Ser Educacional S.A. ($SEER3)

Good morning, everyone, and thank you for joining our conference call to discuss the first quarter 2026 results. You can access in our website of the company. The presentation is also going to be available for download. [Operator Instructions] Before we get started, I would just like to mention that all of these comments come from the administration of Ser Educacional of the current information available to the company. These statements could involve some risks and uncertainties, giving into consideration that we are talking about future events and therefore, depend on circumstances that can or not happen. Investors, analysts, journalists should take into consideration that events connected to the macroeconomic environment and to the segment and other factors could cause the results to be materially changed, different than the ones that were expressed in the respective -- prospective relationships in these statements. We have Janyo Janguie, Director, President; Financial; and Rodrigo Alves, Director of Relationships with Investors. And now I would like to invite Janyo Diniz, our Director, President of the company, that will start with the presentation. Please, Mr. Janyo, you can start.

Good morning, everyone. Thank you very much for joining our conference call to discuss the first quarter 2026 results. Let's move to Slide 4, where we highlight our performance at the beginning of the year. As you can see, we had a very positive start with growth across virtually all operational and financial lines. Our main growth driver continues to be our on-campus undergrad student base, which returned to growth during this period. I especially highlight the improvement in average ticket, one of the key strategic objectives established for 2026. This performance reflects the consolidation of the strategy implemented over the past few years, which has allowed us to operate our campuses with high occupancy rates. In addition, we have increasingly prioritized the academic attributes and value proposition of our programs rather than competing solely on price. As a result, this strategy is now clearly beginning to show its effects. This quarter, we once again delivered revenue growth accompanied by double-digit growth in operating results and margin expansion. From a financial standpoint, the main highlights were net income growth of more than 70% and a solid 45% increase in post-CapEx cash generation. This performance allowed us to reduce net debt by more than 35% during the period. We are operating within a virtuous operation and financial cycle. And we believe the results presented in this first quarter consistently reflect the strength of our strategy, financial discipline, and execution capabilities of the company. Slide 5, we objectively demonstrate that our operational and financial efficiency continues to improve consistently. The number of students per campus has surpassed 3,200 students per unit this year, while our net income continued to show steady improvement. We can conclude that these 2 are quite relevant because it shows the efficiency of our operation and sustainability. Now, let's go to operating results. On Slide 7, we present our student intake figures for the first quarter. As mentioned at the beginning of the presentation, in 2026, we are placing greater emphasis on increasing the perceived value of our program. As a result of this strategy, in on-campus education, when excluding PROUNI student intake, due to the reduction in the number of scholarships offered in 2026 as we already have a base compatible with our tax optimization needs. Enrollment intake remained virtually stable compared to the previous year, which has been a historical record for the company. It is important to highlight that as we'll discuss later, this stability in volume was accompanied by a very consistent increase in average ticket, indicating that the strategy adopted has been successful. In the distance learning and hybrid learning segments, the new denominations for our former Digital Education segment performance more challenging and in line with broader market trends. The scenario mainly reflects the recent regulatory changes widely monitored by the market as well as the demand dynamics that we believe are currently undergoing an adjustment process with fewer effects expected over the coming years. On Slide 8, we analyze the evolution of our student base. The main highlight of the period was the more than 6% growth in on-campus undergrad students, driven largely in the maturation of medical school seats incorporated over the past year. This growth was partially offset by the reduction in the distance learning and hybrid learning student base. As a result, our total student base remained virtually stable during the period, in line with our strategy of prioritized increased perceived value and higher profitability per campus and learning center rather than purely volumetric growth. On Slide 9, we provide details on the evolution of average ticket. As we did in the previous slide, we are now analyzing this indicator based on the last 6 months in order to minimize potential quarterly distortions. We observed a solid increase in the average ticket for on-campus undergraduate programs, mainly driven by tuition price adjustments, lower discount levels, and the evolution of the Ser Solidario program in line with the comments made earlier in the presentation. Regarding the average ticket for medical school programs, the decline observed during the period should be interpreted as a temporary effect. Last year, we experienced an abrupt increase significantly above historical averages, influenced by specific factors such as student intake in Rio de Janeiro and Belo Horizonte, which did not recur this year. And a large number of students progressing into fifth and sixth years, which carry high average ticket and the mix of newly incorporated programs at a time. In 2026, in addition to these effects being mitigated or normalized, we also saw a higher number of students benefiting from the early payment discount, which positively contributed to our cash generation. Additionally, in certain specific markets, we chose to offer discounts during the first semester due to the local competitive dynamics. Looking ahead to the coming quarters, we believe this variation in medical school average ticket should normalize. And I would reinforce that we do not see any structural impact or a meaningful change in our medical school offering strategy. These were my opening remarks. And I'll now turn the call over to our CFO, Joao Aguiar, to discuss the financial results.

