Vitru Ltd (VTRU) 2023 Q4 法說會逐字稿

Good evening, everyone. Thank you for waiting, and welcome to Vitru's fourth-quarter and full year 2023 earnings conference call. We advised you that a video conference is being recorded and will be available will be available on Vitru's IR website where the complete material of our earning call can be found. (Operator Instructions)

We emphasize that 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 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 as 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 future 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, William Matos, Vitro CEO; Carlos Freitas, Vitro CFO and IRO; and Maria Catalina, Investor Relations. I'll now give the floor to Mr. Carlos Freitas. Sir, you may begin.

Thank you. Good afternoon, everyone, and thanks for joining us, again. It's a pleasure to be here with you all for the release of our fourth quarter '23 numbers as well as the numbers for the full year of '23. It's like the presentation we part of today's call, which is also available in our Investor Relations website at investors.vitru.com.br

Before we begin, I'd like to make note that as detailed in slide 2 of this presentation, Safe Harbor is in effect for this call. So now let's start and invite you to go to page 4, which I'm going to show you right now. So here we show the few key operational highlights for the period. First of all, that we had more than 808,000 students as of December of last year which was a 15.4% increase in our core digital education undergrad business.

That was a major growth and I'm going to talk about it a bit more later. Also, we have an important increase of around 10% in the average tickets in the digital education undergraduate segment in the second semester of last year compared to the second semester of '22. Just as a reminder, we always think in terms of semesters here at Vitru because it replicates the academic calendar.

And it is another key reaffirmation of our approach to pricing. Also, we closed the third debenture issuance in early December of last year, which through we extended the average debt duration and also reduce our financing cost. The debenture was issued at a rate of [CDI plus 2.45], while our previous average cost of debt was [CDI plus 3].

And finally, we had important advancements in the migration process of Vitru from NASDAQ to B3. So we already called the shareholder meetings that we will approve the transaction the reverse merger, which Virtu Brazil will incorporate Virtu Limited this these meetings will take place on April 19. So, four weeks from now. And I'm going to give more details about the process in a few minutes.

On page 5, we have the main financial indicators for the year of '23. So net revenue in our core segment of digital education undergrad was up 42% in the year with overall consolidated net revenue increasing 49% year-on-year. Adjusted EBITDA increased even further about 60% in the year and then with that, the margin was up from 33.9% to 36.6% in the full year numbers.

The cash flow from operations was also up even more 31% in the full year, which led to a adjusted cash flow conversion rate of 96%. So that's an important piece of our financing approach is to generate cash and take profit of our scale.

And finally, even with our debt that is decreasing, we managed to have a consolidated adjusted net income increasing around 24% in the year, reaching BRL253 million.

On page 6. This is a slide that I like a lot because it shows our execution over last years. So growing several aspects in number of students, EBITDA margin, EBITDA as a whole cash flow from operations. So we have been, I would say, over-delivering on what we intended to do and what we said that we would do during the IPO.

On page 7, a growth throughout the company. So apart from the 15.4% growth in the digital undergraduate segment. We also grew in graduate business in the on-campus business. So it all led to a total student base of 884,000 students, of which 97.5% are in digital courses. So we are truly focused on the digital business.

And here we can also see that we managed to grow 15%. As I said, even coming from tough camps, we already grew roughly 25% throughout 2022, taking into account the proforma in the base of Uniasselvi plus UniCesumar in December '21. And so as we can see here in the bar chart at the bottom right of the slide, our CAGR, our annual growth rate was around 20% between December '21 and in December '23.

So on page 8, we keep maturing the hubs. This is the most important driver for growth and expansion of revenues at throughout Brazil. On page 9, we grew throughout the country in terms of hubs, insurance days. So even here in the south of the country grew by 9% year-on-year, an important growth of 20% in the Southeast, 22% in the Northeast. And now the number of hubs also increasing by more than 300 hubs year on year with important increase also in the Southeast.

On page 10, we show the geographical footprint of our hubs, which is quite complementary. As you can see here in the table at the left of the page that you know already. So I said throughout last year, we opened more than 200 hubs and a lot of them were opened by partners who used to offer only one brand and now we're working with both brands.

And this can be seen here in the table in the bottom right part of the page, you can see here that we increased by 20.6%. The number of cities in which we operate with both brands for the overall number of cities went up by 5.7%. But overall, number of cities in which we already operate now with both brands went up by more than 20%. So this is synergies.

