Vasta Platform Ltd (VSTA) 2025 Q1 法說會逐字稿

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vasta Platform first-quarter 2025 financial results. (Operator Instructions)

Before we begin, I would like to read a forward-looking statement. During today's presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements.

Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance, expectations for future periods, our expectations regarding our strategic product initiatives, and the related benefit and our expectations regarding the market. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. These risks include those set forth in the press release and we are issuing today as well as those more fully described in our filings with the Securities and Exchange Commission.

The forward-looking statements in this presentation are based on the information available to us as of today. You should not rely on them as predictions of the future events, and we disclaim any obligation to update any forward-looking statements, except as required by law. In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS.

Thank you. And now, I would like to turn the call over to Cesar Silva, CFO. Please go ahead.

Good evening, everyone, and thank you for joining us in this conference call to discuss Vasta Platform's first quarter of 2025 results. I'm Cesar Silva, Vasta's CFO. And today, we have the presence of Guilherme Mélega, Vasta's CEO, who will be joining me on the call.

Let me now hand over the floor to Guilherme Mélega, our CEO, to make his opening statements.

Thank you, Cesar. Thank you, all, for participating in our earnings release call. I'd like to cover slide number 3 with some highlights of our 2025 sales cycle.

I'm pleased to share our progress and achievements made so far. This first quarter also represents halfway through the 2025 commercial cycle, which runs from October 2024 to September 2025.

In this quarter, we have continued delivering strong economic and financial results with a particularly highlight in our free cash flow. In the 2025 cycle to date, our net revenue increased by 11% to reach BRL1.129 billion. This growth was primarily driven by the successful conversion of our annual contract value, ACV into revenue and achieved BRL1.019 billion, a 17% increase compared to 2024 cycle to date. Complementary Solutions continue to present the highest growth rate among our business segments with a 24% expansion in the cycle to date compared to the same period last year.

Moving to the company's profitability. Our focus on operational efficiency and cost savings continued to bring results. Adjusted EBITDA for the 2025 cycle to date was BRL420 million with a margin of 37.2%. It has been an increase of 5% from BRL402 million performed in the last cycle. These gains were driven by a favorable sales mix, benefiting from the growth of our subscription products.

Finally, our cash flow generation was the main highlight of the quarter, totaling BRL144 million in the 2025 sales cycle, which represents 176% higher than the same period in 2024.

In the last 12 months, free cash flow to adjusted EBITDA conversion rate improved from 42.5% to 50.8%, reflecting our sustained efficiency measures. These measures include improvements in the collection process, such as process automation, reminders and past due notifications, customer segmentation, and faster renegotiation and of delayed receivables.

Additionally, we implemented several initiatives to achieve better discipline on the payment side, including rigorous financial planning, centralization of payments on a single monthly date and negotiating longer payment terms with suppliers.

In addition to the financial highlights, I would like to emphasize our continuous development of our technological platform, Plurall, which enables us to provide better service to our customers. Starting in 2026, our schools will use Plurall AI with many new tools, focusing on the concepts of inclusion, diversity, and equity in continuous education.

Plurall AI advances towards creating a welcoming educational environment for all students with the creation of an individualized education plan. The AI generates personalized pedagogical recommendations and assist teachers and schools in inclusive practice, providing an innovative solution to help educators transform challenges into opportunities for growth.

I will now turn back to Cesar Silva who will talk about the financial results of the quarter and the sales cycle to date.

Thank you, Mélega. In this slide number 4, we present the composition of Vasta's net revenue. On the left side, you can observe the organic year-on-year growth in the total net revenue for the first quarter, which decreased by 6.6%, reaching BRL430 million. Vasta subscription revenue achieved in the first quarter of 2025, BRL400 million, a 12% increase compared to the same quarter of 2024. Non-subscription decreased by 27% to BRL25 million as expected.

And in the Government segment, in this quarter, we generated BRL5 million revenues coming from five new contracts, compared to BRL69 million in the first quarter of 2024 when the totality of PARA contract first and second semester was booked all at once. In 2025 cycle, the first semester of PARA contract was booked in the fourth quarter of 2024 and second semester is expected to be performed throughout the year.

