Vitru Educação S.A. (VTRU3) Earnings Call Transcript & Summary

Good evening, everyone, and thank you for waiting. Welcome to Vitru Brasil's Second Quarter 2024 Earnings Conference. [Operator Instructions] Please note that this webcast is being recorded and will be available on the company's Investor Relations website, investors.vitru.com.br. where the complete earnings release material is also available. [Operator Instructions] We would like to emphasize that the information contained in this presentation and any statements made during this webcast regarding the business outlook, projections and operation and financial goals of Vitru Brazil are based on the company's management beliefs and assumptions and currently available information. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions related to future events and, therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operational factors may affect Vitru Brazil's future performance and lead to results that differ materially from those expressed in such statement. Today, we are joined by the company's executives, Mr. William Matos, CEO of Vitru; Maria Carolina, Head of Investor Relations and their team. I'll now turn the floor over to Mr. William Matos.

Hello. Good evening, everyone. Welcome. I hope everyone is doing well. It's a pleasure to be together here today for the presentation of Vitru's second quarter of 2024, the results of Vitru education. This educational giant of quality education, as we've been saying, has been building a new era in Brazilian education. We are sure that all the efforts that we put here make education reach many people leading them to a new level. As I said, I am William Matos, CEO of Vitru. And as -- and currently, I'm serving as an interim CFO, next to me for this meeting is Maria Carolina, our Head of Investor Relations. And we have also our analysts that are building this story with Vitru [indiscernible]. So I'd like to start this call with the highlights of this quarter which was yet another period of progress and hard work for our company. But before we begin with the quarterly numbers. I'd like to thank everyone for their understanding regarding our need to postpone the disclosure of the results of this quarter. And I'd like to clarify that the reason for this postponement was for some technical standards -- accounting standards that we will explain a little further later on. So because of that, we needed a little more time to guarantee that everything would be ready and we'd like to clarify that because this is our main standard transparency and confidence. With that being said, so let's talk about the highlights that you can see on your screen. So on Slide 4, we'd like to remind that Vitru is listed on B3 in the segment of new market under the ticker VTRU3, this [ B3 ] movement that [ reaffirms our ] confidence in the market, this movement that reaffirms our responsibility to the Brazilian population. And without any doubt, demonstrates our commitment as a company to the best corporate governance practices in being like starring this new market, this Novo Mercado. So we assured that this was the size of move that honors our mission as a company to make quality education even more accessible to all Brazilians. I'm sure I know that some of you who are here have been following us on this historic day, you could notice that through the emotions of all those present, how seriously we take the purpose of improving the lives of Brazilian families. As Paulo Freire famously said, the great educator. "Education does not change the world, but it changes people and people change the world." So moving on to the other highlights. I'm pleased to announce that in the second quarter of 2024, as you can see on the screen, we surpassed the milestone of 940,000 students with 90.6% of them enrolled in undergraduate courses in the business learning modality. This achievement that we established confirms the strength of our brands and mainly demonstrates Vitru's commitment to delivering quality as Vitru does through Unicesumar and UNIASSELVI. And talking about commitments on this very slide. We would like to highlight two very important awards that we recently received. The first of those is the MIT Technology Review recognition as one of the Innovative Workplaces Brazil 2024, the certification is a testament to how much we prioritize innovation and value work environment that fosters the development of new ideas and solutions. [indiscernible] slightly away from the protocol at the beginning of this call, I'd like to share a quote that resonates with us. It's a quote from [indiscernible] who says, "companies die today, not from doing the wrong things, but from between the right things for too long". And that's the reason I'd like to emphasize that Vitru is always ahead when it comes to innovation because we know that we are inserted in a market so influenced by technology. And to us, as a company, there is still room for stagnation complacency. So those awards they confirm everything that we've been [indiscernible]. And the second recognition and the one I'm pleased to highlight is that we were the only I'd like to repeat, the only Brazilian institution, the unique one to get the 2024 [ Merit ] TIC International Awards in the user experience category. And this is very important because this international recognition not only validates our efforts to provide a superior educational experience but also places us in a prominent position on the entire global stage regarding education and innovation. And all of that is evidence of our continuous commitment to improving the lives of our students through technology and innovation. So moving on. Next slide, we present some financial highlights from the second quarter of 2024 here. As you can see in the first half of '24, the average ticket for distance learning was almost 2% higher than the same period in '23. These results validates our commitment to maintain competitive prices while ensuring the differentiation that exists in our product in Vitru. And I bring the consolidated net revenue increased by 10.6% compared to the second quarter of 2023. This growth is significant. As I'd like to remind you, it considers our new student activation criteria. And therefore, it reflects the high effectiveness of all of the strategies that we had in this first half. And regarding the consolidated adjusted EBITDA Vitru's growth was 22.2% in the second quarter of '24 versus the second quarter of '23. The adjusted margin reaching nearly 44% in the quarter. These results show certainly an increase in profitability and the highlights our capacity as a company to generate value in an efficient way. And for you that is here listening to us, it's important to emphasize that we historically one more quarter has been delivering margins above the industry average. And another highlight is the fourth debenture issuance. It was crucial for extending our debt to maturity and reducing our financing costs. And this strategic move strengthened our capital structure and pairs us for an even more solid and brilliancy. And now to help me out, I'd like to call Maria Carolina, our IR Head to talk a little more about our B3 movement.

