Ser Educacional S.A. ($SEER3)

Good morning, ladies and gentlemen. Welcome to our video conference. Today, we'll be talking about the fourth trimester 2025. This call is being recorded, and you may access the recording at our website. The presentation is also available for download. [Operator Instructions] Before moving forward, I'd like to say the following. Our declaration is in accordance with our values. The declarations may involve risks and uncertainty. After all, they're connected to unforeseen circumstances. Investors, journalists and analysts should take this into account. The results could be significantly different from our plans for the future. We have with us Mr. Janyo Diniz, CEO; Joao Aguiar, Financial Director; and Rodrigo Alves, Director of Relationship with Investors. And now with you, Mr. Janyo Diniz. Mr. Janyo, floor is yours.

Good morning, everyone, and thank you for joining on our fourth 2025 earnings video conference. Let's move to Slide 4, where we'll present the highlights of a quarter that closed a very important year for our trajectory. It's filled with positive news that consolidated the success of the operational reorganization strategy implemented over recent years. 2025 was a year of harvesting significant results. We closed the year with double-digit growth in the hybrid education student base, our core business. This growth allowed us to optimize the occupancy of our properties, delivering yet another round of solid expansion in the adjusted EBITDA margin, nearly 3 percentage points and 22% growth in adjusted EBITDA. All this without losing focus on our main objectives previously outlined, the reduction of financial indebtedness and leverage, which enabled us to decrease our debt by nearly 30% in just a year, reaching the best financial leverage since the first quarter of 2021. This movement will be transformational for the coming years as it consolidates the company's solid cash generation, low and controlled indebtedness capable of funding its organic growth and resuming shareholder remuneration even in times of elevated interest rates and in a historical period marked by so many uncertainties. With that, we're expanding our objectives between 2025 and 2026. In addition to maintaining control over our indebtedness as we did last year, we're returning profits to shareholders. As I exemplified by the distribution of BRL 61 million in dividends announced in today's financial statements. We're also taking care of future results. We have already initiated an organic growth projected base in the asset-light model, which has delivered positive results. This strategy includes the expansion of existing units in markets where we have identified growth potential with the addition of new floors, classrooms, which should generate quick returns. We're now opening new units in models of approximately 5,000 square meters, preferably in shopping malls. The idea is to increase our reach in cities away from capital cities where we operate, making the most of the positive recognition of our brands. With this, we expect to continue generating growth avenues with low capital requirements, advancing our promising markets with high profitability. Not to mention that we already have 6 new units in operation that, starting in 2027, should begin their growth trajectories. We, thus, have a company with increasingly solid and sustainable results for the few years ahead. For better understanding, we work on Slide 6 and 7. We're going to focus on the net impact accounting income and financial leverage. As the charts demonstrate today, Ser Educacional is a different company when compared to 4 years ago with significant financial strength, profitable and operationally well established. We recorded an increase over 40% in the number of students per unit. Even with nearly 10% growth in new units over the past 2 years, gross margin grew by nearly 7 percentage points, financial leverage was reduced to approximately 1/3 of what it was before, and the net margin, which at the time had reached minus 13% is today nearly 10%. This is, without a doubt, a relevant turnaround case. We're very proud of it. Let's move on to Slide #8, where we analyze enrollment results of the second half of the year. The winter cycle, as I like to call it, which is a season for replenishing the student base from the summer enrollment period. During this period, we adopted a somewhat different strategy. Since we had quite high average class size in the first half and a good enrollment rate, we chose to operate in the second half with a more conservative commercial strategy. The movement combined a tougher comparison base due to high enrollment figures from last year, resulting in a decline in enrollment in both hybrid education and digital education. This movement can be better analyzed on Slide #9, which presents the performance of our undergraduate student base with a growth of 4.6%. The growth in the hybrid learning student base was partially offset by the decline in the digital learning student base, a shift we view as positive given that the average revenue per student for hybrid learning is about 4x higher than that for digital learning. Of particular note is a 12% growth in the medical student base, driven by the growth of new enrollment slots secured over the past 18 months. On Slide #10, we once again present how our student base in health care continues to evolve, reaching now 60% of hybrid education and 47% of the total student base. This reflects the success of our strategy of positioning our course offerings where there is greater market demand, which contributes significantly to the improvement of dropout rates and payment punctuality. Students who are aware of the value added by the program see completion as an important step in their professional journeys. Slide #11. Since this year, the PROUNI base increased substantially, we structured the analysis, excluding this effect to normalize the ticket on a semester base to facilitate understanding. As you can see, it grew by 6%. We improved our mix and now it represents 53% versus 50% last year. When we analyze individual ticket, both from medical programs as well as without it, we see that we managed to slightly increase the ticket even while having increased our cash generation due to improvement in payment punctuality. This is very healthy because although the average ticket did not necessarily keep pace with inflation, cash generation we obtained through the punctuality discount we offer and the changes in the functional line was undoubtedly positive. And now with you, Joao Aguiar.

