Vitru Ltd (VTRU) 2022 Q4 法說會逐字稿

Good evening, everyone. Thank you for waiting, and welcome to Vitru's Fourth Quarter and Full Year 2022 Earnings Conference Call. We advise you that the video conference is being recorded, and it will be available in Vitru's Investor Relations website where the complete material of our earnings call can be found. You can also download the presentation from the chat icon. (Operator Instructions)

We emphasize that the information contained in this presentation and any statements that may be made during the earnings call regarding Vitru's business prospects, projections and operational and financial goals constitute the beliefs and assumptions of the company's management as well as information currently available. Forward considerations are not performance guarantees. They involve risks, uncertainties and assumptions, and they refer to future events and, therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect Vitru's performance and lead to the results to differ materially from those expressed in such forward-looking statements.

Today, we have the presence of the company's executives, Pedro Graca; William Matos, Vitru's Co-CEOs; Carlos Freitas, Vitru's CFO and IRO; and Guilherme Franco, VP of Marketing.

I will now give the floor to Carlos Freitas. Sir, you may begin.

Thank you, Operator.

Sorry. Let's go again. Thanks, everybody, and good afternoon, everyone. Thanks for joining us here again. It's a pleasure to be here with you all for the release of our fourth quarter results of last year as well as the full year results.

Here with me, I have Pedro Graca and William Matos, the Co-CEOs of Vitru; Guilherme Franco, our VP of Marketing and Sales. Maria Carolina Goncalves, the Head of IR; and Raquel Suzaki; [Henry Felipe Da Silva] also from our IR Department.

A slide presentation will be part of today's webcast, which is available, as you know, in our IR website at investors.vitru.com.br. I trust you all have in front of you this presentation for those that are not following our webcast here live with Zoom.

So before I begin, just as a quick reminder, Safe Harbor is in effect for this call. So now I invite you all to follow me here through this presentation in Page 4, which is here, which brings the main highlights of the last month.

The first one is the closing, as you remember, of the primary capital increase of around BRL 400 million, both from Crescera Capital -- or mostly from Crescera Capital, but also the issuance of new common shares that we made pursuant to a rights offering that was executed throughout October and November of last year. So with that, we reinforced our capital structure.

Second key highlight was the price adjustment in our business combination with UniCesumar, which resulted in a reduction in the price of around BRL 73 million that was part of the share purchase agreement with UniCesumar. It was part of the deal that we would evaluate changes in the balance sheet of Cesumar between the reference balance sheet and the closing balance sheet, which was in May of last year. So with that, we reduced the amount to be paid in around BRL 73 million.

And the third key highlight is clearly the advancement of the integration plan between Vitru and Cesumar, which is being executed ahead, in fact, of schedule with overdelivery of the promised synergies that we expected and that we guided the market when we released this information in May of last year.

On the following page, we have the key highlights from a financial perspective. Both the organic numbers, I mean, without the consolidation of UniCesumar into Vitru, and also on a consolidated basis, I mean, with Cesumar, since the closing of the combination which, as I said, took place in May of last year. So roughly with 7 months of Cesumar in numbers.

Throughout this presentation and as we did in the last quarter, we are going to provide information on an organic basis and also on a fully consolidated basis to be as transparent and as clear as possible to you.

So here, the first key highlight was the 88% increase in net revenue in our core business, which is Digital Education Undergraduate, between 2022 and '21, while the overall consolidated net revenue increased around 109%. It is a huge increase, a huge jump in our net revenue in our core business, so more than doubling when taking into account the full package of consolidated numbers.

And with -- on an organic basis, we are showing an increase of around 29%, in the case of UNIASSELVI, Digital Education Undergraduate business, and the 23% organic increases of UNIASSELVI with the 3 business we have, including on-campus and graduate business. So a clear advancement in our numbers here as expected with Cesumar.

When you see the adjusted cash flow from operations, we increased 161% in '22 with an improvement in cash conversion from operations from 83%, more or less, to 96% last year. It is an important pillar in our financing strategy. The fact that we do generate cash, we are a net positive cash flow provider and generator. So this was an important improvement, not only from an organic perspective but also and most importantly because of the strong cash flow position and cash flow strength of Cesumar.

