Yduqs Participações S.A. (YDUQ3) Earnings Call Transcript & Summary

This is Rogério Tostes, Director of RI. And I apologize for the delay. We had a little bit of a technical issue with the platform. Now we're going to have the presentation, but done by Eduardo Parente. And you can see our presentation in the RI Investor Relations website of YDUQS, and we have the simultaneous translation into English. So Eduardo Haiama will share the process to facilitate the work of the translator. [Operator Instructions] This conference have -- well these are positions of our future events that do not -- well the company do not take responsibility for any issues that might take or any changes that might happen in the market. The predictions are solely done at the date of the call and they are merely predictions. Now I give the word to Eduardo Parente to start the presentation.

Hi, Tostes. Thank you very much. Good morning. Thank you for being with us in this morning. I hope that everybody is healthy. So I wanted to start our presentation by saying -- well this is the earnings call, and you can see the opening remarks here on Page 3. First, we made a lot of decisions in the past, and we were a little bit concerned that maybe we were too conservative and that conservatism is now paying off. The first one that we look in the accounting context, the payment of the installments, the self-pay is one of the alternatives and many people embraced that idea with caution. And it's been about a year that -- now that represents about 1% of our basis. And any student that leaves -- well to start, we have 5% provision for them. Now our financing sources, they're always talking to us, spin-off all at once. And eventually, in the future, we might consider that. But if it's said, this is going to be a very clear project and a very adequate one. We are very trustworthy and we know about our value and the growth, and we want to pass that on to our shareholders. And we are working at the limit to finance our projects. Third point, it's the expansion itself. Now we had dozens of opportunities. We had 3 big ones with -- over the past few months. In the M&A, well we should -- we actually have only a few of these options. We can count them on the fingers of our hand. We're very cautious on the M&A, and we're trying to make the correct decisions. As a consequence, the cash generation for the quarter has grown. Now whenever we talk in the call or whatever interaction we have with you in the future, we talk about the 3 basis for the growth of the M&A. They are: they're cheap because M&A -- and it's here predicted in the expansion. Well medicine is the most of the expansion that we're doing, that work that we have done recently, we have done a fewer premium acquisitions. And now we have had a lot of results. We are looking at -- the distance learning is growing and both models are growing. In M&A, we did 6 acquisitions with the EBITDA of 4, 5, the EBITDA over -- the EBITDA is in 4, 5. And when we look, we have a very big year for 2021. And we consider that this is the year that we will finally start to accelerate the issue of the post-FIES will be done. And when we had the crisis of the COVID-19, well firstly, we we're worried about the safety of our employees, our students, of course, and everybody involved in the operation. But once that is passed, the big concern is that 2021, we will accelerate our speed, and we have to start from the inception. However, the concern is while we had the pandemic situation, we have to preserve our base -- our student base, decrease the dropout and maintain the financial results. So once we leave this crisis, we have an absolute relative position in this sector that is ever stronger. And this is what we could achieve. Therefore, the base has grown. The dropout, much better than the scenario at the beginning of the quarantine with a cash -- well the almost BRL 2 billion in cash, the net debt is controlled and cash generation, very strong in the quarter. We have BRL 215 million in recurrent values to date in COVID. And when we look at the core of the business and looking up ahead, we have a revenue that is increasing 11% and a variation of 5% year-on-year on the adjusted EBITDA even though we've had a drop with the FIES. When we look at the post-CIFIES (sic) [ post-FIES ] and post-COVID, the numbers are still encouraging. We are doing readjustments. Of course, we are also taking into account hygiene, washing hands, everybody is taking care. There are some good things. There are some things that need adjustments. We