Ladies and gentlemen, thank you for standing by. My name is Nazareen I will be your conference operator today. At this time, I would like to welcome everyone to the Vasta Platform First Quarter 2024 Financial Results. .

Before we begin, I would like to read a forward-looking statement. During today's presentation, our executives will make forward-looking statements.

Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements. .

Forward-looking statements in this presentation include, but are not limited to statements related to our business and financial performance, expectations for future periods, our expectations regarding our strategic product initiatives and the related benefits and our expectations regarding the market.

Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. This risks includes those set forth in the press release that we are issuing today as well as those more fully described in our filings with the Securities and Exchange Commission. .

The forward-looking statements in this presentation are based on the information available to us as of today. You should not rely on them as predictions of the future events, and we disclaim any obligation to update any forward-looking statements, except as required by law. .

In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. .

I would now like to turn the conference over to Marcelo Werneck, Vasta's Investor Relations. Please go ahead. .

Good evening, everyone. Thank you for joining us in this conference call to discuss Vasta Platform First Quarter of 2024 Results. I'm Marcelo Werneck, Vasta's Investor Relations. And today, we have the presence of Guilherme Melega, Vasta's CEO; and Cesar Silva, Vasta's CFO, who will be joining me on the call. .

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

Thank you, Marcelo. Thank you all for participating in our earnings release call. .

I'd like to cover Slide #3 with some highlights of our 2024 cycle to date. This first quarter also represents halfway through the 2024 commercial cycle, which goes from October 2023 to September 2024. And we have delivered strong economic and financial results.

Vasta concluded the 2024 cycle to date with a 12% net revenue growth over the same period last year, mostly due to the conversion of ACV into revenue and through the performance of the B2G business unit. Vasta's subscription revenue has reached BRL 872 million, a 9% increase compared to 2023. .

Complementary solutions continue to present the highest growth rate among our business segments with a 21% expansion in the cycle to date compared to the same period last year.

And as per announced in our last earnings release, we have already renewed our first B2G contract for 2024, and we have generated BRL 69 million from the B2G sector in the first quarter of 2024. .

Moving to the company's profitability. In 2024 cycle to date, our adjusted EBITDA experienced a growth of 21%, reaching BRL 402 million while increasing an adjusted EBITDA margin to 39.6%. This increase was mainly driven by improved gross margin benefiting from better product, a reducing impact of product cost and operating efficiencies. .

Finally, we continue to see significant improvement in our cash flow. In the 2024 cycle to date, free cash flow totaled BRL 52 million, a BRL 59 million increase from negative BRL 7 million in 2023. In the last 12 months, free cash flow-to-adjusted EBITDA conversion rate improved from 31% to 43%.

As a result of Vasta's growth and implementation of efficiency measures. .

I will now move to Slide #4 to discuss 2024 ACV. In line with our commitment to total transparency, we have adjusted our ACV bookings for 2024 sales cycle.

It's important to note that our previous ACV booking has been revised downward by 3.7% to BRL 1.350 billion due to the effective number of students at our partner schools after complementary orders in Q1. New ACV bookings represent an organic growth of 12% comparing to 2023 sales cycle.

Our top performers continue to be premium brands and our complementary solutions. .

On Slide #5, as previously mentioned, Vasta subscription revenue in 2024 cycle to date has reached BRL 872 million, a 9% increase compared to the same period last year. It's noteworthy that the distribution of subscription revenue throughout 2024 deferred slightly from the previous year with less concentration in the first 2 quarters.

The 2024 cycle to date accounts for 64.5% of the total ACV compared to 66.4% in the previous cycle, mainly due to product deliveries migrate to third commercial quarter and different seasonality of new contracts. .

I will now turn back to Marcelo Werneck, who will talk about the financial results of the quarter in 2024 cycle to date. .

Thank you, Melega. In this slide, we present the composition of Vasta's net revenue. On the left side, you can observe the organic year-on-year growth in total net revenue for the first quarter, which increased by 14%, reaching BRL 461 million.

Total subscription revenue was flat in this quarter with BRL 357 million on revenues, mainly due to the effects mentioned before by Guilherme. Nonsubscription, which now represents only 7% of the total revenue, dropped 24% to BRL 35 million.

