Cogna Educacao SA
BOVESPA:COGN3
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Cogna Educacao SA
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Good morning and thank you for waiting. Welcome to the live broadcast on Cogna earnings conference call in the third quarter 2022. [Operator Instructions]
Also, today's slide webcast, both audio and slide show may be accessed through the address ir.cogna.com.br, where you will find the presentation. The slides will be shown by you and replay of this event will be available shortly after its end. We would like to find that webcast. Participants may submit questions to Cogna, and they will be answered after the end of the conference call by the IR Officer.
We would like to let you know before proceeding that any forward-looking statements on Cogna's beliefs and assumptions are based on our beliefs and information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect future results of the company and could lead to results that differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. Roberto Valerio, who will start the presentation. You may proceed, sir.
Hello. Good morning, everyone. Thank you for participating in our call to discuss our results in the third Q '22. With me today, Frederico Villa, our Finance VP, Mario Ghio, Vasta CEO; and Eduardo Gonzales, our IRO and Corporate Finance Officer. This call will last approximately 1 hour, 40-minute presentation plus 20-minute Q&A.
Let me begin from Slide 3. This is a general view of the third Q and our view about Cogna performance, beginning with Kroton, we've had another cycle of intake growth, the fourth in a row we've grown in revenue, 10.8%, and we've grown in student intake volume, 16.6%, yet another cohort of growth that is the third trench of revenue in this cycle. That is why we've had this increase in revenue, again, delivering our target. Undergraduate student base has grown 11.7% this quarter, reaching 985,000 students. The fifth quarter in a row we've seen a growth in our student base. This is, of course, a result of student intake growth that is more enrollments. And this is a sequence of positive intake plus a better retention.
So of course, that had to hit, that had to hit revenue. We said it would grow as of 2023. And now the cycle of renewals of enrollment renewals has been very positive. So we've been able to deliver the result before. I mean, we expected to deliver this result in 2023. And we've already delivered this target now in the third quarter '22. It means in this year, we've had a year-to-date revenue growth. So it shows that we have passed our inflection point. Also, profitability has grown. Kroton recurring EBITDA margin is up 3.7 percentage points in the third quarter. Even with the inflation pressure, we see students coming back on campus. So it shows our capacity to execute our strategy.
Revenue growth, of course, helped us improve the EBITDA margin. But let me remind you that we already had positive results in the recurring EBITDA margin, even though we had a growth in revenue. As to Kroton Med, it meets our expectations, delivering this half year guidance. I mean, even if we do not look at proportional contributions along the year, we have overcome the guidance. And it shows we were right to be so confident in hybrid and digital programs. Our medical vertical Kroton Med, and also the products we offer on Plural platform in Vasta.
Now the quality of receivables is up. We've had a reduction in ADA of approximately 30%. That is 29.9% in the year-to-date. This used to be a concern, but we continue to look at the commercial aspect. We want to continue to grow enrollments, but with high quality. We've mentioned this in previous meetings. In the last 2 years, we've been hard on the negotiation of payments from students. So little by little, we've been able to improve the credit profile of our students. And this is what you can see in this 30% reduction in ADA.
Now talking about Vasta, we feel extremely happy to talk about the results of last, we've delivered our BRL 1 billion annual contract value guidance. We are actually above BRL 1 billion. Net revenue has grown almost 30% and more important than growing, we must look at the quality of this growth, which is concentrated on subscription products that has grown 35% in this half. And today, they account for 8.5% of our revenue mix. Let me also highlight, we had an increasing share of complementary solutions from 7% to 9.6% of the revenue mix, which confirms Vasta’s plan that this is a great avenue for growth. Now profitability followed suit. I mean, together with the revenue growth, EBITDA margin has grown 10.4 percentage points this quarter, which is a very strong growth. Vasta did great work in restructuring in the first half of the year, and you can see the results regarding EBITDA increased more than double more than 114% in this quarter.
It is high-quality performance, high commodity results. We can see that in operational indicators, and it shows that we were right to be confident in our guidance. We expect our guidance to grow 20% in 2023, reaching BRL 1.23 billion. That is we feel very confident in the work done by Faso. Now as a result, as our 2 operations are performing so well, Kroton and Vasta, Cogna continues to advance. This is our sixth consecutive quarter we've seen value generation that is EBITDA growing, EBITDA margin growing, operating cash generation also up.