On the right part of the slide, we have the adjusted EBITDA which increased 145% last year with adjusted margin reaching 33.9% from 28.9%. So it's 5 points increase in margin last year. Organically, it was an increase of around 22% with a 28.6% margin. So it just confirms the resilience and the strength of UniCesumar is bringing to Vitru.

And finally, on adjusted net income perspective, it increased 124% more or less, reaching a bit more than BRL 200 million. So even with the debt financing that was raised for the business combination with Cesumar, we improved substantially our net income.

So before we go deeper on to the financial numbers and performance of last year. Just a quick reminder of a few slides. And the first one, the one that I love the most here in the presentation, which is a follow-up of what we said that we were going to do and what we did. So basically, we said that we were going to grow in 4 growth avenues, the ramp-up of current hubs, the opening of new hubs throughout the country, the increase in the course offering and inorganic growth through M&A. So we basically ticked the box in 4 growth avenues. So now, as of end of last year, we had 91% of hubs still ramping up with about 73% of all digital education students in those expansion hubs.

So the major hubs now represent around 1/4 only of the -- of student base, and 3/4 are -- in those hubs are still maturing. So this is, by itself, the most important driver of growth is the maturation of our existing hubs. We now have around 750,000 students, and organically within UNIASSELVI, almost 400,000, coming from 287,000 a year and a half ago.

When you see the hubs, we went from 600 to more than 2,100 hubs now, more or less half with Cesumar and half with UNIASSELVI, throughout the country and a strong growth in the Southeast region as I'm going to show later in more detail. Course offering as well, we are improving and increasing our portfolio of courses. And this was -- by the way, the most important driver for commercial synergies last year was the -- in the course offering within Cesumar, taking profit off the products that we had already within UNIASSELVI, also vice versa, but mostly new courses within Cesumar.

And finally, inorganic growth with the M&A with Cesumar which made Vitru not only the fastest-growing player in Brazil in the Higher Education sector, but also the #1 player in the digital education segment in Brazil, which is growing -- which was growing and which is growing and that will keep growing given the still low penetration of higher education in the industry. And it will only be, slowly but steadily, improved and closed through digital education courses.

On Page 7, now going into more details in each and every one of these pillars. The ramp-up of current hubs is advancing as expected. You can see here the cohorts, the different cohorts of hubs, summing UNIASSELVI and UniCesumar. They follow a very -- I'd say, predicted better. And now we have, as I said, around 200,000 students in major hubs out of 800,000, so 25% more or less.

And we have a maturation index of around 42%, meaning that all of these hubs, on average, they have -- they are with less than half of the full capacity of those hubs as they mature, as they keep growing, we are going to increase the number of students with limited execution risk. [Partner] is there, the brand of UNIASSELVI and/or UniCesumar is there in the given city. So it is a virtuous cycle that is operating. And with that, we are going to keep growing throughout the country.

On Page 8, you see the distribution of our student base in Digital Education Undergraduate. So an important jump through all of the 5 regions of Brazil, especially in the Southeast. So this here is the contribution of UniCesumar plus the organic growth of UNIASSELVI. And both organically and inorganically, we are growing a lot in the Southeast, which was one key concern of the market when we started to grow faster in the Southeast is our capacity to expand -- to really expand throughout the 4 states of the Southeast. So now we are growing 340% there in the Southeast. But in around 82% in South, 101% in Northeast. So we are now truly present throughout the country.

In the Southeast, not only now with second largest student based, but also with the largest portfolio of hubs as well in the country. Today, we have 730 hubs in the Southeast, more or less 1/3 of our hubs that we have in Brazil.

On Page 9, the other pillar, which is the expansion in portfolio of courses. We are now fully offering nursing courses in the 2 brands. It is important layer of growth. And we are confident that one day in the future, we will have the capacity to offer law and psychology and other courses also through digital education courses. These are courses that are today the 3 most important ones in the on-campus segment. But the true market, the true market to detect, the true market that we assess is not what we see here in the screen. Once we are able and allowed to offer digital education courses in law and psychology, the total addressable market would be larger than what we see here in the screen. Because of the pure characteristics of digital education, we can access more people throughout the country.

On Page 10, a quick reminder as well on our technology. Today, the most important way to communicate with students and for them to study is through the app. By far, everybody in Brazil has a cellphone, everybody has a computer. So today, we have more than 700,000 students -- active students in our apps. The whole course is provided through the course -- through the app or through the computer. And our apps, in fact, are rated the #1 and Vitru when we see the public rates either in App Store or Play Store.