This is part of our commercial synergies that we showed to you two years ago and then now we are delivering on that, and I'm going to show you more details about the execution of the integration a bit later. On page 11, another important slide to show our client orientation, our focus on quality.

So here on the left, a another confirmation that our average app ratings, taking checkout Play Store and App Store is 4.8 in both UniCesumar and Uniasselvi, which are the best in the market. Here on the right, you can see the Reclame Aqui grades as well. As Reclame Aqui is a site that kind of states and confirms the client orientation and client services in the last six months.

We have a reputation of 8.0 in Uniasselvi, 7.7 UniCesumar. Those are the highest numbers among the listed players in the country. Page 12, this is a new slide. Just to illustrate that we are top positions regarding quality of our courses. In the chart at the left, we show the distribution of the institutional concept, the CI's, as you know.

Of the six institutions of the Virtue Group as well as the other listed players. We have five institutions in the Virtue Group with the maximum score of CI5 and only one would safe 4 which by the way has few students. This even it's important even more now than ever because as you know, one of the possible regulatory changes that have been discussed is to increase the bar from CI3 to CI4 for an institution to be allowed to offer distance learning courses.

And in the chart at the right, we show an indicator that is not usually mentioned, but it is public information. It is a part of mix evolution, it is at inept, which is the CC course concept. As most of you know, every three years usually the Minister of Education makes a local evaluation about the quality, of course, take into account different aspects such as the academic model, the technological infrastructure and the level of teachers.

So as you can see in the short, 61% of the Vitru quarters that were evaluated over the last three evaluation cycles. Meaning all quarters has a CC5, which is two times the average of the market, which is the first bar here at the left. And by the way regarding regulations and we don't know what will change, and we don't know if anything will change, we don't know when it will change.

But we do believe that Vitru will be a stricter focus on quality, which is good, as always, a need for more hybrid given in several quarters. So in this scenario, we're showing here that this would be quite well positions and the changes in regulations may even benefit us. So for us, the higher the bar, the better.

Slide 13 is also new and it mentions Rede Enem. And in most of you probably don't know that we acquired Rede Enem two years ago in September 2022. Rede Enem has different products, including blog do enum, which is one of the leading sites with content for the Encceja preparation, which had 17 million views and 1.3 million followers on Facebook.

And also curso enum gratutito of the group with 3.1 million users and almost 1 million for the YouTube and 12 million views. So this is a major source of leads for us and a very nice piece of our digital education platform. Page 14. In this slide, we show details of the intake and average tickets for each of the brands in the digital education undergraduate business during the second half of last year, comparing to the second half of '22.

So, for intake, the intake in the second half of last year was 27% higher than the previous year, especially due to the performance of only UniCesumar. And as I mentioned in the previous call last year, we worked in the repositioning of UniCesumar and achieved a more balanced split between the first and second semesters of the year.

We saw an untapped opportunity to increase the intake of these brands in the second cycle of the year. And then we grew 59% over the previous year. In the case, Uniasselvi intake grew by 30%, which is a strong performance considering that the quite high comparison base, quite tough comps, knowing that the intake of Uniasselvi grew at an annual rate of almost 30% between 2019 and '22.

So for tickets intake of Uniasselvi, every ticket grew, it's slightly above inflation, but 7%. This is mostly due to this pricing discipline that I mentioned before, our marketing intelligence and the tools and the procedures and the systems that we have in place to set our prices to adjust our prices. And this is the kind of discipline that we have been using in mentioning to you over the last years.

When we see the evolution of the average ticket of Uniasselvi in the last four years. The CAGR of the increase is virtually the same as the annual inflation rate in Brazil over the period. In the case of UniCesumar, we have noticed a clear improvement in the pricing throughout last year to a 13% increase semester on semester.

And this these are the first results of implementation of best practice between the two brands that we started in '22 and we are reaping out the results in '23. And so this change had to do with several improvements, including the commercial approach, attract new students, the annual increase of tuition for students and a more granular and data oriented use as we used to do at UniCesumar.

And by the way, regarding the current intake cycle until today to the March 21, we are growing that at the level of low double digits in the first quarter of this year compared to the first quarter of previous year. So page 15, the big numbers, big financial numbers, net revenue, as I mentioned, growing by 49% year-on-year, gross profit increasing 59%.

