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

Good afternoon, ladies and gentlemen. Welcome to Yduqs videoconference to discuss the results for the first quarter of 2022. This videoconference is being recorded, and the replay will be available at the company's website at www.yduqs.com.br. The presentation will also be available for download. [Operator Instructions] Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, operational and financial projections and goals our beliefs and assumptions of Yduqs Executive Board and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should be aware that events related to the macroeconomic scenario, the industry and other factors that could cause results to differ materially from those expressed in respect to forward-looking statements. Present at this videoconference, we have Mr. Eduardo Parente, CEO of Yduqs; and Mr. Rossano Marques, CFO and Investor Relations Officer. I would like to hand the floor over to Mr. Eduardo Parente, who will begin the presentation. Please, Mr. Eduardo, you may proceed.

Thank you very much. Good morning to all. We had this English session in the previous quarter. And despite the fact that, I don't know, 2 or 3 dozens of people showed up, the feedback that we got was very good in the sense that you always lose something in translation, and it's a way to understand better, and in a lighter way or a slower path, what's going on here. So we decided to repeat, please, if you like it, let a note for our Investor Relations team, who will help us make sure that this is the right thing for -- to keep on doing in the future. Okay. So I'm Eduardo Parente. I'm the CEO of Yduqs. The -- I had to present the first quarter results. We have a first quarter, that's the page here showing that we're very satisfied with it. We have -- for people who followed us for some time now, we have 2 high-growth businesses, which are distance-learning and the premium business. This business have been doing very well and growing double digits always, at least the 2 or 3 in the beginning forever. Even for a long time now, even during the pandemic, the resilience is very high, and the growth was there. And we were always discussing the on-site business, what was the future, the concerns. It was always either shrinking or maintaining levels. And I think that what we show you here this morning is -- sorry, just a clear sign of recovery on the on-campus and the other levers, delivery as they have in the past years. So just to illustrate some numbers on the recovery. There was a huge evolution of the intake. People coming back to classes. The base -- the full base of students is resuming its growth. When we see the [ EBITDA ] of the on-campus business is also growing, and we keep on focusing cost reduction and faculty cost, which is the highest that we have of revenue also, reducing an important amount of 2 percentage points. That is a lot due to the -- lots of investments that we've been doing in the past years in terms of digitalization and making sure that we move on and evolve with the quality of the content and the student experience. But at the end, we're using digital content as much as we can to complement the on-site experience. On the growth levels, delivering as usual, 44% growth versus 1 year ago. And the digital and premium student base, 20% growth, and net revenues and EBITDA more than that. 220 seats -- medical seats approved. This is important, they see if they grow up on government authorization. There are some prerequisites for these authorizations. These authorizations, they are like planned. They're not out-of-the-blue things. These are things that there is a mathematical account for that. And this is going pretty much as planned. So when we look at our medical seats, we always only communicate the ones we already have. We communicate projections as well. Some people communicate projections as guarantee seats. We prefer to guarantee them before we talk about them. We have another 228 seats added to our portfolio early this year, which is very good news. So these seats -- they -- when you sell a medical school, you usually buy -- you sold them at BRL 2 million or BRL 2.5 million per seat. So these seats alone will add another [ BRL 0.5 billion ] in our market cap. I'm not sure, it seem it is not reflected in the valuation still. And the growth in business center, this is pretty important. We've been -- we've evolved into a model, which is very lean. We have a breakeven of 32 students alone. And this lean model is very efficient to evolve to the countryside, which is something that the competitors are not able to do as efficient as we are because the breakeven is much higher than ours. This is [ something ] bigger much bigger in CapEx heavy and also personnel heavy. So this growth to the countryside is very important to us because we -- and we've been saying this for a while, there's a lot of competition on the big cities, and this competition tends to push our prices down. And when you go to the countryside, you're pretty much alone out there. So this would be very successful for us. On the right-hand side of the page, we have the cost optimization here. We've evolved in the market, in sales expenses. Not that we evolved pretty much. We're pretty much coming back towards with what we've been before and where we should be. The reference in Q1 '21 was we started the campaign that did not go well. We had to change