And with the B2G sector, we generated BRL 69 million in revenue in the first quarter of '24 due to the contract renew with the state of Pará. .

Moving to the right side, we analyzed the net revenue for 2024 sales cycle to date. We achieved an organic net revenue growth of 12%, amounting to BRL 1.050 billion. Subscription revenue had an increase of 9%, reaching BRL 872 million and continues to be the major contributor to our total revenues, representing 86% of the revenue share.

Nonsubscription revenue, as expected, dropped 31% to BRL 74 million, and the B2G contributed to 7% of our overall revenue in the '24 cycle to date. .

Moving to Slide #7. In this quarter, our adjusted EBITDA amounted to BRL 162 million and with a margin of 35.2%, a relevant increase of 24% from the BRL 131 million in the first quarter of '23.

On the right side, we see that adjusted EBITDA in 2024 sales cycles increased by 21% and reached BRL 402 million with a margin of 39.6% or 3.1 percentage points above the 2023 cycle to date. .

Let's move to the next slide and explain the breakdown of adjusted EBITDA margin. On Slide #8, we can observe that EBITDA margin improved 3.1 percentage points from 36.5% in the 2023 sales cycle to 39.6% in the 2024 sales cycle to date.

Firstly, our gross margin increased 3 percentage points and the increase in gross margin benefited from better product mix and reduced impact of product cost as '23 was the year that the industry faced higher inventory costs caused by global inflation on paper and production costs. .

Provisions for doubtful accounts, PDA, was stable between the years, in line with the revised credit landscape. .

As a percentage of net revenue, our commercial expenses increased by 2.7 percentage points, driven by higher expenses related to business expansion and marketing investments. And adjusted cash G&A expenses improving by 2.6 percentage points, mainly driven by workforce optimization and budgetary discipline measures. .

Moving to Slide #9, we show the adjusted net profit. In the first quarter of '24, adjusted net profit totaled BRL 50 million, a 97% increase compared to adjusted net profit of BRL 26 million in the first quarter of '23.

In the 2024 sales cycle to date, adjusted net profit reached BRL 146 million, a 49% increase from the adjusted net profit of BRL 98 million in the 2023 sales cycle. .

Moving to Slide #10, we show the free cash flow evolution. In the first quarter of '24, the free cash flow totaled BRL 52 million, representing an increase of 44% compared to BRL 36 million in the first quarter of '23.

On the right side, in the 2024 sales cycle to date, our free cash flow reached BRL 52 million, a solid BRL 59 million increase from the negative BRL 5 million in 2023 cycle. .

On another important metric, our last 12 months free cash flow-to-adjusted EBITDA conversion rate improved from 31% to 43%, reinforcing the message that cash generation continues to be a key focus area of our business. .

Moving to Slide 11, we show the provision for doubtful accounts. Total expenses with PDA in the first quarter of '24 totaled BRL 13 million, representing 2.9% of total net revenue compared to an expense of BRL 10 million in the comparable quarter. .

Moving to the right side of the slide, we can observe that PDA for 2024 sales cycle shows a slight improvement, although still impacted by the credit landscape review. It dropped 0.1 percentage points to 4.2 percentage of the net revenue. .

Moving to the next slide, we observed that the average payment terms of Vasta's accounts receivable portfolio was 180 days in the first quarter of '24, which is 19 days lower than the comparable quarter and in line with the seasonality of our business. .

Moving now to Slide #13, let's take a closer look on the net debt movement. As of the first quarter of '24, Vasta had a net debt position of BRL 1.069 billion, a BRL 5 million increase compared to the last quarter, mainly due to the impact of financial interest costs and the second repurchase program, which were fully completed during this quarter.

In comparison to the third quarter of '23, the beginning of the '24 sales cycle, the net debt position increased BRL 71 million from BRL 998 million, driven also by the financial interest costs and the second repurchase program, which were partially offset by the positive cash flow of BRL 52 million in the period. .

