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

Welcome to Yduqs' video conference to discuss the results for the second quarter 2026. This video conference is being recorded, and the replay can be accessed on the company's website, www.yduqs.com.br. The presentation is available for download also on the company's website. [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, projections and operational and financial goals are beliefs and assumptions of Yduqs' senior management based on the current information available to the company. Those segments may involve risks and uncertainties since they relate to future events and, therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should take into account that events related to macroeconomic environment, the education segment and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. It is important to stress that for a better viewing of the presentation, we recommend enabling the full-screen mode. Present at this video conference, we have Mr. Rossano Marques, CEO of Yduqs; and Mr. Alexandre Aquino, CFO. I'd like to now give the floor to Mr. Rossano Marques, who will begin the presentation. Please, Mr. Marques, you may proceed.

Good morning, everyone. Thanks for being here. For the Yduqs results call. I'm here with Alexandre Aquino. Good morning. Let's talk about the results of the second quarter. To start, we have very consistent result this quarter. We keep focusing on constant results for shareholders. I'm going to talk about the results of all BUs. First, the medical industry as a whole was concerned about intake with a large number of seats, and there was an expectation on what the year would be high demand with the best intake, over 2,000 students and take the largest number represented by a very strong performance, so quite impressive EBITDA growth. We had growth since '24 of 17%, a margin that is very high of the 48% margin, strengthening the leadership of IDOMED in terms of performance, profitability and quality. So premium brand, all the quality that is delivered by IDOMED gives strength of it in this increasingly competitive market, a very high renewal rate. When you have a competitive [indiscernible] you may actually impact the renewal rate, and IDOMED showing its strength, also those that know the project very unlikely will want to leave the fantastic project. So renewal rate is close to 97%. Ibmec is another BU with excellent results consistently growing in terms of results with the gross margin, EBITDA, 70% growth since 2024. You can see BRL 51 reaching BRL 87 million in the first quarter (sic) [ first semester ] of 2026. Another good piece of good news, we are going to open a new unit of Ibmec next year. And we have -- everybody, there's a great hype around it, not only for [indiscernible] the whole Northeast, the first Ibmec unit in the Northeast, opening this new frontier of growth, this beautiful building that you can see, everyone working so that is totally ready to start classes first semester 2027, we're going to welcome everyone to this beautiful unit. When we go back to Estácio/Wyden, it has been difficult for [indiscernible] difficult year for Classes B, C families in Brazil. High debt rates, the World Cup, quite challenging year. Very much debated the impact of bets on the availability of income in the pharmacy. In addition, it's an election year, quite hard even. Despite those conditions, when you compare EBITDA 2025, '26 comparable basis, when we adjust to the drop, reduction in risk, you have 1 point -- so you have a 4% growth and 1.5% less in terms of growth. Depending on each of the industries or segments, we have consistent results with high cash generation. So we are growing a lot in the [ semi-on ] campus [indiscernible] we start the year, the medicine started the year with additional seats [indiscernible] started regulatory changes that impact our digital business. If you have a digital business suffering in terms of demand because of the restriction, but the semi on-campus is booming. Very interesting product for us. We have a great outlook for growth. We started offering semi on-campus on our campuses. It's expanded since 2024 for partnering hub. So we expect it to grow. It has a higher ticket, greater renewal rate of students. It should result in better results, and also low dropout rates, et cetera, and low [indiscernible]. And we have great growth with all our conservative revenue [indiscernible] our collection actions. Well, we had high rates or high debt in families. So if we compare bad debt year-over-year, we have 1.5 percentage points in terms of bad debt. So showing consistency not only the company as a whole, but also the messages were being shared with the message