Good evening, everyone. Moving on to the next slide, Slide #6. We will show you slowly this very important step that was the completion on unprecedented step in the Brazilian market that Vitru did, we've contributed successfully the migration of our listing to B3 since June 2024. Our shares have been traded directly on the Brazilian Stock Exchange market under the ticker VTRU3. This is a significant step is a result of a careful corporate reorganization that enabled the merger of Vitru Limited into Vitru Brazil. This change strengthens are present in the local market. Our role to develop the country and positions us strategically in relation to our investors and all the financial markets. Vitru is now part of the Novo Mercado market, a special listing segment B3, that promotes high standards of corporate governance in the Brazilian market. This inclusion in the Novo Mercado reflects our confidence in the best practice of transparency and quality in everything we do. We believe in the potential of our business, and we believe that our actions yet do not reflect the value creation that we have been delivering since our IPO, and we are committed to our growth plan. In addition, we approved the buyback program lasting up to 18 months and its attributes that we have as a market maker service. So it's a step further to demonstrate the commitment of the senior management and our Board of Directors and to delivering and generating value for all stakeholders. I'll give the floor back to William to talk about a very important movement in our company.

Thank you, Carol. It's a beautiful picture that reminded me of that day on B3. As Carolina said, we're here to emphasize another strategic movement of our company that talks about innovation. So I'd like, like quickly -- just quickly -- we could be spend hours here, but we'd like to say that the strategy of innovation of Vitru is based on three important pillars: Our first pillar is culture; The second is the student satisfaction and the second is efficiency. Through Vitru [ label ] we created an environment of collaboration of experimentation and learning that on campus format or business learning we created environments that stimulated creativity and problem-solving opportunities anticipation to contribute to the innovation ecosystem in -- through education. And among the main fronts that we listed on the right on the slide, and we know that we cannot talk about all of them I'd like to emphasize two specifically. The first is the interpenership program that aims at enhance our culture and turn insights into concrete opportunities. You can see the numbers. Over 400 ideas have been evaluated. 15 are currently being accelerated by the company. I'd also like to emphasize and highlight the practical experiments designed to turn insights into opportunities. As you can see in the bullet below, we have over 218 ideas, 50 of them that are in the experimentation phase with AI and emerging technologies. As I have said and I'd like to emphasize that today, AI does not harm education. On the contrary, when used effectively, it enhances and provides customized learning something that all of us that understand education, we know it's crucial today, mainly because of the reality and the profile of our students. So why we brought this slide to -- for you to know our strategies and our initiatives. And where we are driving the transformation and where we are shaping its future through bold sustainable projects and projects that throughout all the daily [ construction ] will add high value to the initiatives. So this focus on innovation has positively impacted the market. As we said before, besides the recognition that we already said, the [ Merit ] Award, I'd like to remind you that the last bullet that we were included in the Times Magazine list as one of the top ad tech companies in the world in 2024. So we are sure that we are reaping the rewards of our dedicated efforts every day. And we are a benchmark that are highlighted in the educational sector in the 2024 addition of Valor Econômico's Innovation Award. So everything together shows the great work that we've been doing, anticipating what we do. With that being said, changing completely the subject. I'd like to give the floor back to Carol for her to move on.