it. A lot of money spent on there. And so we're very transparent about that a year ago. So pretty much what's happened here is going back to the regular expenditures that we have. Personnel costs, a lot of people are concerned that us coming back full on-site now that we will have an impact on the cost. On the contrary, we've been able to reduce personnel cost. This is a little bit due to the fact that during the pandemic, we communicated nonrecurrent, both in terms of revenues, and of course, there are some savings that we had during the pandemic because of people not going to -- on-site or government bills we communicate is nonrecurring. So the reference is that. [indiscernible] for leasing. Inflation is high here. We were pretty successful in negotiating -- renegotiating some adjustment factors, but also on optimizing physical space not only shutting down the few campuses, but also shrinking some of the campuses that we have fewer people. So all in all, that resulted in an inflationary environment reduction in the lease expenses over [indiscernible]. The actual -- absolutely, expense is a little higher, but when you put over net revenue, there was a reduction. And on far right-hand side, we have the results. Pretty big increase in adjusted EBITDA, same for net income. We're still very healthy in terms of cash and cash equivalents and the debt ratio. Okay. What is very important that -- I will repeat this at the end because of the key message here is that we had a very good, a very exciting first quarter, which -- and I need you to understand this, which we had a bad comparison basis over last year. So you should not replicate this number for the other quarters that we have for this year. So it was good. It was something that we're very proud and very happy about. Second quarter last year was a fantastic second quarter because we -- last year, we postponed a lot of the intakes from first quarter to second quarter. So the base of comparison is much stronger in the second quarter. We're likely to have a second quarter similar to what we had last year, which, again, is a very good number. But -- so very good, [indiscernible] excitement. We have some battles ahead of us. But on the other hand, what I think is pretty clear now, we are trading, I don't know, depending on the multiple -- the results that you get, depending on the year, last year, next year, whatever, it's 4x or 5x EBITDA, perhaps 6, which is pretty much half of what we had in the past, and I think this is unfair not only to us, but to the sector. So a very good quarter. Don't get -- we should be happy about it. We're happy about it. Don't get overexcited. But again, a clear demonstration that the multiple we're trading at is not where we should be now. Okay. [indiscernible] can help you to the next page. So this is an evolution. We don't have these institutes that evaluate market share on a day-to-day basis like consumer goods or retail sectors have. We have an app, which is pretty much delayed information. But again, this information that we have, and I think that was just released a 2020 information. On the left-hand side, we see the on-campus business. I think this -- besides the message that we're gaining market share, and I think if we move this on to '21 and '22, it's going to be even a bigger number. So we're coming from 7% to 9% of the enrollment and 7% to 11% of the intake. But there's a second underlying message here on the left-hand side, it's -- reduce consolidation on the on-campus business. So this is something that right now we see as somewhat expensive, the acquisitions to be made. I think that we acquire somewhere now or to merge, it needs to be either someone that's under value, which is pretty much all the listed companies or something -- someone that has a very special business, either premium side or something tech-related. So all in all, what we see here is an opportunity for consolidation, which right now with the current interest rates that we pay, we look into -- we like to make a position that after synergies, we're paying 5x or 6x EBITDA. And we only consider cost synergies, but the 2 years that we take to get to this 5x to 6x EBITDA, they just became very expensive with the current interest rates that we're paying. So we have to -- we had a list of business about to be done in the last semester, at the end of last year. We have to reassess all of them and pretty much saw some spreads, some negotiation. But at some point in time, it has to happen. We see a lot of companies here that are barely making breakeven and the local [ consolidation level ] in the sector. On the right-hand side is the distance learning segment and a big involvement evolution on the intake, so from 9% to 13% of market share, intake from 8% to 15%, twice a most, high-growth segment, more consolidation in this segment. And we think that these market share gains are going to be even higher when we take a look at the 2021 figures, which will take a little while for the government to announce. Okay. So moving on to Page 5. What we have here, these were guidances that we gave about intakes and pricing. When we look into the premium segment, we said that we will be -- one thing that is important for new guidance in the sector. Premium and on-campus, they have semester intakes and -- while the digital learning every quarter you have intakes here. So it's very different ways to think about the business and the numbers