Vasta Platform Limited Q4 FY2024 earnings call

Key Points - 2024 fiscal year net revenue grew 13% to BRL 1,674 million, driven by successful ACV conversion and growth in B2G and complementary solutions. - Adjusted EBITDA for 2024 fiscal year grew 13% to BRL 580 million with a margin of 30.4%. - Cash flow generation was BRL 215 million, a 14% increase from 2023. - B2G segment generated BRL 105 million in revenue in 2024, a 29% increase. - Start Anglo Bilingual School franchise had 40 signed contracts and over 350 prospects in the pipeline as of 2024. - 2024 saw the completion of the Liceu Complex revitalization project with seven operational units. - Technology platform Plurall launched an intelligent assistant powered by AWS named Blue.

In the 2024 fiscal year, net revenue increased by 13% to BRL 1,674 million. Subscription revenue grew 14% to BRL 1,462 million, accounting for 87% of total revenue. Non-subscription revenue dropped 16% to BRL 107 million. The B2G business unit generated BRL 105 million in revenue, a 29% increase compared to 2023, representing 6% of overall revenue. For the fourth quarter of 2024, subscription revenue reached BRL 690 million, a 20% increase from the same quarter in 2023. Non-subscription revenue increased 12% to BRL 44 million, and the government segment generated BRL 36 million in revenues.

Forward-looking Statements - ACV growth in 2025 is expected to be at the same level as in the 2024 fiscal year. - EBITDA margin target is 30%, with a slight improvement anticipated due to fast growth and better sales mix. - Pará contract in B2G is around BRL 80 million, and there is an active pipeline in B2G. - Start Anglo is expected to see a significant increase in revenue in 2025 due to new unit operations and teaching material shipments for new opening units.

Risks - The credit scenario for non-premium brands business remains challenging, with PGA expected to be higher than the 3.2% in the quarter for the next month.

Q: So we saw a significant decrease in PDA expenses, as a percentage of net revenue in the quarter. So can you please comment the initiatives that latched this decrease? And also if we should consider this level as recurring for the next month, please?

A: We can't serve in this quarter our reduction of the PGA, achieving the 3.2%. However, despite having improving this indicator, we foresee a little difficult in the next month. So we cannot provide a guide for this number, but we expected something higher than this 3.2% Q: The first one, I wanted to ask about the ACV. Maybe I missed it, but I couldn't find. But I saw that, you increased the core students by some, I think, 12% and the complementary students by 22%, much more than you increased previous year. So could you give us a range or maybe a better view on what that could be, if possible? And the second question is regarding the margin outlook for 2025. I mean, in 2024, the margin was EBITDA, just the EBITDA margin was mostly relatively flattish, I think 10 basis points up. What could we expect for the coming year? Thank you very much.

A: ACV growth in the fourth quarter was [indiscernible] price increase and complementary products keep moving fast. So the same growth in 2004 is expected for 2015. -- keeping the same strategy of growing in complementary products and premium learning systems. Regarding margins, we are operating on the target of 30%. Every year, we expect to have slightly improvements due to the fast growth and dilution that it brings and the better sales mix. So we are already performing on our target level, and you can expect a slight increase Q: We understand that this line is virtually flat during the year. But when we exclude the effects of the contingencies reversal, we see a 20% year-on-year growth in the fourth quarter. Could you give us some color on what happened there, if we should expect higher G&A going forward, or if it's just a onetime expense?

A: Hi, Mirela. Thanks for your question. When we see SG&A -- when you see the G&A as a percentage of sales, we actually see pretty flat our G&A around 27%, 28% in terms of G&A. We did have a slight increase in the commercial expenses following the growth of revenues. In terms of percentage sales percentage, we grew on commercial expenses from 16.6% to 16.9%. Besides that, G&A remained flattish Q: The first is related to B2G. Do you expect the contract with Pará to be similar as last year as I think it was around BRL 70 million or BRL 80 million. And also, if you could provide some color on the pipeline of other products in B2G? And the second question is about Start Anglo -- like roughly how much revenue do you expect to generate in 2025, if it's material or not yet?

A: Lucas, thanks for your question. To give you some color about B2G, we renewed the Pará contract, which is around BRL 80 million. So this is so far the current contract that we are operating, we have a very heated pipeline in B2G. The prospection is lowered a little bit in January and February as the schools and the government is engaged in the back-to-school season. But now we do expect to have March and April, very heated season. Keep in mind that, this year is SAEB year, so we do have an examination of SAEB in October. And due to the results in Pará, we are bringing lots of discussions to the table, and we expect to have new contracts soon in the pipeline. Regarding Start Anglo, Start Anglo is a reality. We have around 1,000 students enrolled in our seven schools, 500 students out of the 1,000 are proprietary students in Liceu, Pasteur and São José do Rio Preto, the two flagships that we have. The remaining 500 students are franchise students. So in terms of revenues, we have around BRL 25 million of the entire operation of Start Anglo. It's not yet that significant, but in terms of growth for the coming cycle and also in Q4, when we make the shipments for the teaching material for the new opening units in 2025 that generate a significant increase in this business unit