delivering consistently what we've been talking about. So we are walking our talk. All of that continuing to generate cash and return to shareholders. On our Yduqs Day, we said our focus was cash generation and reducing leverage. We tap the opportunities when they come up. It's also a share buyback. That increases the value generated for shareholders. Since 2024 up to now, we returned 37% of our value or market value, plus dividends, and showing a trust that we have, and result generated consistency in value return to shareholders. We have the strategy of reaching a onetime net debt/EBITDA with the return of results or shareholders paying dividends and with the buyback programs. This is our focus, and we'll keep on delivering for the following semesters. We have 4% growth. When we make the adjustment of this year-over-year, we know we have the fairness comparing year-over-year. This is the last semester that we have this difference of comparability. We started with a large decline in DIS in 2025. When we look at 2026, we won't need to make this adjustment. We're going to have comparable semesters that will show the growth in the business, whilst revenue growth 4%, when we look at EBITDA, 7%, making the adjustments with a slight expansion of our margin. So we have the macro challenging for Estácio [indiscernible] we have a growth with a very stable margin, very high levels with outlook of growth. According to IDOMED, Ibmec [indiscernible] and we have an increasing in margin. We mentioned in the previous quarter, Ibmec, IDOMED responding for about half the EBITDA of the consolidated business. Business by business, the first one will be IDOMED. Very strong intake, bringing continuity and revenue growth, about 10%, adjusted EBITDA operating at very high levels, almost 50% in the quarter, positioning IDOMED in placement of market leader and profitability performance with a very -- the super premium it has in the states it operates. We have a student base and the graduate [indiscernible] is always above inflation for our students overall. Another highlight I'd like to call out or bring your attention to that [indiscernible] renewal rate, 96%, shows the ability of medicine to generate value to all our students. Again, highlight for Ibmec in the quarter with good results, good news to all of us. We look forward to the future quarters and semesters in [ Valesa], we'll get lots of results. We see the results -- well, some campuses maturing. We see Ibmec revenue growth. And we're going to increase the base because we have some campuses maturing, especially Brasilia and [ Parialima ], the newest ones. We made a move from the city center to Botafogo with a super modern building. Very well received by students. So we have revenue growth of [indiscernible], EBITDA 24% with another margin growth. So also keep on margin growth as the campuses are being taken up. The trend is that they should improve even more with very good tickets. The good news on the quarter is our transferring 10% of ticket increased to [indiscernible] freshmen, in terms of intake, showing the strength of Ibmec resuming the brand name in Sao Paulo and other cities. I'm sure [ Portalesa ] will be another case. Ibmec is a leader in business, engineering, law and also technology schools. Let's start to Wyden, our third BU, again, repeating challenging intake quarter versus second. A very solid performance, very much helped by semi on-campus performance, so with the growth there compared to the previous one. Now we have very restricted [indiscernible] trends for -- to have a reduction in the digital, but semi on-campus is resuming we have higher tickets, higher level renewal, good quality of students join, lowering or reducing delinquency. So we should have the increase [indiscernible] the growth in comparative basis is positive in terms of EBITDA. When we look at tickets, same scenario we have been talking about on campus, keeps our trend of recovery ticket growing above the inflation for upper classman, or digital, well, quite competitive. So we have a trend of keeping the ticket. And semi on-campus offering [indiscernible]. It's natural, launching new products. We have high competitive rate. Well, the whole market has [indiscernible] of actually capturing new students migrating from digital to semi on-campus. We don't believe this is sustainable. The cost curve, it's going to grow. With some pleasure on play, in general, we believe the trend in the midterm of the semi on-campus will improve, increasing our profitability. So it's already positive. So we have positive impact on the mix that ticket for semi on-campus will catch up and have grow shortly. This is our view. Now I turn over to Aquino to talk about costs and expenses.