So it shows that we have been consistent to deliver our commitment into the future. Net revenues grown 3.5%. Beyond revenue growth, it is important to look at the quality of this revenue. We've seen a resurgence in nonpayments in Kroton. And Vasta now has a much bigger share of subscription in its revenue mix, which again points to the higher quality. So we see very favorable prospects in the future. Recurring EBITDA has grown 17.2% with an expansion of 3.4 percentage points in the margin. So that's important growth. Operating cash generation has increased by 22.4%, reaching BRL 477 million.
In this quarter, operating cash generation was kept steady because we are making important CapEx investment. So we believe our prospects for cash generation are extremely favorable. Now we expect higher cash generation. So our leverage is at a healthy level. Today, in this quarter, it remained stable 2.15x, which is a comfortable distance from the covenants.
But it's important to talk about how confident this management feels in terms of our capacity to generate cash, continue to use our business models, we see a reduction in leverage in the future.
Having said this, let me now move on to Kroton, Slide #5, talking about our student base growing 11.7%. But I think I want to highlight that we are growing on both high on-campus content or high on-site attendance and also we're growing on low on-site attendance. We're growing on digital products. This is an avenue of growth. As you can see, we're also growing on high on-site attendant programs. They still account for a very important share and they fell 9% this quarter.
This growth in our student base comes from a strong cycle of enrollments, both existing student, students in our base and also renewals and also new students -- and I think it's important to explain, as you look at these 2 segments, so renewals, students on our base and new enrollments. Now they -- well, they were new enrollment, and now they will renew for the first time. As you can see, both lines in the renewal of students in the base and the first renewal of new students, they're both very favorable.
Our intake is growing strong, especially for students enrolled in low on-site attendance programs. We see that in the mix, we have a higher churn, a higher student dropout, but if you look at high on-site attendance, the dropout rate is lower -- and because we have a very strong student intake, the mix is influencing a higher churn rate. But what we see is the consistent growth in student base. This is because the student intake has a very high quality.
Now on Slide #6, talking a bit more about student intake, we've broken down on the 16.6% growth. So on low on-site attendance programs, we've grown more than 21%, 21.5%. This is a great driver of growth for us. And our high on-site attendance has also grown less, but it has also grown. We highlight in this slide is the revenue growth. I mean, when you look at the whole cycle, the revenue of this intake cycle is growing 10.8% in low on-site attendant basically, but all on high on-site attendance. So -- and you see that volume has grown 16%. The revenue has grown 10%. Why? Well, because we're growing much more in low on-site attendance, but we see an overall growth trend and also in segments, growing volume and revenue. So that's a very positive growth.
One more year growing revenue, which makes us confident that our Kroton revenue will continue to grow in the future. Because if we have an increase in revenue, the future will be even better.
Now Slide #7, talking about our revenue. The second chart on the slide is the one we have been showing in the last meetings, showing that -- well, we began the first quarter of '21 with minus 19%. And then we had this favorable trend. We knew we would have a point of inflection looking at revenue because of the work we were doing.
We thought it would be in 2023. But because of the reasons I have already mentioned a point of inflection aimed earlier. So we feel confident that our revenue will just continue to grow. We are now beyond the inflection points, and we're now generating cash and profitability. It's much better than last year. Let me repeat, that we are -- I mean, as we said, after the restructuring of Kroton, we said, well, first, we will break even, and reach profitability. We will improve profitability and revenue will grow again. And so our EBITDA generation would grow even more.
It is still the same thing we say today the same thing we believe. Now recurring EBITDA shows the quality of our work, the work of restructuring and also the work we've been doing to control costs and expenses. We've had a growth of almost 30% in this quarter. EBITDA almost 10% in the year-to-date EBITDA, as you can see on the chart, EBITDA margin also up. And as we break it down, we can see corporate expenses are down, expenses with sales and marketing, although we are already a very efficient operation. We have the best rate on the market, but we still have an opportunity, as you can see here, to gain more efficiency. As of next year, probably -- I mean, we have included this in our budget. We will invest more in marketing because we believe there is an opportunity here today.
Our LTV on cash is 6%, and we believe we can invest a little bit more in marketing so that we can have an even faster growth. So this is what we are willing to invest a bit more in marketing. I think the market understands better our capacity to deliver results. And so we will now begin to invest a bit more in marketing.