Thank you, Janyo. Hello, and good morning, everyone. Thank you once again for joining our earnings conference call. Let's move to Slide 11, where we present 2 charts. Chart on the left shows the evolution of our net revenue, which once again posted consistent growth during the period, driven mainly by the growth of our on-campus undergrad student base and increase in average ticket as previously discussed. On the right-hand side, we highlight revenue composition by modality. We observed that on-campus undergrad education in addition to being our main offering segment and encompassing our medical school programs, increased its share of total revenue, reaching 81%. This movement reinforces the quality of our revenue mix and the importance of higher value-added programs within our strategy. On Slide 12, we present the evolution of EBITDA and adjusted EBITDA, both of which once again delivered double-digit growth this quarter, accompanied by margin expansion. This strong performance was mainly driven by another round of operational efficiency gains. We increased the number of students per campus and continue progressing in the occupancy maturation seats available in our medical school programs, which contributed significantly to operating leverage. On the other hand, we observed higher marketing expenses related to earlier Carnival timings this year compared to last year, which led us to anticipate a relevant portion of our commercial campaigns. We also recorded an increase in personnel expenses, which we view as temporary, resulting from the recognition of expenses associated with our long-term retention plan partially vested during this quarter. The remaining costs and expense lines remained relatively well controlled, in line with our operational objective and capturing recurring efficiency gains every year and sustaining long-term margin expansion. On Slide 13, we present the evolution of reported net income and adjusted net income. This is undoubtedly one of the major highlights of the quarter. Overall, this performance reflects the combination of consistent operating income growth and a reduction of more than 35% in financial debt. This movement led to a significant decline in financial expenses, which combined with stronger operational performance had a substantial impact on earnings growth and net margin expansion. This result reinforces the quality of our growth and demonstrates how operational and financial discipline has been directly translated into greater value creation for shareholders. Moving on to Slide 14, we present an analysis of our operating cash generation, net of taxes, leases, and interest paid during the period. This was a particularly important quarter from this perspective with cash conversion reaching 84% of EBITDA during the period and approximately 70% on a post-CapEx basis. This performance reflect the efforts we have made to improve our collection process through the creation of incentive mechanism for our own payments. We extended the payment window eligible for early payment discounts, which can reach up to 10%, including for medical school programs. At the same time, we adopted a stricter collection criteria for overdue tuition payments. This combination has allowed us to substantially increase cash generation, enabling an accelerated reduction in leverage and further reinforcing our positive profitability cycle. On Slide 15, we present the evolution of our days sales outstanding. Compared to last year, this indicator remained virtually stable. However, when analyzing the dynamics behind this result, we observed important underlying trends. On one hand, we improved the cash conversion cycle of regular tuition payments, reflecting advances in our collection processes and payments for on-time payment. This positive effect was partially offset by the extension of the Ser Solidario program in 2026, which is now entering its third year implementation. Even so, despite the growth of this program, we were able to keep DSO stable, which we view as a positive news, as a sign of the quality of our receivables management. Going now to Slide 16, we present the evolution of our financial leverage, which includes several important milestones. Our net debt declined to the lowest level since 2021, while the net debt-to-EBITDA ratio reached its lowest level since the first quarter 2021. These results are highly significant and represent an important milestone within our business plan and delivery strategy. The largest and usual difference between net debt and gross debt this quarter is related to completion in March of this year of our seventh debenture issuance totaling BRL 250 million with final mature in 2029, cost of CDI plus 1%. These processes are used to prepay the 2 debenture issued in 2022 with a cost of CDI plus 2% and operation concluded in April. This initiative will certainly contribute to a further reduction of financial expenses over the coming quarters, further reinforcing our profitability improvement trajectory. On Slide 17, we present the evolution of our CapEx, which remained relatively stable last year as we had not yet started our planned operation expansion, which is expected to begin in the second quarter. These were my comments on the financial results. And I will now hand the call back to Janyo to discuss our objectives for 2026.

Thank you, Joao. Let's now move to Slide 19, our final slide before opening the Q&A session, where we summarize our main strategic objectives for 2026. As mentioned throughout the presentation, our priority remains maintaining operational leverage and continuously improving day-to-day operations through the gradual implementation of new technology tools across our processes. At the same time, we understand that we must move forward more actively in our organic expansion plan. We also remain committed to expanding our medical seats with injunctions to processing through administrative and judicial instances. And we expect to achieve meaningful progress on this matter throughout the year. The quality and differentiation of the programs we offer are becoming increasingly relevant within our strategy. We are continuously reshaping our portfolio, focusing on expanding academic differentiators and keeping the core constantly updated, reinforcing a unique value proposition for our students. From a financial standpoint, we believe this quarter's results clearly demonstrate that the execution of our strategy is becoming increasingly evident. This year, we resumed shareholder remuneration through dividend payments while continuing to reduce leverage and invest in disciplined organic flow. Thank you very much, everyone. And we are now available for the Q&A session.

