Vitru Ltd (VTRU) 2023 Q1 法說會逐字稿

Good evening to you all. Thank you for waiting. I welcome you to the first quarter 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. During the company's presentation, all participants will have their microphones disabled, then we will start the Q&A session and at this point, you'll be able to use your microphone. (Operator Instructions) 

We emphasize that the information contained in this presentation and any statements that may be made during the earnings calls regarding Vitru's business prospects, projections, and operation, 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 results that 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 Henrique de Freitas. Sir, you may begin.

Thank you, 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; (inaudible), the Head of IR; and (inaudible) department. A slide presentation will be part of today's webcast, which is available in our website at investors.vitru.com.br. 

So 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 for the 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 Criteria Capital or mostly from Crescera Capital, but also the issuance of new common shares that we made percent a rights offering that was executed throughout October and November of last year. 

So with that, we reinforced our capital structure Second, the 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 Unicesumar between the reference balance sheet and the closing balance sheet, which was in May of last year. So with that, we reduced the amounts to be paid in around BRL 73 million. And the third key highlight is clearly the advancement of the integration plan. between Vitru and Unicesumar, which is being executed ahead, in fact, of schedule with over-delivery of the promised figures 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 Unicesumar, since the closing of the combination, which as I said, took place in May of last year. So roughly with 7 months of Unicesumar 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 a conspiracy and as clear as possible to you. So here, the first key highlight was the 8% 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, just in our net revenue in our core business. So more than the doubling when the full package of consolidated numbers. 

And on our organic basis, we are showing an increase of around 29% in the case of UNIASSELVI digital education under great business and the 23% organic increase of UNIASSELVI with 3 businesses we have, including on-campus and graduate business. So a clear advancement in our numbers here as expected with UNIASSELVI. When you see the adjusted cash flow from operations, we increased in 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 our and most importantly, because of the strong cash flow position and cash flow strength of Unicesumar. 

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 5 points increase in margin last year. Organically, it was an increase of around 22% with attrite.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 Unicesumar, 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 cost offering, and inorganic growth through M&A. So we basically ticked the box in the 4 growth avenues. So now, as of the end of last year, we had 91% of hubs still ramping up, with about 73% of all digital location students in those extension 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 it is by itself the most important driver of growth is the maturation of our ecosystem hubs. 

We now have around 750,000 students and organically within Unicesumar, almost 400,000 coming from 287,000 a year ago. When you see the hubs, we went from 600 to more than 2,100 hubs now, more or less which said more than half in the country and a strong growth in the Southeast region, as I'm going to show later in more details. Cost offering as well. We are improving and increasing our portfolio of cores. And this was, by the way, the most important driver for commercial synergies last year was in the cost offering within Unicesumar taking profit of the products that we had already within UNIASSELVI, also vice versa, but mostly new courses within Unicesumar. And finally, inorganic growth with the M&A, which made Vitru not only the fastest-growing player in Brazil, the high location 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 location courses.

On Page 7. Now I'll go into more details on each and every one of these pillars. The ramp-up of 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 pattern and now we have, as I said, around 200,000 students in major hubs out of 800, so 25% or less. And we have a maturation index of around 42%, meaning that all of the hubs on average are with less than half of the full capacity of the hubs as they mature, as they keep growing, we are going to increase the number of students with limited execution risk. The partner is there, the brand of UNIASSELVI or Unicesumar is there in a 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 sense in digital education undergraduate. So an important jump throughout the 5 regions of Brazil, especially in the Southeast. So this here is the contribution of Unicesumar 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 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, 11% in the Northeast . So we are now truly present throughout the country. And the South is not only now with the second largest season-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 quarters also through digital education quarters. These are courses that are today, the 3 most important ones in the on-campus segment. But a true market, the true market to be debt, the true market assessed, is not what we see here in the screen. Once we are able and allowed to offer digital education courts 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 location, 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 cell phone or has a computer. So today, we have more than 700,000 students active student in our apps. The whole course is provided through the app or through the computer. And our apps, in fact, are rated the #1 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 Unicesumar and half in UNIASSELVI with a very complementary footprint, attracting different people, different publics, different audience. And today, we have more than 740 cities that have only 1 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 1 of the 2 brands now we will 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 focus around 700,000 as of end of December of last year, which, together with the graduate digital set, represents around 9% of our base. So we are clearly the leader here in this business and the only (inaudible) 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 90% with 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 in taking tickets on a semester basis, which brings a more accurate picture given the academic 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 22% in the second half of last year compared to the second half of Q1, while Unicesumar grew 51%. So it's important growth in the combined intake of around 31% of Unicesumar 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 Unicesumar 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 that will be showing since the (inaudible). 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 on Unicesumar because in the case of the Unicesumar, there were 2 main reasons for this decrease in tickets. 