have students and teachers that are getting used to the digital world, the business learning, the remote learning, let's just say. And everybody wants to maintain their networking, get to know maybe a significant other. And in terms of on-site, these are people that still want the on-site experience. Now the on-site, of course, because of our legislation issue, it's done exclusively now remotely. This is what the legislation allows. And we have much more comfort to expand this and to bring this in a more welcoming didactic, a better experience for our students. So let's talk about that up ahead. Now our investment in digital learning has brought excellent results. Now the M&A part is still in the agenda, as it was mentioned, and they will continue with what -- with our plans. We also have the possibility of an inorganic growth if there is an attractive option. Now let's go to Page 5, please. You can see the graphs. Let's talk about the 3 levers of growth. Page 5. We start with the distance learning, digital learning. We have a strong growth in the base -- the student base, you can see here, therefore, the important thing. You can see the net revenue at the distance learning or digital learning. And on the left, at the bottom in the graph, we have a strong expansion of DL centers. This is one of our strengths. Our business model requires a low investment and once again, basically, everything else is variable costs. Therefore, when we look at the number of DL centers, 1,200, we consider that this -- it represents a growth in the student base FIES, up ahead, 53%. During the pandemic, we opened over 100 DL centers. This is a very strong moment in the quarantine. We have all the content of our brand. We are producing the content with different brands. We are working with the second semester very well. We are launching the brand, UniFanor. We have the traditional digital learning that you know. We bring new features for these courses as meeting with the tutor, with the professor. Therefore, we can bring a higher ticket for this cost. In Ibmec, well we do not have distance digital learning, but there is a big advancement. MBAs had the transition, and we are advancing into digital learning. Let's go to Page 6, please. Second lever of growth. Let's talk about medicine. Now on the left, in the graph you can see the growth of the student base. And we have the growth -- the maturation actually of our student base with operations from the government. Here, you can see in darker, there is the expenses for the acquisition, the slots. And we have in the second quarter of 2020 the entry of Teresina, that's the units of Adtalem in the state of Piauí. Now on the left, on the graph you can see the total growth of revenue, 35%, even though we had to provide discounts. And this represents 11% of our -- of the total revenue. You can see BRL 114 million. Now you have to understand this table very well. On the left, in blue, we have today's reality. So when you look at the first line, Presidente Vargas in Rio de Janeiro, we had the authorized seats for student base of 1,500. Now when we go to Jaraguá do Sul, SC, it's pretty clear that we have 50 authorized seats and 114 students. Well we have, of course, that still has a lot to grow. So the space -- its maturity of its seats, we can see the authorized seats and the full potential, 150. You can see on the right on the graph. In gray, we're still under development, and we start to capture the students at each of these courses. Our prediction on the right is the potential, the full potential for expansion of the authorizations that were given by the government. We have a tradition of success. Juazeiro do Norte, we have 150 -- sorry, Juazeiro do Norte, student base, 155 seats. And this shows in the table, these 15 units, that we can expand 3x our current student base simply by doing CapEx and working to have the government-issued authorizations. We don't have here the 3 units, that we have another 300 seats. Today, at the official government publication, Diário Oficial, we have another 50 seats authorized. So this number of 16,000 will be higher if we continue to update those numbers, but we have the good numbers, the extra 50 seats that were authorized by the government. Let's go to our third lever of growth, Page 7. We have 3 successful operations, as I mentioned, over the last 9 months. We can see 30 -- we saw 30 to 40 opportunities altogether, and we analyzed them all. Now in the 3 that we paid, we paid less than what was negotiated at the time. And in the 3, we know that with