Ânima Holding S.A. (ANIM3) Earnings Call Transcript & Summary

So this is a disclaimer, and then I'd like to tell you how happy we are to be able to take this step with an institution, which is highly serious, an institution of reference and the maintainers are very serious people. They chose Anima, just as Anima chose UniFG. So it is a great acquisition that strengthens our entrance in the Northeast. And it puts us in a differentiated position in our medicine and health vertical. As you all know, we've been investing in our brand for years now, 16 to 19 years to have a high quality education, and we have different verticals of knowledge with HSM, cooking, law and [ inspirality ] in the health care vertical. [indiscernible] was the person who implemented the medical course at UniFG, a high-quality course as all of our courses are. So it is an honor for us to continue this legacy. This is a type of operation that is very much linked to our culture and Anima has been a good choice for this type of operations. So I'd like to thank the Trust [indiscernible], Allan, [ Joe ], all the managers and maintainers of UniFG. And I'd also like to congratulate Anima for this movement. This was a movement that preserved also the health of our employees. We had a completely digital M&A, completely digital signature process, I'd like to congratulate Marina, Andre and the whole team. We're doing this in a completely safe manner. Everyone's sheltering at home to protect ourselves from the pandemic and we feel that we are in a very good position to take us back a step like that. Now I'd like to give the floor to [indiscernible]. Thank you very much. I forgot to say something, [indiscernible]. I apologize. [Operator Instructions] Thank you, [indiscernible].

Good morning. It is an honor to be here today such an important moment for Anima, bringing such an important institution into the group. This is the result of a long dating relationship, so to speak. This is a transaction that started a long time ago. This relationship was built with the maintainers of the institution, and we established a partnership that led us to this moment. This institution is always focused on high quality education. This is very much aligned with Anima's DNA. They have a special portfolio with a medical school and it has a major impact on the region where it operates on the countryside of the state of Bahia. It actually impacts the whole region. It has a state-of-the-art premises, which is beyond what would be expected for an institution that was built in that region, but we see the love and passion of the maintainers who built these institutions. Okay. So let me start by emphasizing some of the points here. We are assured that our M&A jobs, the work that we've done is very much aligned with our values. This is an institution that has come to strengthen our medical, vertical, our Director of the medical vector in [ Pirelli ] was actually part of the creation of their medical course, so we know that the integration into the Anima ecosystem is going to be very smooth, and we think this also add values to our shareholders because of the maturity of the portfolio that we have and also because of the synergies that we can build together. So now I'd like to tell you a bit about this institution. This is actually a university center that has been operating for almost 20 years. It is a post card of Guanambi, and it has an important impact on the development of the region, as I said before. It focuses on high-quality education and the integration of the institution in the community. So it is remarkable to see that the region and UniFG today, they have a healthy and robust relationship of growth. From the beginning of our conversations with them, we see that quality is always the focus. They have also another dental course in the region with a ticket over BRL 2,000 and also a vet school and 50 spots -- now 50 seats for the medical school and another 50 planned for 2021. So in addition to the medical course, there are another 20 undergraduate courses with a net revenue of BRL 50 million. So this is a complete and robust institution. As you can see, offering the first masters course in the country side of our country, a Law master's course. So we're very happy to bring this institution into Anima's group. This is a major feat, and this is an institution that is already profitable. The revenue is of around BRL 50 million to BRL 60 million and an estimated EBITDA of about BRL 9.5 million. So we think this is a great addition to Anima to complement UniAGES and our footprint in the state of Bahia. Now let's go to our next slide. Here, we can see the infrastructure that is offered at Guanambi school. I hope that you can come and visit someday. Many capital cities do not offer such high-quality infrastructure. The campus is located at the entrance of the city. It causes a major impact, and it brings about a lot of movement to the city. As you can see here in the pictures, the premises are impressive. Now the next slide, Marina, please. Here, you can see there is strategic context that I mentioned earlier. But this is just a bit more organized. We have the health care vertical [ Pirelli ], which is growing. Last time we talked to you, we were talking about [ FASEH ] coming in. And now we're talking about UniFG coming in with 50 medical seats in Guanambi and the expectation of the new campus with another 50 seats already approved in Brumado, in the same region. So we expect enrollment to start in the second half of 2021. When we think about our expansion and Marcelo said a very important word, which is a term, which is resilient revenue. So during times of uncertainty, we are still bringing in institutions, but those that have a resilient portfolio that can go through those harsh times and come out on the other side stronger. So Anima and UniFG have been getting to know each other, and we have [indiscernible], the Director of this Vertical, was actually part of the foundation of the medical course in Guanambi and in Brumado. So we now have a group that have prepared over time to be ready for this professionalization moment. At UniFG today, you have maintainers and managers working separately in a professional management. They have profound knowledge of the local market, and we also have a focus on quality today. So we have our CSC, our learning model. And when we add everything together, we're sure, we're going to offer a very high-return to our shareholders. Our next slide here. So to a bit more about the medical courses. Anima, with the recent acquisitions or partnerships that were established, has evolved and has been offering a larger number of seats with a large number of students, and this shows the growth potential that we still have. So I just wanted to let you understand how business is still growing and what is still ahead of us. When it comes to UniFG, we're talking about 2 cases, Guanambi, that has already been implemented and the Brumado campus that will start operating in 2021. So here in the next slide, you can see our value generation projection. 2019 EBITDA will grow over fourfold until 2025. And this is going to be based on synergies coming from our administrative foundation, our CFC and our pedagogical model. What about the maturity? Well, in Guanambi at the end of 2019, we had 2020 students on average, but we can get up to 360 seats only for the medical school, expanding the average ticket that is around 7,000 right now and increased it to BRL 8,000. That's our plan with the average ticket. And starting in 2021, we also have the Brumado operations. So this is our value generation plan for Guanambi. So fourfold increase of our EBITDA by 2025. So just so you understand the transaction a bit more. We now have a partnership between Anima that controls 55% of the shares of UniFG. In addition, what we have today is 55% of the shares that were purchased for BRL 71.5 million. So we have already paid part of that amount, will also pay a certain amount as capital increase and goodwill, some amount will also be paid after rectification at our extraordinary General meeting. And then another part of it will be paid after submission of certain contract obligations. So we also have an earn-out that can get up to BRL 44 million. BRL 22 million linked to the new campus in Brumado that will just start off offering 50 seats in the medical school and another BRL 22 million linked to other institutions that the maintainers believe are all possible. So the contract covers these other possible 50 seats in medical schools. The maintainers now have different ongoing projects, and we are supporting them in these initiatives with another BRL 22 million. Following our model, we are actually considering only the opening of the Brumado campus. This campus is under construction. They have an approval signed by the Ministry of Education, and we expect the enrollments to start in the second half of 2021. What about the other 45% of UniFG shares? We have a call option to purchase the remaining 45% in up to 60 months. We can do that by purchasing shares or by putting monetary values. And the amount will be determined depending on the future EBITDA. So at the moment of acquisition, the last 12 months of the EBITDA will be used as a basis for us to price the remaining 45%. And so we're very excited to have UniFG with us. And now I'd like to open for questions. Thank you very much for your attention. Now I'd like to give the floor back to Marina.