And finally, on Slide 11, the distribution of hubs as of end of last year. As I said, a bit more than 2,100 hubs, more or less half in Cesumar half with UNIASSELVI, with a very complementary footprint, attracting different people, different publics, different audience. And today, we have more than 740 cities in which we have only one of those 2 brands. So here is an important driver for commercial synergies going forward, which is the expansion with the same partner that is there offering one of the 2 brands now we'll be able and is already offering a second brand.

So with that, we move to Page 12 to go a bit deeper about the financials. So as I said, digital education students are our true focus, around 700,000 as of end of December of last year, which together with the graduate digital students represent around 97% of our base. So we are clearly the leader here in this business and the only listed player truly focused on digital education.

And on the right, you see the evolution over time of our base. So on an organic basis, we grew 19% within UNIASSELVI between December of '21 and '22. And with UniCesumar, the growth reached 129%. So now we have, as I said, almost 700,000 students as of December in Undergraduate Digital Education courses. When we see intake and tickets here on the bottom part of the slide, we show intake and tickets on a semester basis, which brings a more accurate picture given the [current] cycles that we have in the postgrad sector in Brazil.

So first about intake, this information is not new. This is what we disclosed already in November. UNIASSELVI grew 23% in the second half of last year compared to second half of '21, while UniCesumar grew 51%. So this -- it's important growth in the combined intake of around 31% of Cesumar and UNIASSELVI, is a proof of the competitive advantage of our models and the differentiated quality of our products.

So let's go deeper about tickets. As we saw in the third quarter results, and now again, the average ticket of UNIASSELVI has been growing year after year, while the average ticket of Cesumar has decreased this year. Why was that? So in the case of UNIASSELVI, this is mostly due to our pricing discipline, our market intelligence and the tools and procedures that we have in place that we have -- been put in place in the last years and as you all know and that will be showing since the IPO.

So this is part of our model, of our business proposition to have sustained tickets over time. This approach is now being taken to UniCesumar. This is one of the best practice that we are exchanging between the 2 brands that, going forward, we will have a positive impact onto Cesumar. Because in the case of Cesumar, there were 2 main reasons for this decrease in tickets. The first one was the increase in the volume of new students, I mean, freshmen and freshwomen as a percentage of total students. As you know, the average ticket of a new student is lower than the ticket of a senior one.

And second, also the decision taken in the past to be more aggressive in tickets within UniCesumar, which was taken -- a decision taken before the closing of the business combination. And I mean, the closing of the combination was in late May when the first intake of '22 was over and the strategy for the second intake of 2022 was already being implemented. So now we have been working as a sole company. And what we are seeing so far, until today, is that the intake ticket of Cesumar is increasing by more than inflation. So we are seeing a real increase in the intake tickets up to today within UniCesumar. So we are starting to see the effects of this new approach to pricing.

And regarding the intake overall, up to now -- I mean as of Monday, as of March 13, the growth of intake in the 2 brands combined was around 17.4% compared to the same period of last year and, as I said, with health tickets. So again, we are increasing a lot, even knowing that we had a very high comparable base over last year because of the important growth that we had in both brands in the first half of last year. Even knowing that this is the first full year after the pandemic. So we do believe that this year, the overall sector of digital education will grow slightly lower than what we saw last year because it is the first March and the first February after the pandemic. As you know, 1 year ago, we were still discussing about Omicron. And despite the current crisis, so the high comparable basis, the first year after the pandemic and the crisis, we are still delivering a 17% growth in tickets -- in intake with health tickets. So this is just to show that we are a different company. We provide a different service to our clients.

On Page 13, the key financials here, net revenue, gross profit and adjusted EBITDA. Again, 109% growth in net revenue. The gross profit was more or less growing at the same level, 109%. So the margin -- gross margin was stable more or less and the reason for that is that despite the gains of scale, the gross profit of the Cesumar on-campus business is smaller than the digital education. So on average, we are the same margin. And the adjusted EBITDA, growing 5 points, as I said, the margin from 28.9% to 33.9% levered especially on G&A. And I'm going to show this a bit later.

So forward about net revenue on Page 14. We had, as I said, an increase in 28% digital education undergrad rate of UNIASSELVI, a decrease of 20% in on-campus and continuing education business was more or less stable year after year. And on the right part of this chart, the contribution of UniCesumar, a very important contribution, improving here, BRL 130 million of the medical business in 7 months.

