Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or
the “Company,” announces today its financial and operating results
for the first quarter of 2022 (1Q22) ended March 31, 2022.
Financial results are expressed in Brazilian Reais and are
presented in accordance with International Financial Reporting
Standards (IFRS).
HIGHLIGHTS
- Net revenue
increased 36% year-on-year in the first quarter of 2022 (1Q22), to
R$381 million, exceeding the R$370 million guidance.
- Subscription
revenue grew 37% in 1Q22, driven by the recognition of 2022 ACV, or
48% excluding textbook subscription products (“PAR”). The 2022 ACV
has had a superior quality in sources of revenue, as Vasta managed
to increase growth in its premium brands and to initiate the
migration from PAR to digital subscription products (Textbook as a
Service Platform), aligned with the company’s strategy.
- In the 2022
cycle to date (4Q21 and 1Q22), subscription revenue grew 29%, or
41%, excluding PAR. The different seasonality of new brands (Eleva
and Mackenzie) is leading to a less concentrated distribution of
subscription revenue along the 2022 cycle when compared to previous
cycles. In 2Q22, we expect ACV recognition to range between 16% to
18%, and our accumulated subscription revenue growth should
gradually converge to the 2022 ACV growth of 35% by 3Q22.
- Adjusted EBITDA
more than doubled in 1Q22, due to operating leverage gains, cost
savings and better sales mix with the growth of subscription
products and the contribution of Eleva. In the 2022 cycle to date,
adjusted EBITDA grew 41%, with a margin increase of 450 bps.
- Adjusted net
profit increased to R$51 million in 1Q22, from R$21 million in
1Q21, due to the growth in operating profit. In the 2022 cycle to
date, adjusted net profit increased 4%, as the increased operating
profit was partly offset by the higher financial leverage and
interest rates.
- Operating cash
flow (OCF) totaled R$13 million in 1Q22, impacted by the early
payment of royalties to content providers. On a normalized basis,
the OCF was a positive R$33 million, an improvement compared to
1Q21 figures, which remained close to zero.
- According
to the results released in early 2022, Vasta’s brands maintained
the leadership in the number of approvals in the admission tests of
Brazil’s best universities (according to The Higher Education
ranking).
- On April
28, 2022, Vasta issued its first Sustainability Report, elaborated
according to GRI standards, SASB guidelines and aligned with IBC
Stakeholder Capitalism Metrics and World Economic Forum (WEF)
guidelines.
MESSAGE FROM MANAGEMENT
This quarter has a special meaning for us. Vasta
1Q22 results confirm that the worst of the Covid-19 pandemic’s
impact is behind us: net revenue increased 36% year-on-year (and
29% in the 2022 cycle to date), driven by (i) the 35% growth in
2022 ACV, which we expect to be fully captured within the 2022
cycle; and (ii) the stabilization in non-subscription revenue (up
1% in the cycle to date). After a long period of results being hit
by the Covid-19 pandemic, numbers finally attest that the business
is back to normal, with predictability and recurrence among its
most important attributes. In addition, the quality of our sales
improved in the 2022 cycle, with a greater share of sales from
premium and digital products in the mix. Subscription revenue
represented 87.4% of total net revenue in the 2022 sales cycle,
compared to 84.4% in the same period of the previous cycle.
Another key aspect of the quarter is the
repositioning of Vasta’s profitability. Our operating margins
returned to levels that we believe to be more aligned with the
company’s potential. In the 2022 cycle to date, the adjusted EBITDA
margin grew 450 bps, to 38.7%, the highest margin for this period
in recent periods. Although much of this result came from the
normalization of the business and a sales mix of superior quality,
it came with certain efforts: we conducted a workforce optimization
in December 2021 and reinforced our budgetary discipline. These
actions are also paramount to navigating the challenging
macroeconomic scenario ahead of us.
But more important than the improvement in our
operating results is the success of our students, which is our real
purpose. According to the results released in early 2022, Vasta’s
brands maintained the leadership in the number of approvals in the
admission tests of Brazil’s best universities (according to The
Higher Education ranking). The performance of our premium brands
was particularly noticeable in Medicine, the most competitive
career in the country. Our top-of-mind brand Anglo expanded its
leadership in admissions for Medicine at the University of São
Paulo (USP), with an increase of 64% in admitted students compared
to 2021. The top performance at Brazil’s best universities is among
the key attributes considered by K-12 schools when choosing a
content partner.
Reinforcing our commitment with the highest ESG
standards, Vasta released its first Sustainability Report on April
28, 2022. The publication increases awareness around the work we
do, reinforcing the bonds of trust forged with our partners,
employees, customers, investors and other stakeholders. Our
Sustainability Report is aligned with the guidelines of the Global
Reporting Initiative (GRI), and incorporates indicators from the
Sustainability Accounting Standards Board (SASB) and
recommendations from the World Economic Forum (WEF) publication
Stakeholder Capitalism Metrics. The report is available in Vasta’s
website and can be accessed here.