The first one was the increase in the volume of mutants, I mean, freshmen and fresh women as a percentage of total students, as you know, the average ticket of a new student is slower 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 a decision taken before the closing of the 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 '22 was already 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 Unicesumar 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, EAF 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, as I said, with health tickets. So again, we are increasing a lot, even knowing that we had a very high comparable base of last year because of the important growth that we had in both brands in the 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 allocation will grow slightly lower than what we saw last year because it is the first March and the 1st February after the pandemic. As you know, 1 year ago, we were still discussing about Omnicom. 

And despite the current crisis, so the high comparable basis, the first year of 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, clear net revenue, gross profit, and adjusted EBITDA, again, 109% growth in net revenue. The gross profit was more or less growing the same level, 109%. So the gross margin was stable more or less. And the reason for that is that despite the end of scale, the gross profit of the Unicesumar on campus business is smaller than the digital location. So on average, we are seeing the 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 first about net revenue on Page 14. We had, as I said, an increase in 28% an additional location on the grad rate of UNIASSELVI, a decrease of 20% in on-campus and the contained 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 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, 8%, 8% in the digital education underground rate segment, both on an organic and inorganic basis. And this was it was not because of any major in mix of products. When you see the numbers of between 2021 and '22, the 2 brands were full 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 costs 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 future day, (inaudible) 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 Derange with around almost 200 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 segment, mostly due to the 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 Unicesumar. By the way, these health costs in on campus represent more than half of the on-campus revenue of Unicesumar, 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 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 continued education on the right part of the slide. In the last quarters, we fought 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 Unicesumar and now, which is more. 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 you saw the percentage of net revenue was higher. And basically, as said because of the lower gross margin of the on-campus segment of Unicesumar. And when you start D&A on the right part of the slide, there was a decrease both on organic and inorganic business. 

So organically, we increased only by 7% within the Vitru Unicesumar, conforming our lean structure and our lean approach to management. And so 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 of synergies last year was in G&A, especially within Unicesumar. And 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 cut given the important intake that we had left year. So the overall impact of 2022 was 1.5% lower than what we had in '21. And regarding Unicesumar, the hubs are more active than in the case of UNIASSELVI in the 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 expenses. The same happened in PDA. PDA, the overall meaning the provision for that account, 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 and which we thought was clear for the whole economy, and we are not immune to that, which affected more UNIASSELVI, given that the students of UNIASSELVI have a lower average income than the students of Unicesumar.

So we saw that deterioration in the fourth quarter of last year. Nevertheless, it was more reported by Unicesumar. And going forward, when we look to 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 EBITDA 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. The first net income, an increase in margin from 14.5% to 15.6%, driven by the build combination. And we have a -- sorry, this year is 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 Unicesumar. 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 and because of the numbers of Unicesumar.

By the way, about net debt, 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 a full year, our adjusted EBITDA number for last year was more or less around BRL 600 million. So we had net debt 2.4 billion as of December, divided by 600 million. So we had a net debt over EBITDA of around 4x, which is lower than our covenant 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 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 for Unicesumar because the both companies together are important cash flow generators. 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 have around today around 100 products throughout the country, running at full steam, each of them with an action plan with an owner with deadlines with a time table. So this is being implemented, and it 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, et cetera. 

Again, the new offerings of course and products and the faster expansion of hubs throughout Brazil. So today, we already announced the market that this year, we are going to open around 500 hubs, which is more than the rate that we use to open. And on an OpEx perspective, the main levers was and will be personal optimization. But now with more importance in gain-of-scale in contracts and also better retention practices 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 this presentation, and I'd like to open for questions.

(Operator Instructions) 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 senders in 2023? That would 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, was the company also able to readjust prices in other courses?

So regarding the integration, the reason for the overtime here on Page 23. I mean the most important reason for the over-achievement was that we were able to integrate areas faster than what we thought. So we had a plan for area per sector with different timetables, a sector that we were going to integrate last year, a sector that we were not willing to integrate. And we have 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 over-delivery 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 an EBITDA impact coming from synergies of BRL 80 million more or less in 23 being the 30 that we had already plus 50 or less for '23. So with that, we shall expect, coming from synergies, a continued improvement in margins overall within the future. 

The second question about tickets of UNIASSELVI I'm going to go back there on Page 12. In fact, the ticket of UNIASSELVI 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 2021. So the reason for the increase here is a bit twofold. The first one is that we were able to increase prices in the intake cycle 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 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 year, we also increased ticket for the seniors above inflation. So we, for example, this year, just to give one real example. This year, in January of this year, we increased the senior tickets in 8.8%, which is more than inflation, 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 first in the eighth semester. The ticket of those people is higher than the ticket of someone in the second semester for them because of the higher density, we add more discipline 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, the capacity to increase prices given our pricing discipline and the differentiated aspects of our products is what has made it possible to increase prices of inflation at UNIASSELVI. 