I've already spoken about ADA as of 2023. This is something you still do not see in Kroton results. But as of 2023, we will begin to see minor improvements in the product influenced by the distance learning platform. So for this revenue to date, the cost is higher, it will be increasingly lower, which will help us in leverage. As you know, Distance Learning has a very positive margin. So we expect to see improvements in this [indiscernible].
Now Slide 9, talking about accounts receivable average collection period and coverage ratio. We've seen a decrease from '17 to 13% in these provisions, we still have a coverage of about 69%. It's a stable coverage. And I think this is relevant information that ADA is falling. -- average collection period is also falling. If you compare both years, we used to have 110 years. Last year, the average collection period decreased to 55 days. And now we've had another improvement, minus 7 days today, 48 days. It's the average collection period. So again, we feel confident that we will continue to improve here.
Now on Slide 10, talking about Kroton Med. Today, we have 556 medical seats approximately 800 in the near future. So we still have an opportunity for organic growth in this opportunity. The guidance for this year in revenue, we've already reached 83% of our guidance. So we're doing very well in terms of growth of. Also regarding EBITDA, we've attained 78% of our guidance. Well, it confirms not only the opportunity but also the quality of execution. Just like last year, we will also deliver our guidance this year. We feel very confident about the growth potential of Kroton Med. So it will continue to contribute for Kroton growth.
And we said this to help you the floor to Mario Ghio, Vasta, CEO, who will talk about the operating highlights of Vasta...
Thank you very much, Roberto. Welcome to all. Let's start with Slide 12, in which we discussed the revenue for the quarter. This was a very strong quarter with more than 48% of increase in revenue in the third quarter. But even more important for us is to analyze the cycle because we have 4 quarters from 1 year to the next year. So closing our commercial cycle. This is the best way in our view to understand Vasta's business. So in this cycle, our revenue is growing approximately 30% underscoring the importance and the weight of subscription revenue that's growing and within subscription revenue, once again, we highlight the complementary solutions business that are growing 77% in this commercial cycle. So once again, we have high-quality revenue at high predictability as well.
Moving on to Slide #13, I would like to remind you of our annual preliminary annual contract value of BRL 1 million for next year should be confirmed, we will be announcing this guidance at the end of January, February, as we have been doing every year. The preliminary ACV includes all contracts signed until October 31, and as the campaign finishes by the end of February, we'll report the ACV that's definitive for [indiscernible]. But looking at the ACV in 2022, I would like to highlight that the market can expect recognition, the percentage of recognition of revenue of ACV third quarter is similar to what we recognize in 2022.
In 2020, we have incorporated 2 characteristics that have changed recognition. Firstly, it's not a year that has suffered with the effect of the pandemic and the new brands such as Mackenzie and Eleva have had their revenue normalized. So from this BRL 1.23 billion of preliminary ACV for 23, we hope to recognize first semester the same percentages that we recognize for '22 and that are reported in this slide. Also, we met the guidance because it was BRL 1 billion in ACV. We actually surpassed by BRL 24 million, but we are not considering in the preliminary ACV, the fact that schools will have their student base recovering differently from 2024. So we are not predicting that there will be a larger number of students. And next year, we'll see how things turn out.
And of course, this is also an indicator that only announced next year to see whether the volume of students has bounced back.
Now turning to Slide 14. I want to mention our increased margin. We saw improvements in all P&L groups, our cost efficiency, and this led to a bit twice as big as last year, 5 against 5. And in all P&L lines, we saw improvements that drive from our great financial discipline and the reorganization of our workforce and obviously, the reduction of costs that came with -- together with greater revenue.
It's important to highlight that as a result of all these efforts, we gained more than 10 percentage points in margin jumping from 16% last year, which was a year that covered with the pandemic to a margin -- consolidated margin in the Cogna vision of 26%, an increase of 10.4%. And just to close it, just wanted to highlight that the revenue from well, in fact, our -- we made an effort last year of not renewing agreements with the schools that had difficulties with payments. So as a result of this, our allowance for doubtful account has decreased, and we'll see this declining further once the effect of COVID reduce. And now considering the preliminary ACV, we are expecting next year to be very positive.
And now I'll turn it over to Frede...
Good morning, everyone. I'll begin talking about Saber. Let me remind you that Saber represents our Red Balloon, sets and the National Textbook Program, or NPTP. I'm now on Slide 16, showing our financial headlights. On the left side, we've had a net revenue this quarter. We had a reduction of approximately 46% and 29% in this half year. But at the lower chart in recurring EBITDA, we also had a reduction in this quarter. And in the half year of approximately 13%. Let me explain this to you.