OPERATING PERFORMANCE
Student base – subscription models
|
|
2022 |
|
2021 |
|
% Y/Y |
Partner schools - Core content |
|
5,274 |
|
4,508 |
|
18.7 |
% |
Partner schools - Complementary solutions |
|
1,304 |
|
1,114 |
|
16.8 |
% |
Students - Core content |
|
1,589,224 |
|
1,335,152 |
|
15.4 |
% |
Students - Complementary content |
|
372,559 |
|
307,941 |
|
30.0 |
% |
Note: Students enrolled in partner schools.
As we conclude the period of return of
collections, we update the number of partner schools and enrolled
students for the 2022 cycle. The company added 766 new partners
schools compared to the 2021 cycle, serving nearly 1.6 million
students with core content solutions. The partners school base of
complementary solutions increased by 187 new schools, growing 30%
in the number of students served compared to the previous
cycle.
FINANCIAL PERFORMANCE
Net revenue
Values in R$ '000 |
|
1Q22 |
|
1Q21 |
|
% Y/Y |
|
2022 Cycle |
|
2021 Cycle |
|
% Y/Y |
Subscription |
|
333,781 |
|
243,371 |
|
37.1% |
|
680,624 |
|
527,221 |
|
29.1% |
Subscription ex-PAR |
|
296,713 |
|
201,120 |
|
47.5% |
|
577,597 |
|
410,528 |
|
40.7% |
Traditional learning systems |
|
251,148 |
|
169,138 |
|
48.5% |
|
474,299 |
|
350,463 |
|
35.3% |
Complementary solutions |
|
45,565 |
|
31,982 |
|
42.5% |
|
103,298 |
|
60,065 |
|
72.0% |
PAR |
|
37,067 |
|
42,251 |
|
-12.3% |
|
103,027 |
|
116,693 |
|
-11.7% |
Non-subscription |
|
46,801 |
|
37,461 |
|
24.9% |
|
98,217 |
|
97,173 |
|
1.1% |
Total net revenue |
|
380,581 |
|
280,832 |
|
35.5% |
|
778,840 |
|
624,394 |
|
24.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% ACV |
|
33.4% |
|
32.8% |
|
0.5 |
|
68.1% |
|
71.1% |
|
-3.1 |
% Subscription |
|
87.7% |
|
86.7% |
|
1.0 |
|
87.4% |
|
84.4% |
|
3.0 |
In 1Q22, net revenue increased 36% year-on-year,
to R$ 381 million, which exceeded the $370 million guidance.
Excluding Eleva, net revenue grew 28% year-on-year.
Subscription revenue grew 37% in 1Q22, driven by
the recognition of 2022 ACV (33.4% of total), or 48% excluding PAR.
The 2022 ACV has showed a superior quality in sources of revenue,
as Vasta managed to increase growth in our premium brands and to
initiate the migration from PAR to digital subscription products
(Textbook as a Service Platform), aligned with the company’s
strategy. In 1Q22, Vasta recognized 33.4% of the ACV, compared to
32.8% in the same period of last year.
In the cycle to date (4Q21 and 1Q22),
subscription revenue grew 29%, or 41% excluding PAR. In the period,
it represented 68.1% of 2022 ACV, versus 71.1% in the same period
of the 2021 cycle. The different seasonality of new brands (Eleva
and Mackenzie) is leading to a less concentrated distribution of
subscription revenue along the 2022 cycle when compared to previous
cycles. In 2Q22, we expect ACV recognition to range between 16% to
18%, and our accumulated subscription revenue growth should
gradually converge to the ACV growth of 35% by 3Q22.
