Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or
the “Company,” announces today its financial and operating results
for the second quarter of 2021 (2Q21) ended June 30, 2021.
Financial results are expressed in Brazilian Reais and are
presented in accordance with International Financial Reporting
Standards (IFRS).
HIGHLIGHTS
- In the second
quarter, net revenue expanded 17% versus the same quarter of 2020,
owing to the growth in 2021 annual contract value (ACV) and revenue
from non-subscription products. Net revenue from subscription
products increased 12% in the quarter.
- In the 2021
commercial cycle to date (4Q20-2Q21), subscription revenue ex-PAR
increased 18%, while PAR, which revenue is concentrated in the two
first quarters of the cycle (4Q and 1Q), was down 15% due to the
higher re-use of textbooks. Within subscription revenue, we
highlight the strength of complementary solutions, up 51% in the
cycle. Despite all the challenges brought by the Covid-19 pandemic,
we expect to record a low-double-digit organic growth in the
subscription revenue ex-PAR in the 2021 cycle (from 4Q20 to
3Q21).
- Adjusted EBITDA
was negative in R$ 17 million in 2Q21, mostly driven by the
unfavorable revenue seasonality of the second quarter, also
affected by higher provision for doubtful accounts (PDA) and by the
enhancement in our corporate structure following the IPO in July
2020.
- The higher PDA
reflects our conservatism in provisioning standards, amidst a
difficult period for some of our partner schools and the textbook
distribution channel (R$ 8.6 million is attributable to Covid-19
effects in 2Q21). Since the beginning of the pandemic, we have
opted to support our partners by extending payment terms instead of
granting discounts.
- Vasta recorded
adjusted net loss of R$ 25 million in the quarter. In the cycle,
Vasta posted adjusted net profit of R$ 124 million, 29% up
year-on-year.
- On July 29,
Vasta appointed Estela Maris Vieira de Souza to the board of
directors as an independent member and as chairwoman of the audit
committee. She will fill the vacancy in the board of directors and
audit committee due to the passing of Francisco Henrique Passos
Fernandes. We welcome Ms. Vieira and we believe that her vast
experience in business and accounting matters will be a great fit
to our board of directors.
- On August 6,
Vasta’s subsidiary Somos Sistemas de Ensino S.A. issued R$ 500
million in simple debentures, not convertible into shares, subject
to compensatory interest of 100% of the DI Interbank Deposit rate
(CDI), plus a spread of 2.30% per year. The debentures are aimed at
reinforcing the company’s capital structure and elongating the debt
maturity profile, which average maturity now stands at 29
months.
- Today, we
announce the acquisition of EMME – Produções de Materiais em
Multimidia (EMME), which provides educational marketing solutions
for schools, through a license of its “software as a service”
platform. Founded in 2005, EMME has provided services to over 1,500
schools. EMME expects to record net revenue of R$ 7.6 million in
2021.
- Vasta’s board of
directors approved its first share repurchase program through which
it may repurchase up to 1,000,000 Class A common shares in the open
market, based on prevailing market prices, or in privately
negotiated transactions, over a period beginning on August 17,
2021, continuing until the earlier of the completion of the
repurchase or February 17, 2022, depending upon market
conditions.
MESSAGE FROM MANAGEMENT
During the second quarter, we continued to
withstand the adverse effects that the second wave of Covid-19
caused to our business, particularly the lower-than-expected number
of students enrolled at our partner schools and the greater volume
of reuse and purchase of second-hand textbooks. Even with these
challenges, we expect to record a high-single-digit organic growth
in the subscription revenue in the 2021 commercial cycle (from 4Q20
to 3Q21), lower than the reported 2021 ACV growth due to higher
reuse of textbooks in PAR, student migration to public schools and
student dropout at the early years level. Excluding PAR, we expect
to record a low-double-digit organic growth in the subscription
revenue, with the sound increase in complementary solutions (+51%
to date) as the main highlight.