Looking at cost expenses, we had another very solid semester, if we compare apples to -- with the decline [indiscernible] we had a 1 point of margin growth. This is very important for us. We had great performance in bad debt. Looking at [indiscernible] financial impact that should be looked into, we have a reduction of bad debt and also better performance in discounts and interest. So we had a reduction of almost 2 percentage points. And then we have several factors that led to these results that were so good. We have the implementation of the non-engaged program, the drop in [indiscernible] improvement in renewal rates. So we had a great mix performance. So we had -- that led to great [indiscernible]. When we look only to Estacio/Wyden, which is our brand that has the highest bad debt rate, we had a reduction of 1.5 percentage points in this relevant brand to our portfolio. Additionally, when we look at as reported, we had a negative impact on costs coming from 2 items basically: higher volume of transfers, as we've shown to you early this year. With the implementation of the legal framework, this year we're going to have greater transfer to our hubs, we had expected from 0.3% despite of losses for the hubs to adapt to the necessary infrastructure of the legal framework or have 0.2% [indiscernible] in the first semester for a greater mix of on-campus, just higher volume of students in the premium segment. And also on semi on-campus, had an increase of [indiscernible] 0.9 percentage points moving to adjusted net. Revenue, we had a comparison of 1 debt, so on adjusted net income. So we had a -- well, looking at financial results, it's applied by the [indiscernible] impact. We had a reduction of BRL 11 million. And the impact [indiscernible] was BRL 14 million. The second semester will start having a comparison that is favorable of the [indiscernible] the interest rates. We had 25 [indiscernible] was lower first semester 2026. It will revert, like I said, in depreciation and amortization. Last year, we had a difference of BRL 50 million between our investment value, which is lower than our depreciation and administration value. And those values converged with the reduction in the comparison of first semester '25 and '26. When we look at income tax, we had fewer or lower realization of deferred tax impact to cash. When we look at the second semester, we're going to have a much better comparable. This rate, we should have a better rate. Speaking of cash and debt, we had very strong cash position, showing great conversion of net debt and [indiscernible] operating cash flow and cash conversion. This is not better because we had a little impact or negative impact of Selic that it's going to be reverted second semester, BRL 225 million of cash for shareholders, very robust -- actually, cash conversion, we return part of it is BRL 150 million in dividends. And when we optimize when we had the opportunities, we'll make investments for our share [indiscernible]. We started implementing or just ended the program of share buyback. So it was implemented in the first, second quarter, over BRL 100 million. And we ended it in July [indiscernible] that's making us very happy. We had an excellent intake of students in on-campus. It's doing very well in medicine with margins and revenue growth better than what we had expected in our EBIT data, another result of the quarterly was receiving following that, very much linked to initiatives better or more conservatism in the revenue growth with a lower or decline [indiscernible] of our students. And also, we have a better implementation of premium. We see another quarter we had a reduction of our leverage, 1.55x in the second quarter, even with the share buyback program. And looking ahead, we continue seeking reducing this leverage to 1x our EBITDA by the end of 2027. This is a strong goal in the company. And lastly, I'd like to highlight the new amortization we had in May. We had a new reduction of our average cost of debt that is [ 0.9 ] percentage point above Selic. Now we get the slide of ESG. Very good. We got awarded in the Cannes Awards, the Grand Prix, maximum award, in the line for change, the line regarding social actions project, that was actually debated that. It was very important for the whole Yduqs -- for the Yduqs community. It promotes the strengthening diversity within medicine environment in Brazil. It tackles 2 ways, seeking more access to the population. So it's Nigrum Corpus, to have access to medicine, schools, very important. And the second one is to ensure that the Black population has access health care. Considering their specificities, it encourages diversity, social transformation, was crowned with this very important award worldwide. Second point, very important for us, it's Institute Yduqs, to give access to our students to incredible experiences that will increase very much their employability, but also transform [indiscernible] individuals that have been part of the World Cup, perhaps the greatest sports event in the world. Yduqs, with partnership with CBF, giving access to several students from several regions of Brazil. Following several courses, they could experience this event working in this. No better training. Well, I wish we would have had this opportunity in our time. So they're living their career at this event that will certainly be unforgettable actually to those students. And we are very proud at Yduqs to be a means to provide such type of experience to our students. On our final remarks of this presentation, we'd like you to leave with this message, that we reinforced our consistency and ability to deliver results in any scenario, the strong value creation in our portfolio. And each one of our business units shows our ability to generate value. Our diversified portfolio is our strength. We [indiscernible] anyone in the higher education in Brazil and the social economic impact it brings to the whole population. Looking ahead to reaffirm our commitment we made early this year. Generating FCF, earnings per share, BRL 520 million, BRL 620 million. Earnings per share between BRL 1.4 and BRL 2. The outlook for second half of '26 is positive. We see differences in the economics [indiscernible] with a lower Selic that will help our net income, cash generation, comparability. We have a drop in the impact of this. When we look at second semester '26 compared to '25, we'll have clearer growth impact. And we see great space for operational improvement. All of that with great trends. We -- in the first semester, we had leverage reaching 1.55x, which follows strictly our capital allocation policy, our strategy announced at our previous Yduqs Day, we're going to get to 1x net debt over EBITDA. We had a share buyback program where we have the commitment of acting thinking about opportunities, just thinking about value generated to our shareholders. So we completed this program of share buyback of BRL 100 million. IDOMED delivers a historical record for student intake. We started not believing in the market and IDOMED responded with all its potential with the premium brand it has, delivering record intake for our business. And again, very happy when we see growth outlook, Yduqs [indiscernible] likes to grow, delivering new product sources. We like very much what we do. The more opportunities we have, the happier we are. So Fortaleza comes in first time we go into the Northeast with very well-positioned premium brand that has been a success in a very well-positioned building, the way we like. We're sure that it's going to be total success in Fortaleza. So we're very excited about second half. We thank you very much for your time, and we're going to open for your questions. Thank you once again, and we'll see you soon.