EBITDA
Values in R$ '000 |
|
1Q22 |
|
1Q21 |
|
% Y/Y |
|
2022 Cycle |
|
2021 Cycle |
|
% Y/Y |
Net revenue |
|
380,581 |
|
280,832 |
|
35.5% |
|
778,841 |
|
624,394 |
|
24.7% |
Cost of goods sold and services |
|
(129,237) |
|
(113,982) |
|
13.4% |
|
(265,156) |
|
(214,000) |
|
23.9% |
General and administrative expenses |
|
(126,088) |
|
(109,876) |
|
14.8% |
|
(252,159) |
|
(250,475) |
|
0.7% |
Commercial expenses |
|
(47,933) |
|
(49,509) |
|
-3.2% |
|
(93,332) |
|
(98,241) |
|
-5.0% |
Other operating income, net |
|
933 |
|
2,467 |
|
-62.2% |
|
4,286 |
|
3,813 |
|
12.4% |
Impairment on trade receivables |
|
(8,896) |
|
(2,609) |
|
241.0% |
|
(19,624) |
|
(14,920) |
|
31.5% |
Profit before financial income and taxes |
|
69,360 |
|
7,323 |
|
847.2% |
|
152,856 |
|
50,571 |
|
202.3% |
(+) Depreciation and amortization |
|
64,287 |
|
48,585 |
|
32.3% |
|
125,951 |
|
93,539 |
|
34.7% |
EBITDA |
|
133,647 |
|
55,908 |
|
139.0% |
|
278,807 |
|
144,110 |
|
93.5% |
EBITDA margin |
|
35.1% |
|
19.9% |
|
15.2 |
|
35.8% |
|
23.1% |
|
12.7 |
(+) Layoffs related to internal restructuring |
|
1,459 |
|
4,936 |
|
-70.4% |
|
10,871 |
|
4,936 |
|
120.2% |
(+) IPO-related expenses |
|
- |
|
- |
|
0.0% |
|
- |
|
50,580 |
|
-100.0% |
(+) Share-based compensation plan |
|
5,904 |
|
6,544 |
|
-9.8% |
|
12,023 |
|
14,447 |
|
-16.8% |
Adjusted EBITDA |
|
141,011 |
|
67,388 |
|
109.3% |
|
301,700 |
|
214,073 |
|
40.9% |
Adjusted EBITDA margin |
|
37.1% |
|
24.0% |
|
13.1 |
|
38.7% |
|
34.3% |
|
4.5 |
Note: n.m.: not meaningful
Adjusted EBITDA more than doubled in the quarter
compared to 1Q21, reaching R$141 million, due to operating leverage
gains, cost savings and better sales mix with the growth of
subscription products and the contribution of Eleva. In the 2022
cycle to date, Adjusted EBITDA grew 41%, with a margin increase of
450 bps.
In proportion to net revenue, gross margin grew
660 bps in the quarter (from 59.4% to 66.0%), while commercial
expenses and adjusted cash G&A expenses were down 500 bps and
280 bps, respectively. The impairment on trade receivables
increased 140 bps in the quarter, reflecting increased provisions
adopted in the second half of 2021. As a result, adjusted EBITDA
margin grew from 24.0% in 1Q21 to 37.1% in 1Q22.
(%) Net Revenue |
|
1Q22 |
|
1Q21 |
|
Y/Y (p.p.) |
|
2022 Cycle |
|
2021 Cycle |
|
Y/Y (p.p.) |
Gross margin |
|
66.0% |
|
59.4% |
|
6.6 |
|
66.0% |
|
65.7% |
|
0.2 |
Adjusted cash G&A expenses(1) |
|
-14.1% |
|
-16.9% |
|
2.8 |
|
-12.7% |
|
-13.3% |
|
0.6 |
Commercial expenses |
|
-12.6% |
|
-17.6% |
|
5.0 |
|
-12.0% |
|
-15.7% |
|
3.8 |
Impairment on trade receivables |
|
-2.3% |
|
-0.9% |
|
(1.4) |
|
-2.5% |
|
-2.4% |
|
(0.1) |
Adjusted EBITDA margin |
|
37.1% |
|
24.0% |
|
13.1 |
|
38.7% |
|
34.3% |
|
4.5 |
(1) Sum of general and administrative expenses and other
operating income, less: depreciation and amortization,
non-recurring expenses, IPO-related expenses, and share-based
compensation plan.
Net profit (loss)
Values in R$ '000 |
|
1Q22 |
|
1Q21 |
|
% Y/Y |
|
2022 Cycle |
|
2021 Cycle |
|
% Y/Y |
Net profit (loss) |
|
20,190 |
|
(5,517) |
|
n.m. |
|
39,970 |
|
16,732 |
|
138.9% |
(+)
Layoffs related to internal restructuring |
|
1,459 |
|
4,936 |
|
-70.4% |
|
10,871 |
|
4,936 |
|
120.2% |
(+)
Share-based compensation plan |
|
5,904 |
|
6,544 |
|
-9.8% |
|
12,023 |
|
14,447 |
|
-16.8% |
(+)
IPO-related expenses |
|
- |
|
- |
|
n.m. |
|
- |
|
50,580 |
|
n.m. |
(+)
Amortization of intangible assets(1) |
|
38,693 |
|
28,300 |
|
36.7% |
|
74,649 |
|
56,590 |
|
31.9% |
(-) Tax
shield(2) |
|
(15,659) |
|
(13,525) |
|
15.8% |
|
(33,165) |
|
(43,028) |
|
-22.9% |
Adjusted net profit (loss) |
|
50,587 |
|
20,738 |
|
143.9% |
|
104,349 |
|
100,257 |
|
4.1% |
Adjusted net margin |
|
13.3% |
|
7.4% |
|
5.9 |
|
13.4% |
|
16.1% |
|
(2.7) |
(1) From business combinations. (2) Tax shield (34%) generated
by the expenses that are being deducted as net (loss) profit
adjustments. Note: n.m.: not meaningful
In the first quarter, adjusted net profit
increased to R$51 million, from R$21 million in 1Q21, due to the
growth in operating profit. In the 2022 cycle to date, adjusted net
profit increased 4%, as the increased operating profit was partly
offset by the higher financial leverage and interest rates.