Despite the challenging 2021, we see reasons to
believe that the worst may be behind us. The rapid advance of
vaccination in the main capitals of the country could favor the
return of kids to school in 2022. Indeed, we have noticed increased
activity in our partner schools recently, which has favored the
current sales cycle for the 2022 school year. The successful
go-to-market strategy that led us to deliver 23% 2021 ACV growth
and 8% expansion in our school partners base is still in place and
continues to bear promising intake results, now underscored by
top-notch results of our students in the most-competitive
university admission tests in the country. Our Plurall platform
remains as the absolute leader in terms of web traffic, and will be
even stronger for the 2022 sales cycle, with the launch of several
new features. Lastly, we expect to add Eleva Plataforma de Ensino
to our platform by the end of the year once we have the approval of
Brazil’s Administrative Council for Economic Defense (CADE).
As we have already commented in previous
quarters, we have continually expanded the range of digital
solutions, either via complementary solutions offered through
Plurall Store or by the recently launched Plurall My Teacher, our
private classes platform. In the core education, we have launched
the Fibonacci Learning System, in partnership with Colegio
Fibonacci, a top-10 ranked school in Brazil’s National High School
Test (ENEM). Within complementary solutions, we added essay review
services through Redação Nota 1000, which may be embedded with the
core product in premium brands or offered to our base of more than
4,500 partner schools. Still in this area, we proudly announce that
we expanded our agreement with Macmillan for the development of a
full bilingual educational platform, in complement to our existing
offer of English products; this platform will be available from the
2023 sales cycle on.
Finally, our digital services platform begins to
take shape with the launch of Somos Integra, a digital tool for
connecting kindergarten schools and our partner schools, and the
offering of marketing services provided by EMME, our newest
acquisition. Founded in 2005, EMME has provided educational
marketing solutions for more than 1,500 schools, and its business
model is based on a monthly fee in which the clients contract a
service package of custom advertising materials and marketing
products. In addition to aggregating a digital solution and
bringing in new clients, EMME will also improve the student
acquisition and retaining process for the partner schools,
supporting the Vasta’s portfolio growth. EMME expects to record net
revenue of R$ 7.6 million in 2021.
These examples underscore our platform’s
potential to continue expanding through a crescent number of
solutions to our clients, ultimately increasing client loyalty and
enhancing our long-term growth potential.
ESG HIGHLIGHTS
We take the opportunity of Ms. Vieira appointment to Vasta’s
board of directors and audit committee to present a few highlights
of our strong commitment with ESG standards:
- With Ms. Vieira
appointment, our board of directors is complete again, with three
independent members (43% of total): Andres Cardo, Ann Williams, and
Estela Vieira.
- Two of our board
members are women (28% of total), enabling Vasta to earn the Women
on Board (WOB) certification. 49% of leadership positions in Vasta
that are occupied by woman.
- As per our
by-laws, any related-party transactions must be exclusively
approved by an independent committee, which is formed by our three
independent board members.
- Vasta is
accredited by the Forest Stewardship Council (FSC), a globally
recognized commitment with sustainable practices within the paper
chain. We require that 100% of our supplies also possess this
certification.
- We buy energy in
the free market from renewable sources like small hydro power
plants, biomass, wind and solar.
- 100% of the
waste generated in our distribution center is correctly
treated.
- Our corporate
headquarters have the Leadership in Energy and Environmental Design
(LEED) Silver certificate.
- Somos Institute
is a non-profit organization that promotes social impact programs
in favor of education. Among its main initiatives, it has supported
more than 1,000 students from 6 low-income preparatory courses in
2020, in partnership with Curso Anglo, having 172 students admitted
in public universities. Among these courses, we highlight Fera, a
free preparatory course for low-income students sponsored by Curso
Anglo, which has benefitted more than 800 students.
- Another key
social initiative is Somos Futuro, a program that has supported
more than 500 talented low-income students that came from public
schools, providing integral high-school scholarship, didactic
materials, online tutorship, mentorship, and psychological support.
In 2020, a first group of 78 students concluded the high school,
with 22 admitted in public universities so far. More than
6,000 hours of mentoring were offered to this group of students by
Somos employees.
- More than R$ 10
million in products and services were offered to the community in
the context of Covid-19, benefitting more than 94 thousand people
directly.