[Operator Instructions] Our first question comes from Mr. Caio Moscardini from Santander.

First question on intake second half. I'd like to hear what you see in the cycle. We've heard that during the World Cup, the intake was a bit tight. After World Cup, it was -- kind of took off. I'd like to know whether you've observed that. Second question regarding guidance of cash generation [indiscernible] first semester, this entices BRL 120 million second half for you to reach the bottom of guidance. I'd like to understand the main drivers that will help you have a better cash generation in the second half compared to the first half.

I'm going to take the first and turn over to Aquino. In terms of intake, your reading is good. We have similar messages with us. We had a period during World Cup that was a bit as far as expected in terms of budget and forecast that we expected, a tough period. We have -- the World Cup is a driver of media attraction. We actually planned the media according to this scenario. Our media sped up post World Cup, and we have [indiscernible] the World Cup results were a bit lower, but we sped up a lot. As peers have mentioned in the industry, we're quite positive in terms of the movement that is taking place. So it may have impacted the second quarter or third quarter, we're leaving a sort of hangover post World Cup. We had negative impact of the entry of bets, that certainly consumes a relevant part of the available income of workers. And this is shown when we start seeing the post-World Cup, it's the third week post World Cup, and there is a radical change in terms of results. It doesn't seem to be an incredible year for intake. But the change in the pre, post-World Cup, it makes us feel very excited. About intake in the second half, it's early to talk. We have 60% of cycle run, but the trajectory is certainly quite positive. I'll turn over to Aquino to talk about cash in the second half. It's very important to clarify that and make everyone very comfortable with our level of comfort regarding cash generation second half.

Thank you, Caio, for your question. It's important to clarify this point. Our second half is always a stronger cash generation [indiscernible] in 2025, we generated about BRL 350 million in cash. Last year, we generated a bit less at first half basically for 2 factors. So first, most important, we made BRL 70 million of nonrecurring items with cash effect, that won't be repeated this year. So [indiscernible] actually dismissal of faculty members, retroactive tax payment, and we had some administrative group or staff payment. So the expectation of this year, we have a growth outlook and we have a positive factor here that is the reduction of the Selic. Last year, we had an increase of our Selic rate, and we have favorable comparison in terms of percent points.

Our next question is from Marcelo Santos, JPMorgan.

Two questions. First, if you could comment on the ticket environment in this intake that is happening? And if you could give me some flavor on the transfer to the various hubs? This has been happening, or next year will be back. I think it's good for you to talk a bit more about that.