Accounts receivable and PDA
Values in R$ '000 |
|
1Q22 |
|
1Q21 |
|
% Y/Y |
|
4Q21 |
|
% Q/Q |
Gross accounts receivable |
|
628,771 |
|
517,478 |
|
21.5% |
|
552,014 |
|
13.9% |
Provision for doubtful accounts (PDA) |
|
(52,383) |
|
(30,986) |
|
69.1% |
|
(46,500) |
|
12.7% |
Coverage index |
|
8.3% |
|
6.0% |
|
2.3 |
|
8.4% |
|
(0.1) |
Net accounts receivable |
|
576,388 |
|
486,492 |
|
18.5% |
|
505,514 |
|
14.0% |
Average days of accounts receivable(1) |
|
198 |
|
198 |
|
0 |
|
190 |
|
8 |
(1) Balance of net accounts receivable divided by the
last-twelve-month net revenue, multiplied by 360.
The increase in the net accounts receivable in
1Q22 arose from the growth in collected revenue, which was partly
offset by the higher coverage of PDA. Since the beginning of the
pandemic, our approach to credit issues faced by our school
partners has been to extend payment terms instead of granting
discounts, pressuring the PDA level due to aging of the accounts
receivable portfolio. With the return of school activities in 2022,
we expect a gradual normalization in payment cycles for the years
to come. The average payment time of our accounts receivable
portfolio was 198 days in the 1Q22, the same level as of 1Q21. By
adding Eleva’s last-twelve-month (“LTM”) net revenue, the average
time decreases to 188 days.
Operating cash flow
Values in R$ '000 |
|
1Q22 |
|
1Q21 |
|
% Y/Y |
|
2022 Cycle |
|
2021 Cycle |
|
% Y/Y |
Cash from operating activities(1) |
|
76,855 |
|
71,853 |
|
7.0% |
|
39,484 |
|
(15,662) |
|
n.m. |
(-) Income tax and social contribution paid |
|
(523) |
|
- |
|
0.0% |
|
(523) |
|
- |
|
0.0% |
(-) Payment of provision for tax, civil and labor losses |
|
(180) |
|
(9) |
|
1900.7% |
|
(293) |
|
(9) |
|
3151.8% |
(-) Interest lease liabilities paid |
|
(3,750) |
|
(4,021) |
|
-6.7% |
|
(6,878) |
|
(7,796) |
|
-11.8% |
(-) Acquisition of property, plant, and equipment |
|
(34,435) |
|
(2,481) |
|
1287.9% |
|
(45,893) |
|
(393) |
|
11577.6% |
(-) Additions of intangible assets |
|
(19,716) |
|
(9,107) |
|
116.5% |
|
(38,831) |
|
(19,674) |
|
97.4% |
(-) Lease liabilities paid |
|
(5,654) |
|
(4,977) |
|
13.6% |
|
(12,344) |
|
(8,605) |
|
43.4% |
Operating cash flow (OCF) |
|
12,597 |
|
51,258 |
|
-75.4% |
|
(65,277) |
|
(52,139) |
|
25.2% |
OCF/Adjusted EBITDA |
|
8.9% |
|
76.1% |
|
(67.1) |
|
-21.6% |
|
-24.4% |
|
2.7 |
(1) Net (loss) profit less non-cash items less and changes in
working capital. Note: n.m.: not meaningful
In 1Q22, operating cash flow totaled R$13
million in 1Q22, impacted by the early payment of royalties (R$20
million) to content providers. This compares with the R$51 million
OCF registered in 1Q21, which was benefitted by the early receipt
of accounts receivable amounting to R$52 million. Therefore, on a
normalized basis, the OCF increased from nearly zero in 1Q21 to
R$33 million in 1Q22. Likewise, the normalized OCF was a negative
R$45 million in the 2022 cycle to date, up from a negative R$104
million in the same period of 2021. We observe that the operating
cash flow generation is usually negative in the first half of the
cycle, as we invest in the production of materials in preparation
for the school year and we receive payment from costumers in
arrears.