OPERATING PERFORMANCE
Student Base – Subscription Models
|
|
2021 Cycle |
|
2020 Cycle |
|
% Y/Y |
Partner Schools of Core Content |
|
4,508 |
|
4,167 |
|
8.2 |
% |
Partner
Schools of Complementary Solutions |
|
1,114 |
|
636 |
|
75.2 |
% |
Students of Core Content |
|
1,335,152 |
|
1,311,147 |
|
1.8 |
% |
Students of Complementary Solutions |
|
307,941 |
|
213,058 |
|
44.5 |
% |
As we complete the devolution period in the
second quarter, we update the actual number of partner schools and
students that are served by our products. Even with lower numbers
than expected at the ACV formation, our base of partner schools and
students using our core content solutions increased 8% and 2%,
respectively. In complementary solutions, the increases are still
impressive, with 75% more client schools and 45% more associated
students.
FINANCIAL PERFORMANCE
Net Revenue
Values in R$ '000 |
|
2Q21 |
|
2Q20 |
|
% Y/Y |
|
2021 Cycle |
|
2020 Cycle |
|
% Y/Y |
Subscription |
|
117,280 |
|
104,552 |
|
12.2 |
% |
|
644,501 |
|
586,075 |
|
10.0 |
% |
Subscription ex-PAR |
|
111,908 |
|
100,264 |
|
11.6 |
% |
|
522,436 |
|
442,680 |
|
18.0 |
% |
Traditional Learning Systems |
|
108,623 |
|
99,044 |
|
9.7 |
% |
|
459,085 |
|
400,784 |
|
14.5 |
% |
Complementary Solutions |
|
3,285 |
|
1,220 |
|
169.3 |
% |
|
63,350 |
|
41,896 |
|
51.2 |
% |
PAR |
|
5,372 |
|
4,288 |
|
25.3 |
% |
|
122,065 |
|
143,395 |
|
-14.9 |
% |
Non-subscription |
|
23,856 |
|
15,681 |
|
52.1 |
% |
|
121,028 |
|
289,424 |
|
-58.2 |
% |
Total
Net Revenue |
|
141,136 |
|
120,233 |
|
17.4 |
% |
|
765,529 |
|
875,499 |
|
-12.6 |
% |
In the second quarter, net revenue expanded 17%
versus the same quarter of 2020, owing to the growth in the 2021
ACV and non-subscription products. In the 2021 cycle to date (4Q20
to 2Q21, the “cycle”), subscription revenue ex-PAR increased 18%,
while PAR, which revenue is concentrated in the two first quarters
of the cycle (4Q and 1Q), was down 15% due to the higher re-use of
textbooks. Within subscription revenue, we highlight the strength
of complementary solutions, up 51% in the cycle. In the cycle to
date, we recognized nearly 76% of the 2021 ACV. Non-subscription
revenue decreased 58% in the cycle, reflecting the impacts of the
pandemic in the purchase of textbooks during the 2021
back-to-school period, in addition to the migration of former
non-subscription clients to our subscription products, leading to
the 13% total net revenue decline in the same period.