The margin went up by four points from 61.9% to 65.9% in the year and the EBITDA margin went up by 2.7%, reaching, as I mentioned before, 36.6% in the year. Now let's talk about each of the segments. On page 18, first, the digital education undergrad business, which is our core business, and we grew by 42% in the segment in the year.

Quarter-on-quarter was a 70% increase of importance and we kept and keep on gaining market share in this segment. But here on the right, you can see that we have been gaining market share throughout the last two years in a booming in our business.

On page 19, a some remarks about our medical business. As you know, a quite high quality business, it's the best private school in Brazil, the largest medical campus in South of Brazil. We think it's now over BRL12,000 increasing above inflation, given this higher quality and seats is still maturing but we expect promising results for this business over the next years.

So with this combination of seats maturing and ticket growing above inflation, net revenue of our medical business grew 31% in the quarter. On page 20, the on-campus [act] medical business, which grew by 6% in the quarter, but an important growth year on year given the relevancy of this business within UniCesumar especially the health-related courses.

And continuing education on the right, a strong growth year in the continued education, of course, segment. This comprises not only our graduate courses, but also a growing business of technical courses and professional courses. This segment is our smallest today so far with only 5% of our net revenue, but it is the one that is presenting the fastest growth.

So this is also a very promising area. And we do believe that we can offer complementary products shortens throughout their adult life. And to illustrate this potential to illustrate this prospect, we created slide 21 to show the prospects of the continued education segment. So just a few numbers here. We have in Brazil today, around 1.2 million college graduates, which is a important flow for our post graduate courses.

And 7.7 million graduates was in high school in Brazil, which is an important flow for our technical and professional quarter as well besides the undergraduate business, but also important to highlight here that we have around 58,000 students in the segment, most of them are still in graduate courses, but the fastest growing business is the technical courses.

This is a new business that until two years ago, more or less regulated only at state level in Brazil. But two years ago, the Minister of Education, the MEC authorize Distance Learning place such as Vitro and others to offer this type of courses at federal-level based on the quality, rates of the digital education undergrad courses.

So because we offer high-quality undergrad courses, we were allowed to offer anyway, there is a specific accreditation process for each course to offer this technical courses. So given our quality, we were granted, so far 42.8% of the seats authorized by the MEC. So this can be a nice contributor for our numbers over the next years.

So now about EBITDA with the margin growing, as I mentioned 2.7 precent point over the year. And let me show where it comes from. So regarding cost of service, we had a slight increase in the quarter numbers because of intra year, some variations. But the yearly numbers they were declined at 2.3-percentage-points year-on-year, which is basically due to operational synergies and that I have been mentioned to you over the last two quarters.

For G&A, the same who had a slight increase in the quarter, but basically because we had a strong decrease in the third quarter. So when you analyze the numbers, even for cost of service for G&A, we had incurred a cost of service, a decrease in the case of G&A, a stable number of around 6% of net revenue, which is by the way, the lowest in the industry. We are quite lean and quite focused on maintaining a lower level of G&A.

For selling expenses on page 24, the quarterly expenses as a percentage of net revenue were basically flat at 16.6%. And if we look at the yearly numbers, there was a slight reduction in such expenses as a percentage of net revenue, which given certain gains of scale and especially be more optimized our mix between digital and offline marketing for the whole group.

For PDA, at the right, as it was the case in the third quarter of last year, the fourth-quarter of '23 was very positive for us in terms of cash collection. With that, PDA is starting to go down for PDA in the year amounted to 13.4%, so a reduction of 0.8 points over the number of '22. Even despite the strong intake results of last year. This is not yet the ideal level, but I do believe that we are going in the right direction.

On page 25, adjusted net income, this quarter we had a reduction in the net income for the quarter, which was impacted by two effects, two things. One was higher financial expenses, given that we prepaid the self- financing this in December when we issued debentures that we prepaid the self-financing in the same day, which was associated with the acquisition of UniCesumar.

And this prepayments generated a accounting increase in expenses. The other effect was due to lower deferred income taxes in the fourth-quarter of '23 compared to the fourth-quarter of '22. So the positive impact was roughly BRL30 million lower in the fourth-quarter of '23 versus the fourth-quarter of '22. So this deferred income taxes, as you know, is generated as it has flexible office overtime, which is our case.