Financial leverage
Values in R$ '000 |
|
1Q22 |
|
4Q21 |
|
3Q21 |
|
2Q21 |
|
1Q21 |
Financial debt |
|
817,516 |
|
831,226 |
|
812,016 |
|
505,951 |
|
687,203 |
Accounts payable from business combinations |
|
570,660 |
|
532,313 |
|
73,713 |
|
65,201 |
|
62,973 |
Total debt |
|
1,388,176 |
|
1,363,539 |
|
885,729 |
|
571,152 |
|
750,176 |
Cash and cash equivalents |
|
449,673 |
|
309,893 |
|
377,862 |
|
335,098 |
|
415,093 |
Marketable securities |
|
- |
|
166,349 |
|
317,178 |
|
81,090 |
|
259,581 |
Net debt |
|
938,503 |
|
887,297 |
|
190,689 |
|
154,964 |
|
75,502 |
Net debt/LTM adjusted EBITDA |
|
3.67 |
|
4.87 |
|
1.13 |
|
0.76 |
|
0.30 |
(1) LTM adjusted EBITDA includes Eleva. Eleva’s LTM adjusted
EBITDA prior to November 2021 may not reflect Vasta’s accounting
standards.
Vasta ended the 1Q22 with a net debt position of
R$939 million, mainly due to the incorporation of Eleva in late
October, leading to a net debt/LTM adjusted EBITDA of 3.67x. By
adding Eleva’s last-twelve-month EBITDA, this indicator stood at
3.28x.
CONFERENCE CALL INFORMATION
Vasta will discuss its first quarter 2022
results on May 12, 2022, via a conference call at 5:00 p.m. Eastern
Time. To access the call (ID: 5859784), please dial: +1 (833)
519-1336 or +1 (914) 800-3898. A live and archived webcast of the
call will be available on the Investor Relations section of the
Company’s website at https://ir.vastaplatform.com.
ABOUT VASTA
Vasta is a leading, high-growth education
company in Brazil powered by technology, providing end-to-end
educational and digital solutions that cater to all needs of
private schools operating in the K-12 educational segment,
ultimately benefiting all of Vasta’s stakeholders, including
students, parents, educators, administrators and private school
owners. Vasta’s mission is to help private K-12 schools to be
better and more profitable, supporting their digital
transformation. Vasta believes it is uniquely positioned to help
schools in Brazil undergo the process of digital transformation and
bring their education skill-set to the 21st century. Vasta promotes
the unified use of technology in K-12 education with enhanced data
and actionable insight for educators, increased collaboration among
support staff and improvements in production, efficiency and
quality. For more information, please visit
ir.vastaplatform.com.
CONTACT
Investor Relations ri@somoseducacao.com.br
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking
statements that can be identified by the use of forward-looking
words such as “anticipate,” “believe,” “could,” “expect,” “should,”
“plan,” “intend,” “estimate” and “potential,” among others.
Forward-looking statements appear in a number of places in this
press release and include, but are not limited to, statements
regarding our intent, belief or current expectations.
Forward-looking statements are based on our management’s beliefs
and assumptions and on information currently available to our
management. Such statements are subject to risks and uncertainties,
and actual results may differ materially from those expressed or
implied in the forward-looking statements due to of various
factors, including (i) general economic, financial, political,
demographic and business conditions in Brazil, as well as any other
countries we may serve in the future and their impact on our
business; (ii) fluctuations in interest, inflation and exchange
rates in Brazil and any other countries we may serve in the future;
(iii) our ability to implement our business strategy and expand our
portfolio of products and services; (iv) our ability to adapt to
technological changes in the educational sector; (v) the
availability of government authorizations on terms and conditions
and within periods acceptable to us; (vi) our ability to continue
attracting and retaining new partner schools and students; (vii)
our ability to maintain the academic quality of our programs;
(viii) the availability of qualified personnel and the ability to
retain such personnel; (ix) changes in the financial condition of
the students enrolling in our programs in general and in the
competitive conditions in the education industry; (x) our
capitalization and level of indebtedness; (xi) the interests of our
controlling shareholder; (xii) changes in government regulations
applicable to the education industry in Brazil; (xiii) government
interventions in education industry programs, that affect the
economic or tax regime, the collection of tuition fees or the
regulatory framework applicable to educational institutions; (xiv)
cancellations of contracts within the solutions we characterize as
subscription arrangements or limitations on our ability to increase
the rates we charge for the services we characterize as
subscription arrangements; (xv) our ability to compete and conduct
our business in the future; (xvi) our ability to anticipate changes
in the business, changes in regulation or the materialization of
existing and potential new risks; (xvii) the success of operating
initiatives, including advertising and promotional efforts and new
product, service and concept development by us and our competitors;
(xviii) changes in consumer demands and preferences and
technological advances, and our ability to innovate to respond to
such changes; (xix) changes in labor, distribution and other
operating costs; our compliance with, and changes to, government
laws, regulations and tax matters that currently apply to us; (xx)
the effectiveness of our risk management policies and procedures,
including our internal control over financial reporting; (xxi)
health crises, including due to pandemics such as the COVID-19
pandemic and government measures taken in response thereto; (xxii)
other factors that may affect our financial condition, liquidity
and results of operations; and (xxiii) other risk factors discussed
under “Risk Factors.” Forward-looking statements speak only as of
the date they are made, and we do not undertake any obligation to
update them in light of new information or future developments or
to release publicly any revisions to these statements in order to
reflect later events or circumstances or to reflect the occurrence
of unanticipated events.