[Operator Instructions] Our first question comes from Mr. Marcelo Santos from JPMorgan.

I have 2. One is one of the things that Aguiar mentioned in terms of goals for gain efficiency year-to-year. How much more space do we have thinking of the future? And what are some of the sources of these gains? And the second question is, I understand that you have a high utilization of capacity. And this strategy was more value than volume. What is the perspective to open new units? Or should we wait?

Well, throughout the last 3 years, we always reported to you here every single cycle of our program of restructuration of the operational leveraging. We understand that this cycle, this was concluded in 2026 when we finalized everything that we had planned for at the end of 2022 and '23 to be able to bring this bigger efficiency -- operational efficiency throughout time. So this cycle finished in December of 2026. So we have new products, we have new offers, new models for offers. And in this commission more and more, you need to revisit. All of this planning and understand where else we can reach this efficiency, especially at the end to be able to have gains. But there is still an additional round that we are doing connected to the quality of what we are doing in terms of back office automatization. And this will generate this improvement, this operational efficiency. But this will come in lower proportions than what we saw. They will support this margin and they will support the rentability in the future.

And adding to the comment, we also have it in the company, the rampage of 6 units because during the first 4 years, these units are detractors of this margin. And the movement that we have, it's increased our operational levers so that we can continue growing once we already utilize this what we already have. For us to initialize the end of next year and most of them will come into the [indiscernible] operation. And the volume start working in a unit like this. Next year, we have planning of having 5 new openings. And this would be in a model that's a little bit different. Most of them would be an expansion of existing units that have the capacity maximized. And we understand that we have potential to growth in these cities because we have courses that are not completely full, especially in odontology and psychology. And we have 2 units that we need to have this expansion. The organic expansion and we have a longer cycle. And the expansion of an existing unit have a cycle maturation of 2 years or less, while the new one, it's between 5 and 6 years or so. We have an interesting program here for us to have pathways to grow apart from these medicine spots and continuity of -- this is what's going to help us to grow with profitability, which is every company's dream. This is what we are looking for in this new target in our operational organization that we did, reorganization in our operations. This process doesn't go through the reduction of the size of the physical structure, but a complete variation of our portfolio and what type of product is offered in every city, in every single one of our units. But we want to work towards, so that this, utilizing this in an appropriate fashion. And this growth of these new units, just like we mentioned, it comes with a very strong growth on the semi on-side that will have a utilization of space even more optimized.

Next question comes from Lucas Nagano, Morgan Stanley.

The first one is about the revenue of Ser Solidario. You need to talk about the strategy of this cycle. The value here financed by students almost doubled. This first question about new units, you want to detail the cycle of capturing how much they contributed to this?

Now let's answer this question. So Ser Solidario is part of our strategy of increase of average ticket and increase of results in the trimesters, in certain trimesters. The implementation of this in the third quarter of '24, we used to charge 124 enrollment that could be repeated by every 3 months, which is the period of capturing. And every money that would come from these installments would not come into the cash flow of the company, would give a discount called money on the table. And we did some tests on the third trimester and we implemented this. It was a true success. And this has a huge advantage that the values that were charged by Ser Solidario are in the same, just normal regular installment payments. So the student cannot pay one thing and not pay the other. And this year, we had an increase on the monthly payments for everyone on the ticket of capturing and also on the installment payment of Ser Solidario, 15% to 20% depending on the case. Since we had this implementation, it was success last year and we want to maximize value per student. So we operated this year Ser Solidario and increased the amount that you see of releasing our results that generate EBITDA. For certain trimesters, this doesn't make any difference and some others and even trimesters, that changes the expectation here. How we expected when we started with the program, we wanted to include this option in the strategy of capturing for the year. Another important point is that we have more installments during the program than last year. So the final effect of Ser Solidario is not of the increase per se. But the increase of this that take into consideration the later capture that we had in March. If we brought this 60 students, it's already some of the results that we want. We started on the fifth or sixth year. And I think I answered the questions.

Mirela Rodrigues from Bank of America.

I have 2 questions. I have a follow-up on the expansion plan. If you could please comment on what you expect of CapEx for these units? And if you could talk about the levels of rentability of margins that you're expecting, firstly, for one of this expansion, the units and the expansions of the existing units? And the second one, I think you commented on the release and also on the comments here of our medical school ticket. If you could give a little bit more details how this has been happening? What is the capturing here? And some of the effects here was the need to have a little bit more discount. So if you want to comment on this competitive environment, if you have more space for deterioration of tickets in the future would be great?