I'm going to take the first one. I'll start with the second, that is more technical. Well, the transfer on lending to hubs has 2 concepts. We're going to have in this migration more semi on-campus in the hubs. We had a hub very dedicated until 2023, was basically on distance learning. We had very little delivery from '24 to now. The semi on-campus started happening more strongly at the hubs. And from last year to now, we have the new regulation encouraging the semi on-campus growth. You've seen the results during the presentation to a reduction in distance learning and great growth in semi on-campus. The hubs have had this positive change there. They may maintain or speed up their profitability. This makes it difficult for smaller hubs with lower demand, that may create difficulty having the classes. And some of our relationship with our hubs, it tends to be a very positive relationship. And this view of transfer, what we said, well, the full effect of cost structure that happens, this new regulation happens in 2027. We've given a market view as to how we see this impact of margin in 2027. It talks about 0.7 of percent points. But this should happen this year. What happens this year is a bit of this preparation. For next year, some hubs that are not [indiscernible] new courses and new hubs, they are more adapted to these new modalities. This generates a specific increase for this turn. Would you like to add a complement?

Marcelo, this is precisely what Rossano said, we have this trajectory of increase of semi on-campus along with the effect of legal framework with the effect that [indiscernible] talked about is what we actually said, gave in terms of guidance for '26, '27. We have the full adoption of this process. Part of it is related to that. And there's another part, just to add, as we've seen our bad debt is much better considering a collection process that is better and more effective. Since the on-lending is on paid tuition fees, we still have a part of it that goes in the on-lending package. But we understand this movement as positive. Positive movement of those 2 trends, just adding to what Rossano said. As to the ticket in the first question, we see the second half similar to the first. It's very much related to the first. We keep on the recovery point of rebuilding our original ticket, growth about [ 25 ], close to inflation. We see trajectory on campus we see -- or semi on-campus, we see more elasticity, and we have clear trend on the ticket of on-campus of recovery. On distance learning, we see a ticket that is reasonably stable year-over-year, a modality that has been most impacted directly by the new legal framework. But we see resilient ticket. We don't see a trajectory recovery. This may happen as of '27, but quite resilient ticket for the -- considering the legal framework is semi. So what happens in semi on-campus? Two important things for us to understand. You have migration from cost structure that is lower, moving from distance learning and moving to distance -- or to semi on-campus. So it can be more aggressive in terms of ticket. The market trend is to be more aggressive. When you compare year-over-year, you see a different mix. There's greater share in this mix of cost or core structure that leads to [indiscernible]. This is normal. The mix of the company as a whole is positive. So you have a lower ticket from distance learning to semi on-campus. So even though there is a small reduction in semi on-campus, this impact to companies should be positive. And the second factor there is a harder competitive scenario, everybody going after this volume, a smaller volume, and not all students had the course or the distance learning, [indiscernible] can migrate to semi on-campus. So you have an increase in offer or -- so you have a more expensive product, you need volume especially to set up classes. So we have a trend of, first, in this migration period from '25 to '26 of more competitive level of tickets. With the increase in demand, as I've mentioned previously, second half, we have the trend of relieving in this ticket dynamic, but we believe the positive wave of semi on-campus only starts next year. I hope I've answered your question. There have been 2 questions.

Next question is Samuel Alves from BTG Pactual.

Two questions on our side. The first is a bit on delinquency. The company has shown improvement in bad debt that you guided, they're such good numbers. We've seen a moment of delinquency hitting other companies and other segments and industries. We've seen some bad debt indicators and sort of indebtedness levels of family. Do you see a leading indicator when you see delinquency rates and seasons, do you see that any concern, any color of concern from now onwards? Second, I'd like to talk about hub volume metrics. With the new legal framework, the increase in hybrid education, you talked a lot about semi on-campus. We've seen certain hubs being shut down, smaller ones, with a structure that is a bit lower in terms of if we start [indiscernible] almost 300 hubs closed, you have 1,200 hubs today. What do you assume as a magic number or what do you imagine as far as you think about more recurrent structural in terms of hub penetration? Can we keep on imagining shutting down or having a return of turnover? I'd like to know about the flexibility of hubs.

