Cruzeiro do Sul Educacional S.A. ($CSED3)

Good afternoon, and thank you for holding. Welcome to Cruzeiro do Sul Educacional's conference call today discussing the earnings release on the fourth quarter of 2025. [Operator Instructions] We inform that this conference is being recorded and will be available on the company's IR website at ri.creuzeirodosuleducacional.com.br, where you will also find the complete set of materials for our earnings release. You can also download the presentation on the chat icon also available in English. [Operator Instructions] Note that the information in this presentation and statements that may be made during this conference call relating to Cruzeiro do Sul's business prospects projections and operational and financial targets are based on the company's beliefs and assumptions as well as on currently available information. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and hence, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of Cruzeiro do Sul Educacional and lead to results that differ materially from those expressed in such forward-looking statements. Here with us today, we have Mr. Renato Padovese, CEO; Felipe Negrao, CFO; and Luis Felipe Bresaola, Investor Relations Officer. I would now like to turn the floor to Mr. Renato Padovese.

Good afternoon, everyone, and thank you for attending our earnings conference call for the year 2025. It is with great pleasure that in the year in which we celebrate our 60th anniversary, we achieved the highest accounting net profit in the history of Cruzeiro do Sul, reaching BRL 297 million, 2x above 2024. In these 60 years, we have consolidated a path of strong, sustainable and disciplined growth. Since the origin in Sao Miguel Paulista neighborhood in the far east of the city of Sao Paulo, we have preserved the essence of our founders while evolving to become one of the largest educational groups in Brazil. We ended the year 2025 with a base of 572,000 students, representing a 9% growth when compared to the same period of the previous year. This progress is a direct result of the consistent execution of our academic strategy and the experience of our purpose to empower and inspire students to transform their future and impact the community, which translates into greater engagement and retention of our students. The combination of purpose and responsible management allowed us to achieve BRL 297 million in net accounting profit in '25, 106% higher than in 2024. Adjusted EBITDA expanded 15%, resulting in BRL 879 million with a margin of 31%, up 1.2 percentage points versus 2024. In addition, the year 2025 was not only relevant from a financial point of view, but also on the strategic front. We prepared for the new regulatory framework for higher education and for the potential impacts that we should see in the market. We understand that the value proposition will be even more relevant in this new scenario, and we want to be the main choice for future students. We analyzed the strength of our brands regionally, studied the demand of students and employers and moved forward with the strategic planning of focusing on the student and on those who care for the student without losing profitability. We started the rollout of the new academic model focused on employability in 2025, and that in 2026 will be expanded to 18 courses. We've adjusted the portfolio both in On-Campus and Distance Learning to maximize our efforts in those courses that bring results, aligning the interests of all stakeholders. We advanced in investments, in infrastructure and in hiring professors, masters and doctors to ensure greater value generation for the student and at the same time, corroborate the focus on average ticket that we have set out to do since mid-2025. On the technology front, we spare no effort to ensure an attrition-free process for both students and our teachers. We started to record student attendance with proximity validation via Bluetooth and integrated grade management, reducing operational steps and increasing the autonomy of the student and the professor. Another milestone was the automated re-enrollment recognized at The Customer Summit Awards 2025 for the excellence in the student journey. As for artificial intelligence, we included the automated validation of supplementary hours, 100x faster and the digitalization of enrollment and diplomas, both with AI authentication, which reduced the issuance time from 18 days to less than a minute, ensuring agile student service and freeing up our teams for activities with greater value in human service. These advances have contributed to Cruzeiro achieving first place among educational institutions in the ranking of the most innovative companies in the use of IT according to the IT forum released yesterday, reinforcing our commitment to integrating technology, efficiency and care, sustaining the consistency of results throughout the year. We continue to pursue our purpose of empowering and inspiring students to transform their future and impact the community. Our retention rate in recent years indicates that we are on the right path, and we hope to continue. I end my comments here and turn the floor to Felipe Negrao, who will detail the results of the fourth quarter of '25 and the year 2025. Thank you.