What happened that led to this reduction in recurring EBITDA in this quarter, approximately 83%. Well, this is because of the seasonality of a national textbook program in line with the historical variation. It was no surprise. In 2022, we traded the school segment at a lower volume. But for 2023, there will be a more favorable calendar and the acquisition of a larger volume and price segments. So this segment national textbook program will have a growth. The other units, they do not have the same seasonality. And there, we had a revenue growth, net revenue of approximately 24% in red balloon and other services.
Now let me move on to Slide 18. It is our conclusion where I will be talking about our financial and operating indicators at COGNA. Here, you can see net revenue and recurring EBITDA on the left side of the slide. Net revenue grew approximately 11% at Kroton and 49% at Vasta. So you can see our Cogna revenue growth in this quarter, 4.1% and in the year-to-date, 3.5%. Now in the lower chart, recurring EBITDA and EBITDA margin in line with what we mentioned to you in the previous calls, our EBITDA was BRL 200 million in the third quarter of '21 and now BRL 232 million. It is a growth of 16% approximately in margin. And in the year-to-date from January to September, Kroton has published today our recurring EBITDA of BRL 988 million, up 29.1%.
This is a growth of 3.4 percentage points. So this is a positive result, no different from what we announced to the market in previous calls.
Now -- on Slide 18, talking about OCG, operating cash generation, you can see our post-CapEx operating cash generation, BRL 187 million this quarter, which is very close to the third quarter of 2021 when we had BRL 193 million. It shows that the post CapEx operating cash generation this half year, we had an investment in CapEx that was higher than what we had in the third quarter of '21 by approximately BRL 40 million. Had we kept the same level, we would have had a positive cash generation. And so as to remove the seasonal effects, I think the best way to look at these numbers is the year-to-date from January to September, as you can see in the lower chart.
So we are comparing the year-to-date in September 2021, and now in September 2022, up 22% from BRL 390 million to BRL 477 million. Let me remind you that last year in 2021 at approximately BRL 390 million. So it shows how strong we are, how strong the cash generation is today. So it went up to 48.3%. As Mario mentioned, we had a higher revenue, lower expenses, reduction in marketing investments. And that is why we've had this result in operating cash generation. It's a very positive result.
We now show our cash position. Well, you can see the results in Slide #20. So the first chart shows the leverage. Roberto, in fact, begin this presentation talking about leverage. It is under control at 2.15x -- this is considering net debt over adjusted EBITDA. Our covenant is 3x. And so we still have 0.75% in this leverage. And our strategy is to keep the best possible capital allocation. Looking at other Brazilian companies, and we can see that our leverage level is perfectly healthy today. We've had a 17% reduction in gross debt. We were able to elongate our debt an average term of 33 months and 65% of maturities later than 1 year.
Now looking at the debt, our gross debt, as you can see in the lower chart, BRL 5.4 million -- and our cash was 2.1%, and so the net debt is now BRL 3.2 million, showing that our strong cash generation, higher revenue and better EBITDA, I mean, despite the cost of our debt, the cost of capital in 2022, the interest rate is higher than it was in 2021, but we have kept the same level of leverage. And in the amortization program in the third quarter of 2023, we have an amortization of BRL 1.8 billion. But looking at our cash today, 2.1 plus our strong cash generation that will continue as we had in the last quarter, we feel comfortable that we will be able to pay for this debt. So today, we don't have any plans for further funding operations. So the leverage is under control.
And we want to conclude this presentation on Saber and Cogna and let me give the floor to Valério.
Thank you very much, Valerio. Now looking to the future, I think that the key messages here is that the third quarter marks a very important moment for Cogna, a moment in which both operations start growing significantly. We had seen a profitability increase in both units in Vasta and Cogna. But the third quarter, with the Vasta ACV delivery and the growth of revenue in Cogna is really heralding a new era post reorganization of our activities.
And now our energies are all geared to the real growth of both units. There's margin, there is cash generation and the prospects are looking very positive because this growth, both in Kroton and Vasta are based on structural changes. They are not based on circumstances. Kroton has been using for 2-3 years, this strategy based on hub expansion and improvement of the sales channel performances. So even though the market may go through some pressures, -- in terms of income in house loads, we believe that the background for Kroton is positive and will continue to drive growth with cash generation.