Thank you, Janyo. Good morning, everyone. Let's go straight to Slide 13. Here, we present the evolution of the net revenue for the quarter. In this fourth quarter, we had a 9.4% increase in consolidated net revenue with a highlight being of 12.3% growth in hybrid education revenue and 25.8% in other revenues. These results were partially mitigated by the already expected decline in digital education revenue due to the course portfolio shift favoring the offer of health courses over online courses, aiming to increase the company's overall average ticket and operating margins. We, therefore, had a solid quarter in terms of revenue generation, very much in line with our business plans. Slide 14. we presented the EBITDA adjusted, which once again showed solid growth for the year when we look at the fourth quarter. The consistent growth in net revenue, combined with positive cost and expense control, especially through the operating leverage provided by the increase in average class sizes and student per unit, resulted in good expansion by the adjusted EBITDA margin by 2.9 percent points. It's worth noting that even number quarters generally show a great revenue recognition due to seasonality, and comparison base with last year was also somewhat weaker. With this, we closed the year with adjusted EBITDA slightly above 25%, an important milestone for our margin expansion project envisioned 4 years ago. Going forward, we face the important challenge of continuing to expand our operations with healthy and growing margins in the coming years, combining investment in organic growth with the maturation of our units. On Slide 15, we present the evolutions of our net income and adjusted net income. We saw a great reversion, moving from a loss of BRL 30 million to a profit of BRL 74.6 million. This is due to 2 main factors: the improvement of our operating results throughout the year; and the absence of nonrecurring effects that totaled approximately BRL 66 million last year. Based on these results, the company's recurring growth in this quarter was also significant, practically doubling from a profit of BRL 36 million to BRL 71.7 million. Slide 16. Here, we present our operating cash generation net of interest and tax paid. Similarly, what we observed in the previous slide regarding the bottom line, our cash generation also had significant growth of 94.5% pre-CapEx and 228% post-CapEx. This substantially increase occurred due to 2 main factors: one, the improvement in the quality of our operations with an increase to payment punctuality due to improvement of our course mix and the new financial communication time line implemented between 2024 and 2025 and the anticipation of Educred receivables, which generated an additional BRL 31 million compared to last year. With this, we're able to significantly and consistently increase our cash generation. With this, we're able to significantly and consistently increase our cash generation, demonstrating that our company has the capacity to finance itself through its own operations. Furthermore, our student financing operations have liquidity and attractiveness in the market, making them a viable and interesting tool for the company to leverage its operations with a low financial risk. Slide 17. Here, we present our days sales outstanding, which continues on a downward trend for the fourth consecutive year. In line with comments on cash generation, the DSO has been decreasing as a result of operational improvement in anticipation of [indiscernible] receivables. We have now reached the mark of 84 days in collection paid period with significant improvement versus last year, more than offsetting the first year in which the Ser Solidario program operated in full, which increased our accounts receivable by BRL 30 million approximately. This shows that implementation of Solidario not only increases our capacity to generate cash per student, but also that our financial communication time line with students is yielding positive results. Let's now move to Slide 18 to discuss our financial indebtedness. In this quarter, we surpassed our goal of reducing the net debt-to-EBITDA ratio by 1. This is very important for us. In this high interest rate environment, which, according to market estimates, is expected to remain as such for a long time, this new leverage level places us at an important competitive position as it will help us generate the cash needed to fund our organic growth plan and resume shareholder remuneration. We closed the fourth quarter 2025 with this major deleveraging project completed. Going forward, our objective is to continue reducing indebtedness, but in a more gradual manner, balanced with the new objectives we will pursue from now on. Finally, Slide 19. We present our CapEx here, which as observed throughout the year, was more restrained than the previous year. Our focus on debt reduction and absence of significant investments for accreditation new programs was done in the prior year. As a result, CapEx came in very close to our maintenance CapEx during the year, below even our historical average. This scenario should not repeat itself in 2026 and the following years as we will proceed with our asset-light expansion plan to expand, create existing units, building growth channels in the cities where we operate and increasing our reach areas away from capital cities. These were my comments on results. And now I'll give the word back to Mr. Janyo for closing remarks.

