Cogna Educacao SA
BOVESPA:COGN3
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Cogna Educacao SA
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Good morning, everyone, and thank you for waiting. Welcome to the teleconference to disclose the results of the third quarter of '24 of Cogna Education. [Operator Instructions]. We inform this teleconference is being recorded and will be available at the RI website of the company, www.ri.cogne.com.br, where you see the complete material of this disclosure. It is possible to download the presentation in the chat icon in English.
[Operator Instructions]. Before going on, we would like to explain that some declarations made during this conference related to the business perspectives of Cogna projections, operational and financial targets are the beliefs and premises of the company administration as well as the information currently available.
Future considerations are not insurance of performance. It involves risks and uncertainties in the premises because they relate to future events, therefore, determining circumstances that may or may not happen. Investors and analysts may understand that general conditions, conditions of the sector and other operational factors may affect the future results of Cogna and can lead to results differing materially from those expressed in the future conditions.
I'd like now to pass on the floor to Mr. Roberto Valério, CEO of Cogna, to start his presentation. Please, Mr. Roberto, you may go on.
Thank you. Good morning, everyone, and thank you for participating in the teleconference to discuss Cogna results in the third quarter of 2024. I have in this call, Frederico Villa, our Financial Vice President, Guilherme Melega, the Director of Vasta. The call is going to last 1 hour with about 40 minutes presentation, and then we go on for 20 minutes of Q&A. Well, let's start with the presentation. I'd like to start by saying that in our understanding, it was a wonderful result with a quite strong quarter, especially with items related to cash flow, leverage and net debt that at this moment with the increase of interest rates are quite important news for the company. Once again, we overcome the average of expectation of results on the market, which makes not only the administration, but the whole Cogna team quite happy with the results.
Well, I'd like to start talking about Cogna net revenue despite growing 1%. It's easily understandable because we understand the results are quite positive. First, because the Kroton net revenue that is about 65%, 70% of the company grew strongly. By the way, the Kroton results were excellent in the quarter, but the Kroton revenue grew more than 13% due to many aspects, among which the important growth in the student base and inflation that I'll discuss later on. So, this is the business unit that brought a lot of revenue growth. On the other hand, we have the other 2-unit businesses, Avast with ACV guidance with a 12.5% in subscription revenue that is our main strategy, and it didn't grow more due to a factor that I understand is specific that is the revenue in a new business line that is the B2G that we've been exploring recently. And obviously, we don't have complete control on the seasonality.
And clearly, this third quarter was influenced by the municipal elections. It is a new experience to us. So, we imagine it could happen. But obviously, all the people are involved in the municipal elections and all the hiring are suspended for a period. And despite not having this B2G revenue in the third quarter of 2024 compared to the previous year when we had BRL 40 million, we understand this is a specific movement. We see more movement after the elections, and Melega will talk more about it. So, this is not a point of concern. It's the opposite in the core of the company with our subscription strategy, we keep growing, reaching this. So, on the one hand, it explains Vasta. And on the other hand, with SAEB, we've been saying and we have a guidance of SAEB so that the market understands our point of view.
The revenue in SAEB is expected to be lower than '23 because the direct books programs in '24 is smaller than '23 because it is a program with only repurchase. There is no purchase of Fund 1 or 2 or medium. So, it is a smaller program. And in the third quarter, specifically, there was a small delay in part of the revenue of the books that will come to the schools in '24 that could have been invoiced in the third quarter, and it will be in the fourth quarter. So, there is no concern to us because we know these books have to be in the public schools in the beginning of the year. So, it is much more a movement from quarter-to-quarter. Having that said, the strong growth in Kroton and explanations of ACV and SAEB make us sure that the growth in the revenue is quite positive despite 1% growth doesn't seem so.