Now going -- providing to you the breakdown about the 2 companies combined. So more or less, we have about 75% of our net revenue in Undergraduate Digital Education courses, more or less around 5% in continuing education, which is basically digital as well. So we have almost 80% of our revenues coming from the digital segment. And on top of that, we have around 13% of our net revenue coming from a very resilient medical business.

And going now deeper about this segment on Page 16. The net revenue, as I said, grew a lot, 88% in the Digital Education Undergraduate segment, both on organic and inorganic basis. And this was not because of any major shift in mix of products. When you see the numbers between '22 and '23 -- sorry, 2021 and 2022, the 2 brands were sort of steadily improving in health, but not much. There is still a lot of space for UniCesumar to improve and to increase the percentage of health course as well. So this is also going to be an important lever for tickets over time. But basically, we have a very well-distributed portfolio of courses in the 2 brands.

On Page 17, our medical business with the UniCesumar brand. Here, a number of highlights. Again, it is the fifth best private medical school in Brazil, those who could attend our first Vitru day there in Maringa that we held in January of this year could see the quality and the differentiated approach we have to this business. It is a different segment. It is the largest medical school in the south of Brazil, which brings scale there in Maringa with around almost 200 seats with average ticket of more than BRL 10,000. So this is a business that, on an annualized basis, we have a net revenue of roughly BRL 220 million per year. But tickets are increasing above inflation. And the seats are still maturing. So we do expect promising results from our medical business this year.

On Page 18, on-campus and continuing education. So first, on-campus. On an organic basis, I mean, UNIASSELVI alone, there was a reduction in net revenue in the segments, mostly due to the -- a shrinking base which is aligned to our long-term view for the education sector in Brazil. However, there was an important contribution of UniCesumar to the consolidated numbers, given the resilience and the high quality of the health-related on-campus courses of Cesumar. By the way, this health courses in on-campus represent more than half of the on-campus revenue of Cesumar, excluding medicine. So it is a very resilient business with high tickets. And on that front, I'd like to highlight that in the current intake cycle, I mean, up to today, we are seeing an increase in intake of slightly more than 20% in the UniCesumar on-campus business with rising tickets. So this is actually a nice component to our digital education focus.

Regarding continuing education on the right part of slide, in the last quarters, we saw a continued reduction in the average duration of the graduate courses, but this shift was basically over now. So we saw in the last 2 quarters an organic increase already in the continuing education net revenue of UNIASSELVI and now, with Cesumar, we are growing around 30%.

So now going to the EBITDA. Now jump to Page 20. The cost of service and G&A. So cost of service, there was an increase -- organic increase of 20%. So there was a clear gain of scale within UNIASSELVI, but the overall number, when we saw the percentage of net revenue, was higher and basically, as I said, because of the lower gross margin of the on-campus segment of UniCesumar. And when we saw G&A on the right part of the slide, there was a decrease both on our organic and inorganic business. So organically, we increased only by 7% within the Vitru X UniCesumar confirming our lean structure and our lean approach to management. And when we saw the overall consolidated number, there was a reduction from 8.1% to 5.9% only of net revenue, confirming the gains of scale and the synergies. So the key driver for synergies last year was in G&A, especially within Cesumar, as I'm going to show a bit later.

On Page 21, selling expenses and PDA. So selling expenses, on an organic basis, there was an increase of 24%. So slightly higher than the increase of net revenue as a whole but at a lower CAC given the important intake that we had last year. So the overall CAC of 2022 was 1.5% lower than what we had in '21. And regarding Cesumar, the hubs are more active than in the case of UNIASSELVI in this overall sale process. So that's why when you saw the overall picture, the overall number, there was a reduction from 17.7% to 16% of the overall net revenue in selling expenses.

The same happened in PDA. PDA, the overall -- PDA, meaning the provision for doubtful accounts, was down from 17.5% to 14.2% last year. So there was an increase in the PDA of UNIASSELVI. So organically, the most important reason was the deterioration in the macro and overall credit scenario in the fourth quarter of last year that we saw, and that was clear for the whole economy, and we are not yet immune to that, which impacted more UNIASSELVI given that the students of UNIASSELVI have a lower average income than the students of Cesumar. So we saw that deterioration in the third -- in the fourth quarter of last year.