Okay. Thank you.

Marcelo, this is [ Atila ]. I'd like to reinforce what [ Cortina ] said. This is a jam. Guanambi, maybe you don't know, but this is a city in the country side of the state of Bahia in the northeast of Brazil. And that is a regional hub. It has about 80,000 to 100,000 population, but it adds -- I mean, the metropolitan region has 800,000 inhabitants. And UniFG is a reference in the region. It is monitoring COVID-19 in the region. Providing data to the cemetery authorities. It has many expansion projects with a vet course, a dental course, a Law course, the only master scores focusing in law in the country side. So this is an institution that is completely aligned with Anima. We're very happy to have that as part of our group, and we would like to congratulate the maintainers. Alexandre, [ Filippe ], Allan, and the team led by Professor [indiscernible]. These are highly competent and committed people who have created a beautiful, high quality education, showing the power of the country side of our country. We're very happy to have UniFG on board. Marcelo, I'd like to mention 2 things. First of all, I'd like to congratulate Atila and [ Coutinho ] for the way they conducted this whole process. It was brilliant. Of course, we provided our support, but we felt really at ease here and having the financial department, having you heading our company because this M&A process was very well conducted with the competence of people like Atila and [ Coutinho ]. So congratulations. Also, I am especially happy because I am from the Northeast, and I'm really happy to have a Northeast regional office right now because we had a regional office and minister [indiscernible], a South regional office and now the Northeast regional office. So I'm really happy. This is an extremely valuable transaction for us. Andrade?