Moving to the right side, we analyzed the net revenue for the 2025 sales cycle to date. We achieved an organic net revenue growth of 11.3% in the 2025 sales cycle to date, amounting to BRL1.129 billion. The main factors for this performance were, firstly, the subscription revenue has increased 17%, reaching BRL1.019 billion and continues to be the major contributor to our total revenue, representing 90% of the revenue share. Non-subscription revenue dropped 6% to BRL69 million. And the net revenue of B2G reached BRL41 million, a decrease of 40% comparing to 2024 sales cycle.

Moving to slide number 5. In this quarter, our adjusted EBITDA amounted to BRL121 million with a margin of 28.2%, a decrease of 25% from BRL162 million in the first quarter of 2024, mainly due to a lower revenue volume in this quarter and a different product mix. On the right side, we see that adjusted EBITDA in 2025 sales cycle increased by 5% to reach BRL420 million with a margin of 37.2%.

Let's now move on to the next slide and explain the breakdown of the adjusted EBITDA margin. In this slide number 6, we can observe that the adjusted EBITDA margin achieved 37.2% in the 2025 sales cycle, 3.2 percentage points lower than the same period of 2024. Firstly, our gross margin achieved 63.7%, a decrease of 3.2 percentage points from 66.9% in 2024 sales cycle due to a lower revenue in the sales cycle and a different product mix.

Provisions for doubtful accounts, PDA, achieved 3% in relation to the net revenue and have an improvement of 1.2 percentage points when compared to 2024. Despite showing improvement in this indicator, the year has been performing very challenging and restrictive credit landscape for non-premium brands business, and we still foresee some challenges in the credit scenario for the next months.

As a percentage of net revenue, our commercial expenses increased by 1.2 percentage points, driven by higher expenses related to business expansion of the commercial cycle of 2025. And finally, adjusted G&A expenses improved by 0.8 percentage points, mainly driven by workforce optimization and budgetary discipline measures.

Moving to slide number 7, we show the adjusted net profit. In this first quarter of 2025, adjusted net profit totaled BRL26 million, a 49% increase compared to adjusted net profit of BRL50 million in the same quarter of 2024. On the right side of the slide, in 2025 sales cycle, adjusted net profit reached BRL140 million. That has been a decrease of 4.4% from adjusted net profit of BRL146 million in 2024 as a result of the topics commented before.

Moving to slide number 8, we show the free cash flow evolution. We continue to observe the growth of the company's cash flow generation. In the first quarter of 2025, the free cash flow totaled BRL74 million, representing a relevant increase comparing to BRL52 million in the same period of 2024. On the right side of this slide, in the 2025 sales cycle, our free cash flow reached BRL144 million, an increase of 176% from 2024. This quarter and the first semester of 2025 will benefit from early collections regarding 2025 sales cycle, which will be normalized throughout the year, together with the consistent efficient measures implemented in the collection process in the payment balance already detailed by Guilherme in his initial remarks.

On another metric, our last 12 months free cash flow to adjusted EBITDA conversion rate increased from 42.5% in 2024 sales cycle to 50.8% in 2025. Despite having an expressive results in the sales cycle to date, we expect to keep this conversion rate in the following quarters.

Moving to slide number 9, we show the provision for doubtful accounts. Total expenses with PDA in the first quarter of 2025 totaled BRL12 million, representing 2.9% of net revenue, the same level as comparable quarter.

Moving to the right side of the slide, the PDA for 2025 sales cycle amounted to BRL34 million compared to the BRL42 million in 2024. Provision for doubtful accounts represent 3% of net revenue in 2025 sales cycle, an improvement of 1.2 percentage points in comparison to 2024. As explained before, we still foresee some difficulty in the credit scenario, mainly for the school related to mainstream brands.

Moving to the next slide, we observed that the average payment terms of Vasta's accounts receivables portfolio was 188 days in the first quarter of 2025, which is eight days higher than the comparable quarter and in line with the business model seasonality.