Thank you, Renato. In the next slide, I will talk about the operational performance of On-Campus courses. We registered a growth of 4% in the base, reaching a total of 165,000 students. This is the result of an increase of 1.2 percentage points in the retention rate, which reached a record of 92% of the eligible student base, corroborating our purpose of empowering and inspiring students to transform their future and impact society. We also bring the ticket data for the fourth quarter of '25, which showed an expansion of 9% compared to the same period of the previous year, driven by the execution of the strategy of maximizing the value of each course and the mix effect with a greater penetration of medical students and other courses in the health care area. These same effects have also contributed to the 6% ticket expansion in 2025. On the next slide, we bring the operational data of digital, which ended the period with a base of 407,000 students, which represents a growth of 11% when compared to the same period of the previous year. In addition to the largest midyear intake in the history of Cruzeiro do Sul, due to the anticipation of the new regulatory framework that came into effect in September '25, the growth is also the result of the 1.6 percentage point increase in the re-enrollment KPI that reached 81% of the eligible base, the highest level in the last 5 years. Regarding the average ticket for the quarter, we saw an increase of 2% compared to the same period of the previous year. The growth in the period is mainly related to the greater presence of students enrolled in higher value-added courses offered in the hybrid format. Hybrid courses continued to expand and in the fourth quarter of '25 accounted for 26% of the digital base, up 2.1 percentage points compared to the fourth quarter of '24. In 2025, the average ticket was stable when compared to the previous year. Going into the financial details now, I will comment on net revenue in the quarter, which reached BRL 749 million, a growth of 13% versus the fourth quarter of '24 as a result of the larger consolidated student base. In 2025, net revenue was BRL 2.8 billion, 10% above that recorded in 2024. In the On-Campus segment, net revenue for the quarter grew 13%, reaching BRL 513 million as a result of the evolution of the average ticket and the larger student base. In 2025, the growth was 10% when compared to the same period on the previous year, reaching BRL 2 billion. Revenue from health care courses in the quarter expanded 12% driven by the increase in ticket and the 10% growth in student base. In 2025, the expansion was 14%, reaching BRL 1.4 billion. These courses represent approximately 71% of the On-Campus revenue. In Digital, we had a 14% expansion in revenue for the quarter, reaching BRL 260 million as a result of the larger student base and the increase in average ticket. In 2025, the expansion was 12%, reaching BRL 962 million. On the next slide, we demonstrate the gross margin in the quarter, which expanded 1 percentage point compared to the fourth quarter of '24. This margin expansion reflects the growth of the student base in medicine and digital courses in the mix in addition to operational efficiency initiatives without impacting the quality of the courses offered. In 2025, gross margin expansion was 2.2 percentage points, also reflecting the effect of student mix and operational efficiency in the noncore aspects. Next, we bring the adjusted EBITDA for the quarter, which totaled BRL 148 million, representing a decrease of 9% compared to the fourth quarter of '24. The chart shows the breakdown of the adjusted EBITDA margin, which was 19.8% versus 24.5% in the previous year. The drop in margin in the period reflects the one-off increase in consulting expenses in the period in the amount of BRL 13.2 million. This movement is largely stems from the activation of success fee payments related to the consulting services, which have been supporting the evolution of our collection model and specific projects dedicated to the strategy carried out throughout the fourth quarter of 2025. Although additional disbursements may occur as the initiatives progress, the benefits of these improvements are already structurally reflected in the company's PDA, which showed a reduction both in absolute values and as a percentage of revenue when compared to the fourth quarter of '24. In 2025, adjusted EBITDA totaled BRL 874 -- BRL 879 million, up 