Good point of bad debt, it's a history of being [indiscernible] story we've been telling and it's been materializing now. We suffered the impact of market vision for having adopted a more conservative methodology and revenue growth. We knew this would be something, a year-over-year comparison that would hurt us, but we had a reduction of bad debt. We are starting to reap the benefits, both this more conservative view of non-engaged students, the drop in penetration or decline in [indiscernible]. You have a drop in revenue where you suffer in the accounting view of revenue, but the benefit will be translated into bad debt. Once again, having an impact in the relevant reduction of bad debt. We're moving to the second half reaping the profit of what was planted in 2025, '26, will be much stronger semester of reaping the benefits there. Something that draws our attention is following a trajectory and nonrecurring that is much lower, as Aquino mentioned, regarding cash, expectations second half, we had because cash consumption second half last year for exercise of nonrecurred that is stronger adjustment of the faculty payroll that won't happen this year. So clearly, results second half this year would be like this. 2027, even more so, semester of very clean results with easy comparability. It's a promise of ours to the segment, simplicity in understanding [indiscernible] constant deliveries. These are things we promised to the market and we're starting to reap the benefits now. Speaking on market delinquency and the market, we follow that with concern. Income availability, indebtedness level of families is a concerning point. How this reflects in education? Lower demand. Part of the reason for the second quarter having more challenging intake, so of course, lack of availability of income. Families due to indebtedness, this is led by World Cup, election year, this impacts the willingness of common families to join higher education. Through very good work performed at Yduqs, we don't see that reflecting in the current budget. We see new students. We've been talking to the segments as a whole. The great focus of our company to have the best onboarding of students and better service to increase satisfaction and improve renewal. Retention level, you see that growing every semester. And bad debt in higher education are related to that. And if delinquent students cannot renew for you to have good renewal rates, the students need to be paying their tuition and they have to be paying that. So the improvement in retention [indiscernible] you impact the potential results, you have greater income availability. So you see a slight month-by-month small growth of recurring delinquency that is reflected in the renewal. Students want to keep staying or to keep studying and that improves regarding last year. That reflects the positive bad debt. So overall, it's a picture that we see that is sustainable for the future years. It seems to us the market is pointing that it's getting to the end of interest rate growth. We're moving towards a reduction in interest rate. So the market has a delay. It will take a while to see that be impacting -- or impacting the indebtedness of farmers, in an industry that suffered with the growth of the interest rate [indiscernible] we're moving into the reduction of [indiscernible] being reduced, but it's an important point for us to start seeing that, the segment that has suffered a lot. And we're getting to the time when there should be a drop, clear scenario of interest rate drops. Now I'm not talking about the financial market, but in the demand vision, this should take place. As to the -- your question on hub, for the metrics, I mentioned that previously so that we have lower demand in smaller hubs, so we had restrictions of distance learning. They also have more penetration, those the small towns. This is the end that is smaller and with lowest volume, have revenue generation. So and yet, we have great opportunities, greater penetration, greater growth of hubs. There's great opportunity ahead. We've talked a lot about that, of the various segments. We haven't started the expansion of semi on-campus of hubs. They started strongly in '24. You see the growth in '25, '26 of semi on-campus courses related to this penetration. We have great opportunity of expansion, not only of the hubs migrating to higher sizes and also to places where we do not operate in. In terms of revenue, our delta will be positive. The number of hubs, there may be a reduction. The impacts are reflected. We don't see a relevant reduction in the number of hubs. That may be a contrary effect. But certainly, the revenue, the balance is positive for the impact to hubs, okay? Rodolfo, would you like to add anything?

No. Perfect, Rossano. Just to restate this point. This is a sign, a signal we've been mentioning in the previous calls. We see a bit of this trend. Great part due to this restriction of bigger framework, but concentrated in smaller towns. This impacts very little in terms of results. The main impact is the social impact of reduction of offers -- offerings [indiscernible] by the results. There is very little impact to us. And at the end of the day, what we're reinforcing in terms of results is this migration to operations that are more robust [indiscernible] opening hubs at the right place with the right partner, with the right portfolio, especially in mid, large [indiscernible] cities that have greater potential. There are certain regions where we have the potential to explore, just some opportunities to open new hubs with infrastructure. So it's this path of semi on-campus not only of strong maturation and also additional opportunities, especially in the semi on-campus. I think this is a bit of our view ahead. Naturally, you may have some slight drops ahead, but nothing that is significant, nothing that will actually impact the strategy of semi on-campus.

