there is the supply for '26. You may expect a more significant acknowledgment of revenue in the fourth quarter that would be for the classes in '26, but still depending on new contracts to be signed over the next 6 months, but the perspective is quite favorable. Just to complement Eduardo, because you asked about the short-term concerns, and I reinforce the point that we understand this change in the regulation for the big players, and we are obviously included, and this is positive. Obviously, we have a change of cost. We cannot deny that. We have increasing costs, but the regulatory changes. We remove small players that in general have no differential, no caparity. They decrease the prices and they pressure the average ticket intake and these players are lower participation on the process. And maybe without them, we can grow more, but just to emphasize this aspect here.

[Interpreted] The next question is from Maliera sell-side analyst from Bank of America.

[Interpreted] Yes, I have two questions here. In the first semester, the company showed the cash generation that is quite strong, reflecting all the changes that you faced over the years. But in the second semester, we should start seeing at least in the fourth quarter, the impact of the new regulation, especially in competition. So I'd like to know if you expect a decrease in the cash generation of the company from now on in the second semester or even if you have some visibility, if you can comment for the next year how to deal with the changes? And the second question, more operational that you briefly mentioned on the dropout rate in the second semester that is regarding somehow greater than last year, it caused attention that this movement is with the company delivering an average ticket with improvement in the mix of shipments. We would like to understand that if there is an effect that you believe are more specific or if it's a trend that we should pay attention in the next quarters.

[Interpreted] Fred here. The first question about the operational cash generation, and I'll talk about it and the free cash generation because this is how we manage business in the company. The point that you mentioned is that we expect a deceleration? No. But I would like to explain. And this is why and the beauty of the business is our strength point for the second semester is the PLD. So we have a growth of revenue and a strong cash generation for the second semester. Additionally, I have Vasta that also has business with diversity and governmental business that we also have expectation of cash generation for the second semester. And we don't foresee today considering where we are in the cycle of short term in Kroton, we don't see deceleration for the second semester. Additionally, I'd like to emphasize in the free cash generation that the company is in the leverage if you analyze the financial results, we have accrue minus interest of the previous years or semesters, we can see that keeping the interest rate and 15%, we should have a second semester quite similar to what we have regarding the free cash generation quite similarly to what we had in the first quarter of '25. And just to complement in the cash generation, our understanding, analyzing specifically Kroton with the new regulatory framework we have a change in the intake and some costs in DL go to the semiresidential. And I understand that this change from the point of view of competition is quite favorable. It removes a lot of players that reduce prices because they are 100% online, and they won't be on the market when it's semiresidential because they have no, no classrooms, no libraries, no labs. So they have no infrastructure. So we see no reason to believe that the cash generation in absolute terms will be reduced due to the change from DL to the semi. Just to give you an idea, okay? Obviously, the semi-residential model from the point of view of percentage has a lower margin, but the absolute contribution is lower. So in fact, I believe that the competition will drop drastically. And I remember in 2017, when there was a change in regulation in some cities, we were competing with 2 or 3 competitors and then we would have 10, 12 and the 10, 12 keep not having structured poles. They need to leave competition. And we'll again have the 3 or 4 with infrastructure. So the competition from the point of view of price will reduce. The average tickets will move, and we should eventually have a positive result from the point of view of students. So this is a view we have to live with that, and we have to lead to see what will happen. Regarding our question of dropout of new students dropout, I was responding a question. It is the impact of a greater number of students -- new students. When we analyze, we see that presidential had a little increase in dropout 0.2% DL with a slight increase and then presidential a small drop from the point of view of new students in the last cycle, especially in the last 2 months in intake. When we have more volume of new students, the trend that that will have a little more churn, but nothing to be concerning point of attention, nothing out of the regular work for us. We are working in structuring projects as we always do. There is no point of attention in terms of engagement or increase of nonpay.

[Interpreted] Our next question is from Hannah sell-side analyst of [indiscernible].