15% compared to the same period of the previous year and adjusted EBITDA margin of 31%. The 1.2 percentage point expansion in the adjusted EBITDA margin for the period reflects the 2 percentage points increase in gross cash margin and the 2.2 percentage points expansion in PDA, reflecting the improvement in credit and collection actions implemented over the last few quarters and the improved efficiency in marketing spending in the period. In addition, there is an increase in the administrative expenses line due to the one-off increase in consulting expenses due to the activation of success fee payments. Moving on to the next slide. We' demonstrate the updates in the delinquency estimates made in the fourth quarter of '25. In 4Q '25, we completed one year of the update of the provision curve. Since then, we have been reporting the methodologies quarterly from ensuring comparability and transparency. As disclosed in the fourth quarter of '24, the revision of the provision model now considers a 24-month horizon, January '23 to December of '24, reflecting more accurately the portfolio profile in the post-pandemic period, marked by the greater participation of digital students from 62% in 2020 to 69% in 2024. And during this period, we also reduced the write-off period for overdue securities from 720 to 360 days. On the slide, we present a comparison between the PDA pre and post update as well as 2 pro forma tables illustrating the impact of the new methodology on EBITDA for the quarter and the year. As a result of the update, throughout 2025, we observed temporal differences in relation to the values reported in 2024 with variations more concentrated between even and odd quarters. Moving on with the presentation, we show the company's costs and expenses as a percentage of revenue, excluding nonrecurring effects. In the quarter, costs and expenses, cash effect totaled 81.5% of the company's net revenue, 0.8 percentage points higher than the fourth quarter of '24, highlighting the efficiency gains in the personnel and PDA lines, which decreased by 5.4 percentage points versus the fourth quarter of '24. In 2025, costs and expenses totaled 70.2%, representing a drop of 2.2 percentage points when compared to the same period of the previous year, highlighting the labor, PDA and marketing lines. On the next slide, we show the evolution of the company's adjusted net profit, which was BRL 21 million, representing an increase of 21.2% versus the same period of the previous year. In 2025, adjusted net income was BRL 284 million, the highest value in the company's history and 52.2% higher than the value recorded in 2024 with a margin of 10% as a result of the expansion of EBITDA in the period. In the next slide, we bring the average days of receivables period in the fourth quarter of '25 of 34 days, representing an increase of 3 days compared to the same period of the previous year. This variation mainly reflects the higher volume of ongoing agreements resulting from the regularization and collection initiatives conducted throughout the year. Next, we present the investments made by the company, which in the fourth quarter of '25 were approximately BRL 47 million, 35% higher than end of 4Q '24. In the year, investments totaled BRL 119 million versus BRL 141 million in the same period of last year, mainly focused on infrastructure. Going forward, we show the cash flow to equity in the fourth quarter of '25, which was negative by BRL 38 million versus BRL 8 million positive in the same period of the previous year, impacted by the increase of 3 days in the average days of receivables. In the year, cash flow to equity reached the amount of BRL 390 million, which represents an expansion of 47% versus 2024, driven by the expansion of EBITDA ex IFRS 16. On the last slide, we present the company's net debt, which stood at BRL 605 million compared to BRL 774 million in the previous year, representing a reduction of 12% versus the fourth quarter of '24. Cash generation in the period was the main factor for this reduction despite the payment of BRL 177 million in dividends during 2025. To better illustrate the company's debt profile, we present below the amortization schedule broken down by type of debt, highlighting that the current cash level allows us to honor all debt until the end of 2028 and most of 2029. With that, I conclude my comments and turn the floor to the operator to start the question-and-answer session.