the synergies, we have only a fraction of our multiple in the EV over EBITDA of the deal. So 100% concluded with UniToledo, Adtalem very well. We had a quarantine, and we were 50 -- we had 50 people at McKinsey helping us in the identification of 101, to the opportunities that are being presented. Now in Athenas, which is more recent, we are going at a higher speed than the previous one. But also we have to take into consideration our capacity to bring digital learning to Athenas. Now we have -- we are capturing 40% higher than the previous month. These are the 3 levers for success. And let me go into the details on Page 8. I think this is our biggest acquisition, Adtalem. And we announced BRL 80 million of subsidies we had in our map, a number that was reasonably higher, but being conservative. We decided to announce only what we were certain. Now we have mapped initiatives to get to BRL 170 million to BRL 200 million on the short-term 2024 FY estimated. And we are talking 60%, 70% of costs; 30%, 40% in revenue. And the plan is to get at the end of the year with 1/3 of that value captured. Please, let's go to Page 9. In the context that we have in the pandemic, during the quarantine, the focus is of -- well the focus in the student-based expansion and maintaining our financial robustness. We have, today, in this quarter, we have the biggest on-campus on-site. Well number of students in Brazil, we can see here the number 900, about 753,000 students if we didn't have the numbers of Adtalem. We would have to reduce 14% this quarter versus the quarter of '19. On the right, on the graph, we have our dropout rate for semester. The students leave into, say, a few times. We call it a dropout. When they renew -- well during the semester, we call it dropout. At the renewal time, if they do not renew, we call it nonrenewal. This would be a good number. But we have to see the reality that the renewal at the beginning of the year plus the dropout is -- we want to show you the clear numbers. The dropout rate, or the people that leave the course through the semester, that number has increased a little bit on the on-campus, but it dropped in the digital learning. We have the new technologies in digital learning, of course, and that decreased key dropouts in the intake and renewals. Now in the on-campus, the dropout grew just a little bit in comparison to what we expected and in comparison to what we see in the other higher education institutions. We can work with discounts. We can also -- well there is a strong issue with quality. We have good quality in our operation. And we have satisfaction in at least 94% of our student base. And the 76% real-time presence confirms that, with more than 80% having asynchronous presence watching the recorded classes. The other side of preserving our financial solidity. Once again, we have the reduction of the FIES student base. This is always a source of worsening of revenues. We are at Page 10, please. Let me -- well they told me to speak a little bit slower. The FIES base today represents -- well the old FIES, it represents 8% of our on-site. And we have the total base of the students, this is the last year that we have a big impact. In other word, we can see the evolution. It's something that we have -- we are very proud here. And I've mentioned being conservative before on how much cash we're expecting. Well before and when we look at the -- well we generated over the last 6 months, we generated 21% more than the last year. We also have an impact in the indebtedness. It grew, too. And we have BRL 1.9 billion in cash position. Now Page 11. This is something that we've been working for a long time. But because of a strategic commercial relation and also being conservative, we will not talk about these things that are certain. We talked very little about our teaching system. Now on the left, there is the teaching system itself that we started in the first semester of last year. Looking at the undergraduate digital base, we understand that we have a better format for the market easily. They speak the language of the students with text research questionnaires as we go back to the course. So this is a way that is very didactic, very easy to engage. And today, we understand that this is a scale where we can do a substantial increase in the context. When you bring a high-standard teaching to digital learning, you were diluting that into a big set. So it's been 1.5 years that all of our digital learning has the teachers in different disciplines, and this is one of the reasons that we consider strongly here bringing a talent. And we have the people who can help us use the digital tools to elevate the centers of the classes. This is our dream digital project in 2020. Just so you know, we have over 350 disciplines produced in this format, EnsineMe. 