Adjusted EBITDA
Values in R$ '000 |
|
2Q21 |
|
2Q20 |
|
% Y/Y |
|
2021 Cycle |
|
2020 Cycle |
|
% Y/Y |
Net (loss) profit |
|
(62,197) |
|
(54,938) |
|
n.m. |
|
(45,466) |
|
|
13,014 |
|
|
n.m. |
(+) Income tax and social contribution |
|
(29,266) |
|
(27,696) |
|
n.m. |
|
(21,285) |
|
|
5,157 |
|
|
n.m. |
(+) Net financial result |
|
14,975 |
|
28,294 |
|
-47.1% |
|
40,833 |
|
|
109,674 |
|
|
-62.8% |
(+) Depreciation and amortization |
|
50,314 |
|
43,534 |
|
15.6% |
|
143,853 |
|
|
119,185 |
|
|
20.7% |
EBITDA |
|
(26,174) |
|
(10,806) |
|
n.m. |
|
117,936 |
|
|
258,432 |
|
|
-54.4% |
EBITDA Margin |
|
-18.5% |
|
-9.0% |
|
(9.6) |
|
15.4% |
|
|
29.5% |
|
|
(14.1) |
(+) Non-recurring expenses |
|
785 |
|
8,300 |
|
-90.5% |
|
11,236 |
|
|
8,300 |
|
|
35.4% |
(+) IPO-related expenses |
|
- |
|
- |
|
n.m. |
|
50,580 |
|
|
- |
|
|
n.m. |
(+) Share-based compensation plan |
|
8,182 |
|
900 |
|
n.m. |
|
22,629 |
|
|
2,180 |
|
|
938.0% |
Adjusted EBITDA |
|
(17,207) |
|
(1,606) |
|
n.m. |
|
202,381 |
|
|
268,912 |
|
|
-24.7% |
Adjusted EBITDA Margin |
|
-12.2% |
|
-1.3% |
|
(10.9) |
|
26.4% |
|
|
30.7% |
|
|
(4.3) |
Note: n.m.: not meaningful
Adjusted EBITDA was negative in R$ 17 million in
2Q21, mostly driven by the unfavorable revenue seasonality of the
second quarter. Additionally, our operating performance was
adversely affected by higher provision for doubtful accounts (PDA)
incurred in the quarter, by the enhancement in our corporate
structure following the company’s IPO in July 2020, while 2Q20 had
been helped by savings of R$ 5.3 million in personnel expenses
captured from reduced work journeys allowed by the provisional
measure 936. Regarding the PDA increase, we estimate that nearly R$
8.6 million is related to effects originated by the Covid-19 (R$
14.5 million in the cycle). In the cycle, our adjusted EBITDA
totaled R$ 202 million, a drop of 25%, driven by the net revenue
decline of 13% and by the adverse effects previously mentioned.
Adjusted net income
Values in R$ '000 |
|
2Q21 |
|
2Q20 |
|
% Y/Y |
|
2021 Cycle |
|
2020 Cycle |
|
% Y/Y |
(Loss) Profit before taxes |
|
(62,197) |
|
|
(54,938) |
|
|
n.m. |
|
|
(45,466) |
|
|
13,014 |
|
|
n.m. |
|
(-)
Taxes paid |
|
(1,167) |
|
|
- |
|
|
n.m. |
|
|
(1,167) |
|
|
(4,611) |
|
|
n.m. |
|
(+)
Non-recurring expenses |
|
785 |
|
|
8,300 |
|
|
-90.5% |
|
|
11,236 |
|
|
8,300 |
|
|
35.4% |
|
(+)
Share-based compensation plan |
|
8,182 |
|
|
900 |
|
|
809.1% |
|
|
22,629 |
|
|
2,180 |
|
|
938.0% |
|
(+) Provision for risks of tax, civil and labor losses |
|
- |
|
|
- |
|
|
0.0% |
|
|
- |
|
|
922 |
|
|
n.m. |
|
(+) IPO-related expenses |
|
- |
|
|
- |
|
|
0.0% |
|
|
50,580 |
|
|
- |
|
|
n.m. |
|
(+) Amortization of intangible assets(1) |
|
29,216 |
|
|
25,808 |
|
|
13.2% |
|
|
85,807 |
|
|
75,717 |
|
|
13.3% |
|
Adjusted net (loss) profit |
|
(25,181) |
|
|
(19,930) |
|
|
n.m. |
|
|
123,619 |
|
|
95,522 |
|
|
29.4% |
|
(1) From business combinations. Note: n.m.: not meaningful
Adjusted net loss totaled R$ 25 million in 2Q21.
In the cycle, Vasta posted adjusted net profit of R$ 124 million,
29% up year-on-year.