that we presented here. So on the premium, we gave a guidance between 10% and 20% of increase in intake. On the quarter, it was 31%. The right way to look at this is look at 24%, which was the semester number. So the 24% is going after the March 31 date, right? So it includes everybody that came in, in early April, which is when we finish this intake. On the average ticket, we talked about 0% to 5% increase. We had a very good late cycle that they come as unlike on the on-campus [indiscernible]. Sometimes pay more for medicine Ibmec, that's what's happened. So we were able to deliver way above the guidance that we gave. Okay. I'm going to go to the right-hand side first, which is on-campus, which is the same semester way to think about. So we gave a guidance between [ 30% and 50% ] increase. The actual increase in the quarter was 69%. The right way to think about this was a 39% year-over-year increase, including the ones that entered early April there. On the pricing, we have -- we gave the guidance of between 0% -- minus 5%. We had a minus 6%. The reason for that is we have a product called DIS, which is a way to finance the first installments of the new students. What happens there is that he paid a little bit on the first installment, and the difference between that and the full price, it gets financed for the remaining of his course. We account the revenues on the spot. Fewer people decided to take this opportunity to finance the first installments. So what happens, instead of paying -- recognizing revenue of BRL 1,200, that will become cash over the length of the stay here. We recognize a number much lower than that. That will not affect his seventh month on. It's just a way to finance, and people -- because people -- fewer people chose to do this financing, we had an impact on the revenue divided by a number of people, which are not -- being the average ticket. Had people adhere to this program at the same level that they had last year, our ticket for on-campus would have been flat. So what we've contracted with the people coming in -- remember, this is a huge intake, roughly 1/3 of the base is newcomers. They had a [indiscernible] will be the same. When we're looking to the seventh month on, we're looking to numbers flattish versus the previous year. Going to the middle of the page, we're talking about -- middle of the page talking about Digital Learning. Again, so this is a quarterly intake. We projected between 50% and 60% growth. We had 68%. Be careful with this number because, again, last year, we had a lot of people -- because of the campaign we did. I'm not going to get into details, but a lot of people were postponed or pushed as of 13th February, somebody showed here up -- showed up here in February 26. We said, okay, you enrolled, but you start April 1. So there's a lot of movement from people from the first quarter to the second quarter. We wrote down here the way to think in terms of what's happening to this market is if we thought about this in a semester basis, we will be looking to 15%, 20% growth, which is a very good growth. And we're happy and proud of it. But again, we fulfill the guidance here. Regarding pricing, remember that we had a fantastic intake on the second quarter last year. So these people -- now they are doing the one year, the full 12 months that they're here. This is when we are allowed to increase them. The increases that we have for veterans about 14%. So we have a lot of people that joined in the second, third and fourth quarter last year and first quarter this year that they have not had that prices increased yet. When we see the regular situation, something much closer to flattish than what we have here, okay? So moving on to the next page. We had the biggest intake of our life. And I think that this -- a couple of things that we have to credit that. One is -- I'm going to talk about it a little bit on the next page. We improved a lot the experience of the people here, not only in terms of academic side, but also how they interact digitally and how they study, how they engage with us. But also, we have invested a lot of money both in the digital side. So today, a year ago, people taken 2 weeks to engage here, to enroll here. Today, that's taking less than 15 minutes. More than half of the people have a full digital process. They don't talk to anyone. They just -- they make the test. They get the test back, and everything is computer-based. This is extremely helpful in -- to make sure that the people join us. And it's when they're left, when we see the competition, they're far behind a very manual process, very logic, very lengthy as well. Not clear path on how to do this. On the right-hand side is about investment and image. We had some iconic campaigns, very strong media, very big reaction from the public. These people here Anitta, famous singer, #1 Spotify globally for a couple of weeks. Juliette is a winner of Big Brother 2 seasons ago. Both of them, I know strong women that -- a lot of resilience, humble background, very successful. A lot of people -- a lot of the class of [ CMD ] students that we intend to, they look up to her. They want to be like them, huge success. The change of the brand in medicine from [indiscernible], very big impact as well. Results of that, I could go on about Ibmec, I might [indiscernible] brands. But all in all, what we have is -- when you look at Google, we have a 44% share of interest in the