56% are Freshmen, but they leave with 100% of the content with a high-level content in EnsineMe, and we think that this will bring a big impact in digital learning. We -- you can use this at any brand. It's not a brand that we have today at Estácio, UniFanor and UniToledo. And when we -- we don't use all the brands. We have the capacity in the first day and we can optimize the cost on operations and also salaries and et cetera. Well, this is the first step. And this is a reality. And we will go over 20%. And we innovated. We had the courage, and we want to bring this to the on-site world. Well the Estácio student, the analogic level is not a reality. The analogic world isn't a reality that he lived. And we are doing a very strong pilot with this teaching context using the digital learning that would substitute the analogic learning in the classes. When we go to the pilot classes, the students have more ease. A lot of them have iPads, have cellphones, have tablets, and they can go and see the podcast and see the video, see the content, and the level of preparedness that the student arose is completely different than what we used and when we use the analogic teaching system. So now we are taking that, we're substituting the books by the materials that will -- for the on-site students as well. The semester that we used with the digital learning, the class is more centered in the feature, organizing the interaction of the students based on what they had before. And we really did a deep dive for this 340,000 students. We have 80,000 students studying in this reality in the Aura. And this has transformed both the disciplines in the digital world and on-site. They will be apart. Therefore, the student will have to set itself and then go and work with a student, with a teacher. We have thousands -- 50,000 of students that have the on-site and digital learning. And we can get to the limit of 40% online with a very big improvement in the experience and the directive of the student that we have here in our teaching system. Another benefit of that is that this stabilizes the number of credits and the big concern of NPS, which is the adjustment of the monthly fees per month for the students. I'm going to change to Page 13, the nonrecurring events in the quarter. So we had a lot of actions, the actions that we take with COVID-19. First one, Estácio com você, we're starting with you, or Wyden with you, Wyden com você in Portuguese. We understood that from the standpoint of social responsibility and also to preserve our student base, the -- well giving a discount is not the most important thing. It's not the most important thing because if your last year dropped, you're not going to pay 80%. So we wanted to be very aggressive and hear the story of each student. The result of that is that we benefited 31,000 students in a very emphatic and personal way. We had 29,000 fully exempt on FIES tuition fees, and 95% of the beneficiaries come with a house -- come from a household that has income below BRL 3,000 a month. We understand that this is the right thing to do, helping everybody that needs. And this is also good for the business. And we are working to retain loyalty at a moment that people have difficulties. Another thing that is important, and I would be -- well we have a big financial robustness and -- but by saying that, I would -- and reducing the salary of our team, that wouldn't make sense, but -- and we haven't done that. We maintain the full salaries of all employees, therefore, we commit to the team. And even the ones that the government helped, we worked so people didn't have to wait for the government. We never stopped keeping the salaries in full. Once again, the teachers all kept their times, their working hours during the semester. And we have a great pride in that. We are doing the advocacy of the units with -- and also the hygiene and air conditioning systems. We are working with Magalu Oi, TIM, Vivo to help the students that didn't have good Internet. And these are 5,000 students that were benefited so that people can -- so the people can actually have access to the content. And we have had a big effort of a lot of people and our 15,000 employees to make this work. Of course, this has a cost. And I will go to Renato, and he will detail the cost.