And with the restructuring of all of our systems, we've left behind the legacy systems and are now implementing new systems with also a focus on NPS and operations, both in distance learning centers. And so I see that this is a very positive moment for Kroton and also for Vasta. We are so confident that we are proposing a growth of ACV of 20% for next year. And the most important message is that we've left behind its phase of restructuring and the phaseout of other operations and even the impact of the pandemic in Vasta. And we're looking to the future. Feeling confident that we have 2 great operations with many prospects for growth. Of course, this is an ever-changing gain. I'm not saying it's going to be easy, but in the team, we're feeling very confident that the future will be very positive. We have made some very good deliveries in terms of cash generation even when we are under pressure now with revenue on the rise, we have one to be even more optimistic.
Just to close, I would like to reinforce Fred's words. We are feeling confident about our cash generation, reduction of our net debt and also reduction of our leverage. This is the next step we will do -- growth indicators, and this will create some space in medium term for us to think of growing faster through other initiatives that are still not in our near-term greater, but that will enable us to take even more ambitious steps.
With this, I close my presentation, and I would like to thank all for your participating. You're all invited now for our Q&A. Please feel free to ask any questions.
[Operator Instructions]. Our first question is from Vinicius Itau BBA.
The first point I would like to touch in relation to Kroton, you showed a strong student intake in a cycle that was looking very tough in comparison with your peers. And the difference between the debt of students and the revenue from student intake seems to be explained by the mix. There was not much of a price variation. So what do you think was different in this semester? Was it the competition that push prices higher as we try to recover margins? And was this that stood in the way for the competition and also in relation to dropout rates, drop out was more significant in low on-site attendance. And maybe this is because of more freshmen coming in. But what can you say to us in relation to retention in these new cycles?
I will take the 2 questions on Kroton. In relation to our pricing, what I can say is that a cycle began with our peers signaling an intention to increase average ticket I just kind of put off in this cycle. We saw larger discounts being offered and not only because of the competition between the players, but also because of the economic background.
So my interpretation and trying to tap into my experience of 11 years in the business, I think that all players are trying to increase the average ticket, but they are subject to very many influences, different influences, for example, some players launched nursing programs. being offered at much lower ticket than the one we have been using since 2016 when we launched our program. So in that specific segment, we saw some deterioration in pricing. But overall, there is this push -- they're pushing up the prices a little bit, and this is very important. And if we grow our revenue and grow our volume of students, then we'll be using more reasonable pricing, more rational pricing.
Now in relation to the segments of students with high on-site campus and low on-site campus presence, we see an improvement in re-enrollment -- in both segments, both high on-site attendance and low on-site attendance because we have improved our process of collection and also invoicing. There are several actions that are improving our operations and that are favorable to our re-enrollment rates. They have been growing because of some processes that we implemented, but there are many students coming in, in the low on-site attendance segment. And this segment has a higher dropout rate. This has some weight, but it's not concerning. We are tracking this in all detail in next year's budget, we see some improvement in the re-enrollment rate year-on-year. So we believe that there is still room for improvement because there's space for that in operations.
Our next question is from Marcelo Santos, JPMorgan.
My question is to Roberto Valerio about the potential of growing Kroton's margins in 2023. Where would this growth be coming from? I believe that you're investing more in marketing next and that gross profit could also grow because of more distance learning volume. But can you give us a little color on the margin growth potential? This is my first question. Secondly, R Roberto Valério, about ACV, the preliminary ACV for 2023. In your perception are we going to see other improvements between now and February -- or do you think that this is a very accurate prediction for the final ACV?
Marcelo, I will answer the first question, and then Ghio will take the questions on Vasta -- the increase in margins for Kroton 23. -- we see that there is a possibility of improving our delinquency rates and on payments, rates are much better than in the past and last year, but there is still room for improvement. And as for revenue growth, well, we also see a reduction in cost because of this.
But the important point -- and this is not going to be a one-off situation in the quarter, but rather, it will be something incremental with growth of the primary margin in Kroton because of the concept of distance learning, operating leverage, I'll explain for every BRL 200 in additional revenue in distance learning. -- we cut down some costs. So if we're projecting 20% of revenue growth in low home campus content, then there will be a margin where this cost will be reduced, creating more primary margin. Now in on-campus, on-campus doesn't grow at the same rate, but we have the call-offs that come from the campus itself security, cleaning. So this is definitely a headwind. So distance learning generates primary margins and sometimes on campus in some units actually create some pressure depending on the inflation pressures -- so I would say that primary margins is something that we can grow in the long term. You won't be seeing this in the first quarter.