But the positive contribution of this was more important and more were stronger in the fourth-quarter of '22, in BRL30 million than it was in Q4 of '23. Anyway, representing an important growth in the adjusted income in the numbers, even with the customer acquisition debt in our balance sheet throughout the year.

So as you do remember, we acquired UniCesumar in May of '22 that when we issued our BRL1.9 billion, the bench to the fundamentals of the company and here, you can see on the right part of slide, the increase in expenses in financial expenses that I mentioned.

For even with the increase in expenses of about BRL100 million last year, comparing '23 with '22, we had an increase of about 24% in the net income adjusted of last year. Page 26. So important cash flow generation and a reducing level of CapEx. So first, CapEx went down throughout the year. So in the fourth quarter, it was 7.1% of net revenue reaching 6.2% throughout the year on average last year in '23, going down from 7.4% in '22.

So this okay, relatively low given our asset-light operation and by the way, around two-thirds of our CapEx is related to investments in learning and IT systems and technology. So most of our CapEx is focused on technology and very few of its very, very little of it is focused on hard assets. On the right-hand part of slide, the cash flows.

So we had a slight decrease in the cash flow in the quarter, this was because of certain at the same way that we had in the cost. We had very strong performance in the third quarter as smaller performance in fourth quarter. So that's why we show here as well the semester numbers in the middle of the chart. The second half of '22 and the second half of '23, we had a 36% increase in the operational cash flow between those two years.

And by the way, as I mentioned, we acquired for UniCesumar in May '22. Here, we are do comparing apples to apples, but this is just to illustrate the positive working capital environment that we managed to have in the second half of last year. For example, we are now in December, we were at the lowest level ever in receivables days with 44 days compared to 57 days that we had for example in June of '23.

And if we take, for example, our net revenue in '23 and compare this net revenue to the net revenue accumulated in the previous quarter, I mean between October '22 and September '23, there was an increase of 4.1%, more or less, which is more or less what has been growing on a yearly basis. But there was a decrease of around 10.8% in our short-term accounts receivables position in December '23 compared to September '23, so we managed to grow revenues by 4.1% in one quarter and reduce in almost 11%, the accounts receivables. So this is cash flow itself.

So page 27, the integration, which we just called your project, Illumina integration, which at the one is advanced and is advancing first and expected. So here on the right, you can see the impact on EBITDA through cost and expenses. The cost expense reduction that we had that we overachieved what we said we were going to do. These levers are not only personnel optimization and but also gains of scale in contract and better retention practice at Uniasselvi.

And also on the commercial side, as I mentioned before, through the expansion with other brands, the Uniasselvi through different new products and courses. We also managed to beat our estimation for this commercial synergies. So now the next step will be the amortization of the criteria for recognition of the students engagement means that as from this year on yourself will use the same criteria of UniCesumar for the activation of students this will result overtime in higher retention rates, lower PDA and higher EBITDA margins as well.

So on page 28, our debt level, our debt level was BRL1.94 billion in net debt. And this without leasing, it is the way banks used to look at debt levels. So BRL1.9 billion of net debt, which meant a ratio of net debt over adjusted EBITDA of 2.9 in December. So it was 3.3 in June; 3.1 in September of last year; and then 2.9 in December.

So we are not only it deleveraging but often reinvest. And of course, this was all aligned with our financing plan that we draw that we designed when we had the combination with the UniCesumar and also with this new debentures that I mentioned before, we also extended the average duration and the amortization schedule of our debt.

Finally, on page 29, the status of the migration from NASDAQ to B3. So what we have been able to do in the last months where we launched the transaction in September of last year. We got the green light from CVM to convert Vitru Brazil as a from a big category to a category in Brazil in December 4 of last year. And then just after Christmas, we got the green light from B3 for the Novo Mercado listing.

And finally, we got the realized from the SEC and the F-4 form was declared effective by the SEC two weeks ago, March 6, finally, it was a long process, but we managed to accomplish it. And now and then we were able to call the shareholder meeting, which was done last week on Friday. And then the next step will be the shareholder meetings of both Vitru Brazil and Vitru Limited, and that will take place, as I mentioned before, on April 19 and one month for now.

Then there will be an election period of about one month as well, during which the shareholders of Vitru Limited, that we'll be able to choose whether to receive Virtu Brazil shares or Virtu Brazil ADRs. So some of them will choose to receive directly share, which would be easier to trade here B3. Some of them, for example, some small shareholders in the US, for example, they'll choose to receive ADRs.