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

I have 2. The first is a follow-up from delinquency. When we look at the macro scenario regulatory changes, what is made for next year is difficult, both in margin and cash generation. What do you think we still have to see in terms of results of the initiatives you've taken, especially considering delinquency or default rates may mitigate this impact for next year? Second question is regarding ticket dynamics on semi on-campus. You've been commenting for some time that the dynamics is difficult or [indiscernible]. We hear that from peers as well. If you could explore that a bit. How do you think this remake of tickets will be like in the future? If it will be a more gradual composition or more aggressive readjustment, perhaps next year, to try to hold margins. If you could share with us those dynamics, it would help a lot.

On the first, 2 points, one of delinquency with the bridge for next year. How we see the margins, we still have potential gains that we don't have positive outlook to adjust. I think you're right in terms of the macro scenario. Brazil will be quite similar to what '26 has been. A lot of electoral uncertainty It's hard to predict what it will be like. Might be similar to 2026. For the education segment, there is a very positive outline year-over-year. I think the World Cup impact has been quite relevant to us. It actually [indiscernible] the important part of our intake, it won't happen next year. And we have election. We take the track of previous national election day in general have been tough years for intake. We take these 2 blocks off that are important for us to understand the demand for education. So we start having a drop in interest rate, and that may have an impact for next year. Not perhaps the first semester, but second half, we start reaping positive results, financial results in the first half -- or second half of 2026, like what happened in the first half, we had negative comparison compared to 2025. We start second half of '26, we have lower Selic rates, that will help our financial results with a level of leverage, net debt lower. That will help us in cash generation. We had payment transfer, which is changing our debt, enabling better cash generation for the second half. Year-over-year in your question, well, it follows for 2027. We follow with lower debt with a Selic that is lower then 2026 should also benefit the level of demand as a whole. We're more positive regarding '27 compared to what you feel. As improvement potentials, I'm turning to Aquino to talk about other aspects regarding bad debt and our margin structure. Overall, we have benefits that have been taken, captured the run on the round rate for the -- in the future years. Several adjustments we've made over the year, benefits in technology use, expanding AI use, reflecting in some cost structure of the company. And we should get to 2027 reaping other things. Well, I'm turning over to Aquino to complement that.

Mirela, great question. I totally agree with Rossano that the outlook for next year tends to be more positive because it's a first year post election, it's where we have hope in the population. And for us, working in an area which the person makes a commitment, when they register with us for the next 2, 4 years, it has a positive impact for our intake. Speaking of the default levels, it's important to say that we've had a reduction of default rates for several reasons. One of the most import was improvement of premium in our mix. Premium brands have bad debt that is lower than Estacio/Wyden. And so we have the decline in this, lower addition to DIS that had happened in the first half of this year has an immediate impact of worsening our revenue EBITDA result. But the counterpart is lower in the short term of DIS and is practically 100% offset in a low -- in the PDG, or the bad debt, and has a poor performance in the midterm in terms of lower or decline in DIS will have positive impact bad debt this year and also next year since we're going to move second half with the level of DIS very similar to the first half. We're talking about continuity and reduction of bad debt that will continue next year. We have positive outlooks of reducing bad debt due to structural factors, premium mix, less long-term revenue in addition to what Rossano mentioned, all the efforts we make to increase engagement of students and renewal rates and also collection is not yet 100% implemented. So we still have new positive results to be collected that will improve our bad debt rates for the future years.