You can feel at ease that this is indeed a great acquisition, but you're going to have to work hard with that.

Okay. Very good, everyone. This is Marina speaking. We've received a few questions, starting with Thiago Bortoluci. Thank you, Thiago. He says, good morning, and he congratulates us on the acquisition, and he has 2 questions. So the first question is why would you structure the operations with a 55% stake at first? Rather than acquiring 100% of the shares. So can you also give us more details about the in out -- the earn-out rules? And what is the status of the opening of the second medical school campus? Can you tell us a bit more about that, [ Coutinho ]?

Thiago, thank you for your question. This is Marcelo speaking. Well, Anima specializes in continuing the legacy of families that have devoted their lives to their institutions. But of course, this is done on a case-by-case basis. Each family is a family, and sometimes they don't want to be completely out of the transaction. So we provide customer solutions depending on the interests of the party. So Anima was actually chosen by them. And that's why we decided to start with a 55% stake. And we feel very much aligned with them. Part of the family will continue in the region. We'll continue keeping up with the work and we are very much aligned to be able to make this a win-win situation for everyone. [ Coutinho ], now you can give further details.

Yes. Perfect, Marcelo. I think this is definitely a win-win situation. It says it all. We have local knowledge with specialized infrastructure, this relationship that was built throughout a long time, and we have the ability of sharing the near future of the institution with the family. Now he also asked about the earn-out and about the new campus in Brumado. So as I said in my presentation, everything we're talking about was referring to 55% in Guanambi and Brumado. So the BRL 44 million of the earn-out is divided into BRL 22 million of this earn-out are linked to the opening of the campus in the city of Brumado. So we have 55% of the Brumado shares by paying those BRL 22 million. The other BRL 22 million are linked to other future expansions that are being studied by the maintainers and that we included into our contractual negotiations. So the other BRL 22 million of the earn-out would be opened as other expansions that would bring another 50 seats in the medical schools -- are indeed developed. But when it comes to modeling and projection, only Brumado has been considered. Now what is the status of Brumado? Brumado already exists. It's already operating. There's no bureaucratic red tape challenge here. They're just actually finishing the works in the campus. Once the works are completed, we expect this to be completed this year, then the Ministry of Education will come approve the course, and then we'll be open to start enrolling students. That's the current status. It's not operating yet. But it's under construction. Once the constructions are over by the end of the year, the Ministry of Education will come, visit, approve it and we'll start enrollment. Right. The family, [ Filippe ] and other people are building this relationship with us for a very long time, and they have the quality standards that we're used to.

Right. This is Andrade speaking. I'd like to emphasize that the family already had this investor perspective. And they will continue with this perspective, working with us. So as part of their good governance practices, they had already separated the investors and the managers. So the management that we saw operating there was already completely professionalized. They have a President, the University President, so they work really in a professional manner.

Now the next question is by Susana Salaru from Itau. Thank you, Susana, for your questions. She says can you please give us further information about whether you want to use the brand to develop your footprint in the region following the growth strategy that you used in other regions as well? And another question about the other medical school seats. What are the approval stages that you still need? Can you give us an idea in terms of time line?

Well, about the brand, while this is [ Coutinho ] speaking. About the brand, I think it became clear from what we said this is a very important brand in the region. And like we do with all of Anima brands, we will keep on studying the possibilities of using the brand in a region where it means a lot. So for now, we don't have any immediate plans of expansion, of course, in addition to Brumado, but yes, this is a valuable brand in the region, and we plan to use it in our expansion. Now about the other medical seats, we still don't have any time lines to share. We have ongoing discussions that are at different stages of the process. We have a program, a project that is part of the more physicians program, the government program and what we want to do is to open more seats and start enrollment in the second half of 2021. Now in terms of the other medical seats, that's going to be a part of strategic decisions between Anima and the maintainers, but we have nothing to share yet. This is still very incipient. What we want to face, Susana, is that the [ Pirelli ] team of the medical or the health care vertical conducted a study to look at the number of beds that are in use and the number of medical school seats in the region. So we use the data of the Ministry of Health and data of the Ministry of Education to conduct that study. But this has only given us perspective, the possibilities of opening new medical school seats, but we haven't yet applied for the opening of those seats. This is incipient, as we said, but that's the number that we take into account. The number of beds being used in hospitals and the number of medical school seats.