I will conclude my part of this presentation with Slide #14, where we can observe that as of the first quarter of '24, the net debt to the last 12 months adjusted EBITDA ratio continues to improve for the fourth consecutive quarter and now stands at 2.22x, which marks an improvement of 0.14x compared to the fourth quarter of '23 and an improvement of 0.63x when compared to the first quarter of '23.

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With that being said, I'll pass the word to our CEO, Guilherme Melega. .

Thank you, Marcelo. On Slide 15, let me provide you with an exciting update on our significant avenue of growth of Vasta. As mentioned last quarter, the launch of the Start Anglo franchise combining bilingual education with academic excellence continues to ramp up and signify the strategic expansion in our new revenue streams.

Both of our two fully operational units in 2024 are exceeding expectation and our first franchise in Alphaville is now operating with over 190 students, surpassing our target of 120 students. We have signed 5 new contracts, and we now have 20 contracts. Security distributed across 10 states in Brazil and over 200 prospects in negotiation.

This broad geographic presence and strong pipeline underscore the robust potential for future growth and market penetration of Start Anglo. .

Moving to Slide 16. Finally, I would like to introduce our latest breakthrough unveiled at [indiscernible] last month, which has been met with tremendous success, the teacher and student intelligent assistant, our Plurall AI platform. .

In summary, we gathered all of our excellence content from our basic education systems that we want to enable and put AI itself. It divides, classifies and prepares the content creating several knowledge bases separated by brand and material.

With each interaction, Plurall AI understands your request, searches, all related knowledge and decides its best response. Building on its preparation, generative AI enables features to create supplementary lessons plans, generate images, scripts for presentation, question list and help students develop study guidelines. .

This innovation aims to empower teachers in their teaching process and enhance students' learning. This groundbreaking tool is reshaping how creators and learners engage, offering a more dynamic and efficient educational experience.

With the Plurall AI platform, we are transforming education, providing a smarter and more inspiring learning environment, and we can't wait to see how it will further enhance teaching and learning national-wide. .

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

[Operator Instructions] Your first question comes from the line of Mirela Oliveira with Bank of America. .

I have two on my side. First on the ACV contract.

Could you comment a little bit on the recognition seasonality if this is a new seasonality or is it more of a one-off from the 2024 cycle? And secondly, on the B2G contract, we previously understood that these contracts were more expected from the second quarter onwards due to the seasonality of government contracts.

So could you comment a bit on the specifics of this revenue recognition in the first Q? Is this related to [indiscernible] or is another contract?.

Thank you, Mirela, for your questions. I will start with the ACV and the seasonality. Every year, we have a slightly different seasonality. This year, we had more contracts, more new contracts that we are serving twice in a year. So concentrates a little bit the recognition on Q2 and Q3.

So that's why we expect more recognition of ACV, as mentioned on the presentation on Q2 and Q3 related to last year -- to the same period last year. And for now, you can expect this seasonality because that's the landscape that we have from our contracts. .

And related to the ACV bookings -- to the reduction of ACV bookings, we are seeing a soft market in terms of enrolled students at our partner schools, and we do expect it to be a one-off this year. .

Regarding B2G, we recognized the orders that we received so far from the same contract that we had last year from the government of Pará. So we already secured BRL 69 million from that contract, and we can have more orders coming in Q2 and also more services being provided in Q2.

We don't secure the orders yet, but we definitely expect more to come regarding this contract. And yes, this contract is related to the [indiscernible] enhancement products that we are serving Pará. .

Our next question comes from the line of Marcelo Santos with JPMorgan. .

I wanted to go a little bit deeper on this B2G product [indiscernible] enhancement. What would be the extra orders you could get? Just trying to understand the mechanics. I mean, so you didn't service all the students in the first quarter or they would be buying for -- just wanted to get a little bit better the dynamics. .

And I would want to ask as a second question, how do you see the margin outlook for 2024 when compared to 2023? I mean you had a very good start in the beginning of the year.

So is that something that we should expect for the following quarters to remain in place?.

Marcelo, thanks for your questions. Let me give you more details about the B2G contract. This year, we are serving not exactly the same grades that we served last year.