Nevertheless, it was more than compensated by UniCesumar. And going forward, when we look at 2023 as a whole, we expect the overall consolidated PDA level to remain more or less at this level of 14%. I mean, 6 months ago, if you asked me this question, I was expecting a lower PDA amount for '23 and even for '22. Now seeing what we see today, we do expect that for 2023, we shall expect more or less the same level of PDA of around 14% of net revenue.

On Page 22, cash flow and net income. First, net income, an increase in margin from 14.5% to 15.6%, driven by the business combination. And we have a -- sorry, this year is high -- slightly higher than margin -- a slightly higher margin given the -- even knowing that we have a higher leverage in this quarter. We raised funds for the combination with Cesumar. And even with this debt level that we today have a net debt of around BRL 2.4 billion, we managed to increase net income overall seen and because of the numbers of Cesumar.

By the way, about net debt, we -- when we see the overall numbers that we have for last year. I mean if we take the full year of Vitru X UniCesumar, plus if we take the normalized and annualized numbers of UniCesumar for the full year, our adjusted EBITDA number for last year was more or less around BRL 600 million. So we had net debt BRL 2.4 billion as of December divided by BRL 600 million, so we had a net debt over EBITDA of around 4x which is lower than our [covenants] and going down. So we do expect that this ratio for the end of this year will probably reach around 3% because of the growth of the business as a whole and because, as I said before, we are a net positive cash generator.

And this cash generation here seen on the right part of the slide, we increased the cash flow generation from operations in 162% between '21 and '22 and cash conversion from 83% to 96%. So this is a very important pillar of our financing strategy. We managed to raise debt and to have the acquisition of Cesumar because the both companies together are important cash flow generator.

And by the way, it's important to highlight that these numbers are before CapEx, but our CapEx for last year was only 7.4% of net revenue, down from 9.2% in 2021. So even with CapEx, we are generating cash on a net-net perspective.

So finally, on Page 23, the integration plan and synergies so far. So the whole plan was designed before the closing of the business combination and was detailed and implemented after the combination, taking into account several perspectives and with a lot of care and consideration for our people.

But the plan is being executed ahead of schedule. We are -- we have around today around 100 products throughout the country, running at full steam, each of them with an action plan, with an owner, with deliverables, with deadlines, with a timetable. So this is being implemented and this is the key priority of the company today. And with that, we overdelivered in the synergies expected for this year. So on the right part of the slide, we see in yellow the expected evolution of synergies that we communicated to the market in May '22.

So as you will certainly remember at that time, we mentioned that we expected an increase in the EBITDA margin of 6 points between 2021 and '25. From now, the synergies that we delivered, I mean, the BRL 32 million more or less in cost and expenses represented an increase in our EBITDA margin of around 2.4 points. I mean, without the synergies, our margin would have been 31.5% instead of 33.9%.

And on top of that, we started to have synergies as well on the commercial front also overdelivering, instead of 5.6%, we delivered 10.7%. So the main levers from a commercial perspective will be, for this year, the better pricing at Cesumar; again, the new offerings of courses and products; and the faster expansion of hubs throughout Brazil. So we already announced to the market that this year, we are going to open around 500 hubs which is more than the rate that we used to open.

And on an OpEx perspective, the main levers was and will be personnel optimization. But now with more importance in gains of scale in contracts and also better retention practice at UNIASSELVI, we already had a number of pilot products implemented and tested within UNIASSELVI using the intelligence and the procedures of UniCesumar for onboarding, for retention, for collection which have shown already promising results and that now we are starting to deploy this throughout UNIASSELVI. So we are very confident in our capacity to deliver the expected synergies and the gains in margins.

So with that, I finish the presentation, and I'd like to open for questions.

(Operator Instructions) Let's now move on to our first question. We have Lucca Marquezini, sell-side analyst from Itau BBA.

We have 2 questions from our side. The first one would be regarding the integration plan and the initial synergies. So the company has mentioned that it has executed the plan ahead of the schedule. So can you please provide some more detail on what has caused this overachievement. And then secondly, what are the new expectations for synergies in 2023? That will be our first question.

And then the second one would be regarding the average ticket. So we saw an 8% increase in the average ticket of UNIASSELVI, the digital business. So can you please provide some more detail on what has driven this increase. And then besides the higher contribution of courses such as nursing, what -- was the company also able to readjust prices in other courses?