Thank you, Parente. So good morning. Let's go to Slide 14. Let's talk about numbers. Basically, in the quarter, we had an impact of BRL 215 million, the impact on the EBITDA in the second quarter. And I will go line-by-line to explain. The first one is in the revenue, which is related to the program that Parente mentioned with Estácio com você, Wyden com você, and also with the discount and the -- by the laws and court decisions has that reduced our revenue in BRL 67.5 million. It's important to mention that we are very conservative. We could have adopted a practice of launching the full invoice. And with that, the reported EBITDA in the financial results would be higher. And -- but being conservative as we are, we think that it's more prudent to show this discount that is impacting our results. And obviously, reducing the turnover to cash flow. Now another point, BRL 67.5 million, it does not include other impacts that certainly we did have in capturing the students, especially in the on-site distance learning. We already commented that it grew in separate lines, but it seems like on-site, we also had separate. But also in the retention of students, we had direct impacts. Second line, costs. We have -- we are reporting here the benefits that we have in the nonrecurrent, such as the MP 936, the negotiation with providers. We had some help in that sales of BRL 14 million in the quarter -- in the semester, but we had to mention what we commented in the slide -- in the previous slide. It could have been higher, I think Parente mentioned. We think that it's better to keep the full salaries of our collaborators and that has brought in a cost. Nonetheless, we understand that this is the correct thing. Now third line, commercial. We have -- that we can see these provisions on the right. But one of the provisions from the past FIES and the other one that talks about the conservative of our -- our conservative numbers in the FIES. We are in comparison to 2018 and back, and '19 being a part of that. I'm just going to comment this very. Quickly. Basically, we have today a part of this value that would probably be charged in the future, apart from the student part, apart from the government, we understand that the moment is not right now to do this. And as time goes by, the probability decreases. Since we have uncertain time in economy, and we don't know how it's going to behave, we are going to provision this amount. In the case of COVID, if we are going to follow our policy of provisioning for TBD, you will probably just see the result of the financial results in the fourth quarter. Now here, we are more conservative, once again. What have we done? We compared with the days in the second quarter of '19 versus in second quarter of '20 an increase of invoicing, we provisioned it. That's why there was very little increase if you look at our balance sheet. And this is -- we had the incorporation of segment and there is no growth that is relative. And the fourth line, talking about the contingencies. We launched an addition of contingency of BRL 54 million. It's important to mention that this is not for the quarter. It's related to the older causes, and this is the work that we've done in the company for over a year, well not only take into account our strategic processes, but also best practices on how should we proceed up ahead. I think it's okay to get to know the contingencies. We also have help and we will continue to have the help from M&A consulting. But this is a small chunk of the investment that is important to mention, that these are the expenses. The last item, you are used to seeing it. Well once again, the M&A are very point operations. Now Slide 16, in revenue. The net revenues adjusted here, 11% in comparison to the previous year. BRL 67.5 million is nonrecurrent. Well a little bit -- a part of that is because of the scholarships and the other one for discounts granted due to laws and decisions of the court. And another point that is very interesting. We have our 3 levers for growth. We insistently talk about them every quarter, which is distance learning, medicine and M&A. If you add the incremental revenue of these 3 items, BRL 61 million, BRL 22 million, BRL 123 million with Adtalem, you will see that it was a double of the drop in the FIES. So we can see here there was the drop in the FIES BRL 103 million, but there was a growth of over BRL 200 million in the revenue and which would have grown our revenue 13%. And distance learning would have been -- would have added 44%, and medicine 35%. Now Slide 17 and the part of the evolution of costs and expenses. We have the inclusion of the incorporation of Adtalem for 2 months. And these impacts nonrecurring effects that are documented here -- or are not documented, but they are documented on Slide 14. The main point is there is a seasonality that happens in the costs, it's not an increment itself. That is very relevant. In the part of PDD, of course, as you reduce the revenue of FIES, you will incorporate new revenues. And in the end, which is the part of cost of services, here is the operational numbers that are improving. On Slide 18, there is a growth of 11% in the revenue of Adtalem, with 20% of the cost. And there is -- it resulted in a reduction of 5% in the EBITDA, where the reported EBITDA is BRL 111 million, where the adjustments are BRL 327 million, as I commented. Since we are very conservative and the way that we report things, we recognize that discount by the loss, and we will anticipate potential PDDs in the third and fourth quarter, difficult to present, the total amount would have been less. Now the main point in the slide is the graph on the right, which is the operation cash flow before CapEx, which it grew almost 50% year-by-year -- year-on-year. Now I give back the word to Eduardo Parente.

