Vasta Platform Ltd. Q1 FY2024 earnings call

• 2024 cycle to date: 12% net revenue growth, subscription revenue up 9% to BRL 872 million, complementary solutions grew 21%, B2G generated BRL 69 million. Adjusted EBITDA grew 21% to BRL 402 million with a margin of 39.6%. Free cash flow improved to BRL 52 million from negative BRL 7 million in 2023.
• ACV bookings: Revised downward by 3.7% to BRL 1.350 billion due to fewer students at partner schools, but organic growth of 12% compared to 2023 sales cycle.
• Start Anglo franchise: Two fully operational units in 2024 exceed expectations, first unit in Alphaville has over 190 students, 5 new contracts signed, 20 contracts in total with security across 10 states and over 200 prospects in negotiation.
• Plurall AI platform: Unveiled, gathers excellence content from basic education systems, enables features like creating supplementary lesson plans, generating images, etc., to enhance teaching and learning.

Vasta concluded the 2024 cycle to date with a 12% net revenue growth. Subscription revenue reached BRL 872 million, a 9% increase compared to 2023, representing 86% of total revenue. Complementary solutions saw a 21% expansion in the cycle to date. B2G generated BRL 69 million in revenue in the first quarter of 2024. Adjusted EBITDA experienced a 21% growth to BRL 402 million with an adjusted EBITDA margin of 39.6%. Free cash flow totaled BRL 52 million in the 2024 cycle to date, a BRL 59 million increase from negative BRL 7 million in 2023.

• Net revenue organic growth of 12% in 2024 cycle to date. Adjusted EBITDA grew 21% to BRL 402 million. Free cash flow improved.
• ACV bookings revision is seen as a one-off due to soft market impact on mainstream schools.
• Start Anglo franchise has strong pipeline and broad geographic presence with potential for future growth.
• Plurall AI platform is a breakthrough with tremendous success, reshaping education experience.

• Market uncertainty affecting ACV bookings due to fewer students at partner schools.
• Seasonality issues with government contracts (B2G) potentially impacting revenue recognition timing.
• Soft market conditions affecting mainstream schools, which could impact overall revenue if not managed properly.

Q: Could you comment a little bit on the recognition seasonality if this is a new seasonality or is it more of a one-off from the 2024 cycle? And secondly, on the B2G contract, we previously understood that these contracts were more expected from the second quarter onwards due to the seasonality of government contracts. So could you comment a bit on the specifics of this revenue recognition in the first Q?

A: Every year has slightly different seasonality. This year more new contracts are served twice a year, concentrating recognition on Q2 and Q3. Regarding B2G, recognized orders from the contract with the state of Pará in Q1, with more orders expected in Q2.

Q: If you could detail a little bit more about the revision of the ACV, exactly the mechanism in which it happens? So as far as I understand, there was kind of a tolerance in the contracts for base students and you saw that there would be less students this year than it was foreseen originally in the contract.

A: ACV bookings share contracts, number of students with price and discounts. This year fewer complementary orders and schools reporting fewer students than initially contracted led to a 3.7% adjustment. Mechanics is respecting actual student numbers due to soft market impacting mainstream schools.