Thank you, Lucca, for your questions. So regarding the integration, the reason for the overachievement here on Page 23, the -- I mean the most important reason for this overachievement was that we were able to integrate areas faster than what we thought. So we had a plan per area, per sector with different timetables, sectors that we were going to integrate last year, sectors that we were not going to integrate. And we had an idea, a plan for this integration of areas. And what we saw is that detailing the plan after May that we were able to accelerate this integration. And now we have already several areas of the company operating as one area, and this was the key driver for the overdelivery of synergies.

So going forward, I mean, for '23, what we expect is what we have here on the screen, BRL 80 million in EBITDA impact coming from synergies. I mean, the 31 that we had delivered plus 50, more or less. So this is the guidance for synergies that we expect a EBITDA impact coming from synergies of BRL 80 million more or less in '23 being the BRL 30 million that we had already plus BRL 50 million more or less for '23. So with that, we shall expect coming from synergies a continued improvement in margins overall within Vitru.

The second question about tickets of UNIASSELVI and I'm going to go back there on Page 12. In fact, the ticket of UNIASSELVI in the semester -- in the second semester grew 8.4%, which is above inflation. This was not really because of mix of nursing because nursing started to be offered in August of '21. So there was an increase in the tickets last year, I mean when we showed the second half of '21, we saw an increase compared to '20 because of nursing.

Not the case now. We are already offering nursing since August of 2021. So the reason for the increase here is basically twofold. The first one is that we were able to increase prices in the intake cycles because of the resilience of our model and the differentiated aspects of our products. So we were able, on average to increase prices throughout the country. In some areas more, in some areas less, in some products more than in others. But on average, we were able to increase intake tickets last year.

And the second reason also is that we generally -- and we have been doing this for the last years, we also increased ticket for the seniors above inflation. So we -- for example, this year, just to give one real example. This year, we -- in January of this year, we increased the senior tickets in 8.8%, which is more than inflation.

So -- and the third one as well that, throughout the course, we also increased the density of the course. So that's why when we saw a ticket of a senior in the -- for example, in the 8th semester, the ticket of those people is higher than the ticket of someone in the second semester, for example. Because of the higher density, we add more disciplines and more courses. And with that, we charge a bit more. So those are the 3, say, reasons being the first one, the most important one, right, the capacity to increase prices given our pricing discipline and the differentiated aspects of our products is what has been -- has made us possible to increase prices above inflation at UNIASSELVI.

And this pricing intelligence, this granularity that we have, this fast reaction to change in the market that we have been implementing within UNIASSELVI in the last 4, 5 years, we are now also starting to implement within UniCesumar, and that's why we are seeing already an increase in the intake tickets of Cesumar these last 2 months.

The next question now comes from Lucas Nagano, sell-side analyst from Morgan Stanley.

First question is regarding the intake cycle. You mentioned that your combined volume growth is 17%, but we were wondering if you could give a bit more color on the mix between both brands to get a sense on how the ticket repositioning at UniCesumar is impacting the demand? And the second question is regarding the delay of the law -- distance learning law's expansion. In our view, it doesn't seem to be a priority for MED right now, but it could be an important catalyst for the sector. And could you give some -- your comments and perspectives on the outcomes of this working group.

Hi, Lucas. Perfect. So the first one regarding intake. So today, I mean, as of March 13, I mean, Monday, we have on average, our -- the 2 brands combined 17.4%, slightly more than that with UNIASSELVI and slightly less than that with Unicesumar. So more or less 14% Cesumar, and more or less 20% -- or a bit more 21% UNIASSELVI, more or less. So this is not only an impact of the tickets, but most importantly, the high comparable basis. I guess this is more important, in this case, now when you see the 2 different brands, you saw that there was a very important increase in intake at UniCesumar, not only in the second half of last year, which is here on the screen, 51%, but also in the first semester.

In the first semester, there was an even higher increase in intake with UniCesumar, while the number of UNIASSELVI was more or less aligned to the more or less between 20% and 30% growth that we have been showing in the last years. So the comparable basis, the bar of UniCesumar is higher than the bar of UNIASSELVI. That's why it is natural now that UniCesumar shall grow less than Cesumar in this current intake cycle.