So talking about Slide #8. I'd like to show you a topic [indiscernible] since the beginning of the year, we had a harmonization of criteria between our two brands. We made some adjustments that [indiscernible] to align student activation criteria for students for recognition in the student base with these standards already used at Unicesumar. As a result of this harmonization, we expect lower nominal growth in 2024 in comparison to 2023, both in the student base and in net revenue. What I would like to emphasize since the announcement of this harmonization, it's crucial for enhancing our strategic vision. And through that, we will have an even more precise sustainable growth plan. So with testament the confidence investors can have in our management. We're committed to having indicators that are really reliable and accurate. And every time we see that we have to adjust, of course, for the best results, we are going to do it so confidently. So this unique management philosophy has ensured Vitru's exceptional results and promising growth prospects. With this harmonization, our performance in the first quarter of '24 and the second quarter of '24 demonstrates the resilience of our business model our net revenue on business learning has accumulated growth of 9% in the first half of '24, and we will discuss revenue further as the presentation goes on. The impact of this harmonization is approximately 25,000 fewer students in the student base with a 5 million effect on net revenue for the second quarter. As we showed, we are confident in this move. We are mitigating any doubts you may have and it's essentially to emphasize that these changes will not impact the company's cash flow. It is very relevant. It's important that we emphasize that. It has no impact on our cash flow because the invoices generated or unengaged students who are not paid and ultimately became bad debt provisions within 12 months after issuance. And this change in criteria brings a positive effect. And the other positive effects associated with these changes. Two, we need to highlight. One is the reduction of the provision for [ delta ] accounts throughout 2024 and 2025 and some tax savings associated with the non-issuance of those invoices contributing to a greater financial stability at Vitru. So moving on to the next slide with the operational numbers for the quarter. William, please.

