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

Ladies and gentlemen, thank you for waiting. Now we're going to talk about the earnings call of the second quarter of 2021. [Operator Instructions] Before we continue, we would like to clarify that anything that we might say during this earnings call about the perspective of the business or the company projection and operational goals are based on beliefs of the Board of Directors of YDUQS as well as based on information that is available for the company. This document may have such forward statements that is based on uncertainties and risks, which might lead to expectations materializing or substantially differ from those expectations. We have other operational factors that might affect the results and might lead to results that are materially different. Now I'd like to give the floor to Mr. Eduardo Parente. You may proceed.

Good morning, everyone. I hope that everyone is doing fine. I'd like to apologize for this delay. Our provider had a problem with link. We tried to do this via video, and now I ask you that you follow the presentation here on the telephone. And now I'm going to start on Page 3. I think that we had a wonderful quarter, and we had the pre-pandemic, and we're going back to the same level, which is one of the highlights. We'd like to say that this is the first in length that we have a guidance reach because we operated the business and the results per business unit in a quarter that was very atypical in the late capturing. But I think it's important that we give visibility to the 2 quarters, given this important moment we reached the numbers and we were keen on the guidance. This is before COVID, and it shows that we have a straightforward path, and we're trusting at this moment is improving. As we have said previously, the -- well, the mandatory discounts are a fraction, everybody that is doing digital transformation to try and have a teaching system that is very robust that we have been applying since 2019, has had an impact that is very important in the NPS on-campus and Digital Learning. Second quarter, I remember you that in the second quarter of 2020, we had a big advancement in 2019. And as we said -- and at the beginning of the year, we mentioned that we have an expectation that the Digital will get to the revenue, while we have increased premium and be a representativeness and bordering 47% of net revenue for the semester, a big renewal in regards to the first quarter. We're keeping the standard with a solid capital structure. If you remember, last year, we had the program Estácio com você. We had -- that was a very severe moment because of the pandemic. There was issues with loss of revenue from our students, loss of jobs. And now we are moving on with our financial part. We have a solid capital structure leverage, gives us comfort and flexibility. As we have shown in the last 2 sessions, we are doing the M&A, which I think that we are very recognized. The operating net revenue is growing a lot in premium in digital. That has happened since 2018. We are talking about medicine and M&A. I think that a lot of Digital Learning and -- really Digital Learning and Medicine has had a growth in revenue as it has been demonstrated in the 4, 5 years. We have another stable point. The EBITDA reported has grown a lot. We are talking about probably the adjusted, which is the most correct. It's 50% growth. Last year, same thing with the adjusted net revenue. In Medicine and Digital, the big highlights. The growth in the student base, 22% medicine, and we have Digital up 52% year-on-year undergraduate student base growth. We have -- we are really focusing actually as the seat -- when the seat -- until the seat is approved, it is not accounted for it. But this is very important. We have to be extremely transparent. And we opened another 500 DL centers, and we will continue. Moving up. The average ticket, and we have an increase in year-on-year. As we said, it's been based on Digital and also on-site also growth. Something that is very important. Something that we have worked in December and understanding if we can give more transparency. And our industry has a lot of dynamic issues. There's M&A, Digital Learning, Medicine, it has to be transparent so that people understand the different businesses. And we have done that today. We can show you the margin, Digital 39%; on-site 19%. And I believe there are 2 messages here. Premium and Digital are levers of growth with gross margins and EBITDA, and this is very superior to our average margin. And on-site, we had not so much of a good capture. So I can show you the report. And this is a big opportunity. The on-site is here. Any student that comes back, the revenue becomes EBITDA almost in it for the 3 numbers are very positive. Let me get into the details on Page 4. What do we have here? We have premium on the right. You can see that it is 1/3 of our EBITDA, 29%. On the left, we see the evolution of the revenue, second quarter 2019. So of course, we have Ibmec here from the second quarter onwards. Even when we just get to green. And this is, we have the student base in Medicine. And this is what I always say Medicine has had a very accelerated growth. And it's a number that is very significant. Most of this growth is organic and our