Thank you, Aguiar. Let's now move to Slide 21, our last slides before we open to Q&A. We'll present a summary of our strategic objectives for 2026. As mentioned earlier -- can you hear me? Thank you. As I mentioned earlier, the priority now is to maintain our operating leverage and improve our day-to-day operations, gradually implementing new technology tools, but we need to pay greater attention to the organic expansion plan. We seem to be having some technical problems with the audio. We believe markets selected for expanding our current operations are quite promising, especially given the existence of programs already established but not yet matured in health care fields and some capitals in the North and Northeast regions where we operate. We also continue to develop our medical programs in which they are in the ramp-up phase. For these programs, we're adding this year new student preparation programs so they can take any quality assessment that may arise going forward, be it ENADE, ENAMED or any others. Accordingly, our curriculum has been adapted to align with the new regulatory topics. We're also committed to expanding our available seats. We have at least 3 accreditation processes underway. We continue discussing regarding Rio de Janeiro and Belo Horizonte processes, aiming to resume the entrance exams that we were unable to offer in 2026. The topic of quality and differentiation of the programs we offer is increasingly relevant with the design of programs aimed at offering even ever more differentiations, keeping Ubiqua always up to date and unique value propositions. Lastly, we are resuming our consistent shareholder remuneration program. Yesterday, we announced the distribution of dividends equivalent to 30% of 2025 full year earnings with net earnings income once again recorded in our balance sheet for a full fiscal year. Our dividend policy, which consists of a semiannual payment of 30%, is back. Therefore, starting this year, we expect to have consistency in the semiannual payment dividends. With that, we're excited about 2026's focus on continuing to add value for our shareholders throughout the gradual and continuous implementation of the objectives. Thank you all, and we are available for the question-and-answer session.

And now the Q&A session. [Operator Instructions] First question from Renan Prata from Citi.

I have 2 questions. One is a little more focused on results. We saw an improvement on EBITDA. I'd like to understand what's expected in terms of dynamic now. And then second point, could you tell us a little bit more about intake for the first trimester? What are the expectations, both for medical, hybrid and in-person?

Sure. I'll talk about intake, and then Aguiar will tackle the other question. Online and in-person intake is following according to plan. Remote learning is also following the trend from the second semester. As we can tell, the trend is following what we expected. But in-person intake is doing well. Thank you for the question.

Thank you for the question. Starting in 2024, we've been making a few changes in terms of dynamic and communication with students. This has brought us very positive results. It's true that families have increased their debt and therefore, the greater difficulty to pay. Despite all that, we've been able to help, and we have been able to present a program that have increased the pay rate. That has increased the payment punctuality, and this has improved our cash flow. The environment is of high interest rates and high debt rates. We were expecting it to drop further than it did. And this is due to the number of events happening all around the world. The expectation is that these numbers should remain so at least in the near future, at least for the year of 2026, despite our efforts to bring these numbers down. I think in order to be realistic, we can't expect a huge drop for those numbers. And I think this is consistent with the factors that we are taking into account for 2026, but we don't expect a great increase in terms of indebtedness.

Next question from Marcelo Santos from JPMorgan.