Thank you again, Carol. So moving on to Page 9. You can see on the left side of your screen, the evolution in total student intake for distant learning, it grew 12% in the last quarter, following an intake over the past 3 years that has grown 22% and these numbers reflect our competence and leadership in distance learning, it demonstrates a solid growth, and it highlights all our advantages. And on the right, you saw that the breakdown of the intake among engaged students were recognized in both the intake in the student base in the non-engaged students who, as Carol previously explained, with the new criteria of student activation are not being recognized in the student base since the beginning of 2024 [indiscernible]. Moving on to the next slide# 10, it shows the continued growth of Vitru's student base. As you can see, in this quarter, our base grew by almost 3%, note in that we are already the largest distance learning company in the country. So we have a high comparison base which has accumulated a strong growth in recent years, and this phase is now supported by new engaged students. So we are confident in the results that we will achieve moving forward. It's also worth noting that on this base, 97.6% of our students are on the business learning, and another 854 students are enrolled in under graduated programs, and it's a 2% increase compared to the same period in 2023. So this growth is within the company's expectations. And I know that sometimes we repeat ourselves, but we will do that, it's odd this year because it's very important to explain that since the first quarter of 2024, did not engage students of UNIASSELVI. Those who signed a contract with UNIASSELVI did not take any expense and did not make any tuition payments. They are no longer included in the student base and even that our numbers are growing. Now moving forward to the next slide# 11. It shows how we are one of the leading national players presence across the country, across Brazil. We continue to like strong growth of our student base and in the hub -- the growth of hubs in the country in other regions. So looking at this slide, it's clear that we are making continuous progress in the Southeastern region of Brazil, as we said in the first quarter. This has a higher population density and many opportunities for the extension for both brands or the increase in the number of hubs and also an increased students in this region. And it's going to remain prominent in the following quarters. The next slide, we can get a better view of its presence, please. As you can see on the left side of Slide 12, have a clear view of our national presence and or we can see how our brands have been complementing each other within this geographical distribution. But it's important to say here on the second quarter, we closed with 2,515 hubs, and they are distributed across over 1,400 municipalities. And all of that is in line with our synergy plan, as we said before, the cross expansion of the brands when you sell [indiscernible]. As you can see on the right side of your screen in June 2024, we have seen a 10% increase in the number of Brazilian cities served by both brands. compared to the distribution of cities when we look at the same period in 2023. So moving on to the next slide. We would like to take our time here to emphasize. It's very important for everybody that knows Vitru that we focus on delivering high-quality digital education. Many times, it's evidenced by the ratings that our users give our apps. And this is very important for the market when they choose the institution. Today, we have the best apps compared to the listed players in the country. And it's important to emphasize that all our apps are proprietary and not only that, but they are a very important part of our students' learning journey. And we are fully committed to delivering an excellent experience to our students. And today, we know how our students are using our apps to have this experience. And besides that, we'd like to highlight on the right side of the screen. The ratings from the website [indiscernible]. We always try to solve any reported issues in the best possible way. And you know that the reputation of our brands, they remained well above average when compared to the other players. And all those quality indicators when added to the public recognition that we highlighted in the beginning of the presentation, demonstrate how evident it is to the market and to our students, our commitment is unwavering commitment, if I can say, excellence. And we have been seeing all the positive impact at Vitru Unicesumar and UNIASSELVI are the positive impact we have created on people's lives. As I'd like to say, we have a company with a very strong organizational culture, a culture driven by purpose, which is what pushes us forward and that's the reason you see an institution that care about details when we talk about our students' experience. So continuing our presentation moving on to slide. So let's talk a little bit about our numbers of average tickets price. It reflected a 2% growth over the last 12 months. Average growth of 4%, about 4% over the past 3 years. It considers Vitru as a whole, meaning since 2024, we united the brands in the reports that we present to the market. And those numbers are very close to inflation, it focus on the strategy of differentiation we have in our products and our positioning as a quality player in digital education. However, when you look at the right side, it's important to emphasize [indiscernible] that the average ticket grew despite a slight fluctuation in the semesters in total student intake and a decrease in the share of premium courses that have a higher average ticket counterbalanced by -- you can see here 35% to 38% of technological courses as evidenced, and we know that they have a more cheaper ticket price. So it's worth noting that this variation in course participation was predicted especially when you look at health care and the engineering courses, we saw that they grew significantly during the pandemic. So this adjustment of their performance was expected especially the health courses. So next slide, now you can see some financial indicators. As you can see, in the second quarter, we had an approximately 11%, especially in net revenue and a 22% adjusted EBITDA. And it's worth noting, as we had said in the previous quarter that the company margin will now begin some -- begin to reflect costs related to preceptors especially related to the health courses. As the year moves on, this metric show a more neutral performance. So on Slide #16, please. You can see here the main drivers for revenue growth on this quarter. That was the on-campus and the graduate and the continuing education segment. So the continuing education business unit increased its revenue by 34%. So it's a performance significantly relevant, and we've been talking a lot about that since the end of last year. That demonstrates the great potential of digital lifelong learning in Brazil, and we've been pioneers in this movement. So we believe that this [indiscernible] segment was a wise decision. And we made it opportunities and opportunities of growth that we observed in adding to that, we're focused on digital education, we look for being pioneers and being ahead of the market. So following the same pro that brought us here that there's everything that we do needs to be well done. So we contributed to the consolidated Net revenue in our on-campus education segment, as you can see, had an increase of 26% of revenue, reflecting the temporary recovery of the segment and the rise [indiscernible]. So on the next slide, we can see clearly the proportion of those two businesses within Vitru's overall portfolio in the second quarter of 2024 versus the second quarter of '23. In other words, the business of continuing education increased its share from 5% to 7% on-campus undergraduate education showed an increase from 8% to 9%, but business learning, on the other hand, is our strongest point in consolidated in the consolidated revenue mix. So I'd like to give the floor back to Carolina.