operations are maturing. Up top in the guidance, BRL 400 million and BRL 430 million. The EBITDA, BRL 424 million. If we had the reported income, the gains would have been higher probably because of coherence thing. We are always based on the revenue. This was reported last year, and we have the trustworthiness in the restart post-COVID. And this is why you will see all throughout this presentation, and we've seen the numbers that were adjusted. Same thing is applied to the EBITDA. You can see the EBITDA of 45%. Also within the guidance is BRL 110 million. Here is the importance of this guidance. The first quarter in the Premium was better than the second quarter. And it shows the sensitivity. The guidance here has helped us. And we are having to explain the second quarter in the aggregated number. I think that we are stable. And we will have to explain what went from one semester to another. Everything is well aligned. In the middle of the page, there's 6,200 students, 6,200, 6,600. We are within the range, the ticket, 5% in this quarter. And IDOMED has 5,500 thousand students, renewal rates above what was last year. And this issue of Medicine, which is very important. 450 new medicine seats approved for 2021 second quarter. Digital Learning, revenue base and doubling every 2 years. While we know that the second was better than the first quarter because -- well, we had a bit of a delay of capturing these new students and the reality of the business is here well displayed. When we look on the left, we can think of the undergraduate and lifelong for the adjusted net revenue. Growth of 130% and 43% year-on-year. 130% was '19 to '21. The average ticket on the right is going in parallel. It's very good. This represents almost 40% of the total EBITDA. At the bottom, if you take a look, it's a very impressive number, the student base, which is the undergraduate. We had 246,000 and now 511,000 growth due to the middle graph. We see our centers, the number of centers and its expansion. This is very important. We are reaching very small cities, even we have centers where we have 32 students even, a very simple model. We can work with municipalities and in small cities. We have 500 -- we have -- well, we have 500 students in the city of 30,000. So we can peak -- with the deal centric, we can get education to this -- get access to education for these people and keep a profitable operation. When we look at the 2,500 centers, 80% are less than 3 years of age. And actually, it was 1,700 centers, I apologize. We had a renewal rate that's very good. As you can see, 77% first quarter '21. And we continue with the growth in centers and an improvement of 25 points in the NPS. Page 6. Let's talk about the on-campus. On-campus, we have good news in this page. When we look at it, it had a drop in revenue, which is very important, BRL 703 million. And when we look at the revenue and the EBITDA, actually adjusted revenue dropped from BRL 700 million to BRL 600 million, 16%. What we had the results in the second quarter that were better than what we saw in the first quarter because of the capturing of new students. We are talking about 1/3 of the company in this margin of 19%. We had a very big impact in the quarter, in a nutshell. The -- most of students -- well, it happens more in the first quarter than the second quarter. So this was a very frustrating moment in the first quarter, and we can see a margin of 19% revenue, adjusted of course. Well, we are not talking about FIES anymore. We're talking around that we had COVID, FIES and the integration of Adtalem. So we had a loss of relevance FIES, and we see that the base doesn't consider FIES, which is at the bottom, that base is growing without FIES, on campus and semi on-campus. This is good. We're going to talk about this capture. We see an inflection point and it was never decrease or risk. It's an inflection point. That has a big impact at the moment that it happens. And the ticket here in the middle, undergraduate, we see clearly that -- I will show you up ahead and we're going to see this. We've had an adjustment of tickets very relevant when we look at the ticket. When we look at the -- well, if you just look at the ticket, we wanted to write down a footnote. If it was relevant it wouldn't be in the footnote, but it's here because we don't think that this information is that important. But option per read, there are many people who ask us, well, your increase in ticket is worse than the competition. Here's some issues that when you mix information, it's not relevant anymore. We want to give you the information that allows you to solve the issues, to understand the issues. So we had placed Medicine here because of a change in mix. Medicine is growing a lot. Instead of 9% of growth, we would have seen 16% year-on-year. And we could have said, oh, we had a very good ticket. But the issue is a change in mix. So we'd rather be transparent. I'm just writing this down to illustrate that difference of concepts. And we will report as we have always reported. Thank you for being here and for trusting in us. So on the right of the page, same thing. Renewal rate, very stable, 86%, no sacrifices. Average ticket, on the third consecutive period, it's stable. Very important improvement in the mix. Now Haiama will talk about revenue.