So we do expect that the delivery of the securities ADRs and shares will take place potentially early June, and then we will be able to start trading at B3 at Novo Mercado. So that was it. I think it was a good set of results, and I would like to open for questions.

We will now begin the Q&A session. (Operator Instructions)

Lucas Dai Nagano, Morgan Stanley. (Operator Instructions)

Hi, Carlos. Good evening. Thanks for taking our questions. We have two. The first one is related to average ticket. The increase last year was particularly high and for 2024, should both move both tickets more aligned with inflation and in the case of initials, are you seeing any impact with attrition due to this new pricing policy?

And the second question is related to regulation if MEC goes in the direction of increasing the percentage of in-person hours to something from like 30% to 50%, let's say. How do you see it impacting your operations, both for the Uniasselvi and UniCesumar? Thanks.

Great, Lucas, thanks for your questions. So regarding tickets, that's indeed return there to the slide about tickets here. So indeed, we had important growth last year in the first semester of in the second semester. Now looking forward, I mean, we have the intention and we have been working to deliver it to increase tickets more or less in line with inflation.

So there are quarters in which we'll be able to deliver more inflation and some quarter less inflation. I think it's still a bit premature to measure how this will evolve over time. What we are seeing that is that so far, we have been able to have intakes. For example, more or less at the same level of last year. So we were able last year to two grew intake tickets quite well.

This year we were at a higher price of year on year, our intake price is more or less at the same level of last year, but it didn't mean that our average ticket we increase more than zero. But I don't know yet if this will be in line with inflation or slightly less inflation, let's see. Over time last year, we grew by 7% Uniasselvi and 30% of them are for the different way more than inflation.

So it's not feasible to keep growing more inflation forever. So let's see how it evolves for the year and for regulation regarding in-person hours, we were adapt. We have when we see our hubs on a comparable basis. I mean, we have indicated Uniasselvi the current model, it hybrid indicators UniCesumar the hubs are also way better and bigger than the ones of the peers.

And so we will adapt. So let's see what it comes. We do believe that we are better prepared than anybody else to adapt to this type of requirements for more in-person hours, our percentage for fourth quarter.

Okay, Carlos. Thanks.

Thanks Lucas.

Mirela Oliveira, Bank of America. (Operator Instructions)

Good evening, Carlos. I have one question here on costs. What do you think on cost opportunities cost ? What do you think it's the main lines that could bring on gross margin expansion in 2024?

And secondly, you mentioned on the release on the cash flow from operations that there was an one-off effect for the semester, which effect was that if you could give more details on the impact for the semester. Thank you.

Great. So, for cost opportunities, we are quite well advanced in integration. So actually, the most of the gains synergies, they are already incorporated in the numbers of last year, but there will still be some more gains for '24 and one of the lines that we do expect against is, for example, a contract. So this impacts both cost and G&A.

So when you renew a contract a service contract, for example, REIT contract. Now have a much bigger scale for our contract, which are two years, three years or one year in duration. So when we renew it, you have only the full year effect of this better rate only in the following year. But we're still going to have more impact for it for this year.

We are we are also integrating our academic ERP. So our current ERP is still separate. The ones for UniCesumar and one for Uniasselvi is proprietary, one of UniCesumar is not. So we are now integrating and moving to the one of Uniasselvi, which also means some cost savings in costs for this year. But I would tell you that to be frank, that I mean, most of the gains coming from the integration, they are already in house.

We do expect, of course, some more gains of scale with the dilution of fixed costs, which is normal given our business our size. But with gains from integration, they are mostly in-house are done and I mean the one-off effect in cash that we mentioned, we have a very strong collection in third quarter of last year. We had also some postponements of payments in the third quarter.

So and then we had to pay these costs or to have a higher comparable basis in the fourth quarter of this year. So basically that's why we mentioned here that the normalized number for the semester is much more important to you to show, which grew 36%, if I'm not mistaken, which is here, 36% semester on semester. So my point is that the basis for the next for this year is what we have here.

So BRL325 million in cash flow from operations in the semester, it's a very nice level and a very important cash conversion as well.

Thank you. That's super clear.