So on Slide 18, we highlight the growth in net revenue from business learning that grew 8% related to the previous year. As we have repeatedly that it's very important to emphasize that Vitru is showing a positive performance in business -- in the business learning segment along 2024, including adopting more conservative student activation criteria. And therefore, even with the student base growing at more modest rates, our scale gains and healthy pricing policies are reflected in the segment's net revenue. We can see on the right side of screen, historical growth of the business learning market in Brazil, the continuous expansion of our market share within this growing market according to figures. So we have many solid reasons trusting on the [indiscernible] fiscal groups in the world, and we believe strongly that the business learning factor in Brazil still has a long growth ahead. in coming years. So when we move to Slide #19, we can see the evolution in the net revenue in the medicine course. So it was 6% compared with the second quarter of '24 -- comparing the second quarter of '24 to second quarter of '23, this implementing net revenue is a combination of the maturity of the vacancies with the majority of the average students as we can. We would like to remind the market that our medicine school is the biggest in this region of the country. It's located in the city that is connected to the high quality of the institution and the service we provide for our students. We have the fifth best course in medicine among in Brazil among the private institutions, what explains in health of our average ticket. In the late last month, we increased the occupation of vacancies that contributed to the performance of this segment. So here, we see the evolution of the on-campus segment that increased 26% in this quarter, and this performance is explained by the segments cover after the end of the pandemic combined with a better ticket for the same period. On the same slide, on the right side, we highlight the significant increase in net revenue from continuing education. It is 34% increase that reflects an expansion which is aligned to the diversification strategy in technical and postgraduate courses that Vitru has adopted. In Slide #21, we have more data on the growth that Vitru believes in this continuous education segment. And it's very clear that there is an interesting opportunity in this segment, which is underexplored by large players in Brazil. So the continuing education segment, we include technical courses, vocational training and post-graduate programs. On the left side, according to the latest census data Brazil graduates 1.2 million university students every year. It's a potential target audience for postgraduate courses. In addition to all the professionals who are already graduated and are looking for new training. So we also look at the high school education. We have a significant number, like 7.7 million young students over 16 years old. And considering the country socioeconomic direct risks, I have to know that those young people are about to enter the market and we look for those vocational courses as an entry point as they are seeking the first job. It's also worth noting that the new regulation of technical education, the federal government allowed new vacancies, only a few listed players with a national presence have focused on this market. And with that, we obtained nearly 43% of the regulated vacancies in Brazil. So give the floor back to William to present some other numbers of the company.