We'll have just minor gains coming from the growth in the DL base and Marcelo. The preliminary ACE 20% growth over the cycle revenue or 23% growth of -- over the previous ACV since the revenue in the cycle met the same level. This is our best at our best expectation, even though it reflects the contract sign until October. Most of our gain has already been played. We have some more activities as part of our sales campaign and what we cannot really see clearly and that could perhaps cause a positive impact on ACV is the student base.
We know that the student base in '22 is still smaller because of COVID, some families that enroll their children at the end of '21 had been suffering with the impacts of COVID, but we cannot really adjust any expectations before February. So I think this is the best at 20% growth over the recognized revenue or 23% ACV in the comparison between the years, and if there is any upside for the end of the campaign or any of the improvements during the enrollment period of our partner schools, which is exactly now, and they start placing orders in January, February, then we'll update our ACV towards the end of January or February, but this is our most accurate expectation now.
JPMorgan Chase & Co, Research Division Let me just clarify one point. Based on what you said, there is a risk of an upside only because you have already signed those agreements. But what is the downside risk? Because it's expected that you'll sign additional contracts until February. Are there any risks? Or are there an expectation?
I think that the downside risk could happen, and we saw this happen mostly last year, is if any schools that is in dire straits, closes stores. This is a type of churn that we call closing internally I do think it's relevant that the downside would be that. And unfortunately, we cannot really measure that risk.
Our next question comes from Lucas Nagano from Morgan Stanley.
I have 2 questions on our side. First, a follow-up on the previous question about the ADA or allocation for doubtful accounts. You expect an improvement next year. but would that come from the revenue mix? Or do you think there will be a progressive, consistent improvement in your receivables? The second question is about Vasta. My question is whether you were going to have an integration with the [indiscernible] bank? And what is your strategy? Do you view that as a financial investment to bring return? Or do you think that's going to help you grow operations in operations as well?
Lucas, this is Fred. I will answer the first question about ADA. As you can see, quarter after quarter, we have been able to show in numbers, that our revenue, I mean, ADA compared to revenue at Kroton, we've kept the same level. We are improving in the allocation for doubtful accounts. Why? Because we have been able to reduce nonpayments, and we've also gained efficiency in recovering amounts due. So this mixture will help me improve ADA. And that is what you've seen in the last quarters.
And it is this mix, the positive effect, lower non-payments and also the recovery of previous debt. As you know, today, we no longer have students in this segment, but we are still recovering payments that were overdue. So as Roberto explained as well in our cycles of enrollment, we see a stronger student intake and the students now have a better financial profile. And so this is the effect that you can see.
Just reinforcing what Fred said, Lucas, this growth strategy also includes having better quality in terms of students' financial profile. So these students, they have to pay for their enrollment. They have to show in a digital platform to be able to study. And so we can measure the level of engagement. That is why we are more accurate in predicting revenue and also non payments. If you want to add something.
Lucas, thank you for the question. Yes, next year, we know that will led value from 3 different income streams. The next go-to-market will be integrated to our commercial campaign. Our commercial teams will also offer our package of digital services already including the different services for each school. It is Vasta student that we have a contract signed that will generate revenue for Vasta, but also through this integration, we will generate revenue for Fidelis, our integration between payment, working capital, I mean the whole financial solution.
We've seen it's a very interesting solution for schools, and it brings revenue to us in this combination. But finally, it also adds midterm and long-term value because the school that adopts our service platform. And also, our financial services, these schools will reduce their churn, their students drop out. So that's again good for us. Now in terms of recognizing the results next year, we will not be doing that on equity basis. But -- we will look at the commercial campaign.
We will recognize the numbers in our balance sheet, and the revenue from Fidelis will also appear in the balance sheet. Now as we talk about commercial, let me highlight that we've had twice as much -- I mean, our equity is much -- has a much higher value because of this possibility of having the integration with our commercial teams. So compared to the invested capital, we've had this significant improvement because now our distribution channel has been integrated.
Our next question comes from Vitor Tomita, Goldman Sachs.
Two questions on our side. The first, could you please give us some more color on Vasta ACV, especially in a specific point, which is how much growth is coming from other learning systems? And how much growth is coming from schools that use traditional textbooks? Now second question about Kroton, as you mentioned, Kroton is been very efficient in their cycle. But now -- we see a lot of speculation about a potential return of VS or other types of student financial systems from the government. How do you view your level of preparedness and your ideal capacity to be able to work with that. And if a change in the structure of incentives could change your strategy of growth and your capital structure.