I have 2 of them. The first one is related to CapEx. What should we expect for the next couple of years? It was very clear that 2025 was an [ outliner ]. Second question, what's the ticket environment for 2026? What's your approach? Is it something similar to the second semester of 2025? Are you trying to accommodate for inflation?

Thank you. Thank you, Marcelo. Thank you for the questions. You noticed how we had a more aggressive CapEx in 2024. We wanted to accommodate the investments in the units that we started. We had a strong focus in medical programs. We really wanted students to recognize the improvements that we have been bringing about. So we held back on some of the investments. And the CapEx, in fact, came in a little bit below average. It's going back to 5% to 6% in 2026. We have an expansion project. The idea is that the expanding infrastructure will be able to absorb the growing number of students. I'd expect that from now on, we should go back to the historical average of 5% to 6% of net revenue.

Marcelo, now going back to the ticket. I think Janyo mentioned something about that at the beginning. The idea is to maximize educational assets. We have a high occupancy rate. Commercially speaking, what we're trying to do is to increase the ticket. We finally have the desired occupancy rate. It would make no sense to increase intake at this point. So the focus in 2026 will be in-person, and this should have a higher average ticket. Remote learning is a different story. We are aware of the pressures in the market. The goal of remote learning is also complicated for this year.

Next question comes from Lucca Marquezini from Itau BBA.

I have 2 questions. The first one is more related to remote learning. We are seeing some of the competition moving ahead. Are you already trying to stay ahead of the curve? That's our first question. And then the second one is more related to results. We noticed that you're trying to anticipate receivables. Is this something that we should expect for the rest of 2026? Or is this a one-off?

Thank you for the question. We are recognized by our strong EBITDA. Once the new regulatory framework came out, we started adapting to it. All our students are already working under the new legislation. That's how we work. That's how we're approaching this.

Thank you for the question, Lucca. We don't -- we are not known for working entirely on the early receivables. This came about from an attempt to generate these assets better. We wanted to be able to focus on other parts of the business in terms of improvement, improvement of average ticket and so on. I'd say that flies a little bit under the radar for us. There's another interesting point that I'd like to remark on. It's how we approach the EBITDA and how it allows us to be a bit more flexible and more efficient as well. I'm not ruling that out, but we could do something similar in the future. But again, I just want to reiterate that, that's not our focus.

Everyone, I'd just like to piggyback on what Aguiar just said. It's about student private financing. When done well, it's very positive. Educred that was sold in 2023 was sold by a price that we quite approved of. So when we take into account numbers are coming in, expected dropout rates, we did this for the second time already, and this shows that it's possible to have private financial for students and leverage profitability from the companies.

Next question comes from Flavio Yoshida from Bank of America.

We have 2 questions. First one is a follow-up. It's related to the first question related to intake. Janyo mentioned how in-person came very close to the planned expectations. We understand that every campus has its limitations. Are you expecting growth? Second question is a little bit more focused on the organic expansion plan. You've mentioned units of up to 5,000 square meters. What can we expect for this year and the next few years?

Thank you. Flavio, in terms of intake, here's what we're expecting. Last year, we broke a record. We had an ideal occupancy rate for the year. Our goal is to keep the same rate of last year. However, we'd like to improve in terms of ticket. So there will be a small shift in our focus. You talked -- you mentioned expansion. We'd like 2026 to be a bridge between the work from the previous years in terms of operational turnaround, connecting with good organic growth. Hopefully, moderate CapEx will allow us for strong growth in the future. Here's what we expect for 2026: A lesser focus on growth and volume, not that, that's not going to happen in terms of paying students, but a greater focus on passing tickets once we have a higher occupancy rate and a more desirable program portfolio. 65% of in-person students are within health care and law. Law, that's very developed, very well developed. Med school sign-up rates that are almost done by now, and it looks like we have achieved the better numbers than last year with great difficulty. And now, Janyo.