educational spectrum in Brazil. Our #1 24 points ahead of the second place. Talking about the next page of the experience of the student. We have now a fully developed app. It's important -- it's here, but that does everything on the app. You pay the invoices of the app. You'll select the classes for next semester on the app. You will attend the classes on the app as well. You will exchange information with the professor in the app. He'll exchange his work. He will upload a spreadsheet that he did, and you will get to know the content of the class on the app. We have developed our own system for this. We realize, a, we were able to develop something much leaner and efficient to the -- to our students and the regular suppliers have. We think that this became a competitive advantage for us. When we had an external supplier, we develop things with them that ended up being used for the entire market, that supply kind of become a competitor of ours as well. So now we begin to know our external suppliers, and we're not only operating cheaper, but I think the speed that we add new features and change things and correct things is great. And I think this became a key competitive advantage for us. The app is graded at 4.6 at PlayStore. We have 750,000 active students on the app monthly. So it's not something that it's there and people use it once in a while. It's day-to-day use. We have -- we're shifting people from using computers into the app. So 35% of the access to the classes is done through the app. We're starting Phase 2 of [indiscernible]. So Phase 1 was changing the format of the classes, making something way more interesting, engaging and academically more efficient. Phase 2 now is making it very lean and fast to upload and making -- allowing people to study on a bus real time. And so it's a real big step for us that graded on the app store that I mentioned to you on PlayStore. It's improved a lot since we've changed it to [indiscernible] Phase 2. Okay. Moving on to the financial numbers on the [indiscernible]. On the premium segment, we added this quarter number since 2018 because I think the -- especially for people that have not been following the case for long, which I think is a pretty big chunk of the people at the start of the pandemic went away and started to bring their phones again. It's -- I think it's pretty impressive the growth that we had. And bear in mind that most of this is organic. When we look at the green side, we're talking about medicine here. The gray side is Ibmec. Ibmec makes a higher-end business school that we have that we bought in mid-2020. But when you see the 69 million to 206 million, the threefold increase over these 5 years, what -- that's pretty much organic, and this is [indiscernible]. Same thing applies in the bottom for the student base. Not to say that it was entirely organic, and this acquisition came a few hundred students, but it's -- when we see some of our competitors growing, paying BRL 2 million, BRL 2.5 million per seat, it's not what happened. What we paid the most here was $600,000 per seat. And these are still young schools now. They're still growing. So they're not a big contribution to the base here. Most of what we see here is organic. This is a growth that is pretty much predicted. We can tell you what's going to be this year. We're going to tell what's going to be next year. What do you see there in medicine, a 14% increase on the base. On the bottom, you see a 29% increase in revenues. When you see the total premium segment, 25 increase -- 25% increase on the revenue. So result of that is an important increase in EBITDA levels. People have been following us will remember that first quarter last year, we said that the results on the premium were abnormal. We even give a guidance to the second quarter, the semester as a whole. So this 53% should have looked like -- more like a 49%, so percentage margins, they're still stable as they were last year. As I mentioned before, we were able to increase prices in a relevant manner here, [ 5% increase ]. So Digital, again, we brought all the numbers back to 2018. This is 100% organic growth. The green in the bottom is the undergraduate and the blue is lifelong. You'll see that from 98 to 317 in the course of now 1, 2, 3, 4 years. I think super impressive growth, especially imagine the little investment that we did on this. On the bottom, you see the same for the basic students. And this is still growing. And people were always asking us when we start to grow, we would not see this happening anytime soon. We see that the base of people, high school diploma and without a higher degree of diploma is increasing. We graduate fewer people than high schools do. So we see this growth still for quite some time. So we see an impressive increase in the base for 45%, an increase of revenues in 37%. On the blue side, which is the lifelong, we had a tough time pre-COVID. And these are shorter-term courses. So if people don't enroll, the effect of the business is pretty fast. We are working hard on finding the digital solution for this platform. We are a big lifelong player. Lots of it is still analogic. And we're working hard and having some important advancements in creating a digital platform for that. And once we do, I think this is going to bring us a lot of joy and good results. The gray, on the bottom of student base is [ conclusive ]. Conclusive acquisition that we made last year. They