Thank you. Thank you, Haiama. Now looking up ahead, we are very trustworthy that our position here in the market is becoming ever stronger. Our capacity to give answers on the short-term, the base is growing. The cash flow is growing year-on-year. The levers of growth are all here. They are unchanged. Digital learning growing 44%, with a lot of discipline with every M&A that we do. And the perspective for the future is that in the first week of classes, we have people live. Well our record was 79% of people that were in real-time attendance in the first week of classes. And in the second week, 79%, the first week, 72%. We have the renewal of the on-campus and digital learnings. And the units of learning that we have, we also have a very natural growth, very cheap growth, and we have a very comfortable position. Second quarter, the big factor that impacts the second quarter is the renewal. We had 70% of the facts included, and it's 90% above the FIES with the re-enrollment on-campus in comparison to the second quarter of '19. And in digital learning, we have renewals at -- well 50% more in comparison to the second quarter of '19. This leads us to believe that the worst had passed, and now we can restart our growth plan. And we will grow strongly next year, thanks to all the measures that we've taken into account. Thank you very much. Now we will go through the Q&A.

[Operator Instructions] First question from Mr. Samuel from BTG Pactual.

Two questions. As if an infant theme in this initiative of the scholarships and discounts and loss and court decisions. If you can talk about the resilience of the student base to avoid the dropouts, how the students were benefited? Is this base still in the company? And second question, if you can do a breakdown of what was the scholarship, what was the discount. That's it.

Thank you. Samuel. I hope that you're doing well. Well I thought that it was very nice that you realized, perceived the impact of this initiative, yes. Again, we have been working with education, and we want to understand the situation of each student. And this is a valuable thing to us. There is the issue of preserving the student base, and we can classify our students using artificial intelligence to do so. And this takes into consideration their payment history, their presence, et cetera. All of our students is in the half of the features, you know what is a student, that is red, yellow or green. The teachers work with that. We have a comparable base of students that, of course, there -- some of the right ones have more of a propensity for -- to drop out, sometimes difficulty into pay. And we could compare them exactly. This is not an estimate. It's the student that has scholarship versus the student in the same profile that is not in the program Estácio com você. The difference is 30 percentage points in renewal of the students that are in the Estácio com você program. Now second question, the distribution will be BRL 67.5 million. 1/3 is scholarship, 2/3 discounts.

Next question from Susana Salaru from Itaú Bank.

We have 2 questions here. First, about the receivables. Looking up ahead, how is this evolving? And is it the same also in the margins? First question. And the second question regarding the previous question. When you say it's 1/3 or 2/3 of the scholarships. The 1/3 of the scholarship is restricted to the quarter? Or is it a scholarship that is higher? What is the time frame of these scholarships?

Susana, I want to start with the second one, and then I will give to Adriano to answer the first one. In terms of the você program, it was basically everything, 90% within the quarter that you're perceiving. Now we do not see today the regrowth, but it is a lever that was exceptionally efficient, and we can consider this maybe as an extension for this semester. We are still analyzing. So it doesn't -- everybody is going back. It doesn't makes sense to continue the filling of the big volume of Rio de Janeiro and Ceará, those were states where the situation is improving and the worst has passed, and we won't have to go back to that. But this is a lever that we have in hand.

Susana, in regards to the receivables, I could give you an answer that is very positive and say this is much better. But it would be wrong to affirm with 100% certainty that at the beginning of the semester, the numbers are better because now we have the renewal. We -- our invoicing is low during the renewal period. And this is what you, in fact, negotiate, any delays to renew, because if you are having indebtedness, you are -- well we've improved since June, since the end of last quarter, but it's still early to affirm what is the degree of improvement. But certainly, discussions matter.

Next question, Mr. Marcelo Santos, JPMorgan.

[Foreign Language] First question -- two questions. First, comment a little bit on what you see the on-site transforming on post-COVID, do you -- how do you think that it would be -- how dramatic is the change in behavior of the student with the different types of courses? Can you -- what can you tell us in the context of the Estácio? Second question. Talking a little bit about the teaching system, the classes, do you see a potential for selling abroad this model? Can you imagine this maybe working -- that's happening in cities that you do not work currently? Can you expand on that?

Thank you, Marcelo. Marcelo, I think that we have -- once again, going back to the lever of being conservative. We have our units full. If we had profiled more, if we had our numbers lower, we would do a drastic change. It's very relevant for the footprint. And you have to offer an option for the students. And definitely, this is not the case. As I mentioned before, we believe that there is going to be social distancing in the on-site units, but we don't see any relevant changes in the demand for the on-site. I think that [ ORA ] is a very intelligent way, without false modesty, that we implemented to integrate much better the on-site with this digital learning. So we have the students 3 days at home, 2 days on-site. Well in the end, we have 1 -- a one-stop shop. And not only that improves the didactic, the experience, that improves the perception of the student. This is the relevant change. And now, they will have the teacher, but the teacher will still have to work with the student, and the student will have to do a lot of homework. And once again, we have -- we know what is the -- who is the student that watched the video and did not watch the video. You can ask -- you can see who -- those that participate. It changes the experiences from both sides, the on-campus and the digital learning experience. In regards to selling, well there'll be a very small pilot to try and understand how that could possibly unfold. But this is so far away that it would be irresponsible to talk about this and generate any expectation in that sense. We had in the higher education, we -- the K-12, we have much less participation in the market. For you to earn money in the teaching system, you necessarily have to leave your universe. Since we have a relevant share in the higher division, we believe that we generate a lot of value in-house, and there is a big competitive differential. So we believe that it is important, it generates a lot of value, it generates a lot of growth, but it's still very early to consider any business -- well, expanding that outside of our home.