Accounts receivable and provision for doubtful
accounts
Values in R$ '000 |
|
2Q21 |
|
2Q20 |
|
% Y/Y |
|
1Q21 |
|
% Q/Q |
Gross accounts receivable |
|
336,958 |
|
|
368,962 |
|
|
-8.7% |
|
|
517,478 |
|
|
-34.9% |
|
Provision for doubtful accounts (PDA) |
|
(37,898) |
|
|
(30,715) |
|
|
23.4% |
|
|
(30,986) |
|
|
22.3% |
|
Coverage index |
|
11.2% |
|
|
8.3% |
|
|
2.9 |
|
|
6.0% |
|
|
5.3 |
|
Net
accounts receivable |
|
299,060 |
|
|
338,247 |
|
|
-11.6% |
|
|
486,492 |
|
|
-38.5% |
|
Average
days of accounts receivable(1) |
|
119 |
|
|
120 |
|
|
(1) |
|
|
198 |
|
|
(79) |
|
(1) Balance of net accounts receivable divided by the
last-twelve-month net revenue, multiplied by 360.
The greater amount of provision for doubtful
accounts (PDA) recognized in the 2Q21 reflects our conservatism in
our provisioning standards. Consequently, the coverage index
increased to 11.2% in 2Q21 from 8.3% in 2Q20, while the average
days of receivable stayed flat in the yearly comparison, at 119
days.
Since the beginning of the pandemic, our
approach to credit issues faced by our school partners have been to
extend payment terms instead of granting discounts. With the
expected normalization of school activities in the upcoming school
year, we expect a normalization in the payment cycle of this client
segment in 2022. The textbook distribution channel has also been
hurt by the rapid deterioration in sales, causing some of our
clients to fall back in payments. Our commercial strategy for the
2022 sales cycle has been to foster even more the migration from
textbooks to learning systems and to PAR Digital platform;
therefore, we expect to reduce our exposure to the textbook
distribution channel in the next business cycles.
Financial leverage
Vasta ended the 2Q21 with a net debt position of
R$155 million, 0.7x the adjusted EBITDA of last twelve months.
Values in R$ '000 |
|
2Q21 |
|
1Q21 |
|
4Q20 |
|
3Q20 |
|
Financial debt |
|
505,951 |
|
687,203 |
|
793,341 |
|
787,131 |
|
|
Accounts payable from business combinations |
|
65,201 |
|
62,973 |
|
48,055 |
|
43,550 |
|
|
Total
debt |
|
571,152 |
|
750,176 |
|
841,396 |
|
830,681 |
|
|
Cash
and cash equivalents |
|
335,098 |
|
415,093 |
|
311,156 |
|
1,024,998 |
|
|
Marketable securities |
|
81,090 |
|
259,581 |
|
491,102 |
|
- |
|
|
Net
debt |
|
154,964 |
|
75,502 |
|
39,138 |
|
(194,317) |
|
|
Net
debt/LTM adjusted EBITDA |
|
0.72 |
|
0.33 |
|
0.14 |
|
(0.72) |
|
|
CONFERENCE CALL INFORMATION
Vasta will discuss its second quarter 2021
results on August 13, 2021, via a conference call at 11:00 a.m.
Eastern Time. To access the call (ID: 3386226), please dial: +1
(833) 519-1336 or (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, Free Cash Flow and Adjusted Cash Conversion Ratio, Adjusted
Net (Loss) profit are information for the convenience of investors.
EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash
Conversion Ratio are 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 profit (loss) 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) 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 (a) to the Consolidated Financial
Statements); (b) Bonus IPO expenses, share based payments offered
to certain employees and executives as result of IPO process and
(c) other non-recurring expenses composed substantially by
restructuring provisions. 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 Free Cash Flow as the net cash
flows from operating activities as presented in the statement of
cash flows of our financial statements adjusted by debt-like
instruments (reverse factoring instruments) less cash flows
required for: (i) acquisition of property, plant and equipment;
(ii) addition to intangible assets; and (iii) acquisition of
subsidiaries. We consider Free Cash Flow to be a liquidity measure,
therefore, we adjust our Free Cash Flow metric with amounts that
directly impacted the cash flows in the period in addition to the
operating activities. The Free Cash Flow measure provides useful
information to management and investors about the amount of cash
generated by our operations, deducting for investments in property
and equipment to maintain and grow our business.
We calculate Adjusted Cash Conversion Ratio as
the cash flows from operating activities divided by Adjusted EBITDA
for the relevant period.