were not here in Q1 '21. Therefore, we separated the student base. Okay. [indiscernible] for the one not following closely is a platform for short-term courses on a preparation for [indiscernible]. Very low tickets, but very high volume, have very high international traffic. And people that are much younger than I am, fantastic, creativity and digital knowledge and client view that's helping us a lot, not only with the evolution [indiscernible], which in itself is financially stable and very interesting numbers in terms of growth and cash flow generation, but also them helping us becoming more digital as Yduqs as a whole. The EBITDA on the right top hand side of the page, we have an interesting growth again, 25% versus last year. The margin is still flat despite the fact that we have a 5 percentage point increase in bad debt here because -- the reason for that is, as I mentioned before, the intake, instead of being per semester, it became per quarter. So what you have is people enrolling in the first semester, they use -- they did not renew in the middle of the year. It became 100% provisioned on the even quarter. So people enrolled in January, they did not renew in July. They become fully provisioned in October and November. Once you move that 3 months, you have a group of people, which are not small because, as I mentioned, the intake in the second quarter last year was huge. So what we have is the people that joined in April last year, they did not renew in October. The people who did not renew in October became fully provisioned in the first quarter. So that huge percentage point increase of 5-point -- percentage points in bad debt for this [indiscernible] is a matter of adjusting from everything on the even quarters to everything now in all the quarters. So what we're going to see with time is a softened of these curves of bad debt along the year's quarter. So this is the first big hit. And despite the fact that we have this, we were able to sustain the same EBITDA margins, which is pretty good. On the bottom here, you see the growth that were coming on the undergraduate student base by type of center. The growth is coming majorly from partners, which is where we have the lowest margin. Reason for that is that we have to pay 30% commission on the partners. When we have our own business centers, that's where we will be 0. You can see by the figure looking at it that the own have grown as well, but the partner is becoming more and more important. Key thing here, which is very important, is that when you see the additional students we get from the partners, their average margin is bigger than my average margin as a whole, and I explain. When you have an additional student from a partner, you have a 30% commission that you have paid, another 10% that -- on bad debt and some -- another -- ish on marketing. So we're talking about roughly 45%, 50%, 55% margin on the additional students, which is higher than average of 38%. So the operational leverage of this business is huge and more than enough to sustain the reduction that we have on the margin of the additional students. Notwithstanding that, we have the partners, the growth in the partners coming mostly from the countryside, where generally the prices are higher. On the right-hand side, you can see the average ticket. For the ones following the for some time now, you'll be familiar that I'm saying always that the tickets for Digital Learning will fall. I think what you see here on the 6% is it perhaps doesn't reflect the true reality. What we have here is that we have a massive amount of people that join us. As I said, as of second, third and fourth quarter last year, you cannot increase people by law before they complete a full year here. So there's a massive amount of number that did not receive -- or people that did not receive the 14% increase that we apply to the people that have been here for more than a year. So this -- the trend for prices to go down still there, perhaps not as fast. We're seeing some more rational behavior, both in the business front and on on-site as this intake season now is going on. And -- but -- and we're likely to see some improvement in those numbers in the quarters to come. Okay. The on-site, we split this in 2 charts because I think there's a lot of news here and put everything in one chart will be too much to digest. On the top of this page, we see the evolution of the intakes since 2018. So it was a big evolution since last year. This 101,000 students that joined us on this first half is a number in ballpark close what we have pre-pandemic. We think that this number is small. We'd like to have it bigger, and the reason for that is when you compare it to pre-pandemic levels, we did not have a talent by then. So we bought an important group of schools in 2020. So if you have apples-to-apples, we should have to be compared to pre-pandemic levels number closer to 130 or so. The good news there is that we think there's a lot of space to grow. I think there's still an economic challenging situation for us. So the numbers that we're getting here, our numbers still in the economic crisis mode. We believe there is a substantial upside in this business still and that we're going to have intakes better than this year after year as we go back into normal economic conditions. On the bottom left-hand side of this page, we have the number of students per campus. We left off before pandemic [indiscernible] students per campus. We made the acquisition. We had 15 additional campuses. We shut down 7, most of the America campuses, not from their acquisition. We're still optimizing that. So we reached in the first quarter, now the levels -- the pre-pandemic levels of student per campus. And this number is evolving well, and we're excited to have numbers to the 2017 levels, which are the 3 [indiscernible] numbers or in 2016, which were high 3s and perhaps low 4s on the occupation per cap [indiscernible]. What's happening here, you see a lot of additional students, additional revenue coming in without additional costs or without relevant additional costs because we have the other capacity to absorb this. On faculty costs, again, we've been investing a lot in IT, a lot in systems. And when I say systems, it's the software that you see, the apps that you see, also a lot of hardware behind, putting everything in the cloud. We make sure electric systems are broken down to smaller systems that we're going to make more agile changes. We're adding sales force and other systems to our portfolio. So we had this little bump in 2021, much more because of the revenue side. But we keep on and brought this series back to 16% or so, we would see another close to 27% of our cost. So we're still evolving. Still some room to go, not a lot, still some room to go on this reduction moving forward. [indiscernible]. So we split this number here in a slightly different way than we had done before. The dark blue here is the regular pay students. The gray is the FIES students, students was financed by the government. This finance program is called FIES. The old FIES was extremely favorable to us in terms of profitability. All in all, because students tend to look for higher cost courses, but also all the bad debt was in the responsibility of the government. This old FIES was shut down in 2015 where we had a legacy of students still studying with that, not graduating. What you see today the 14,000 is all new FIES. So this is what we're going to be seeing on a regular basis as a size of the FIES base, but again, not a special base. It's not a base that gives us more profitability than the regular student that we have. The [ 32 ] in green is the, the semi on-site. So people come here instead of 4 times a week, they come here 2 -- twice a week. The other 3 days, they study at home. This is going back to the levels that were pre-pandemic as well. It's something that we did. And I think we hit the jackpot here because we had the students paying 700. We had the students paying 200 for the on-site. We had nothing in between -- for the online, I'm sorry. And now we have these guys in 350 or 400 to be in the middle of the price range. But the point I wanted to make with the dark blue is that we have had our base and revenues increasing slowly before the pandemic. We took a hit in the dynamic. So there was a sharp drop between 262,000 to 249,000. Remember this is an acquisition here. So there's a sharp drop between 262,000 to 249,000. We've been flattish, slightly above. So I think this is good news. I think that we've seen the bottom of the well, and we're assuming growth, especially with this fantastic intake that we had. On the revenue side, it's important that we have an accounting issue. I spoke a little bit about this on the first page. This drop in prices and accounting matter, we had fewer people adhering to our financing programs, that DIS had we not -- have had the same levels of DIS adherence that we had last year, these prices, you'll see them as flat. Okay. This on-campus plus Medicine pricing is a number that means nothing. Just some of our competitors like to report it this way, and people like to compare their with Medicine number to our member without Medicine, and it looks bad on us. So we just put this as a business information. And again, on top of the page here, you can see that the increase in EBITDA was an important increase. Don't get very excited. We're looking into the margins of the 3 businesses to be roughly in line with what we had last year, which for -- the on-site was 19% or 20%, I think 20% for the year. This is what we're looking into again this year. It's a matter of when you have -- when reported by business unit, the number gets smaller, some things split from 1 quarter to the other. So we're going to see an average for the year of the on-site business roughly around 20% like it was last year, hopefully, with greater revenues than what we had. Okay. Renewal, one important thing on the renewal. We had numbers that are -- we've been on the path of growing renewal rates in all the business that we have. Last year, we had -- we made a very aggressive campaign. So in the first semester, the out-of-pocket expenses could have been BRL [ 150 ]. So we attracted some people that had a lower trend to renew. This year, the minimum they have to take out-of-pocket is like BRL 1,100 on the on-site for the semester, usually more. So we track a better class. So this renewal rate, a little smaller than was last year. It's nothing to be concerned. We expect numbers to resume growth in the future, not fantastic growth, but the low single-digit growth that we've been seeing because we have a better class coming up this time than what we had in the past. Okay. So I'll hand it over to Rossano to present to you some of the financial numbers, and I'll be back in a little while. Thank you.