Well can you comment -- you were talking about the results, we know. But what about the intake?

Thank you, Marcelo. Well the intake is a little bit delayed. The student is looking at the future and how things are going to unfold, where they're going, the distance learning digital value is growing much higher than our CapEx. We don't have a 50% big dropout rate, that doesn't exist. We think that we're going to have an intake that is much like the one in '19, but there's going to be a change in the proportions of the on-campus and digital learning.

Next question, Mr. Thiago Bortoluci from Goldman Sachs.

We have 2 questions. First, in regards to PDD. Well as you explained CES and COVID, well we want to know about the balance. How is the dropout? And do you have a risk for a higher provisioning up ahead? Second one has to do with digital learning. We have the student base, how will you choose your partners? Is it the epidemic model, the infrastructure, the geographic position? And depending on this answer, what are the impacts for the profitability in the future?

Thank you, Thiago. I'm going to start with the second question with Araújo. He is our VP of Digital Learning, and then we can answer the first question.

Thiago, good question. In regards to how do we assure that we are growing within the strategy of using different brands to reaching different publics, we grow -- well before we only use the Estácio brand and now we have quality products that we already mentioned. We have new brands that are promoting growth, and everything has to do with that. Now we are commenting a lot on the project, that we have a big project that we want to follow up on the profitability of the DL center and reducing the cost at the DL center. And we want to reach the small cities where the competition is lower, and sometimes they don't have distance digital learning opportunities. We have to differentiate the product to brand and that's how we respond on the expansion.

Thiago, thank you for the question. In regards to, well G&A and selling expenses, PDD. Well there is no additional risk. Remember that our provisioning policy is very conservative. As Parente has mentioned before, PDD, it will -- well we are provisioning very quickly. And we -- well our base is ever smaller with the PIS, so the impact is almost irrelevant at 20% of the base. And the turnover, well it's very difficult to expect some oscillations from the pad in the future.

Next question from Mr. Vinicius Ribeiro from UBS.

We have 2 questions, both about Adtalem. How do we explain the synergy? Well you have an excerpt of being conservative or do you have some certainties or uncertainties about the leverage of growth? Second question, about the capturing in Adtalem. The question is, does anything change in how Adtalem needs to work? Is there a different approach? What can we expect in this capture of students for the second semester in the context of Adtalem?

Thank you, Vinicius. Okay. Excerpt of being conservative? Well, I wouldn't call it that. We always like to talk about the numbers that we're certain of. We want to be certain of the numbers. Well these are the 80, and we thought that we had more. When we did the detailed analysis and we could get the numbers very quickly, we thought, okay, the number that we have today is the number that we are certain of. Therefore, this is the evolution. And now the second question. Adtalem, to us, it doesn't exist. We have several universes. And when you look at Ibmec, it's one thing which is very criterious to actually -- we don't want to -- we want to increase the power of the brand. We don't want to change things with Ibmec. We're spending more money in marketing, and we're working with -- to bring different teachers with a better curriculum. So the universe of the older talent, there is a big chunk which is the Wyden. Now we don't see it as Wyden. Wyden has its own reality. And we have units, the units of -- only from work. We're bringing it to digital learning, that we can work with it as premium in the digital learning. We have 4 units in Ceará, 4 are Estácio, and we don't want to change the brands there. That slide where we have more units than we have in Estácio and non-Estácio, we're working with a different position. But we are bringing a lot of technology to capture the experience. We have done our homework. Well we had a big turnaround in the last 3 years. And we say, well we're going to earn a lot of money and the success on the pricing of the digital learning tools that capture -- well now we're capturing all the toolings digitally because of the time online. So we have a lot of technology. And I think that clearly, the competition was behind us. And also, you have that culture, that those of you that work with Estácio for a long time, well we -- even before the IPO, we are generating results. We want to reach our goals.