Thank you, Carol, again. So moving to Slide #22. As you can see on the screen, we have the evolution of Vitru's adjusted EBITDA with a growth of 22.2% compared to the second quarter of '23, in a margin of 4.2 percentage points higher. So BRL 253 million reflects not only the strong revenue performance, but as you can see later, lower cost of provision from outflow accounts. And as we promised in the other quarter, a lower level of marketing expenses, as you will see in the upcoming slides. So we are going to explain a little more [ outflow accounts ], so you can move to the next slide, please. So do you see a chart on the left. It shows the reduction in costs, cost of services as a percentage as a percentage of net revenue in 2024, reflecting, as I said before, both the scale gains and the final impacts of the integration of Unicesumar in June. And also, I'd like to say in advance that throughout this year, we will observe a slight increase in the direct costs, as I said before, is a natural consequence of the maturation of hybrid courses in health area that have cost us with [indiscernible] and it leads to some cost increased. And talking about the chart on the right, you have the general and administrative expenses of Vitru's. And again, they confirm our lean structure with G&A representing only 4.9% of net revenue this quarter as we like to emphasize one of the lowest educational sector. Going to Slide #24. As you can see on the left, you see the marketing sales expenses, which remained stable in this quarter as a percentage of net revenue and the accumulated in the year, it still reflects the expansion strategy implemented by the company at the beginning of 2024. So this expansion at that moment included a significant movement in the first quarter, both digital and traditional media, aiming at bringing new students in that first big intake. As we said in the latest quarter, we have an entry in the Southeast Southeastern region. So it's worth recalling that in the first quarter of 2024, we stated that while 2024, the marketing expenses as a percentage of revenue with return on the similar levels to those seen in 2023. It is this something that the company after a very serious work -- good highlights from the second quarter on. And on the right-hand part, we bring some good news. It's the provision for doubtful accounts. It was decreased expressively by 27% in the second quarter presenting only 10% as revenue for the period, and this reduction will occur. We might see some oscillations this year. But most important reflection will come 2025. And those are the nonengaged students that no longer recognized, and therefore, you're not billing them anymore. So it reflects a more modest growth in the students base. But on the other hand, we can see that is a positive impact on Vitru's profitability. So on the next slide, we can see on the left side on the chart on the left, the adjusted cash flow from operations showing a decrease of about 14% compared to the second quarter of '23. And this lower cash conversion is related to lower accounts receivable, which reflects the change in revenue recognition criteria initiated at the beginning of the year. And another very important issue point that I'd like to highlight here was the -- some benefits that Vitro offered to students in Rio Grande do Sul, the south part of the country that were affected by the climate crisis is at the beginning of the quarter. So at first, we respond to all the students from that state, the payment deadline for May and June, so we postponed the payment of the tuition fees to the end of 2024. It brings an initial impact. And on the right side of the slide, we show the adjusted net income profit for '24 that was BRL 104.4 million. This reduction compared to 2023 reflects higher net financial expenses due to the new debt issuance, lower interest on [ recent ] payments and also a lower impact, as you can see in the bullet of deferred income tax during this period as we explained on the screen below. Moving to the last two slides of our presentation. We had a lot to share with you. So moving on. On this slide, we can have a review of our debt and our leverage. As you can see on this quarter, as you're aware, it completed its fourth debenture issuance, totaling BRL 850 million. These debentures are indexed to the CDI interbank deposit certificate was a spread of 2% and they have a 4-year maturity. So the proceeds from those debentures were used for the prepayment in July 2024 of part of the second series of the company's first debenture issuance and the other part for cash solidification. And it's worth noting that by the end of the quarter, we had -- something happened with the amortization and the prepayment as we -- that we have just mentioned that they were -- they haven't only on June 2, in a way that we finished the second quarter with a cash way above the optimal level. So with this -- so next week, we paid second June. So regarding debt management on the right is also worth highlighting that our leverage is decreasing, and we have an adjusted EBITDA at 2.6x, well below the company's covenant levels. But I'd like to -- as I said at the beginning, I'd like to break down the explanations and really all very confident regarding the delay we had in this quarter. In early July, company was questioned by an Investor through the fiduciary agent about the compliance with the clause in the guarantee agreement of the first debenture issuance of [indiscernible] and this clause, I talked about restrictions on the declaration distribution or payment of interest on equity or any other form of dividends of Unicesumar without approval through a general meeting of venture holders. So Vitru that manages its capital considering the consolidated position of its operations and it assumes the distribution of dividends from the entities of the group to its parent company to honor the commitments made at the holding and level such commitments encompass Vitru Brasil and encompasses the respective debenture issuance. So what's important to highlight here. Since it's an intercompany movementation that do not harm the debenture holders. We responded to this question, informing the fiduciary agent who contacted directly to debenture holders and received a positive feedback are two things: First, the writing of the clause amendment that was -- and the waiver related to this obligation have existed in the past. So as a company, we had the General Meeting in August 13, 2024, we regularized this situation. And we amended the writing of this clause so that we don't need the General Meeting in the future for this kind of distribution events. However, in this compliance with the current accounting standards, our auditors opted to follow the CPC 26 accounting standards that required a reclassification of the contract of the first debenture to short-term liabilities. Regarding our financial results from the past related to this quarter. So this caused a delay in some days, and we had the earnings release of the second quarter only today. So Vitru as a company expects of course, the technical perspective adopted by the auditors as possible for this General Meeting. However, the statement of results in the second quarter does not reflect our real position regarding our liabilities in short and long term. That's the reason we have a note to show you the maturity of our debts. And then you can see the time line of amortization here on your screen without any impact of [ non-denominational ] restrictions that we discussed. So it was a topic that delayed our General Meeting. But it's already settled and align with all the [indiscernible] of stakeholders. So -- and then we move on with great expectations to do what we have and to conclude, moving on to the final remarks before opening the floor to the Q&A. I'd like to emphasize the amazing work Vitru has been doing in Brazilian education, resulting in leadership and business learning education in Brazil, and we assure that all the market recognition of the quality education we offer is the most tangible proof of how we've been doing that with excellence and effectiveness in this -- regarding the experience of our students in our commercial strategies for growth. So we remain focused on expanding our students base, improving the margins, increasing the penetration of business learning in Brazil, and of course, in differentiating ourselves through quality and innovation basically what we delivered for students. So once again, I'd like to thank the confidence, the trust you place in us, and we are sure we are on the right path. And now I'd like to give the floor back to our host for us to commence the Q&A session. Thank you very much.

[Operator Instructions]. So let's move on to our first question from Lucas Nagano, Morgan Stanley.