Thank you, Parente. Well, let's just continue with the previous slide on the revenue and the follow-up. How are we working with it. The global revenue. The guidance is a bit above. We had BRL 2,295 million. Now we are BRL 2,258 million. And we highlight the second semester, the Premium and Digital segment is almost 30% of the total ROI. Now the important thing is here in the middle. And you see the reduction of the impact that we had with loss almost BRL 70 million, the medical community impact of laws and the court decisions of BRL 67 million. Now when we look at the adjusted net revenue on the left, we're growing year-on-year 10%. And when we look, here is% 19 to '21, 22%. On the right, talking about the evolution. We have a mix of our segments all throughout time. You can see that the growth on Digital and Premium, 25% 2 years ago, and now this quarter is 50% of all. Now let's go to Slide 8, and let me show you a little bit of what we are calling resuming normality, going back to normal. For quarterly, since the fourth quarter of '19, how every segment is behaving in terms of student base, revenue and ticket and the reported value premium. The -- we have a jump in this base -- in the student base because of Adtalem and M&A plus Ibmec. Regardless of that, we are growing every quarter with new captures. And down below net revenue, this is important. In every quarter regardless that the ticket -- average ticket, we suffered in the second quarter of last year and for the third quarter of last year with the laws and court mandate, and the tickets are well aligned for the pre-pandemic period and adjusted by inflation. Digital, the crisis has almost not been told. I mean, the ticket is the only one that we are doing something -- we said that it would drop. We can see that the student base, everything is working well. On-site, on-campus, we can see the base -- student base that would be stable, relatively stable. From FIES, we suffered a loss due to the laws and court mandate. Now we're going to the revenue pre-pandemic but there was court mandate on the ticket. We lost almost BRL 100 tickets per month, and we are going back to the standards of the pre-pandemic showing that this is what we mentioned that this is recurring and nonrecurring. So now we're going back to normal. Next slide. Reported cost and expenses. Highlights is that bad debt and discounts, PDD in Portuguese, second quarter of 2020, we can see BRL 70 million of -- we can see the previous year. There was no revival or adjusting to the percentage of bad debt plus the cost and expenses in discounts that was very straightforward from the adjusted number. We can see another point that is important. There was a question in the first quarter. The cost was an increase in D&A and acquisition. And we are talking about the absolute values. The second quarter has created a standard gear align. Next, in the middle graph, just wanted to show you the cost evolution. Here, we're talking about amortization and depreciation. This has grown a lot due to the amortization from M&A and due to Adtalem. But when we exclude these costs, which are more manageable, then it's relatively clean. And acquisitions, it seems that it grows, but it is important to mention, the reported case of Adtalem is just 2 months. And in this quarter, we have Athenas, which we just incorporated from August onwards. So the comparison is not correct. In which way this is reflected on Slide 10. The EBITDA is a little bit better. 685 -- BRL 686 million, actually. And we can see clearly that the distribution of the EBITDA is very balanced, 1/3 for each segment on site, on-campus, Digital Learning and Premium. In terms of reported EBITDA for last year, have a question on recurring costs are not. And adjusted number for EBITDA. If we compare it now to 10% in the adjusted, if we are going to keep the previous year, and this was a recurring number, we would have grown 214%. And really, this doesn't make any sense with the BRL 349 million. The margin of the EBITDA non-adjusted is aligned with the previous period. And even the reported of this adjusted quarter is also aligned, showing that the reported -- the way that we report it is correct to give visibility to anybody that wants to do any future projections. In the net income, here are 2 things, the EBITDA of the quarter, that is BRL 23 million. But the other one, the other thing that we do is to have the cash, net revenue since we are amortizing the payment with the M&A and the acquisition of Adtalem that had an amortization of BRL 32 million is for the method. So our net revenue, cash, I should say, cash flow nonrecurring would be from BRL 160 million to BRL 217 million as you can see on the right of the slide per quarter. And on the bottom left, we can see the difference between the reported and the former IFRS adjusted net income, you can see that the net income adjusted BRL 143 million. When we adjust by the IFRS, it would have been BRL 152 million. Why do we have this difference? The mechanics that I have to do the calculation of the rentals, I believe that in the first year of IFRS 16, I have a smaller revenue and my accounting will be higher if I just had rental expenses. Next slide. Well, let's talk about the cash flow. If you get our and if you look at our ITR and if you look at the first line, you will see a drop of BRL 350 million, but we have to do a few adjustments to do a comparison quarter-on-quarter. Both are very aligned. And here is the path of the FIES. And we can see here in the first quarter and the first quarter of 2020. And you can see here that should have dropped in December of '19. And here, I'm going to show you a few things for January '20. Besides due to NPS and the bonus that would have been paid in the second semester of last year, we are saving almost BRL 220 million of cash that would be a normal semester here. Besides, we have to think about the mechanics here and what is important for the operational results of the company. So ever since we know that because there is a comparison here in terms of cash generation. And finally, there is one thing that is not really recurring. There is a decision here that was envisioned before. That was only paid now. It's a one-off payment of BRL 45 million. And when you do that adjustment, it looks similar. So as was said before, we have good cash, around BRL 2 billion, with low leverage here, and that allows us to continue with our investments, which is what you see here on the right. That is aligned with what we had beforehand. There was an acceleration until the end of this year. The total investment this year is probably going to be a little bit above what we had last year. And that is very well focused on digital transformation and IP as well. So in the 3 years -- 2 or 3 years, we'll have a little bit more investment on those aspects, especially in IT with some changes in the legacy systems. As the highlight here in terms of investments, I'm going to mention 2 things. One would be the new building that we have in Maracanã, in which we're looking at the first [Foreign Language], the unit that is close to Maracanã, the stadium; and the other one, the Presidente Vargas for Medicine, which is nowadays within one of the units that we have right now, but we're going to put that in another building in the region. Well, besides all that, still on digital transformation in IT, we know that, that represents 44%, usually around 40%, a little bit above, a little bit around 40%, and that has brought good improvement in the experience of our students, with a consequent improvement in NPS. We also have better retention and better teaching quality. And I will turn it over back to my colleague now. Thank you.