[Interpreted] Briefly 2 follow-ups. The first one in PLD that Valerio mentioned they are receiving the contract, and I would like to understand that according to the news we see the manifestation was that they were receiving Portuguese mathematics and it was missed in Science books. And I would like to know if the new contracts involve that or if it's only Portuguese mathematics. First question. And the second one in NLD about the company budget, if you foresee any delays in the purchase for a high school in the third quarters, if the government will pay that this year. So that's it.

[Interpreted] Thank you for the question. Fred, if you want to complement?

[Interpreted] Well, in fact, the orders were delayed -- so when the association talks about the delays, it is because it's concrete, it's real according to the agenda expected, the contracts were quite delayed, and we are receiving the last days, the last weeks. This is the first point. So even conceptually, thinking conceptually, it's quite difficult for the government not to purchase books to schools for '21 and 2, especially in this electro context. I personally do not believe it will happen despite delay here and there. So that's why we were paying attention, but believing that the call for bid that was even signed in the past and those who won the call, they have contracts and the government has to pay for that. So if we have delays for logistics or something, it's not good for us. But as I said, contracts are being paid. And one thing that impact didn't come is sciences, but the rest are regular. So now regarding high school. In high school, in our budget for the fourth quarter, we have some budget, and we have a part that will be received in the first quarter. It's common, and we work with this scenario.

[Interpreted] The next question is from Lucas Nagano, sell-side analyst of Morgan Stanley.

[Interpreted] We also have two questions. The first about the partner... How is the environment regarding that and the new regulation because we saw the news of the government closing polls on March. So how it can impact the economic viability if we have a conformity environment with the adjustment or if there is some rationalization? And the second one about Acerta Brasil the same way B2G is consolidated as a leverage to Vasta. How do you see a potential market and the focus of management regarding the solution?

[Interpreted] Lucas, I'll answer about the polls and Fred respond about Acerta Brasil. I can tell you for sure that our polls regarding the regulatory changes are quite real. Despite it sounds strange to you, but I can explain it easily. The new regulation came in 2017 with a lot of efforts and resources offered to the pose it was -- I don't know if I can say -- I can say frustration because our assets, our origin is residential. -- poles have infrastructure and the great majority of our poles bringing the 80-20 in the intake are poles that evolved from individual poles to economic groups with a big amount of poles with infrastructure all. So to them, the change in 100% DL to presidential is a great push up, and it's helping us in this aspect that we are speeding up the enrollment of DL and SEMI because the poles are thrilled because they are structured with labs with all the structure years there facing that part of sale with no infrastructure and lower prices that was the history so far. It's quite difficult to compete. And now they understand they have competitive differentials to keep growing. So I reaffirm here that ours are quite fill. Regarding Acerta Brasil, Fred...

[Interpreted] Well, Lucas, thank you for your question. Regarding Acerta Brasil in SA, we are consolidating that as a growth of the company. The reason for our ability to distribute to intake schools and students and government and states to sell the products. And secondly, due to the quality of our products. And here analyzing with here, we are growing double digits, and there's nothing in the future to tell us that it's different from what we've seen. And just to give you some idea, this product of portfolio go-to-market B2B, this is something that we analyze closely here. Clia that is the leader in [indiscernible] leader of, Fred and I and other executives, they are in meetings every 2 weeks to check the initiatives and points of improvement because we understand that B2 is an important set of growth to our operation as a whole. So we have to make that business grow.

[Interpreted] The Q&A session is over. And now we would like to pass on the floor to the final considerations of the company.

[Interpreted] Well, I thank once again you all for following our results call. I congratulate all the Cogna team, our 24,000 employees working nonstop for us to reach our goals. Let's keep up the good work. We still have a lot ahead of us, and I reinforce the team is available to clear any doubts investors might have, feel free to get in contact. Thank you, and see you next quarter.

[Interpreted] The results teleconference regarding the second quarter '25 of Cogna caão is over. The department of relations with investors is available to answer the other questions you might have. Thank you all participants. Have a nice evening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]