We calculate Adjusted net (loss) profit as the
net (loss) profit from the period as presented in Statement of
Profit or Loss and Other Comprehensive Income adjusted by the same
Adjusted EBTDA items, however, added by (a) Amortization of
intangible assets from M&A, that included goodwill and other
assets and (b) taxes paid composed by cash effect over Income tax
and social contribution expenses.
We understand that, although Adjusted net (loss)
profit, EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash
Conversion Ratio 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, Free Cash Flow and Adjusted Cash
Conversion Ratio 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 |
|
June 30, 2021 |
|
December 31, 2020 |
|
|
|
|
|
Current
assets |
|
|
|
|
Cash and cash equivalents |
|
335,098 |
|
311,156 |
Marketable securities |
|
81,090 |
|
491,102 |
Trade receivables |
|
299,060 |
|
492,234 |
Inventories |
|
249,451 |
|
249,632 |
Taxes recoverable |
|
18,858 |
|
18,871 |
Income tax and social
contribution recoverable |
|
10,297 |
|
7,594 |
Prepayments |
|
29,071 |
|
27,461 |
Other receivables |
|
1,443 |
|
124 |
Related parties – other
receivables |
|
1,118 |
|
2,070 |
Total current
assets |
|
1,025,486 |
|
1,600,244 |
|
|
|
|
|
Non-current
assets |
|
|
|
|
Judicial deposits and escrow
accounts |
|
173,377 |
|
172,748 |
Deferred income tax and social
contribution |
|
116,309 |
|
88,546 |
Property and equipment |
|
192,160 |
|
192,006 |
Intangible assets and
goodwill |
|
4,939,253 |
|
4,924,726 |
Total non-current
assets |
|
5,421,099 |
|
5,378,026 |
|
|
|
|
|
Total
Assets |
|
6,446,585 |
|
6,978,270 |
Consolidated Statements of Financial
Position (continued)
Liabilities |
|
June 30, 2021 |
|
December 31, 2020 |
|
|
|
|
|
Current
liabilities |
|
|
|
|
Bonds and financing |
|
199,405 |
|
|
502,882 |
|
Lease liabilities |
|
21,732 |
|
|
18,263 |
|
Suppliers |
|
195,165 |
|
|
279,454 |
|
Income tax and social
contribution payable |
|
- |
|
|
1,761 |
|
Salaries and social
contributions |
|
76,666 |
|
|
69,123 |
|
Contract liabilities and
deferred income |
|
30,678 |
|
|
47,169 |
|
Accounts payable for business
combination |
|
18,348 |
|
|
17,132 |
|
Other liabilities |
|
6,362 |
|
|
4,285 |
|
Other liabilities - related
parties |
|
33,862 |
|
|
135,307 |
|
Loans from related
parties |
|
- |
|
|
20,884 |
|
Total current
liabilities |
|
582,218 |
|
|
1,096,260 |
|
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
Bonds and financing |
|
306,546 |
|
|
290,459 |
|
Lease liabilities |
|
152,634 |
|
|
154,840 |
|
Accounts payable for business
combination |
|
46,853 |
|
|
30,923 |
|
Provision for tax, civil and
labor losses |
|
623,283 |
|
|
613,933 |
|
Contract liabilities and
deferred income |
|
5,227 |
|
|
6,538 |
|
Total non-current
liabilities |
|
1,134,543 |
|
|
1,096,693 |
|
|
|
|
|
|
Shareholder’s Equity /
Parent Company's Net investment |
|
|
|
|
Share capital |
|
4,820,815 |
|
|
4,820,815 |
|
Capital reserve |
|
51,183 |
|
|
38,962 |
|