[Operator Instructions] The first question, Mirela Oliveira, Bank of America.

My first question is about SG&A. You mentioned that there was an investment focus on technology. We'd like to understand with this increase, how much of this increase in SG&A do you expect to be recurrent from 2026 and the levels we should expect for the year? And then the second about the ticket. If you can talk a little bit about how the ticket has been performing, excluding the effects of the mix of products and the pricing of hybrid courses and also by course, if you can. If you can detail it a little bit, that would be very helpful.

This is Renato. About SG&A, we cannot give you a guidance, but this year, you see that a lot of them are structural and operational improvements that will bring future results. People also -- personnel increased G&A, but bring benefits in other items such as gross margin, collection, et cetera. So not all G&A reflects improvements in other lines. There are some one-off expenses that may be reduced over time like consulting fees and some administrative structures that have people in the framework and they're building tools. And once they are finalized, we may reduce potentially the number of people involved. This bigger administrative structure with the revenue improvement ends up being diluted because they're fixed expenses. They're not variable. So automatically, they go down compared to revenue. Another point I'd like to mention is that we are very conservative in the accounting policies. And now with the digital products and the agile methodology, a lot of technology expenses are no longer classified as CapEx. They became classified as OpEx. So you can look at our results and you' see the technology CapEx going down from '24 to '25 from BRL 141 million in 2024 to BRL 118 million in 2025. So that's less or minus BRL 20 million, even considering that the total expense in technology was bigger in 2025, but CapEx went down. In addition, by the management's decision, we're spending more, as I said, in technology to support a better student journey, teacher journey and to strengthen internal controls, investing more in human resources since our main input is people. And we had an important evolution there for the third consecutive year, we've been able to achieve the GPTW, the best -- Great Place to Work and an important data is an EPS that question they ask employees, whether they would recommend a friend to work in our institutions. The NPS went from 27 to 47. So 20 points up. According to GPTW, that was the second largest increase in NPS from all of the Brazilian companies surveyed by the institute. We also invest in the academic side. Our business is education, and we have quality education focused on the student. That's also part of these expenses. Finally, as you know, we're a company where 88% of the shareholders are long-term shareholders, and we have a concern of maximizing the company's value as well as generating value to our stakeholders.

Mirela, this is Felipe Negrao. In terms of the ticket, I think it's important to note that it's difficult to look at a consolidated ticket number. There's a difference between different BUs, one line grows more than the other. Even when you look inside the same BU, there's different mix of the courses. And when you look at courses, there's also different tickets for localities. You may be growing more in one area with a higher ticket or a lower ticket. So the number that we present to look at it in the detail course by course, location or -- location is what's going to give you a trend for the ticket because this is heavily influenced by the mix. With that, 2025 and looking at '26 as well, we've been focusing a lot on increasing ticket. So that's also changing our sales process for a sales process where we sell courses with a competitive edge and the reputation of our brand. So looking at course by course, we have a very detailed analysis, and we end up increasing our focus that is the ticket.

Next question, Maria Eduarda Resende, BTG Pactual.

I would like to talk about expenses with consulting that was relevant. I know you mentioned it in the release, but I'd like to understand a little bit more the nature of these projects, the scope of them and what we should expect as a recurring factor going forward. I don't know if the projects have been concluded or if we should expect some impact in 2026? And the second question is if you can share about the intake now in the beginning of the year, if it's been balanced and the procedures. And if you can talk in qualitative terms in the comparison, what you see for the company?