Following up on what Rodrigo said, we are hoping that between now and the next year, we'll have between 3 and 4 new units ready to go. We have 6 new units that are starting to mature. What we don't have is a plan like we had in 2017 and '18. So we'll start working step by step. We're working in regions where our brand is strong and well recognized. And we'll take advantage of the strength of in-person learning. Every new plan model will take into account the possibilities of the following year. Unfortunately, the original audio has frozen. Once again, the original audio has frozen. Pardon me. My Internet connection is a bit choppy. The idea is to have 3 new units per year. The idea is that once those new units mature, we can keep growing, and that will help us with our organic growth model. Thank you.

Next question comes from Caio Moscardini from Santander.

I'd just like to start with a follow-up on organic growth. How are you going to balance the strategy, opening new campus versus taking advantage of the fast track in nursing, which allows you to add new programs? Do you think there will be new opportunities there? How do you see that? And second question, what level of leverage are you expecting to -- for the near future? You have a strong cash flow at this point despite the growing CapEx.

Thank you. We have an organic growth model. We have a cap, spending cap. It means that the new units have a cap in how much they can use. This should calibrate the new openings based on the performance of existing units. We have some expansion plans in 2026. The focus is for existing units. That means new floors for the same units, attached buildings, operations where we know that growth is a given because it's based on groups of, let's say, I have a dentistry course of 3 years when we know it should take 5 years. And the reason for that is because I need more room. So that's what we're doing now. Now there are new units where we know that, for example, we need new nursing programs. We are going to first add in-person courses. And that's where we're going to take advantage of units in shopping malls and so on.

Thank you for the question, Caio. We've been working on the leverage. This is part of our 3-year cycle plan. The leverage is part of our strategic planning. It's very interesting, actually. It's exactly what you mentioned. The idea is what kind of return this will give to our shareholders. Our goal is to keep that leverage between, I'd say, 0.5, 0.6 and 0.8. It shouldn't be much, much smaller than 0.6. But it shouldn't go above 0.8 either. I think that's our range. Expansion CapEx should go back to 5% and 6% of net income. And our expectations of dividends to our shareholders, like we mentioned before, should, as I say, should represent the relationship that I mentioned earlier. So 0.6 to 0.8.

Our next question comes from Lucas Nagano from Morgan Stanley.

I have a few questions for the medical program. The first one is about ticket. What kind of impact did it have on the fourth quarter? What are the expectations for 2026? And second question. This is more focused on intake. Rodrigo said that intake went well for the first semester. Is there any expectations of a slowdown for the second semester? Are there any ways to improve the average grade for next year?

[ Mads ] will take it. We saw 2 impacts in the fourth trimester. First is a transference from PROUNI. We chose to incorporate that in our presentation in order to dilute those variations. Third trimester was a little bit higher, fourth trimester, a little bit lower. But the idea was to even it out. Why -- you might ask why is ticket not following interest rates? It's related to payment from students. There's another effect that we prefer that is generate an increase in cash flow. I'm going to pass the word to Janyo. He will talk a little bit more about the ENAMED.

Med school intake for the first semester was very positive as expected. ENAMED event was an isolated event. The impositions by MEC started in the second semester. As we saw, ENAMED did not have clear rules. In fact, the former valuation was defined after the announcement of the test. We were already aiming for some changes in our medical program. Our students have 8 semester in the classroom and then the 4 last semesters are in hospitals. And now with the current changes, we should bring them back to the classroom for longer periods. The expectation is that these results will improve greatly. ENAMED takes place in September. We don't have the exact date yet. And the students taking it are the students in the 11th or 12th semesters already? Is my audio still good?

Yes. I'm going to pause the video, maybe the audio will improve. Can you hear me? So we implemented a number of changes in terms of curriculum. And now the 2 years that they used to spend in the hospital now has mentorship -- more mentorship with professors. And this is -- this new model is starting to be implemented this year.

[Operator Instructions] This is the end of the Q&A session. And now Mr. Janyo Diniz for closing remarks.

I'd like to thank everyone's presence for another result conference. It was very positive. It showed a process of optimization of operations. It showed how these changes have been very positive. And we'd like to make ourselves available in case you have any questions. Good afternoon, everyone.

The video conference from Ser Educacional now is over. We'd like to thank you, everyone, for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]