NON-GAAP FINANCIAL MEASURES
This press release presents our EBITDA, Adjusted
EBITDA and Adjusted net (loss) profit and Operating cash flow
(OCF), which is information provided for the convenience of
investors. EBITDA and Adjusted EBITDA are among the key performance
indicators used by us to measure financial operating performance.
Our management believes that these Non-GAAP financial measures
provide useful information to investors and shareholders. We also
use these measures internally to establish budgets and operational
goals to manage and monitor our business, evaluate our underlying
historical performance and business strategies and to report our
results to the board of directors.
We calculate EBITDA as net (loss) profit for the
period/year plus income taxes and social contribution plus/minus
net finance result plus depreciation and amortization. The EBITDA
measure provides useful information to assess our operational
performance.
We calculate Adjusted EBITDA as EBITDA
plus/minus: (a) income tax and social contribution; (b) net finance
result; (c) depreciation and amortization; (d) share-based
compensation expenses, mainly due to the grant of additional shares
to Somos’ employees in connection with the change of control of
Somos to Cogna (for further information refer to note 23 to the
audited consolidated financial statements); (e) provision for risks
of tax, civil and labor losses regarding penalties, related to
income tax positions taken by the Predecessor Somos – Anglo and
Vasta in connection with a corporate reorganization carried out by
the Predecessor Somos – Anglo; (f) Bonus IPO, which refers to bonus
paid to certain executives and employees based on restricted share
units; and (g) expenses with contractual termination of employees
due to organizational restructuring. We understand that such
adjustments are relevant and should be considered when calculating
our Adjusted EBITDA, which is a practical measure to assess our
operational performance that allows us to compare it with other
companies that operates in the same segment.
We calculate Adjusted net (loss) profit as the
(loss) profit for the period/year as presented in Statement of
Profit or Loss and Other Comprehensive Income adjusted by the same
Adjusted EBITDA items, however, added by (a) Amortization of
intangible assets from Business Combination and (b) Tax shield of
34% generated by the aforementioned adjustments.
We calculate Operating cash flow (OCF) as the
cash from operating activities as presented in the Statement of
Cash Flows less (a) income tax and social contribution paid; (b)
tax, civil and labor proceedings paid; (c) interest lease
liabilities paid; (d) acquisition of property, plant and equipment;
(e) additions to intangible assets; and (f) lease liabilities
paid.
We understand that, although Adjusted net (loss)
profit, EBITDA, Adjusted EBITDA and Operating cash flow (OCF) are
used by investors and securities analysts in their evaluation of
companies, these measures have limitations as analytical tools, and
you should not consider them in isolation or as substitutes for
analysis of our results of operations as reported under IFRS.
Additionally, our calculations of Adjusted net (loss) profit,
Adjusted EBITDA and Operating cash flow (OCF) may be different from
the calculation used by other companies, including our competitors
in the education services industry, and therefore, our measures may
not be comparable to those of other companies.
REVENUE RECOGNITION AND
SEASONALITY
Our main deliveries of printed and digital
materials to our customers occur in the last quarter of each year
(typically in November and December), and in the first quarter of
each subsequent year (typically in February and March), and revenue
is recognized when the customers obtain control over the materials.
In addition, the printed and digital materials we provide in the
fourth quarter are used by our customers in the following school
year and, therefore, our fourth quarter results reflect the growth
in the number of our students from one school year to the next,
leading to higher revenue in general in our fourth quarter compared
with the preceding quarters in each year. Consequently, in
aggregate, the seasonality of our revenues generally produces
higher revenues in the first and fourth quarters of our fiscal
year. Thus, the numbers for the second quarter and third quarter
are usually less relevant. In addition, we generally bill our
customers during the first half of each school year (which starts
in January), which generally results in a higher cash position in
the first half of each year compared to the second half.
A significant part of our expenses is also
seasonal. Due to the nature of our business cycle, we need
significant working capital, typically in September or October of
each year, to cover costs related to production and inventory
accumulation, selling and marketing expenses, and delivery of our
teaching materials at the end of each year in preparation for the
beginning of each school year. As a result, these operating
expenses are generally incurred between September and December of
each year.
Purchases through our Livro Fácil e-commerce
platform are also very intense during the back-to-school period,
between November, when school enrollment takes place and families
plan to anticipate the purchase of products and services, and
February of the following year, when classes are about to start.
Thus, e-commerce revenue is mainly concentrated in the first and
fourth quarters of the year.