Mirela, yes, I haven't answered your question, sorry, on semi on-campus ticket. If you believe we have fast recovery or gradual. Unfortunately, ticket recovery are gradual, unfortunately. I don't think it's going to be very fast to start the second half '26, a modest way. 2027 should be a year that is much more positive for semi on-campus ticket. Market is consolidating, students understand better what the semi on-campus product is. We had a restriction of offering. We cannot deliver all the products as the regulation demands. So it requires more flexibility in '26. In '27, should be [indiscernible] when we restrict offerings, so we should rationalize ticket. We strongly believe this will happen as of '27 since it demands an adaptation of market, students perception on the project competitiveness that students see in the market. This should be gradual. But we're very posited that this should start happening in a relevant way early '27. But it should be growing for sure. It's not a radical transformation. I hope I've answered your question.

Our next question is from Vinicius Figueiredo from Itau BBA.

Two points that I'd like to address. First on -- regarding medicine ticket. I understand you put the ticket of upper classman. But I'd like to understand a bit the effect on consolidated. So when we consider more intake of [ VS ] units or with tickets maturing, gaining more share and the whole, I'd like to understand how much would be the effect of each one of those factors, or might try to quantify a bit and also how the ticket considering those points, how they influence the IDOMED revenue growth looking ahead? And second is contingency forecast 2026. You mentioned that there should be a deacceleration, reduction of this line. But just to try to have some magnitude, how much it slows down? Second quarter was a bit below what we expected, actually. Just to try to explore the magnitude looking into the second half and even 2027.

Vinicius, good questions. First, on medicine intake. So you have here maturing of courses in smaller towns. How these factors impact growth. We're starting with great news, growth for IDOMED. The whole market was very fearful. Let's remember, we go through those big clouds, they impact the segment negatively. When they move away, we had a great cloud on intake in medicine. Actually, we had a great growth in the number of offered seats. There was a fear in the market in terms of intake. IDOMED responded with the highest record intake in its history. Yes, it is supported by greater FIES penetration. We believe there are several pieces of good news. First, yes, news, usually were very good. The petition for FIES grants for medicine is very fierce. We have students that are very well-prepared academically. This brings several positive effects to us. It's an institution that is proud of its academic quality. Students better prepared contribute overall to the ecosystem. And also, we have improvement of average income. So we have more competence to DIS, and they're going to go through a very competent educational academic system and make them even better prepared for the national ENAMED or the national examination assessment for medical education. And second, yes, has no bad debt. It's 0. Although medicine is low, we do have some bad debt. The FIES student is 0, comes into the discount in the NOR. The effect in bad debt is very positive. And retention is a student that tends almost 0 dropout. Students stay with us until the end. So this helps a lot our [ LTV ]. Well, the impact goes to the ticket, so you have an impact of, yes, up to 27%, depending on the delinquency of each student. But that event is impact [indiscernible] students that joined with FIES, they join with this hit in the revenue and we reap the benefits over time, both in bad debt retention and academic quality, as you've mentioned. Overall, we think it's been an excellent piece of news, yes, doing well. Replacing this potential demand, we have this negative effect on ticket. We are not opening up the intake numbers, but you can see in our release, the penetration base, we have a growth that is in a very sustainable way. There's no alert sign for that [indiscernible] more increase in the penetration of seats offered, impacting the cost very slightly, but we see this in a very positive way. Second question on contingency. I'm going to turn over to Aquino to address that.

This contingency line takes some time to react or down. We have had realization we've been sharing with you, maybe you're aware of it, we've been realizing cash [indiscernible] lower than the level that we have in the impact to net income. So 2 parts on this line that impact our EBITDA. Second part that impacts our financial results -- financial updating of contingency, when you compare both they're BRL 30 million below what has been our cash [indiscernible] on this line. So what's this happening? We've changed our policy of contingency provisions to be more conservative, making this provision previously. So this makes us to -- without any difference in the disbursement, we increased the realization that impacts actually net income. This happened last year. It's happening now. As you know, just as of second quarter, it's more difficult to reveal when the numbers converge, but it tends to converge in the future years. We're going to have much greater conversion. There's a relevant point here. We have a long-term indicated that these 2 better results of this line, the number of processes we get. Great part of this line to us is linked to labor, actually legal cases. So we had a reduction in the number of those dismissed or laid off faculty members. We're going to have significant reduction in these contingency levels considering legal cases.