Lucca Marquezini, Itaú BBA. (Operator Instructions)

Good evening, everyone, and thank you for taking our questions. Just we've been hearing from other players, that intake volume has been flattish so far in the first half intake cycle for this year. Mainly due to not only a strong comparison base, but also to the top-down now as a whole. So could you can you provide us with some color on the order intake so far? And you have been seeing the same trends for Vitru? Thank you.

Thanks, Lucca, for the question. In our case, what we have been seeing so far, it's a growth in intake. So the first until now until today, March 21, we have a low double digit growth in intake compared to the first semester of last year to the first same period of last year. In fact, about a low double-digit growth in intake and more at flattish tickets for intake than what we've been seeing. So it seems that we are growing more than the market again and given the quality of our offerings.

That's very clear. Thank you, Carlos.

Thank you, Lucca.

Caio Moscardini, Santander. (Operator Instructions)

Good afternoon. Thanks for taking my question. I have two questions here. One in regards to regulation, right, one of the discussions that we have been hearing that the Minister of Education could implement a minimum number of professors per student. But so I would like to ask how can you protect yourself if something goes on that direction, right, and you have to increase the number of professors that you have to achieve a certain minimum, we don't know?

And the other questions is in regards to leverage, right. What is your expectation in terms of net debt to EBITDA during 2024, what level could you achieved through the end of 2024, thinking just purely organic here? So thank you for the opportunity.

Thank you, Caio. So regarding the second question, what leverage. we would keep on expanding EBITDA and also reducing net debt, given that we generate more free cash flow than accrued interest. So our net debt will go down over time. So the debt will be lower in December of this year than it was last year. So our expectation that this ratio of net debt over adjusted EBITDA, we will be at around by the end of December of this year.

And again, it not take into account leasing expenses in the debt, but take into account these expenses as an expense in EBITDA. So the way banks used to calculate the comments. So around today we are 2.9 and if it will go down at around more or less 0.2 points per quarter, more or less.

And for regulation, I mean regarding the number of professors of students per professor, this is not a requirement from the Minister of Education when this was what when the requirement were defines a few years ago and there was no indication there was no requirement about having maximum number of professors (technical difficulty)

So what we have been doing that we are quite if it would, if this reduced issue, we have the academic agents, which are also tutors. So the regulation mentions academic agents, which are professors and tutors and who have today more than 3,500 tutors throughout Brazil. So this is what is required to have academic agents.

There's no such requirement such as you cannot have more than X students for processor. So otherwise, we will not be complying a law. So how can I not complying, if there's no law. There's no maximum ratio. So we're quite, I'd say, comfortable with that and we that's why we showed that anyway, when we see the CC course concepts that the Ministry of Education itself give to every institution that you have, of course, in fact that and put here as well in the screen on page 12.

You see that 61%, of course, have a [65%] and 99% of our course have CC of four or five. So this is just a illustration that I mean, we are not very worried about it.

That's very clear, Carlos. Thank you very much.

You too.

(Operator Instructions)

Bruno Gebara, Tarpon. (Operator Instructions)

Hi, all. Thanks for taking the question and congrats on the results. I have a specific question. I know it was not part of the discussion here, but is related to churn. And if there is any change in churn in 2024, and if you could give us some information on that? Thank you very much.

Thank you, Bruno, for your question regarding churn and retention rates, that's an important issue when you compare to fourth quarter of last year with the fourth quarter of '22, there was a slight improvement in the ratio and the retention rate, both at the Board and Uniasselvi. So, this is -- I think, the start of this recovery process.

We had a deterioration of this retention rates in the last years, given the economic situation, et cetera, given our growth. And now even, despite the fact that we are growing a lot and we had this important intake also last year. We managed to decrease slightly but the trend is positive, the churn. So, I mentioned the intake because most of the churn is related to newcomers to a new students.

So we could have a very low churn or a very low overall average churn. If you have no intake, for example. But we don't want it. So we have to have a balance between churn and intake and tickets for this three-piece equilibrium must be reached. I guess that now we are closer to reaching the balance.

Thank you.

This Q&A session is now closed. I would like to turn the floor over to Mr. Freitas for the company's closing remarks.

Thank you, everybody, for following us throughout last year, and we are available for any further questions you may have over the next days. Thanks, and good evening.

The video conference of results referring to Vitru's fourth-quarter and full year 2023 is closed. The Investor Relations department is available to address further questions and concerns. Thank you so much to all participants and have a good evening.