Thank you. I'm going to go to Page 13 now. We've looked at digital transformation, where we have discussed IT as well. And I think there are a few things that allow us to think about this in that manner. Of course, we don't have much time to do this, but -- so I think it is important for us to see a perspective. On Page 13, people have been talking about digital transformation a lot. They forget that behind all that, there is a lot of people. There are many factors. There is hardware and software programs. If we don't have that with good quality, we're not really going anywhere. We're not really going to be able to fly very high, I would say. Well, we put a few examples here to the right. Everything is on the cloud nowadays. Our applications have gained a lot of momentum. We're able to do a lot without interfering with everything else, all of the code. All of the code is really new. We have an API that allows us to work in a continuous manner. So we've been developing this for a long time. These things, they usually take a few years to run the test, then everything else. Now we're running these tests with computers, not humans. There are a few things. At university in Salvador, for instance, they will have the same experience as someone who is in Sao Paulo. So these things, they allow for that even though they have different features. We're able to add or remove things from these apps as necessary depending on the profile of the students or the way that we want to work with them. Now to the left of this chart here, a lot of people have been talking about digital transformation in this part here. It's very important. It has to do with students, they have to understand what they're paying for and they need to know how to negotiate their debt, if that's the case. So that is client -- there is a good relationship with our clients, with our customers in a way. So that's something that we've learned a long time ago, and we continue to improve that. And on top here, you can see that we're changing the way we're teaching and the way these people are learning. So we're able to change the way they're learning, and we want to be more engaging. So we want to give them content that is more up to date and that is also high quality. I'm going to talk about that later. They're going to have a completely different experience that they had before. And through that, we're really able to do something different, something interesting, different from the rest of the market. We were just about thinking about this. If you think about it 1 year ago, if we thought about where we are or where we would be, it is completely different. We're continuously learning and taking things to the next level. So on Page 14, I just have a few examples of that. It is 500,000 people DL and on-campus, thanks to this new platform, the EnsineMe. Well, we had almost 5 million digital exams and mock tests. We are looking at 400,000 log-ins to virtual labs impacting 30,000 students. 90% of our student base is also student, the -- using the student app. And we're actually also looking at the other institutions, educational institutions around us. When we look at the cell phones, when we're looking at that kind of competition, you know that they're using games, they're using that kind of experience. So that's not really focused on studying let's say. So it's very important to have them know that they can study through their cell phones with sponsored Internet usage, that's very important as well. We also have a great faculty app, which is a reference in the market, already in use by 6,000 teachers, and we have digital transformation and administrative areas as well, which allows them to do the entrance exam. The enrollment process is easier. We have 40 percentage points versus 2020 in terms of the renewal satisfaction level. So there is a very important increase. Before they end the next quarter or the next semester, they already know how much they're going to pay in the next one and what they're going to be willing to study in the next one. So that's very engaging for them. And they understand that if I study more credits, I'm going to pay more. If I want to study fewer credits, I'm going to pay less. What used to happen is that didn't start it to choose at the very end or at the very beginning actually of the semester. Now they can do that beforehand and plenty ahead of time. Now on Page 15, I just wanted to show you a little bit about the ecosystem and the channels. Everything begins here with e-chain. So what is EnsineMe. EnsineMe is something that we created back in 2019. We understood that distance learning would be interesting, and if we want to have high-quality that could be -- I mean, we would have a serious investment there, but that would be diluted because there would be so many people that would be serviced with that. So we were discussing how to do that. We wanted something that could be used with the best students with the best teachers. It wasn't just about the content, but about engaging people as well. So it created that curatorship. We have great curators coming from very good universities here in Brazil and also abroad, and they will define and update everything in real time. I was looking at something about sports psychology and there was Zico, a very important sport reference really talking about that. The other day I was talking to one of the people in the Secretariat of Rio, various diplomats and all that, and that's going to be also in the platform. So you have so many references, so many people talking about life, talking about the career. So it's really very rich content, and technology allows us to do that. So if someone had a presentation here, for instance, they would go to the auditorium to talk to, I don't know, 300 people. But now we're talking about thousands of people. Well, we also have the questions database. So that was the process really featuring it more simply. So it's about questions database and see the grades and gave us a report with those grades. Now with digital, we have run a few different pilots. We're going to implement that with larger scale, and they're going to actually -- students are going to do those exams directly on the systems. They're going to see what questions they did right, what they did wrong. And the questions that they did right or wrong. In the beginning, they didn't really help us, gain a lot of insight. But now computers are showing us where we have to change and improve the questions database. It is very nice, but it's digital. It's for the app, it's for the web, we can use. It's a white label digital platform basically. In attendance, for instance, which we purchased last month, in around 40 days, everything was running already, and we can see content consumption and behavioral data in real time. So you know what they're reading, what they're not reading, what kind of things they're asking about, what they're really learning. Now ever since 2019, we've had the digital platform and digital classes. Remember, I was talking about digital learning, but we noticed that teaching materials, they are very important for students. There is maybe a different format, they can use WhatsApp, Internet, ask questions and all that. And that is a very important factor to increase our NPS. However, since 2019, we have that. And this year, we're working on it. We're looking at the feedback on teachers. We're looking at the assessment. We're looking at what works, what does not work. And we're trying to translate that into the system, into an improvement. I have a subject where there are 120 features approximately. And then we can also do this comparison, say, okay, this feature did well on this or that assignments and so on and so forth. So you can see the points for improvement, everything that they did right or not, so that we can reinforce that. And also there is a student segmentation. I mean that is my experience at a classroom. If you have 30 people or 50 people, they all have a different background. So you sometimes focus on the ones that are facing more difficulty. But those -- the other ones are not going to have such an engaging experience. So now when we know what the questions are really, it's easier for us to say, "Okay, these students, it's easier for them. So they're going to have this kind of approach. Now these other students, it's not that easy for them. So we're going to give them a different approach." So now we're able to do that, to divide them and to have a more professional thing. So this set of knowledge will interact with the channels and with the process. And here, for instance, on Page 16, you will see we have so many different