So good morning, everybody. This is Rossano, CFO of the company. So talking about revenue. We have had a revenue expansion this quarter, mainly driven by the premium and digital learning sectors. That is leading our revenue mix to be increasingly diversified and you're getting high exposure to our highest growth and margin sectors, which is the digital and premium sectors. Going forward, discussing costs. So we have had a very strict cost management -- we have been very strict on the cost management along the last few years. And this is showing with a very strong cost reduction mainly when we see cost of revenue basically in every line. So as a highlight, marketing and sales is getting back to a regular expenditure level following a higher-than-usual Q1 2021. And that should be stable along the semester and along the year. The costs are down 2.6 percentage points, mainly due to increasing efficiency on faculty allocation. This is something Eduardo has shown you in previous slides that is going down every single quarter, and we again show a relevant reduction on that impact. Leasing. So this was a line we were alert at the start of the year because we know there's a lot of inflation pressure, and that should directly translate into higher leasing costs for us. But we have been very tough on negotiating the contracts and also reducing our space to make sure we are as efficient as possible on our -- the [ incubation ] of our sites. So that is also showing us a positive effect here in the quarter. On the other hand, we can see an increase in bad debt of revenue year-over-year, but that is mainly -- that is due to extraordinary effects. If we exclude those extraordinary effects that I'm going to explain later on, we should be stable year-over-year. So what are the 3 effects I have mentioned? So first of them is the seasonality of the digital intake. As you guys know, until 2020, we had 2 intake cycles, one every semester. Starting 2021, we have divided the intake into 4 different cycles, one every quarter. So the effect of that in 2022 is that we also have 2 cycles of drop-off. We didn't use to have any impact on Q1. In the past, the impact of the drop-off registration on bad debt would be always on Q2 and Q4. And now in 2022, for the first time, we also have the impact on Q1. So that increases automatically along 2023 the cost of bad debt. That should get to the regular percentage points in 2003 compared to 2021. The second exceptional effect is the renewal of the medicine students that according to a local law in the state of Rio de Janeiro who have been forced to have the renewal of every student independently of the delinquency level that we were measuring. So as the renewal is our strongest collection, too, we have seen an increase in delinquency in medicine in Rio. So that is a fact that is going to end this semester. The effect of this law will end by the end of the semester, and we expect the recovery by the end of the year. And the third one is a higher participation of the intake revenue against the total revenue. And we have a higher bad debt provision for the intake revenue, mainly due to what Eduardo explained to you is the DIS, which is our -- one of our tools we use in the intake that basically dilutes the revenue of the first 3 -- 2 or 3 months along the life of the student. So as the increase of the intake revenue over the total revenue has increased, we also increased bad debt over there. So as I said, if we eliminate those 3 effects, we would be stable year-over-year on bad debt. Going forward -- okay. So as a result of what we've seen as a revenue increase and also the strict cost control, we presented a 23% increase in EBITDA. That is -- we should highlight the on-campus sector with 6 point -- 6 percentage points increase year-over-year, which is driving this change. On the premium segment, it is stable against last year after adjusting for the unusual cost curve that we have seen in the first half of 2021. The cost should be stable along the semester this year. The Digital Learning is slightly lower, mainly due to the bad debt impact, which was partially offset by cost control initiatives that also benefits Digital Learning. Going forward -- so moving on to adjusted net income. We see a 33% increase in adjusted income, mainly due to our strongest operational results. It has been negatively impacted by our financial results, which is impacted by the higher cost of the debt, mainly due to the base tax increase that we had in Brazil. We also had positive results on our tax management to have optimized our tax structure, which caused a very positive benefit on the semester. So that leads us to the BRL 96 million result on net income. So we end the quarter with BRL 1.7 billion in cash and a 1.7 leverage rate, which is very comfortable for us looking forward. Going on. So looking to the cash flow. The semester have generated BRL 86 million in cash. That is -- I'm sorry, BRL 276 million in operating cash flow, that is 38% above the previous year. It represents an 88% cash conversion, which we -- which is also very positive and shows how strong our cash generation and balance sheet is. On that scenario, we have run a buyback program, which has totalized $100 million -- BRL 100 million year-to-date until last month. We are at the moment analyzing the scenario to assess the continuity of this program or not. When looking to CapEx, we have seen an increase of 30% year-over-year, but that is basically a curve that is flatter than it has been last year. When you forecast for the year, we are looking to a BRL 532 million expenditure, which is lower than last year, both in absolute value and as a percentage of the revenue. An important highlight here is the concentration of that CapEx on digital transformation and IT and also on the expansion of our business, which shows our continuous [ debt ] on the transformation of the business in an increasingly digital world. We see the benefits of these investments on the previous slides. Eduardo has shown 2 very interesting examples, both on the admissions and also on the learning process of our students, and we see that as a very positive. And we'll keep investing in digital transformation and IT along the following years. Having said that, handing over to Eduardo for the conclusion.