Moving to slide number 11. Let's take a closer look at the net debt movement. In the first quarter of 2025, Vasta had a net debt position of BRL963 million, BRL40 million decrease from the previous quarter. This achievement is due to the positive cash flow generated during the period in the amount of BRL74 million, which surpassed the impact of interest accrual of BRL34 million.

Moving to the right side of the slide, the net debt position decreased by BRL77 million since last year. This decrease was driven also by the free cash flow generated in 2025 sales cycle, which was partially offset by financial interest costs.

I will conclude my part of this presentation with slide 12, explaining some more detail about our net debt composition, which represents BRL963 million at the end of the quarter. This amount is composed of BRL771 million on debentures issued to the parent company in addition to BRL449 million on accounts payable for business combinations, mainly related to [Eleva] acquisition, offset by BRL257 million in cash and cash equivalents that the company owned.

In the lower left of this slide, we can see that in the first quarter of 2025, the net debt to last 12 months adjusted EBITDA ratio has increased 0.09 times from the last quarter. This slight increase was expected and when compared to the fourth quarter of 2022 or the first quarter of 2024, the indicators shows up relevance downwards and now stands at 2.06 times. We would like to reinforce our commitment to continuing to generate free cash flow and deleverage the company.

Having said that, I finish our presentation and invite you all to the Q&A session.

(Operator Instructions) Jessica Mehler, JPMorgan.

Hello, good evening. Thank you for taking my question. Actually, I have two. So first, how do you see margins for 2025 comparing to 2024? This is my first question.

And second, what is the strategy in terms of mix? What is the expectations for the B2G business? How much this business can expand going forward?

Thank you, Jessica. I will take your questions. I will start with the margins. We expect stable margins for 2025. So we ended 2024 slightly above 30%. We forecast similar margins, although Q1 and Q2 will have lower margin due to some concentration in marketing spending and mix. We expect mix to catch up in Q2.

And now I will jump to the second question about strategy mix and B2G because it also compounds with the margins. So we have -- last year in 2024, we had a concentration in B2G because the PARA contract was entirely recognized in Q1. This contract this year on the sales side for 2025 was partially recognized in Q4 2024, and we expect to perform the remaining of the contract in Q2 and Q3.

Additionally, we already noticed new contracts in B2G, where we have five new contracts in Q1, and we have definitely more contracts to pile up in Q2. So this will enhance mix in terms of segment mix.

In terms of B2B product mix, we expect to be very similar to last year with complementary products growing high double digits, actually above 20% and core content in double digits. That's what we expected, and we expect it to have similar margins in 2025.

(Operator Instructions) Lucas Nagano, Morgan Stanley.

Hi, good evening. Thanks for taking my question. I have just one, and it's related to the B2G. You mentioned that part of the contract was booked last year. So do you expect a lower B2G revenue this year, or should there be a seasonality? The seasonality of the PARA contract should be kind of the same in which part of it is booked on the fourth quarter of the previous year. Just a question to assess the potential growth of B2G this year.

Thank you very much, Lucas. I really would like to have more data to have a confident seasonality in terms of B2G. But this year, I would say that, for instance, in PARA, we are having a more normal seasonality because first semester should be recognized in late Q4. So when we start classes in January and February, you already have the material. So it's quite similar to the B2B distribution process. So we expect to have the same distribution in 2025. So we do not expect any difference in terms of fiscal year on 2025.

Additionally, we have a very heated pipeline. We have -- we are prospecting several new contracts that will pile up in the contracts that we already signed. So we expect growth in the B2G. We will not give a guidance about that, but we are working to have it a sound growth for 2025.

And there are no further questions at this time. I will now turn the conference back over to Mr. Guilherme Mélega, our CEO, for closing remarks.

Thank you all very much for participating in the Vasta Platform Q1 conference call. We are very happy with the beginning of the year with the ACV recognition, with the start of sales campaign of ACV for 2026.

We just finalized the [Betia do Car Fair] last week that generated a significant pipeline for us in B2B and B2G. So both segments with heated pipeline.

And additionally to that, we already see very positive signs in free cash flow that we will remain -- perform positively throughout the year. So thank you very much. Looking forward to see you on our Q2 earnings release call. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.