products. We have the online. You can see here the picture. The one with the finger is the online. You also have teams, you have the virtual labs and have the teacher. So you have different products with different brands. These are different ways for us to deliver that kind of content, that very high-quality content that we have. What we have here is, we're looking at a system that up until recently had a limited access. But now it's completely different. It depends on how much they're willing to pay, where they are, what they want to study. But the thing is, fundamentally, we want to have high quality for all of them. So we're starting with online, Distance Learning. It goes from BRL 100 to BRL 450, depending on the scores and everything. We also have the on-campus, which is a bit more expensive. And by the way, we have the online. We have the premium DL and we have the flex when it comes to DL. And now as I was saying now we have the on-campus as well. But we have the semi on-campus and we have the on-campus. So to my intent, it's really a combination of lessons where people will go to the university, let's say, 4 times a week. Some of those lessons are going to be live, some of the other lessons are going to actually have to sit there beforehand. For semi on-campus setup having 4 hybrids subject, so they have 2 and then 3 online, for instance, and so on and so forth. So the idea here is to show you the different channels, products and platforms that we have to deliver the good content that we have developed. So it is our educational service with less content, I would say, that could be for any kind of audience. Even before we can have access to that beforehand. Now on the next page, we have a few results. Here to the left, we see the first half basically of 2021. So that's the evaluation that we have for. So we're changing the patterns from 25 and 63 and 13, we now see 67 and 43, so forth. There is a lot that we have to do still. We want to improve the content even further, and we hope to show this to everyone next year. We have a few indicators in terms of the MEC, the Ministry of Education and Culture, evaluation and also in terms of NPS that are very good. So for last year, it was very complicated. It was the peak of the pandemic, and we just don't want to have variance with the reference of last year because it's not really fair. So we're showing you versus 2019 to have a better reference. So you know that in 2020, we also have very good NPS. So that's a very good level for us to work with and to overcome any challenges. Now on Page 18, we have 4 acquisitions that we had in the past 4 years. We believe that we have very good acquisitions actually. There were a few necessities. We have very good national systems Ibmec, with Medicine. Ibmec being the valid institution has a very important responsibility to work with its ecosystem in terms of content, and attendance at work was a very good thing that happened in Acre -- certain things -- actually, it is well done here in certain things and attendance was a very good momentum, I would say, where all those places, all those have -- they're doing very well right now. We paid 100 -- actually BRL 600 for medicine fees and it's doing great. We still usually like to have the EBITDA compared where look at just individually, but still, this is what we have here on this slide. We have Unitoledo, Adtalem, Athenas, QConsursos. We have the expenses, of course. Adtalem addition, they're going to go until 2023, we have some expenses until 2023. Here to the right, we have QConsursos. The price was BRL 208 million, which was excluding the cash generation. They had -- they didn't really capitalize on much. So it certainly makes sense to talk about EBITDA. But anyway, that was the number, that would be the number. The easy cash flow. So we're not talking about EBITDA after the synergy because the idea is not to go for an integration. It is completely separate, I would say. I am part of a council there with 3 other people here. And it's interesting to see the Internet traffic there. We look at that monthly and they have so many active users, and that could help us reduce CAC from now to the future. But it's really open-minded people. And I am around 50 and I can see that they think about technology in a different way from a different perspective. So we're working with them to create this opportunity for external suppliers to help providers -- to help all of our brands really and go beyond. So these are very good acquisitions. These are the recent acquisitions, it's very good one. We did what we could in terms of our capital and respecting our profile. And we have very interesting expectations about them. Now on Page 19, just a few final remarks. I would say that these are the main messages. I'm sure you're probably tired of me speaking. That's the final message. Well, premium and digital continue with solid growth, that would be one of the main messages. It's good EBITDA. We have Medicine as well with administration following -- having all seats. We're probably going to have this expectation of 6,200 or 6,600 students in 2021. 450 seats for approval in 2021, second semester. We also have those new hubs for this year, for next year. We had 5 higher education institutions with the authorization of the Ministry of Education and Culture visits were made for the law major in DL format. So since everything is now in AURA and in EnsineMe, it is very easy for us to prepare for. We have basically 2 years that are there on the digital platform. They're done and good to go. So since we are looking at small cities and all that, I think that law major students are going to come from those small cities, cities where they didn't have a university hub, you know the phones, so they called them as we call them. So I think that the expectation we're going to have these people coming from smaller cities to study. That's probably going to be very positive. So I wouldn't put this in my spreadsheet as an upside here in the short term. But that was the first message, premium and digital continue with solid growth. The second thing, on-campus resuming normality. I think that we are ready to restart. In the inviting, we have around 50. And these students, they had a little bit of a difficulty. I mean they had license of last year, they have license this year. And it is complicated. We have so many people that want to go back to study, they want to go back to working and studying the normal way, I would say. They want to resume normalize. So we have students returning to classrooms with the expectation of all units operating with students back on site by the end of 2021. I am not promising anything, of course. But I think it would be interesting. We had 20% of students going back last semester. Now we're looking at around 60% for the next few months. AURA has had a very good impact in terms of performance of the students, and we had -- well, I've already mentioned this, nevermind. So now the last message here finally, digital ecosystem, improving quality and NPS. I know I have talked about it already about the acquisition of QConcursos. We have EnsineMe, have an improvement in the quality of teaching. And we also have investments in digital transformation and IT. Now on Page 20, we weren't so sure about all this during the pandemic. But now in Medicine, we're looking at a number of students if we look here. This is the volume and the average ticket is interesting against the reference, and the reference against would be the second semester of 2020. And when we look at digital -- both digital and on-campus, we are looking at around 2/3 of our profits of capturing students. So it would be around 10% to 20% different against last year. We want to have a good positive impact against last year. And this last third is very difficult. We're looking at a very special phenomenon right now, which is there is difficulty that is still not obvious. We're trying to be ready for everything that happens. I mean in terms of vaccinations, people are feeling better right now. What we can tell now is that we're 20% better in terms of volume. We have very good ticket. When we look at on-campus, we're a bit better than in the previous year. Well, I think that would be all. I wanted to thank you all for your attention. I think this is a very important moment for us. It is worth all of our efforts, everything that we've done. I wanted to thank everyone who is connected, all of the employees, teachers who have been so resilient and helped us greatly. And I would like to thank everyone for, especially during these difficult times that are almost over now. Thank you so much.