And this pricing intelligence, this granularity that we have, this first 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 ticket of UNIASSELVI 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 units impacts the demand. And the second question is regarding the delay of the loss -- distance learning loss suspension. In our view, it doesn't seem to be a priority for MACRA now, but it could be an important catalyst for the sector. And could you give your comments and perspectives on the outcomes of this working group?

Perfect. So the first one regarding intake. So today, I mean, as of March 13, I mean, Monday, we have, on average, or the 2 brands combined 17.4%, slightly more than that with UNIASSELVI and less than that with Unicesumar. So more or less 14, a bit more, 21% UNIASSELVI. So this is, I mean, not only an impact of the tickets, but most importantly is the high comparable basis.

I guess this is more important, in this case, 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, 1%, 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 year. 

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 UNIASSELVI in this current intake cycle. Sorry. And the second question about 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 this allocation. 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 location solution. But it is something that would take some time. So with this committee, we do not expect this to be a possibility this year. That's clear for now. But we are still of risk 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 cut you were expecting since you're expanding to somehow, we don't say a new region, but a region where our 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 start to become -- I don't see 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 cars, I don't know. But at which level we 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 ticket, that's a price to be paid, that's natural. And after we have more brand recognition locally, which start to normalize prices.

That's what we did in the past in other regions that we did in the past in [Minjar]. That's what we are starting to do now in some areas of Rio and Sao Paulo. But clearly, when you see the Southeast, it is the, I would say, the left frontier, especially risen Poland from the perspective of UNIASSELVI because in the case of Unicesumar, there was already an important prom there. But overall, it is still the region in which we have the lower presence. 

So when we see, 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, we have word of mouth as well work in our favor once we have as well the partner going through a learning curve to operate and to sell locally with our support. So once we pay this initial, I'd 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 reason that we are growing a lot, but 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 have in the last sensors, we had around 22% of the market as of 2021. Probably now is 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 one of 2 brands.

And as I said, they attract different people, the hybrid product 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 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. But 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 Hoban imperative again. This is a sector that has been growing a lot and grew even faster during the pandemic.

This year, we do believe that it will 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 location in Brazil. So when we see the overall postgrad sector in Brazil, I mean 7 million people in the 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 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 now. But anyway, this 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 location. We had discussions going on in other players that offer graduate courses that offer technical courses, reporter costs for the first job. And that we are now already offering. We already have these courses in our portfolio. 

So when we see our continuing education segment, it is a bunch of things, mostly graded courses, 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 undergrad rated business because we do believe that we have the 2 leading brands that on an organic basis, UNIASSELVI and Unicesumar 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 at 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's results. So I think there are things that we ask then that we should ask you because, 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 to solve 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 these first-year students so that you can have intake and then, let's say, try to retain them even without the subsidies throughout time. You've mentioned that Unicesumar had a period where the tickets were still a little bit lower. And now there has been a recovery of tickets in Unicesumar.

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 FIS. I know it's kind of a tricky discussion because 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 cycle, which was already seen to a certain extent last year 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. We have to have high quality, you must have delivery. But anyway, what we are seeing in the last -- this is take in the last year, I mean, the last 12 months, more or less, if a more rational environment, I mean, rationally, if that's strange words, less players with 2 adhesive strategies. 

So in the end, a sector that is operating in a very competitive environment, but in a more, say, disciplined approach. With some differences for the region, for products, it is, in some cases, with some changes over time, with some players starting 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 disciplined tickets. 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 we don't see today a more competitive market than what we saw in '22 or '21 or '20. 

And for, yes, I mean that's the million-dollar question or billion-dollar question. Our opinion is the following: when CS was created, distant learning or digital location 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 instead of on-campus. So 1/3 of the newcomers is going to cap digital. I mean the standard decision, the base case decision now, is to go to the digital. So in our opinion, a potential new version of yet or any other name will include different learning for sure. We do not believe in a possibility only for once, it is not impossible. We do believe it is unlikely. 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 that also are part of the overall base of the current administration. We do believe that in case there is NFS, it will include on-campus and digital education. 

And also because today, there's more gray areas than 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 virtual company's closing remarks. So Mr. Carlos Henrique de Freitas, please make your final remarks and close the call.

Well, thank you all. Thanks for following this. Thanks for your trust, and we keep open for any final questions that you may have. Thank you. Good night.

The video 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.