Sorry, and the second question about the law and psychology, you're fully right. There was a committee created by the Ministry of Education in September of last year for 6 months with the possibility to be renewed for more 6 months. So now what was done was that this term was extended to 270 days, so 9 months with the possibility to be extended again.

So I mean we are expecting evolution on this front so far, nothing that we can comment here. We are still positive about the intrinsic capacity of being able to offer law and psychology in digital education. There is no underlying reason for us or for the sector not to be allowed to offer law and psychology through a hybrid quality digital education solution, but it is something that would take some time. So I mean for -- with this committee, we do not expect this to be a possibility this year. That's clear for now. But we are still optimistic that in the medium term, this will be a possibility.

We're going to go to the next question from Fred Mendes, sell-side analyst from Bank of America.

I have 2 questions here as well. I mean, the first one, Carlos, if you can just comment a little bit more on the strategy about entering into the Southeast. How is that working out? And even with that, you're able to raise prices and decrease the CAC you were expecting since you were expanding to somehow -- I don't see a new region, but a region where market share is lower. There would probably be an impact in CAC, this is the first one.

And then the second is more like a strategic question. When does your market share starts to become -- I would not say a concern, but something that you start to think, okay, maybe that is getting too much. It's going to be harder to grow from now on. Maybe I need to expand my addressable market. Maybe I need to come out with some English course, I don't know. But at which level you think it would start to make sense to have not only a strategy of gaining market share but also maybe trying to expand these markets through your platform?

Thank you, Fred, for these very good questions. So the first one about Southeast here on the screen on Page 8. Not only within the Southeast, but throughout the country, in any new region or macro region that we enter, we have to start offering a slightly lower tickets. That's a price to be paid, that's natural.

And after we have more brand recognition locally, we start to normalize prices. That's what we have -- did in the past in other regions, that we did in the past in Minas Gerais. That's what we are starting to do now in some areas of Rio and Sao Paulo. But clearly, when you say the southeast, it is the, I would say, the last frontier, especially Rio and Sao Paulo, from the perspective of UNIASSELVI because in the case of UniCesumar, there was already an important presence there. But overall, it is still the reason in which we have the lower presence.

So when you see the, for example, tickets that we offer in Sao Paulo and Rio, today, they are, on average, smaller than the ones that we offer in other regions, in other states. This is part of the overall commercial approach to enter a new region, so in the first 1, 2, 3 semesters, we have to pay the price. And then once we have more brand recognition locally and we have word of mouth as well work in our favor, once we have as well that the partner going through a learning curve to operate and to sell locally with our support, so once we pay this initial, I would say, price, we start to normalize tickets, and that's what we have been doing in the last years, and that is working already.

So for the Southeast, it is a region that we are growing a lot, that we are growing the most, in fact, throughout the country, both on organic and inorganic business. And we are very confident that we are going to keep growing there.

For the overall market share to be a concern or not, we are still far from the level in which we will be concerned with being too big. Today, we'll have in the last census, we had around 23% of the market as of 2021.

Probably now it's a bit higher than that, maybe 25%. We're still not in a position in which we don't have space to grow. There are several regions in which we're not present, either with both brands or with 1 of 2 brands. And as I said, they attract different people. The hybrid products of UNIASSELVI attracts a different person than the model of UniCesumar. So our market is not the same.

And we are present in some areas with only one brand and some areas with no brand. So there's still a lot of space to be occupied, that's the issue. So there's no single answer to your question, but on average, we are not concerned from a market share perspective. Anyway, the most important single driver for growth in student base is not going to be gaining market share. It's because of the overall market is going to keep growing. This is not a (foreign language) in Portuguese, a game. This is a sector that has been growing a lot, grew even faster during the pandemic. This year, we do believe that we grow slightly lower than the, I would say, normalized numbers because of the high comparable base of last year. But for several years, we'll keep growing because of the lower penetration of higher education in Brazil.

So the overall -- when we see the overall post-grad sector in Brazil, with 7 million people in private sector in Brazil as of 2021, this is not the total addressable market that we can tap, the more we have hubs from Vitru or other players being opened throughout the country, the bigger the market will be. So the increase in supply drives demand. So we're not concerned about being too big here, no.

But anyway, but which does not prevent us from exploring other avenues for growth. I mean, when we IPO-ed the company, we said that we had a number of M&A possibilities. And most of them, by the way, were not in our core business. Most of them were not in undergrad business in digital education. We had discussions going on in other players that offer graduate courses, that offer technical courses, preparatory courses for their first jobs and that we are now already offering. We already have this courses in our portfolio.