[Operator Instructions] The first question is from Samuel, BTG Pactual.

First of all, about the -- about what you were showing on Slide 20, about the digital systems. Could you give us a little bit more detail about that curve that you're expecting to grow and increase actually in terms of the ticket? Is that the base effect or are there any other factors in 2021? And also about CapEx, I just wanted to understand if that would be recurring or not.

Thank you, Samuel, for the question. So we usually -- you've probably been around for a while. You've already seen our results in other years as well. And I would say, I'm not promising anything, but it is now more than 10%. It is around 20%, and there could be some acceleration. We do not think that we're going to lose momentum. We're keeping up with the previous semesters, previous years.

What about CapEx?

Eduardo?

Well, it's probably going to be a little bit higher than what we had last year. We had BRL 450 million. So it is normal rhythm, no differences.

Our next question is from Victor from Goldman Sachs.

I have a few questions. Could you tell us about the competitive scenario in terms of prices, about digital, about FIES. There wasn't so much of an impact in the first semester for the ticket. So I was wondering. And for digital and for CapEx, could you tell us more about that, the digital CapEx, what kind of development and investment? In the acquisition of QConcursos, are we going to have an important accelerator of this investment?

Thank you, Victor, for the questions. Well, digital is very competitive, but it's changing. What we saw 3 years ago is no longer valid. There are many new hubs. And since you have costs for production and also the CAC that is high, you kind of change the profile of the competition, of that competitive scenario. We believe that, that price is going to drop at some point. In our mind, it would be up to 10% in the space of around 3 years. And we have to see what it kind of feels. We've said that for a long time, and this is still not dropping. It's not dropping for the second semester. So we could see 0 to 5 -- minus 5 expecting that stability in the semester that ended. So since the market is so expanding, we still don't see such a competitive scenario. But that's probably going to happen. But so we're going to -- we're ready for that. If you think about the margins, if you think about the situation of the sector, our EBITDA is now separated, but we have DL separated from the other aspects. So we believe that, that's going to lead to lower cost. And whenever we're not satisfied, we're still going to have some space to expand because of the margins. That's what's not going to happen this year. And what about CapEx, Eduardo?

Well, Victor, about that, that is done already. Hardware and software, We also have data lakes. But as for hardware per se, we had some older systems running. That was probably outdated already. And as for IT, what we're doing is changing part of the legacy system that wouldn't allow us to do as much as we wanted. That's probably going to be done this year, and we'll have something to finish next year and also until 2023, but much less. And the rest has to do with digital transformation. That's a huge change in how we interact with students, teachers, content. That's the context.

Our next question is from Gabriel Menezes from JPMorgan.

So want to know about nonpayment in accounts receivable. And also about the perspective that you have for everything that is due in 2022.