I have two questions. The first is regarding the intake. Could you recommend an outlook of growth for the second quarter? and also the perspective of opening new hubs with this MEC degree that may impact your operation, the opening of new hubs, how many hubs besides those 2,515 that you reported, you can start operation? And the second question is regarding the cash conversion. Could you detail a little more the items that impacted the cash generation and the capital in the period. We understand that with this harmonization and with some conservative criteria of revenue, we might approximate the EBITDA and the cash. So I'd like to have some color on the sense, please.

Hello, Lucas. Thanks for your question. It's great to see you here. So let's begin with the first question regarding intake and growth on the second half of the year, not having the privilege of having the last months because of the delay, but we have been delivering a great result growth in face of all the challenges that we have been facing, looking for a double digits, a little lower regarding the volume of capitation we had in '23. So we are working that the intake of the second half, we can keep delivering something closer to the first half a double digit lower. We have some difficulties, our colleagues set some challenges ahead, but we are sure that we can deliver growth. And regarding the opening of new hubs, they are not official numbers. So we cannot attest that but we are very calm that besides the 2,515 hubs. We are in the process of opening something that was the goal of the company that is in year of 2024, opening between 100 and 150 hubs in both brands. So we are still doing that, it's still reserved. And we guarantee the expansion that we predicted by the end of 2024. And then we can have the harvest in 2025. So I believe we're going to open around 150 hubs in every company -- in both companies to have a significant growth in [indiscernible]. And regarding the cash issue. I'm going to give the floor to Carol.

Good evening Lucas, looking at the major conversion that was different from the EBITDA in the first [indiscernible] the main impact are the topics related to the [ conversion ], the postponement of the tuition payment or the students from Rio Grande do Sul in May and June. And there are some other issues that are natural in the business, the movement last year and this year. If you look at the semester, our cash conversion is within the company's standards. And we're going to work along the year that this postponement of payment of those invoices are followed. So we have -- because a humane decision we made, we looked the safety of our collaborators and students. And we -- but we are working on recovering this cash flow for the following months. And that's why the average of conversion was not the same. And then the use of the cash, we had some expenses with the migration to B3 divesting. So we had some expenses that are not in the adjusted EBITDA because of that.

Thank you, William and Carol. It's very clear. I don't know if William wants to add something.

No, no, I think Carol answered very well.

Our next question is from Lucca Marquezini, Sale side Analyst of Itaú BBA.

Good evening, everyone. Thanks for the opportunity. I'd like to talk about the provision for doubtful accounts. It was responsible for the improving the EBITDA in this semester. Is this a normalized level of doubtful accounts of PDD? Is it sustainable? Or do you believe that we can extract some gains in this front?

Lucca, thanks for your question. As I said during my speech, the PDD, the provision for doubtful accounts and we've been saying that since the beginning, the expectation of normalizing will happen in 2025 because we have some students curves that are in the new criteria, we have some students. So we believe that in 2024, we'll have some oscillation in this PDD, we've been working intensively at UNIASSELVI to understand this new guideline, this new movement we've been moving. There is a little impact, not only a positive [ line inside ] of our business model. It happens at Unicesumar. So we believe as a company that we can't aim -- act as a, as a platform, we might have some hiccups during the second semester, a few bumps that we are following what close that is the [indiscernible] prices. So we had a process of increasing the revenue. We need to understand if this student will be engaged on the second half of the year after look at that further maybe part of those figures are going to be part of the PDD that as maybe the student will not engage in the second semester. So we are aiming at a level that is going to be built along '24. So the final statement results in 2024, we will be able to establish a definite curve way more aligned with the PDD for ''25.

Our next question comes from Yan Cesquim from BTG Pactual.

William, Carol, all the other directors. I'd like to ask two questions. First, a follow-up in this intake if -- I'd like to understand some other aspects of the cycle that you can realize the retention and tickets. Like to understand if you notice some change or some maintenance of the retention rate of the students in this capitation this intake cycle. And if you can foresee some oscillation so different, stronger our solution in ticket given the competition in the second cycle of capitation. Second question is about CapEx. We can realize a reduction in the CapEx level, it's just a little but we can realize that. So we can have this lower CapEx level as healthy or -- that's it.