So when we see our continuing education segment, it is a bunch of things, mostly graduate courses but not only. But we are looking for future growth, not now, in the very short term, but more in the medium term with other growth avenues apart from our core business of -- on the graduate business because we do believe that we have the 2 leading brands that, on an organic basis, UNIASSELVI and UniCesumar, we will keep growing and we will keep gaining market share. But the key driver for growth in our revenues is the expansion of the market as a whole, not only gaining market share.

The next question now comes from Mauricio, sell-side analyst from Credit Suisse.

This is Cepeda from Credit Suisse. [Idox] reported yesterday results. So I think there are things that we asked them that we should ask you because -- but first of all, congratulations on the results and the clarity of the presentation. One of the things that was discussed with them, and I think it's a fair point to ask you as well, is about all these commercial dynamics to attract first year students, all the commercial dynamics to have more intakes.

So I will ask you a little bit about the necessity to, in a certain way, subsidize this first year students so that you can have intake. And then, let's say, try to retain them even with all the subsidies throughout time. You've mentioned that Cesumar had a period where the tickets were still -- were a little bit lower. And now there has been a recovery of tickets in Cesumar. So my question would be, okay, if you keep this kind of policy, which kind of policy, how aggressive is the market in terms of prices so that you can obtain more or less growth in this first year?

And the second question would be about FIES. I know it's kind of a tricky discussion because there is -- there is nothing concrete about that, but what is the sector discussing with the working group there about the inclusion of distance learning in a future program design?

Thank you, Cepeda. So regarding the market and prices and intake, et cetera, I mean what we are seeing in this current intake cycle, which was already saw, to a certain extent last year, was a more -- is and was a more rational market. I mean competition is here. It's fierce as it has always been. We are operating in a competitive environment. It is as tough this year as it was last year as it was in '21. It is a tough market in which you have to have differentiation. You have to have high quality. You must have delivery. So -- but anyway, what we are seeing in the last -- give and take in the last year, I mean, in the last 12 months, more or less, is a more rational environment, I mean, rationally, is a strange word, less players with more -- with too aggressive strategies.

So in the end, a sector that is, I'd say, operating in a very competitive environment, but in a more, say, disciplined approach. With some differences per region per products. It is, in some cases, with some changes over time with some players start to be less aggressive and then more aggressive at the end. It changed from player to player from region to region. But overall, it is a competitive environment in which we keep gaining market share with a disciplined ticket.

So we don't want to grow for the sake of growing. We are growing -- operating in a market that is growing, and we are delivering what we believe to be a high-quality product, and we keep gaining market share. So this is not -- we don't see today a more competitive market than what we saw in '22 or '21 or '20.

And for FIES, I mean that's the million-dollar question or billion-dollar question. We -- our opinion is the following. When FIES was created, distance learning or digital education was the exception. Now it is the norm. So now when we see that more than 2/3 of the new students are deciding to enroll in digital education courses instead of on-campus, so 1/3 of newcomers is going to on-campus, 2/3 to digital. The norm is -- I mean the standard decision, the base-case decision now is to go to digital education. So in our opinion, a potential new version of FIES or any other name will include distance learning, for sure.

We do not believe in possibility only for on-campus, it is not impossible. We do believe it is unlikely. We -- and also from a purely economic perspective, when we see the -- I would say, the efficiency of capital allocation, it is more efficient also to allocate capital to impact more people, especially people that need education and are -- that also are part of the overall base of the current administration. We do believe that in case there is new FIES, it will include on-campus and digital education. And also because today, there's more gray areas than in the past. It is -- today, education is becoming more and more hybrid than what we saw 10 years ago. So the short answer is that we don't know. But we do believe that if there is something, it will be for the overall sector.

The Q&A session is closed. And now we would like to turn the floor over to the company's closing remarks. So Mr. Carlos Freitas, please make your final remarks and close the call.

Thank you all. Thanks for following Vitru, thanks for your trust. And we keep open for any final questions that you may have. Thank you. Goodnight.

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The digital conference results for Vitru's fourth quarter and full year 2022 is closed. The Investor Relations department is available to answer other questions and concerns. Thanks so much to the participants, and have a good evening.