This is Felipe. So the consulting firm, basically, there's 3 consulting services we have that had an impact on the results. The first is focused on efficiency. We had this gain in admin expenses, as Renato mentioned, they are strategic projects that we believe will bring a lot of results in the future. But there was a lot of efficiency gains in other lines. This was a project, almost all of it for this first consulting service that's relevant that was paid last year 2025. There's a second consulting service focused on collection. That's one of the major companies who are already very good in collection. But to take the next step, we hired them. But 80% of the contract has already been concluded. It's not linked to results. So what comes in the company's cash effectively. This project will be concluded in November, and we pay them according to results. So 80% of the total according to results, an increase in consulting has an improvement there. In the PDA line, and as you can see as well on the discount of financial expenses, there's also financial discounts because they also act by giving less financial discounts when renegotiating debt. So getting to the bottom. So combining these 2 lines are used as a base to pay this service. And the third consulting, that's also a large consultancy firm. The project is concluded to work with the IT operational model. As Renato mentioned, we're working very strongly. All of the technology projects today, we're working in the agile methodology. There was a consulting service to help us accelerate this greatly, change the entire organization for this type of work that's completely different from the previous model that we used. This project is concluded now in the first quarter. And we should -- we don't have any -- we don't anticipate hiring any major consultancy. There is still some remaining success fee for the collection consulting service a little bit in the first quarter of the organizational consulting as well. Now talking about intake on On-Campus, as I said, our strategy since last year is ticket, and we enhanced that in the first quarter and price elasticity as in any market. But it's very important for us in the future. We see that as bringing great value to us. We start to sell competitive edge, quality reputation. It's slightly different from what we thought about in the past, the strategy we had in the past that was to maximize revenue. Maximizing revenue ends up leading to discount and price and so on. So we have this change in strategy since last year. On Distance Learning, we are following the market trend. So there is great progress in the hybrid method, and there's some challenge in the digital. The regulatory framework also had an impact on our digital portfolio. So there are courses who will migrate to hybrid. And for others, we end up having to close the courses. But if you see the growth in the same courses, it's similar to same-store sales in retail, we are performing well. In health care, intake is a little bit more difficult considering the higher supply you see in the market, but we are present in high-income cities, and we're not discounting prices either, which is very relevant for our strategy.

[Operator Instructions] Our next question, Lucca Marquezini at Itau.

I think this is more related to the regulatory framework. We saw some competitors talking about how they're getting ahead of it to make some investments to prepare for this migration to this new regulatory framework. So maybe accelerating CapEx or readjusting personnel. I'd like to understand if you intend to do something like that? Or if we should see a normal course in terms of investments and expenses and the adjustments would be in 2027? That's the question.

This is Renato speaking. So actually, we have the 2-year deadline to adapt and make the adjustments. But of course, we are already preparing for it. It's not something that we're going to solve at the end of this deadline. So yes, we are mainly expanding the -- increasing the infrastructure of our hubs to offer the hybrid courses. We had a small number of hubs prepared with laboratories. And now we have this possibility to increase this network. So that's a lot of the work we've been doing. And the model -- the business model itself, considering the need now to have a higher course with mediators with physical attendance, especially in the Bachelor courses being On-Campus, in-person. So that's a normal cost of adapting to a new legislation, a new regulation. We're used to doing that over time in history, we've gone through changes like that. But we believe that as we're focusing strongly in student experience, quality of courses, we have an advantage there. We have the means to capture value on the long term with this new regulatory framework and the new format of hybrid courses mostly.

Lucca, this is Felipe. Just to add, in the CapEx, remember that CapEx is our partners, right? There may be some CapEx at our own centers at our own infrastructure, but a lot of the CapEx is done by our partners. They are profitable companies that can make these make up for these costs, worst-case scenario, and we have not seen it, but we are prepared, if necessary, what we can do is maybe advance a pass-through to them to a specific hub here and there following eligibility criteria and that we can discount afterwards from the revenue share with the DL hubs that would impact working capital. But until now, there was no need to do anything like that.

The question-and-answer session is now closed. I would like to turn the floor to Mr. Renato Padovese for his closing remarks.

So to conclude as a final message, I would like to highlight that we have one of the highest retention rates in the sector according to data from the education centers. We are above the market average. And since 2020, we increased our retention rate in 3% while the market went down 7%. So to keep in mind that this corroborates our purpose of empowering and inspiring students to transform their future and impact their community. So the more the student stays with us and graduate, the higher the retention of that student, the more of an impact they will have. They will get a job and have an increase in their revenue or income, and they have the opportunity to climb socially, and that's the purpose. Thank you very much for attending.

Cruzeiro do Sul's fourth quarter of 2025 earnings conference call is now concluded. The Investor Relations department remains available to answer any questions you may have. Thank you all for attending. Have a great afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]