Accumulated losses |
|
(142,174 |
) |
|
(74,460 |
) |
Total Shareholder's
Equity |
|
4,729,824 |
|
|
4,785,317 |
|
|
|
|
|
|
Total Liabilities and
Shareholder's Equity |
|
6,446,585 |
|
|
6,978,270 |
|
Consolidated Income
Statement
|
|
Apr 01, to Jun 30, 2021 |
|
Jan 01, to Jun 30, 2021 |
|
Apr 01, to Jun 30, 2020 |
|
Jan 01, to Jun 30, 2020 |
|
|
|
|
|
|
|
|
|
Net revenue from sales
and services |
|
141,135 |
|
|
421,967 |
|
|
120,233 |
|
|
512,651 |
|
Sales |
|
127,688 |
|
|
402,572 |
|
|
111,625 |
|
|
500,713 |
|
Services |
|
13,447 |
|
|
19,395 |
|
|
8,608 |
|
|
11,938 |
|
|
|
|
|
|
|
|
|
|
Cost of goods sold and
services |
|
(67,547 |
) |
|
(181,529 |
) |
|
(48,422 |
) |
|
(215,755 |
) |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
73,588 |
|
|
240,438 |
|
|
71,811 |
|
|
296,896 |
|
|
|
|
|
|
|
|
|
|
Operating income
(expenses) |
|
|
|
|
|
|
|
|
General and administrative
expenses |
|
(97,930 |
) |
|
(207,806 |
) |
|
(83,260 |
) |
|
(182,294 |
) |
Commercial expenses |
|
(35,584 |
) |
|
(85,093 |
) |
|
(42,803 |
) |
|
(80,596 |
) |
Other operating income
(expenses) |
|
(963 |
) |
|
1,504 |
|
|
1,176 |
|
|
1,988 |
|
Impairment losses on trade
receivables |
|
(15,599 |
) |
|
(18,208 |
) |
|
(1,264 |
) |
|
(11,583 |
) |
|
|
|
|
|
|
|
|
|
(Loss) Profit before
finance result and taxes |
|
(76,488 |
) |
|
(69,165 |
) |
|
(54,340 |
) |
|
24,411 |
|
|
|
|
|
|
|
|
|
|
Finance income |
|
5,798 |
|
|
11,261 |
|
|
3,567 |
|
|
8,637 |
|
Finance costs |
|
(20,773 |
) |
|
(40,488 |
) |
|
(31,861 |
) |
|
(76,545 |
) |
Finance
result |
|
(14,975 |
) |
|
(29,227 |
) |
|
(28,294 |
) |
|
(67,908 |
) |
|
|
|
|
|
|
|
|
|
(Loss) Profit before
income tax and social contribution |
|
(91,463 |
) |
|
(98,392 |
) |
|
(82,634 |
) |
|
(43,497 |
) |
|
|
|
|
|
|
|
|
|
Income tax and social
contribution |
|
29,266 |
|
|
30,678 |
|
|
27,696 |
|
|
16,204 |
|
|
|
|
|
|
|
|
|
|
Net (loss) profit for
the period |
|
(62,197 |
) |
|
(67,714 |
) |
|
(54,938 |
) |
|
(27,293 |
) |
|
|
|
|
|
|
|
|
|
Total comprehensive
(loss) profit for the period |
|
(62,197 |
) |
|
(67,714 |
) |
|
(54,938 |
) |
|
(27,293 |
) |
Earning (Loss) per
share |
|
|
|
|
|
|
|
|
Basic |
|
(0.75 |
) |
|
(0.82 |
) |
|
(0.66 |
) |
|
(0.33 |
) |
Diluted |
|
(0.74 |
) |
|
(0.81 |
) |
|
(0.66 |
) |
|
(0.33 |
) |
Consolidated Statement of Cash
Flows
|
|
For the six months ended June 30 |
|
|
2021 |
|
2020 |
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES |
|
|
|
|
Loss before income tax and
social contribution |
|
(98,392 |
) |
|
(43,497 |
) |
Adjustments
for: |
|
|
|
|
Depreciation and
amortization |
|
98,899 |
|
|
85,618 |
|
Impairment losses on trade
receivables |
|
18,208 |
|
|
6,546 |
|
Provision for tax, civil and
labor risks |
|
(849 |
) |
|
(4,331 |
) |
Interest on provision for tax,
civil and labor losses |
|
10,275 |
|
|
10,564 |
|
Provision for obsolete
inventories |
|
8,647 |
|
|
1,985 |
|
Interest on bonds and
financing |
|
12,940 |
|
|
39,414 |
|
Refund liability and right to
returned goods |