This year, we are serving fourth and second grade in high school, which represents a different number of students, but there are more products that were not shipped in Q1, such as teacher training materials and assessments that we can provide in Q2. That's pretty much it from this contract.

We do not expect much more to be recognized, but there is room to improvement in the same contract. .

Regarding the margin outlook for the remaining of the year. We had a great start. This good start is related to a better mix. We are focusing on premium products. We have stated that our strategy is growth on premium products, obviously, with better margins. And this has already reflected on Q1 margin.

And we have the huge recognition of B2G that dilutes our fixed costs. So looking to -- and we don't have the same costs -- the same pressure that we had in production costs as we had last year. So when we look to the remaining of the year, we expect a better margin, but it realigns on more volume of B2G.

With fewer volumes in B2G, we should convert a little bit above the historical margin. .

Next question comes from the line of Mauricio Cepeda with Morgan Stanley. .

I have two questions. First one, if you could detail a little bit more about the revision of the ACV, exactly the mechanism in which it happens? So as far as I understand, there was kind of a tolerance in the contracts for base students and you saw that there would be less students this year than it was foreseen originally in the contract.

So if you can explain a little bit the mechanism that allowed this kind of variation and how it translates to the future, if there we should expect a kind of a variance in the ACV versus revenue recognition throughout the year?.

And my second question is about the mix.

If you could comment a little bit on your strategy in terms of mix, how you want to play in the private market in terms of product positioning and how it could help you in the gross margin in PDA, et cetera?.

Thank you very much, Mauricio, for your questions. Let me give you more details about the ACV mechanism. ACV, when we share our ACV bookings, we are sharing our contracts, the number of students that we have on our contracts with the price -- the new price and discounts that we have secured in the contract with each of our customers.

There is some room in the contract for the schools to order fewer students. Normally, it doesn't happen. We see normally a breakeven in the contract, in the overall contracts or slightly above. .

This year, during the complementary orders because in Q4, we fulfill the majority of the contracts to the schools. And in Q1, we received complementary orders depending on the pace of enrollments. What we observed in this quarter is that we received fewer complementary orders than expected in the contracts.

And these schools are reporting fewer students than initially contracted. So our decision was to respect that number of students and do not push products to the chain. And we are sharing with you this impact of 3.7%, slightly above the ACV bookings previously reported. But the mechanics is pretty much the same.

What we have this year is, in our opinion, a soft market. That impacts much more the mainstream schools. And the premium schools are always more protected, and that's obviously why our strategy is on premium schools. .

That allows me to comment on mix. Our strategy is to pursue a better market share for our premium brands. I'm talking about Anglo, pH, Fibonacci and Amplia. And we are moving fast.

We have a very good start in Q1 sales campaign for 2025, where we are investing our campaign in enhancing products, as I mentioned, the Plurall AI that goes pretty much focusing on the premium brands. And we are enhancing product, enhancing sales campaign for the premium schools.

And the first quarter of our 2025 sales campaign led us very optimistic that we are on the right track. But what we are pursuing is to grow on premium and cross-sell complementary products to those schools. .

There are no further questions at this time. Mr. Guilherme Melega, I turn the call back over to you. .

Thank you very much to participate in Vasta's Q1 conference call. .

I would like to make some comments. We just launched our sales campaign for 2025, and we had a very strong first quarter. We already signed 3x more contract than we had in the same period last year.

Obviously, it's not yet a very significant amount in terms of total of the campaign, but a very good start is very important to make us confident that we are on the right track. .

We have a very robust pipeline on B2G. We expect to have more contracts soon signed this quarter. On Start Anglo Bilingual School, we already reached 20 contracts. It's already ahead of our forecast sales and we have a huge demand for it, and we are very confident that in a few years, this will be a very important segment for us. .

And lastly, but very important, we're implementing a big breakthrough technology in our Plurall platform with the implementation of AI that will allow our teachers to save time and to be much more efficient, producing materials for their classes and their students.

And by doing so, we really believe that we are strong in our relationship with our schools and our network of teachers. .

Having said that, we are very optimistic for the remaining of the year. And I look forward to talk with you in Q2 earnings call. Thank you very much. .

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..