Thank you, Rossano. So guys, I'm not going to read the full page for you, but very important growth in the student base in other businesses. Net revenue also important growth with the exception of on-campuses and it's what I mentioned to you on an accounting issue of less -- fewer DIS adherence. So we should see some reversion of debt in the future, a very important increase of EBITDA and also a percentage margin. Okay. We put some numbers here on the right-hand side of how to look to the future. We mentioned already 7,200 to 7,400 students on Yduqs towards the end of this year, 2,500 [indiscernible] center. The students per campus were at 3.3%. So we're coming back to the leverage that we had per campus here. CapEx is really important. As Rossano mentioned, we're having a smaller number in nominal terms for this year, with increase of revenues. It's going to be -- and what we had last year, 11%, we should see a smaller number this year. And the way we see this in couple of years' time is coming back to the 7% to 8% of net revenue that should stay and the reality of the company. So repeating myself from the first chart, messages that we would love you guys to take home. One, a very, very good quarter. We're very happy about it. Number two, don't get super excited. Okay. We had a very good quarter, but over a low comparison base. Last year, the second quarter was a fantastic quarter, mostly because we postponed some of the first quarter guys to the second quarter on the intake. So there was a transfer of value from one quarter to the other. So first quarter, we had a low base. Second quarter, we're going to have a high base. So we should see numbers around the same numbers that we had in the second quarter last year and the second quarter this year. Okay. So great result. Don't get super excited. But if you see the number -- the trend that we have, we cannot understand or justify us trading at 4x or 5x EBITDA that we're seeing today. Okay. So I think this is not only for us, but for the sector as a whole. There is a clear improvement. The worst is certainly behind us. We have prepared -- we are way stronger than we were before the pandemic, both in absolute terms and in relative terms in the market, see a lot of small guys in a dire situation out there waiting to be bought or to go out of the business. So we are seeing -- I don't want to sound like the [indiscernible], but this is what's going on,. So there's a lot of room for consolidation. We are not super excited with M&A right now. It became very expensive, some deals and us holding per cash flows while we have very high interest rates in the market. But again, we have to be neither a company that's in the same situation as very undervalued by our perspective or a very professional business that complements our portfolio somewhere. So again, we have a lot of hard work ahead of us. And the results that we're showing here is a reassurance for us that we are in the right path. Okay. Thank you very much for your trust. Thank you. Thank you very much for being with us. Again, I asked you if you appreciated the session [indiscernible] our IR Department knows because they keep on bugging me not to do 2 sessions. And I think despite the small audience, I think, it's worth having a direct communication with you instead of going through a translator. Okay. Thank you.

[Operator Instructions] The question-and-answer section is over. I would like to hand the floor back to Mr. Eduardo Parente for the company's final remarks.

Great semester. Don't get super excited. Multiple that we have today doesn't reflect the reality that we have. Thank you very much for your trust. Thank you very much for the patience for this who have gone with us through these tough times, and I hope to see you in 3 months from now. Thank you.

Yduqs videoconference is now closed. We thank you all for your participation and wish you a very good day.