Vitor, Well, when we published that in the first quarter, we'll give you a full breakdown of the ACV. So you will see the details. The ACV, I mean you have a new revenue of ACV comes from new schools and also upselling or cross-sell of complementary products with schools already at the base. Now about new schools, I'd say that 3/4 of all new roots come from other learning systems. So 3/4 of this ACV will come from other learning systems. That is we are taking share from other learning systems. The same thing already happened in the 2022 enrollment cycle, and we expect the same thing to happen in the enrollment cycle of 2023.
And that's good for the performance of our premium brands, who feel the need to have a more premium brand for them to improve their execution, their operations and their own communities. So 3/4 of our ACV new schools come from other learning systems. And 1/4 will be schools that did not use a learning system. They use from text books and they are now migrating to a learning system. All right. Is that clear, Vitor?
Just a quick follow-up. What about the conversion of schools that used textbooks? Is it coming from par or via the more premium learning systems, more traditional learning systems.
Well, usually, we consider that schools that sell textbooks when they have contact with the par, well, in this case, the migration is different. It is from paper to digital. This is another -- this is another line that we consider in our ACV, not the new schools. For new schools, usually, they use traditional textbooks from different sources, either ours or from other providers and in-learning systems, this comes mostly from competitors. I have to confess that I cannot give you off the top of my head. The difference between premium and less premium competitors, but they are going to -- there's a move towards more premium brands in our catalog.
I will now answer the question on PS and the government support programs. We all agree that the outlook is very positive. -- the future administration has been very vocal in relation to the intention to support education. We'll participate in all programs like we did in the past in our history, Kroton and Cogna. We are -- we have expertise in doing this. We were the largest player. We know how to upgrade these programs, and we have a very good track record in the participation of these programs.
So our program portfolio is extensive with better distribution than in the past, we direct our efforts towards TL, but we continue to offer on-campus programs. I'm not sure if I mentioned, but our strategy is to always offer in a single town, both DL and on campus, and we let the market decide what they prefer. And we offer both programs, both DL and on campus. In terms of investment strategy, I would say that our capital allocation strategy doesn't change much because our installed capacity in Campy is next to 50% in [indiscernible]. There is room for growth, there is room in our labs, in classrooms as well.
Sometimes we close a certain box and we deactivate them to reduce maintenance costs. But we have assets that can be employed, and I don't see a need for additional investment. And this means that our investment rate, well, we'll continue to invest in digital transformation and changing our systems and enhancing our digital capacity so that we can become even stronger.
Our next question is from Fred Mendes Bank of America.
In fact, I have just one question. The others have already been covered. The amortization schedule, Fred has said that you're feeling comfortable about it and the operating cash generation, but the net revenue is still being burned. And you have a very good cost of debt at 2.5%. So how do you view the amortization schedule? And also in relation to cash itself, do -- do you think that the cost of the debt will increase.
This is Fred. As I said during my presentation, we're very comfortable with BRL 2.1 million in cash. We generate BRL 400 million and BRL 77 million year-to-date. The company is bankable, and we also have the opportunity to roll out term of our debt, but everything depends on interest rates, we have amortized in August BRL 52 million. This debt had been originated before covering the lower cost, but we also took some initiatives at the end of the quarter, the last quarter, we sort some funds at a more efficient cost looking at the next 10 years, and we're rolling that at a lower cost.
We don't see today to pay the company believes that we have sufficient cash in addition to the OCG to amortize our debt. And we are also trying to seize the opportunities that are available to repay some of our debt. It's something that's not in our control or is not a major concern. We are more concerned about the interest rates in the market. So increasingly, operating cash generation is something that will help us amortize our debt with confidence. So it's not a point of concern. And the best way of analyzing this is by looking at our leverage in the fourth last quarters, we've been between 2.1% and 2.15 in net debt over adjusted EBITDA.
Our next question is from Pedro Lima, BTG Pactual Pedro.
From our side, we have 2 simple questions. The first in relation to the G&A in Kroton this semester that was -- there was an increase both year-on-year and quarter-on-quarter, even as a percentage of revenue, could you please give us some light on what influenced the increase of SG&A in the quarter? And do you think that this increase will be recurrent or those recurring expenses? The second question is about CapEx. What do you expect for next year in terms of CapEx as a percentage of revenue, -- for example, 10% of net revenue. Let's consider that how much could we expect for 2023.