KEY BUSINESS METRICS
ACV Bookings is a non-accounting managerial
metric and represents our partner schools’ commitment to pay for
our solutions offerings. We believe it is a meaningful indicator of
demand for our solutions. We consider ACV Bookings is a helpful
metric because it is designed to show amounts that we expect to be
recognized as revenue from subscription services for the 12-month
period between October 1 of one fiscal year through September 30 of
the following fiscal year. We define ACV Bookings as the revenue we
would expect to recognize from a partner school in each school
year, based on the number of students who have contracted our
services, or “enrolled students,” that will access our content at
such partner school in such school year. We calculate ACV Bookings
by multiplying the number of enrolled students at each school with
the average ticket per student per year; the related number of
enrolled students and average ticket per student per year are each
calculated in accordance with the terms of each contract with the
related school. Although our contracts with our schools are
typically for 4-year terms, we record one year of revenue under
such contracts as ACV Bookings. ACV Bookings are calculated based
on the sum of actual contracts signed during the sales period and
assumes the historical rates of returned goods from customers for
the preceding 24-month period. Since the actual rates of returned
goods from sales during the period may be different from the
historical average rates and the actual volume of merchandise
ordered by our customers may be different from the contracted
amount, the actual revenue recognized during each period of a sales
cycle may be different from the ACV Bookings for the respective
sales cycle. Our reported ACV Bookings are subject to risks
associated with, among other things, economic conditions and the
markets in which we operate, including risks that our contracts may
be canceled or adjusted (including as a result of the COVID-19
pandemic).
FINANCIAL STATEMENTS
Consolidated Statements of Financial
Position
Assets |
|
March 31, 2022 |
|
December 31, 2021 |
|
|
|
|
|
Current assets |
|
|
|
|
Cash
and cash equivalents |
|
145,998 |
|
309,893 |
Marketable securities |
|
303,675 |
|
166,349 |
Trade
receivables |
|
576,388 |
|
505,514 |
Inventories |
|
208,744 |
|
242,363 |
Taxes
recoverable |
|
27,040 |
|
24,564 |
Income tax and social contribution recoverable |
|
9,689 |
|
8,771 |
Prepayments |
|
57,335 |
|
40,069 |
Other
receivables |
|
982 |
|
2,105 |
Related parties – other receivables |
|
1,126 |
|
501 |
Total current assets |
|
1,330,977 |
|
1,300,129 |
|
|
|
|
|
Non-current assets |
|
|
|
|
Judicial deposits and escrow accounts |
|
177,579 |
|
178,824 |
Deferred income tax and social contribution |
|
129,453 |
|
130,405 |
Property, plant and equipment |
|
222,265 |
|
185,682 |
Intangible assets and goodwill |
|
5,542,991 |
|
5,538,367 |
Total non-current assets |
|
6,072,288 |
|
6,033,278 |
|
|
|
|
|
Total Assets |
|
7,403,265 |
|
7,333,407 |
Consolidated Statements of Financial
Position (continued)
Liabilities |
|
March 31, 2022 |
|
December 31, 2021 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Bonds
and financing |
|
267,568 |
|
281,491 |
Lease
liabilities |
|
27,915 |
|
26,636 |
Suppliers |
|
261,219 |
|
264,787 |
Income tax and social contribution payable |
|
16,644 |
|
16,666 |
Salaries and social contributions |
|
75,952 |
|
62,829 |
Contractual obligations and deferred income |
|
44,812 |
|
42,179 |
Accounts payable for business combination |
|
59,296 |
|
20,502 |
Other
liabilities |
|
25,350 |
|
20,033 |
Other
liabilities - related parties |
|
30,393 |
|
39,271 |
Total current liabilities |
|
809,149 |
|
774,394 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Bonds
and financing |
|
549,948 |
|
549,735 |
Lease
liabilities |
|
139,640 |
|
133,906 |
Accounts payable for business combination |
|
511,364 |
|
511,811 |
Provision for tax, civil and labor losses |
|
652,015 |
|
646,850 |
Contract liabilities and deferred income |
|
4,544 |
|
3,986 |
Other
liabilities |
|
47,080 |
|
47,516 |
Total non-current liabilities |
|
1,904,591 |
|
1,893,804 |
|
|
|
|
|
Shareholder’s Equity |
|
|
|
|
Share
capital |
|
4,820,815 |
|
4,820,815 |
Capital reserve |
|
65,614 |
|
61,488 |
Treasury shares |
|
(23,880) |
|
(23,880) |
Accumulated losses |
|
(173,024) |
|
(193,214) |