I did not understand your last question. I'll answer the first one and then if you could repeat the second one. Now, in terms of CapEx, we start seeing some of the units here that will have 3,000, 4,000 square feet. And the other units that have been presenting success, CapEx a little less because it's focused on the structure. So CapEx to every single one of them. Our expectation just like you said before. It's starting this year, starting a project that we will start with some of the cores that are on site. They would start next year. The second question, I did not understand.

The question is connected to the competitive environment for the medical school. You mentioned a bit especially on the discounts that you need to have a concession of discounts better. So I want to understand how has this competitiveness for the ticket has been like? And if you see space for more deterioration of ticket in the future?

Naturally in this process of this -- in the medical school, the way it was done in Brazil, in certain units, we have additional difficulties, especially in those units that you had. You have an increased number of authorized. But we start with the difficulties because we are -- because the market will position with these 2 things specifically because of the need and of the demand of students in those cities. So for this, specifically, we need to promote some discounts on the tuition fees, starting with the students to understand exactly how this would be in the future. But now overall speaking, to understand the individual outlook for every demand locally when we have every single one of these operating. So to complement what Janyo and Aguiar said, we have a different situation of average ticket. We have a long explanation here. But I think in our perception, there is no change of price in the medical courses that we are offering. Some of them, it's easy to capture. But the overall scenario, our vision wasn't that different than what we saw last year. I think something important here is even though Ser Solidario creates an additional revenue in the first quarter, the effect of average, we try to balance this quarter than creating any sort of efficiency or recognition of revenue, which would be different than what we've been doing. So the second quarter, we had a revenue that was higher, especially for the discounts. What's happening now is that it's more of a balance of these quarterly revenues. And the third quarter is always the strongest one in the company. The difference is that we are changing the seasonality and it's more balanced. But you don't have this huge change that the first quarter being too different between the second, but we see a balance between the quarters.

Our next question comes from Renan Prata from Citi.

Two quick questions. The first, still in medical school, but thinking about the last slide of the outlook for 2026, you commented on expansion. So I just wanted to get an update here that you have this in medical school, but -- and the second will be allocation in capital. The same slide, you say 30% of the semester payments. I need to understand what is this target leveraging? What would be part of the strategy? What would be the expansion of the units, shareholders? If you could just give us some -- an idea here.

Let me just answer the first question. For medicine, specifically, what we've been seeing, especially with this discussion of the different actions that we had. We still have our different actions here. We have several courses that are still being discussed. We still have one that has a variation. And we are continuing a process with that for Rio de Janeiro. But the expectation is that we still have depending on some of the things that we are discussing. And we still have some positive responses for this.

Thank you for the question. Since we started this process, between 1 and 1.5 is actually quite healthy here. And we want to reduce this from 5x the EBITDA. And this is part of what we are welcoming here, having a higher distribution of dividends. We are now distributing the dividends again. And the expectation that we are going to continue to do this in our policy of semester sharing of dividend once you increase the project of extension here. Especially in the process of new units and we are now ready for any strategic development. So in the future, we want to show. So we are actually focused on giving back the rentability and being able to support the movements of new units and the retrofit of the current units.

Our next question comes from Lucca Marquezini from Itau.

Just a quick question about our cost line. We saw a difference here. For this regulatory milestone, please could you please more -- could you please share?

Lucca, you mentioned that in some of the material that we share information -- piece of information that I think is interesting is that we chose to use the hybrid model as an educational product in a form of new offer just like we shared because some of the things we understand that you would get in the way of some of the things that we were offering in the past. But especially because we made the decision of implementing the operation of the hybrid model according to the entire regulation without waiting the 2 years that the new framework brought. So what we are seeing already in the first trimester, we are going to see in the year as a whole. It's going to contemplate every single increase of structure that we might have with this implementation. Of course, there are some fluctuations that we'll have because of the increase of this margin because of the revenue and the cost. But we have no investment or any sort of adaptation, academically speaking, financially speaking, to compose this new format of offerings.

[Operator Instructions] The Q&A session now is finished. And I'd like to invite Janyo Diniz, so that he can make the final remarks.

Thank you all for participating in our earnings conference call. We really wanted to share this information with you, especially what happened in the beginning of the year, the first semester quarter to find what is going to happen in the rest of the year. If you have any other questions, our different channels are available to clarify even further. Have a good afternoon, everyone.

The video conference is now finished. We thank you for your participation. And have a wonderful day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]