Well, for nonpayment and accounts receivables, ever since July 2020, we said that things were improving. And I would say that ever since 2020 around July and until July now, it's a positive impact, a positive trend. If we compare what we have now against last year, it's much better, and that even better compared to the pre-pandemic time. And that reflects on the PDD. Now for UniToledo, we had good acceleration with digital. So there was an improvement. That doesn't have to do with the seasonality and all that. Right now for the second semester in July and August, I would say that we have good collection, and it's also a positive trend. Of course, it's going to depend on how digital is going to look like from now on. Whenever we have new students, that makes those numbers go up a little bit, so that's good. But as time will decide, that number usually starts to drop. So that's normal. It's not something that is showing that the operation is wrong or anything. It's normal.

Hello, everyone. This is Marina from the premium unit. About the second part that you were asking, the second question. Well, our expectation, we are looking at this very carefully, and we don't think there are going to be huge definitions right now about how they're going to work after the moratorium in 2023. But our expectation is that it's going to be very well organized. We have that program for physicians, the first time. We have the second one -- the second wave, and we're going to have more medicine seats as well after the moratorium. So it's not defined per se, but we've had conversations about how to organize that and extend the number of medicine seats.

Our next question is from Mauricio Cepeda from Crédit Suisse.

I am Cepeda, and I just have a few questions. About the growth that you're expecting in the second semester, I want to know a little bit more about what you're expecting. And also about the costs that some of you mentioned. There are 2 new campus that are going to be launched, and I want to know more about that. Would you -- are you thinking of changing the profile, or are you going to also be looking at the competitors to adapt to the situation? That's also a question that I had. Finally, about the cash flow impact in the first and the second quarter, is that connected to any specific factors? Do you think that has changed the payment schemes, et cetera?

Well, Mauricio. I'm not sure if I understood your question because your sound wasn't great. So the first one has to do with the students that we have nowadays, also going back to on-campus education and the third has to do with the change in cost profile and the competition and also working capital. Is that right about cash flow? Okay. I'm going to turn it over to Marcel to start answering those questions.

Mauricio, thank you for the question. About the profile for students for this semester, yes, it is different. It depends on the modalities. If we think about distance learning, that would be an audience that starts at any time, at any point during the year. So we don't see any unmet needs really. We're still capturing those students very well in that modality. So both on digital or Flex and all the cost -- and for on on-campus education, we see a new audience that was expecting, something normal in the first semester. We see these people already. After June, July, we see that they're starting their courses. And since there's no time, we did restock our services, that's also very good. We have the good wave of capturing students who maybe were frustrated with another higher education institutions, maybe because their forces were not confirmed, they didn't have enough people. They did not know when to start the course. Okay. Let's see our second question. The resumption of on-campus education, let me tell you about what we have today. Today, we have some idleness. I mean, there are some student groups and some forces that have fewer people than they could. So we have some idle capacity, that's it. So of course, we're always looking at reducing costs. We have some of the savings as it's recurrent. So the delta variant you're going to see now is much lower than if we had said, well, this is our new reality, and that was very important. But when you look at the campy, what happens is the following. We have certain businesses nowadays because of safety and that limits the number of students in 1 classroom. I had, I don't know, 110 people in the beginning of last year and 30 this year because of social distancing because of having them in just 1 classroom in February. So we have this capacity nowadays where we can absorb more people than what we have. So basically, every student that comes, we have to think about those factors, and it's very different for DL as foreign campus. So let's say that their ticket is BRL 200. They are going to have a margin of, I don't know, 60%, 70%. That's going to bring me BRL 140, let's say. So with a ticket of BRL 700, it's basically a noncampus, student is worth around 5 DL students. So really, we have to consider those factors. We expect to have a resumption that maybe is not that strong in terms of capturing new students and all that, but it has still a great impact for EBITDA. Now about the other question about the profile. In our basket of references here as managers, we had this universe that was further and now has extended so much. We have put so many other institutions in our basket. So in the end, we have a business portfolio. When we look at our own references, they are -- they really depend on, on-campus education much more than us. So if you think about Medicine, about any other deals in our competitors, they are doing some movements or trying some initiatives or actually they're trying to copy from what we have done. So I think it's a completely different value. When I see DL or on-campus, when I think about Medicine, I am looking outside of our sector because of the growth indexes that we have. They are much more compatible with the educational system that is outside of the pressure. So it is very different. I think that our portfolio, if you think about the intent of separating the EBITDA per business unit, that's the point. I understand it's a small factor and it's still a bit opportunity. There are just a few people looking at this and the people who are doing so, their -- they have a different purpose. Sometimes they're doing that on Friday evening, they could put someone look at that. So I think we're trying to make it easier by separating the EBITDA. And now we have the portfolio. Our portfolio is well distributed. The rest is much lower. So we understand that we should look at the business units separately.

So thank you Marcel for that comment. Well, about working capital, let me just tell you very briefly. Collection has improved in many of the layers. Usually, the second quarter is a bit lower, because you usually have a higher trend in the first quarter, then it drops in the second, it's seasonal, it's normal. It's something that we usually notice. Now in the second quarter, since we had a very good result in the first quarter, it didn't really drop that much. So that's what made the working capital go up a little bit. We're not working on any specific campaigns that needs to either to maintain the students or to renew anything on the contrary. For the semester, we have anticipated renewals. I think many things have helped students choose their subjects in an easier way, and they are more aware of what they're doing. And actually, if you look at the curve, it's very good, and the profile has improved overall. Financially speaking, it's a very good scenario.