What about Wyden?

It has a different experience than what it was a few years ago in terms of capturing new students.

Next question, Mr. Mauricio Cepeda from Crédit Suisse.

Well congratulations for being conservative. In fact, what you have invested now is paying off. I wanted to know more about the perspective, the effects of COVID-19. They are being credited in the short term. Well COVID should generate an economic crisis that is much more serious up ahead. What have you thought about optimization of costs and that sort of thing that can preserve the company with the decline in the on-site teaching, on-campus teaching in comparison to the digital learning? Second is, well something that can be perpetuated in the future. There is the discount. There's the scholarships. I know that you're being very conservative, but is there anything that can be extended on the long term?

Thank you, Mauricio. Welcome once again. I'll let Adriano start.

Just before we start, I'd digress. I think that we are in the third wave, as we call it. The first one was CES, then there is the crisis and now COVID. I believe that this will differentiate those in the market that are optimized or not some competition.

Well they did the work that we've done a few years ago. They are just starting. And I think that is very healthy. And I believe that the lifespan of those that have scalability to produce quality content in a digital world. And if you have a student base that is relevant, I think that your life is going to be very difficult if you don't have those 2 things. So I see the ticket, and I see that we are reaching the limit of what the optimized operation can withhold. But I believe that us and others that are optimized, we have scalability, and we have the chance of having an upside in this new reality that you just mentioned. I'm going to give the word to our VP of operations about the cost.

Mauricio, the work of optimization is constant in our campi. Well as another point that Eduardo has mentioned which is we have an optimization that is higher not only an increment in the digital learning, but also in the integration of the costs. The same courses with a small number of students, they work in a more integrated way. And we have the indicators that are improving, and they are ever-improving throughout the year. The direct impact of that is the cost of teaching. Well this is our day-to-day. And we imagine that we're going to follow up on that line.

In regards to your question, just discounts and scholarships, the expectation for the future in terms of discount, well is it TBD? Or that at the end of the day, is it a loss of ticket for the future?

Well I think it's 2 things. Well what do you imagine that will happen in the impact for the ticket? No, we do not. Well what we are doing right now specifically for the scholarship with Estácio com você, as Parente had mentioned, was specific for the people that really suffered a lot during this crisis. And what we are doing for some time is changing the performance. Everything that we mentioned in the digital world and other initiatives to improve the experience of the student is actually growing. And we are improving the retention. We want to improve their presence in the classes. In the end of the day, this is the service that we are providing with quality. That assures the sustainability of the business and not negotiate via discount. I don't know if I answered your question, but I believe yes.

So you said that you had to do some very specific actions, but they are not going to have a long-term effect. There is not going to be a deterioration in the average ticket, I guess to the point of Parente that this is despite the time frame.

Yes. When you look at what we are delivering, the ticket that we charge and the quality that, in fact, we are producing, we understand that we have the minimal value already that we can practice in the market.

Congratulations for being conservative. This really makes a difference.

If you don't have any more questions, I would like to give the word to Eduardo Parente for the final thoughts.

Well thank you very much, once again. Thank you for joining us today. And I believe that we can and we managed to be very transparent about the reality of what is going on. I believe that the level and the quality of the questions also reflect on that very constructive ideas. Thank you very much. We are very confident with 2021. And we have a perspective for the second semester. And we are the -- at the inception of the regrowth. Thank you very much.

The earnings call of YDUQS is closed. Thank you for your participation. Have a wonderful day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]