Total Shareholder's Equity |
|
4,689,525 |
|
4,665,209 |
|
|
|
|
|
Total Liabilities and Shareholder's Equity |
|
7,403,265 |
|
7,333,407 |
Consolidated Income
Statement
|
|
Jan 01, to Mar 31, 2022 |
|
Jan 01, to Mar 31, 2021 |
|
|
|
|
|
Net revenue from sales and services |
|
380,581 |
|
280,832 |
Sales |
|
374,734 |
|
274,884 |
Services |
|
5,847 |
|
5,948 |
|
|
|
|
|
Cost
of goods sold and services |
|
(129,237) |
|
(113,982) |
|
|
|
|
|
Gross profit |
|
251,344 |
|
166,850 |
|
|
|
|
|
Operating income (expenses) |
|
|
|
|
General and administrative expenses |
|
(126,088) |
|
(109,876) |
Commercial expenses |
|
(47,933) |
|
(49,509) |
Other
operating income, net |
|
933 |
|
2,467 |
Impairment losses on trade receivables |
|
(8,896) |
|
(2,609) |
|
|
|
|
|
Profit (Loss) before finance result and taxes |
|
69,360 |
|
7,323 |
|
|
|
|
|
Finance result |
|
|
|
|
Finance income |
|
15,269 |
|
5,463 |
Finance costs |
|
(57,963) |
|
(19,715) |
|
|
|
|
|
Profit (Loss) before income tax and social
contribution |
|
26,666 |
|
(6,929) |
|
|
|
|
|
Income tax and social contribution |
|
(6,476) |
|
1,412 |
|
|
|
|
|
Profit (Loss) for the period |
|
20,190 |
|
(5,517) |
|
|
|
|
|
Profit (Loss) per share |
|
|
|
|
Basic |
|
0.242 |
|
(0.066) |
Diluted |
|
0.239 |
|
(0.065) |
Consolidated Statement of Cash
Flows
|
|
For the three months ended March 31 |
|
|
2022 |
|
2021 |
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
Profit (Loss) before income tax and social contribution |
|
26,666 |
|
(6,929) |
Adjustments for: |
|
|
|
|
Depreciation and amortization |
|
64,287 |
|
48,585 |
Impairment losses on trade receivables |
|
8,896 |
|
2,609 |
Reversal of provision for tax, civil and labor losses |
|
(6,109) |
|
(740) |
Interest on provision for tax, civil and labor losses |
|
11,454 |
|
5,630 |
Provision for obsolete inventories |
|
6,780 |
|
4,838 |
Interest on bonds and financing |
|
23,974 |
|
6,077 |
Contractual obligations and right to returned goods |
|
(10,732) |
|
(6,220) |
Imputed interest on suppliers |
|
- |
|
1,452 |
Interest on accounts payable for business combination |
|
13,694 |
|
167 |
Share-based payment expense |
|
4,126 |
|
5,271 |
Interest on lease liabilities |
|
3,596 |
|
4,022 |
Interest on marketable securities incurred |
|
(11,459) |
|
(3,298) |
Disposal of right of use assets and lease liabilities |
|
(1,284) |
|
14 |
|
|
|
|
|
Changes in |
|
|
|
|
Trade
receivables |
|
(79,574) |
|
3,133 |
Inventories |
|
26,787 |
|
4,564 |
Prepayments |
|
(17,266) |
|
1,588 |
Taxes
recoverable |
|
(2,434) |
|
(184) |
Judicial deposits and escrow accounts |
|
1,245 |
|
644 |
Other
receivables |
|
1,123 |
|
- |
Suppliers |
|
(3,568) |
|
(16,804) |
Salaries and social charges |
|
13,153 |
|
(6) |
Tax
payable |
|
(5,852) |
|
(2,000) |
Contract liabilities and deferred income |
|
13,976 |
|
(3,128) |
Other
receivables and liabilities from related parties |
|
(9,504) |
|
20,281 |
Other
liabilities |
|
4,880 |
|
2,287 |
Cash from operating activities |
|
76,855 |
|
71,853 |
|
|
|
|
|
Income tax and social contribution paid |
|
(523) |
|
- |
Interest lease liabilities paid |
|
(3,750) |
|
(4,021) |
Payment of interest on bonds and financing |
|
(37,640) |
|
(12,215) |
Payment of provision for tax, civil and labor losses |
|
(180) |
|
(9) |
Net cash generated by operating activities |
|
34,762 |
|
55,608 |
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
Acquisition of property, plant, and equipment |
|
(34,435) |
|
(2,481) |
Additions of intangible assets |
|
(19,716) |
|
(9,107) |
Acquisition of subsidiaries net of cash acquired |
|
(8,475) |
|
(36,663) |
Proceeds from (purchase of) investment in marketable
securities |
|
(125,866) |
|
234,819 |
Net cash (applied in) from investing
activities |
|
(188,492) |
|
186,568 |
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
Payments of loans from related parties |
|
- |
|
(20,884) |
Lease
liabilities paid |
|
(5,654) |
|
(4,977) |
Payments of bonds and financing |
|
- |
|
(100,000) |
Payments of accounts payable for business combination |
|
(4,511) |
|
(12,378) |
Net cash applied in financing activities |
|
(10,165) |
|
(138,239) |
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS |
|
(163,895) |
|
103,937 |
Cash
and cash equivalents at beginning of period |
|
309,893 |
|
311,156 |
Cash
and cash equivalents at end of period |
|
145,998 |
|
415,093 |
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