Okay. I was just wondering about some of the strategies that you're using. If you could talk a little bit about that, maybe percentages, how much are you anticipating in terms of new students and accounts receivables?

Well, for accounts receivable, what happens is for the second quarter, we had -- and as I was saying before, we usually have this drop naturally in the second quarter. But this time, we had a very good result in the first quarter. So a drop didn't happen. So in the renewal, with all the investments that we have put into digital transformation, that curve, our renewal actually improved. And collection went up as well. So in terms of nonpayment, we're looking at a better scenario now. For our accounts receivable, that's the deflection rate. I am having trouble with Mauricio. His audio is not very good. So it's difficult to hear his questions as to what he is saying. Yes. I mean I couldn't really understand his questions. No problem. I'm going to ask him to read if necessary. Well, now thinking about premium. I just wanted to say that it depends on what we're going to have in the future. Midwest and South of Brazil or Sao Paulo, we might need more of that sector, premium or medicine there. So if you think that we're looking at in terms of the digital world, that could help us with the main business as well. But for premium, we're happy with Ibmec, and we're still developing and we're still expanding. But yes, if anything happens, I will certainly review the strategy for premium.

Next question is from Vinicius from UBS.

Just a quick question. I want to know about the M&A dynamics. How is your cash flow? And are you looking at other possible M&As? Eduardo was talking about what makes sense or what's going to happen in the next few months. So is that going to change the M&A scenario as well? Can we imagine a more active pipeline for larger acquisitions? Or is it still going to be aligned with what you have done so far?

Well, thank you for that questions, Vinicius. We have a pipeline of things that are aligned with what we have done in the past few years. M&As in education, they have a little bit of science and a lot of arts. So we're talking about people who have this emotional connection with the assets in the end. It's not always very direct, especially right now, we're saying that it's been difficult in the market. We have to be very careful. But again, we're very happy with what we have done, and we have overcome many frustrations. But there are some things happening. And the large M&A, well, that depends, say, these conversations may happen whenever it's necessary. We don't have any negotiations ongoing. But it doesn't mean that maybe 3 months from now, we're not going to have something in mind. Right now, there is nothing in our perspective.

So our next question is from Itaú BBA, Luca.

You were talking about NPS and the significant increase, right? Is there any initiatives to maintain that engagement?

For sure, there is. I usually spend 3 or 4 hours a week looking at that and there are many people doing that all the time. I mean, NPS is a very good indicator. But it is not just that. We usually separate students and categories, DL and campus, and then we start to identify what they are doing. It's not just they have paid, they have not paid. You also look at the grade if they're using the system, et cetera. So way before the moment of truth when they're not paying, way before that, you're already working on their engagement. And that's what's going to really change it because someone who is motivated and entering the system and studying, doing things. It's a completely different connection from a person who just pays for the fourth and doesn't really do anything. And then at the end of semester, they may drop out. So you have different approaches. If they decided to do a DL course, for instance, but then 2 weeks from then, they didn't enter the system, they didn't log in, we have someone call them and say, "Oh, is everything okay. Have you got any questions about how to connect to the platform, et cetera, et cetera." Or if someone miss the exam, somebody calls them and asks, "Is everything okay, do you need help, et cetera." So around 3 years ago, we started working in that regard. Whenever they said, "Oh, I want to leave." We tried to capture them back, retain them. And now we're working with other engagement factors way before that. I think that's a great victory. We want to maintain the same level that we had last year without sacrificing a discount or letting go of their debt or anything. And retention process is probably even more important at the end of the day if you think about the lifetime value, even more than capturing students, so we have been very successful in that.

Well, since there are no further questions, I will turn it over to Eduardo Parente for the final message.

Well, I would like to say I am sorry for this delay. I think it's probably an issue with our cellphone provider here. And we want to thank you for your trust, for your patience. We understand that people working well with triggers now. I think there's resumption to on-campus education could be a relevant trigger. When we look at our accounts here, when we think about the value in the business and the difficulties that we're looking at and all that, we think that it makes sense. I just want to thank you, again, for your trust, for your messages for very positive comments that we have received about the way that we've been conducting our business all these years, especially during the difficult times. I must say that we lost the edge and then we had this huge economic crisis and then COVID-19, but we're still been on to the results, and we're still even expanding somehow. So in 2021, this is what probably what they have in last year or so. I'm not sure that we had a solid win and that we're able to continue with the solid plans. We're now looking at different structures and initiatives for the future. And I believe we have a concrete consistent plan for the future. I repeat that so many times that people probably think it's boring to hear it, but it is important to say that we are still growing. We are still expanding. We are very happy about our future. Thank you so much once again.

This is the end of the YDUQS Conference. Thank you very much. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]