|
3,802 |
|
|
(2,256 |
) |
Imputed interest on
suppliers |
|
2,783 |
|
|
3,379 |
|
Interest on accounts payable
for business combination |
|
(623 |
) |
|
39 |
|
Share-based payment
expense |
|
12,221 |
|
|
1,629 |
|
Interest on lease
liabilities |
|
8,060 |
|
|
7,592 |
|
Interest on marketable
securities incurred and not withdrawed |
|
(8,077 |
) |
|
- |
|
Disposals of right of use
assets and lease liabilities |
|
- |
|
|
(705 |
) |
Residual value of disposals of
property and equipment and intangible assets |
|
76 |
|
|
1,415 |
|
|
|
|
|
|
Changes
in |
|
|
|
|
Trade receivables |
|
176,293 |
|
|
49,044 |
|
Inventories |
|
(10,831 |
) |
|
3,670 |
|
Prepayments |
|
(1,610 |
) |
|
(24,881 |
) |
Taxes recoverable |
|
(2,690 |
) |
|
10,192 |
|
Judicial deposits and escrow
accounts |
|
(629 |
) |
|
1,829 |
|
Other receivables |
|
(918 |
) |
|
4,325 |
|
Suppliers |
|
(87,072 |
) |
|
(70,348 |
) |
Salaries and social
charges |
|
7,418 |
|
|
2,231 |
|
Tax payable/Income taxes and
social contribution |
|
2,064 |
|
|
7,218 |
|
Contract liabilities and
deferred income |
|
(19,239 |
) |
|
399 |
|
Other receivables and
liabilities from related parties |
|
(94,125 |
) |
|
129,959 |
|
Other liabilities |
|
(772 |
) |
|
7,840 |
|
Cash from operating
activities |
|
35,859 |
|
|
228,870 |
|
|
|
|
|
|
Income tax and social
contribution paid |
|
(1,167 |
) |
|
(5,234 |
) |
Interest lease liabilities
paid |
|
(8,022 |
) |
|
(7,616 |
) |
Payment of interest on bonds
and financing |
|
(12,243 |
) |
|
(17,576 |
) |
Payment of provision for tax,
civil and labor losses |
|
(76 |
) |
|
(6,779 |
) |
Net cash from
operating activities |
|
176,293 |
|
|
49,044 |
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES |
|
|
|
|
Acquisition of property and
equipment |
|
(6,344 |
) |
|
(2,166 |
) |
Additions to intangible
assets |
|
(19,468 |
) |
|
(25,701 |
) |
Acquisition of subsidiaries
net of cash acquired and payments of business combinations |
|
(40,231 |
) |
|
(23,526 |
) |
Realization of investment in
marketable securities |
|
418,089 |
|
|
- |
|
Net cash applied in
investing activities |
|
352,046 |
|
|
(51,393 |
) |
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES |
|
|
|
|
Suppliers - related
parties |
|
(6,368 |
) |
|
(44,112 |
) |
Loans from related
parties |
|
- |
|
|
65,600 |
|
Payments of loans from related
parties |
|
(20,884 |
) |
|
(29,092 |
) |
Lease liabilities paid |
|
(10,359 |
) |
|
(5,797 |
) |
Parent Company's Net
Investment |
|
- |
|
|
12,252 |
|
Payments of bonds and
financing |
|
(288,087 |
) |
|
- |
|
Payments of accounts payable
for business combination |
|
(16,757 |
) |
|
- |
|
Net cash applied in
financing activities |
|
(342,455 |
) |
|
(1,149 |
) |
|
|
|
|
|
NET INCREASE IN CASH
AND CASH EQUIVALENTS |
|
23,942 |
|
|
139,123 |
|
|
|
|
|
|
Cash and cash equivalents at
beginning of period |
|
311,156 |
|
|
43,287 |
|
Cash and cash equivalents at
end of period |
|
335,098 |
|
|
182,410 |
|
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