Yan, thanks for your question. So let's echo your first question, having a view of the second semester. When we talk about ticket, we don't have any -- we're not worried with decrease in ticket for the second half and the retention is aligned to what we've been presenting on the first half. In spite of the difficulties in capitation, it's a little more challenging. This policy has always been not having big movements in tickets. On the contrary, we have always had a policy that keeps the ticket. We had an increase in ticket mainly at Unicesumar when all the combination happened. So we don't have -- we're not worried about tickets and retention. Of course, as we -- as I said before, the effort you have to put is big for us to [indiscernible] low double-digit. But all the markets have been talking -- has been talking about it, and I'd like to seize the moment to talk about the challenges of capitation. When we look at the [indiscernible] landscape. So the retail positioned itself and part of this -- the impact they've been suffering, we can't forget that this profile of the [indiscernible] clients, DE is very similar to the audience that chooses business learning education. So those people have been investing on average BRL 200, 250 per month in [indiscernible], and this is very close to our tuition -- monthly tuition. So we have been looking at that alongside the retail market. We're looking at this impact and we felt that, especially on the second half. And regarding CapEx, we know that the insertion of CapEx in the company is a little seasonal. We have a first quarter and we initiated the operation. And in the second half, this value goes up a little because we prepared the operation for the next year. So we don't have a balance point in the second quarter. But regarding CapEx, Vitru has always differentiated itself having a lower cost. And at first, we don't see any risk or anything new that will give us some like scare both from next year.

Our next question is from Mirela Oliveira from Bank of America.

William and Carol. I have two questions. First is a follow-up regarding the harmonization of student criteria. So was there any change in the provisions curve used for UNIASSELVI, what was the dynamics that brought this quick change in PDD? And regarding ENEM, since we had this slight increase on second quarter.

Mirela I'm going to start answering the first -- second question, and William will answer your first. Thank you for joining our call. Regarding the PDD curves, we follow -- we having some strict criteria. We -- what changed is that we do not activate a student we no longer activate the students that are bound to enter this curve. So I don't recognize him at the basis, I do not issue invoices for them. So I have fewer credits to consider in this curve, but the criteria of the curve is unchanged, conservative as we've been doing in the last years.

Mirela, thanks for your question. Just a small complement of the Carol's answer. We have a settlement for those curves, it's something new with the control sector, understanding the profile of this year, it changed. But this change not always goes to the direction we want. However, on the second quarter, we could have a positive impact. I'd like to remind you that the second quarter comes from the first quarter and the [indiscernible]. So we can't guarantee in 2024, this number and in the second quarter we have some renovation. So we might have some change in behavior. And the question about M&A, how can I say, Mirela? It's important that we are aware, like where the market is and which direction the tides will follow. So we have to remember that Vitru has in its very strong growth, very strong expansion combination. That was a big transformation that happened 2 years ago, and we are still finishing in 2024. This integration of everything that has been -- that was built in those 2 companies. And M&A, we are always aware the managers have to be aware of to be attentive for everything that's happening, small things, medium things and big things in all the segments. And obviously, as a company, we've been looking at reducing our leverage levels, and this reduction might in the near future, maybe in 2025, that's the goal, producing the leverage levels, we can open a room to think about M&A for growth and keep expanding our company.

Thank you William, and Carol. Maybe I didn't make myself -- I didn't make myself clear. I'm talking about DNA. So we saw a slight increase in the second quarter.

Mirela, I'm sorry, I thought you were like pushing me. So now I'll give the floor back to Carol for her to talk about our DNA.

Our DNA have some [indiscernible] now combination, a mismatch the new businesses. But when we look at the time line, we can -- we have a lean structure, and we have a percentage of revenue that is above 5.5%, 6%, and we keep that going forward.

So we'd like to say that the Q&A is closed, I would like to give back the floor for the final remarks of the company.

So we'd like to thank you again to be part, to be attending here. And I would like to apologize for not being able to do it in the correct date. However, we are here. We solved many problems. We had a quarter with great results, and we keep working or delivering future results for the company. So once again, thank you very much for your participation.

Webcast for Vitru Brasil's second quarter 2024 results is now concluded. The Investor Relations department is available to address any further questions or concerns. Thank you to all participants and have a great evening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]