It's [indiscernible] here answering your first question. Firstly, thank you for asking a question about SG&A. I think there are 2 ways of looking at this Cogna as stand-alone and Cogna as a whole. I think that your question is about administrative expenses where we saw an increase, looking in the comparison between third quarter '21, '22. And this growth was driven by the fact that some of the expenses are linked to revenue. And since we are focusing on the customer and improving our NPS, we have hired some consulting firms to try to improve service to our students and also some consulting firms or rather collection agencies, they get a cut of the debt that they recover and we have some one-off mismatches in contingencies -- and what has become clear to us is that the level of administrative expenses are correlated to our operating efficiency.
So this is something we see as we improve our nonpayment rate and improve our student focus. Something that I would like to see is not Kroton, but also Cogna as a whole because we had some higher expenses in Kroton, but when we look at our corporate expenses in Cogna, the reduction amounted to BRL 11 million in the -- from BRL 51 million in 3Q '21 on corporate expenses. And now this number is down to BRL 39 million. So I have approximately BRL 40 million minus BRL 11 million, and this is what we are capturing in higher efficiency. This will be recurrent in coming quarters if we maintain efficiency in the revenue lines and our NPLs and also in the improvement of our nonpayment rates.
The other question was on CapEx, right? Onward CapEx in 2021 was BRL 415 million - BRL 420 million around that. And as we said before, we believe that our CapEx level this year will be in the order of BRL 400 million. We are not expecting growth for 2023. I will not announce the percentage of our revenue, but we believe that the CapEx for 2023 should not be different from the one in 2022 sorry. Well, in the case of Vasta, if I can just piggyback on your answer, we have been reducing CapEx over net operating revenues. Cogna have 7% of the nor invested as CapEx, and this will be our cruise-speed FX. We have had 12%, 13% next year, will be 7%. We can make some optimizations, but this is the ballpark for next year. It's very clear.
Our next question is from Mauricio Cepeda.
I have 2 questions now thinking of the future strategy. Well, the student intake has increased significantly. What were the key success drivers? And how sustainable are those factors.
For future quarters. The second question, we have seen, your competitors saying that -- there is a lack of elasticity between the average ticket and student intake. So do you confirm this? Do you think that there is a lack of elasticity? And do you think that this could act as something that will discipline the sector or the industry as a whole.
Mauricio, let me answer your questions. In relation to the Kroton growth, it's driven by structural changes. I'm not going to say that it's going to be an ongoing process, but we can start talking about the growth in DL centers. They are expanding in number and also becoming more mature. Those are 2 avenues for growth. And also the expansion of our program portfolio before if somebody wanted to study digital marketing, they have to study business administration -- now they can take a 3-year program in digital marketing.
So this creates more sales opportunities. And we have also seen the growth in sales channels. For example, we have programs with resellers. They are small businesses that sell our courses and this is another opportunity for growth. Similar to the direct [indiscernible] model used by Natura and this network can grow in Brazil as well. Thirdly, digital marketing. It's something that every 6 months changes because the new opportunity emergence, we are the most mature companies in digital marketing, and this is not us saying it. It's Google from the 3 companies with more digital maturity. We are the one with more opportunities for growth. And those are not circumstantial factors. They are structural factors. So we'll continue to grow. And as far as we can -- and in relation to price in elasticity, I agree 100%.
I think I've been saying this for over 2 years. You cannot lower prices any further because it will bring more business. And for 2.5 years, what we are seeing is that we have growing revenue in the student intake cycles and lowering prices will not pay off because revenue will drop. So this is something I've been saying for at least 2 or 3 years.
We now close our Q&A session. I would like to hand it over now to Mr. Roberto Valerio for his final remarks. Mr. Valerio, you have the floor.
Thank you very much. First of all, I would like to congratulate the Cogna team, over 24,000 employees working tirelessly to build this organization based on a sound, strong culture working consistently to offer educational opportunities for Brazil and helping people become the best versions of themselves. And this is something we have been doing for a long time, now consolidated in our cash generation results and general performance. But I thank you very much for tracking our progress, and we are on for any questions you might have later.
Cogna’s live broadcast is now closed. We thank you all for participating. Have a great day. and thank you for using Chorus Call.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]