Even though the revenue has grown 1%, the EBITDA growth was quite strong, we reached almost 26% in the recurring EBITDA with a margin quite expressive of 6 pp in the increase of margin in the quarter and increase of margin also in the 9 accumulated months, showing that, in fact, the company can progress a lot, in efficiency, how I'll explain later on. In a clear way, we've been saying that everything we are searching in revenue and EBITDA needs to be a quality revenue to become cash generation. Once again, we see that in the cash generation after CapEx with BRL 400 million, more than 57% compared to the same period in '23. And it reinforces the point we were mentioning in the first quarter that the second semester would be stronger, much stronger with better results. I've said that in other calls. And here is the third quarter showing that the cash generation is quite strong and the fourth quarter to us is very good because we have not only Vast with the income to schools in the B2B and selling to schools, we sell a lot and make a lot of revenue in the fourth quarter and the income of PNLD as well.
Well, another important highlight is the free cash flow of BRL 192 million in the third quarter, showing that the company, in fact, is able to generate a lot of cash with a relevant overlap and we reduced the net debt in BRL 257 million, basically 8% less debt compared to last year. So, the reduction in the debt is quite important with a very positive result, obviously, with more EBITDA and less debt, our leverage would reduce and the reduction in leverage of 1.79x EBITDA versus 1.58 is quite nice. We are celebrating. This is the lowest leverage of the company since 2018. So, in 22 quarters, it's the lower leverage, which shows we are working nicely and our strategy is to reduce debt to have fewer financial expenses and then invest the excessive capital in other projects.
Now let's go on going to Slide 5 with Kroton results. As I said, the Kroton results are, in fact, wonderful. It's nice basically in all lines with strong results. It's very nice in revenue, in EBITDA, in EBITDA margin and cash generation, but I would like to start by emphasizing our intake in the context that you know is quite difficult in this third quarter because we could grow a little in the intake with 1.3% compared to last year. But as I always say, and I've been saying that for more than 3 years to us more important than the amount of intake is the revenue in the intake and the volume of revenue grew 7.7% in this quarter. So, despite a smaller amount, the revenue in intake is much better, and we repeat that all the time period after period, we are having additional revenue in intake with a business that is imminently with the fixed cost, we can only generate better margins and EBITDA and results. So once again, we could do that. And where is this growth coming from this growth in the revenue?
Well, it comes from selling courses with a greater LTV, the most expensive ones, both presentation and online and hybrid education. And it is easy to understand that creating a group in the presential course when you create a group in the first semester, all the enrollments for the second semesters are naturally absorbed in this group that is already formed. And I had already mentioned in previous calls that in the first semester, we had a wonderful creation of groups, so many presidential groups created. Therefore, the enrollments for the second semester had no discharge. All the presential enrollment had groups to be incorporated. The same in the hybrid courses that we believe we have groups in the lab. So, it's a better result and selling enrollments in groups of higher DL that is our strategy benefited a lot this cycle. So, this is the emphasis. So, the final base of students with a strong growth, more than 12% growth.
We are saying that our improvement in the processes in NPS is important with many awards we are receiving over the last year, showing the level of engagement of our students. And we are focusing a lot in enrollment with the quality. So, we only acknowledge them after the contract is signed and paid and the student in the learning environment. So, we know that reenrollment rates will increase. And in this quarter, it increased 3% and it pushed the growth of the student base in this 2.6%, okay? Well, just a highlight here regarding KrotonMed because we had the approval of one more course in this quarter in Sao Luis. It was via legal with more 60 spots, plus the 50, ones that we had in the end of the second quarter in Ponta Pura are 110 new spots for medicines that started operating in this third quarter and will obviously contribute to the growth. And you see that the growth in the student base in KrotonMed is quite relevant.
So, these 2 authorizations are quite important. In terms of the average ticket in Kroton, it's stable with an increase in KrotonMed that we are seeing that our regional medicine brands are quite strong. We can give tickets above inflation, not only in KrotonMed, but also in present as well. The average ticket in DL is a little lower because of this effect of the quality of intake with a freshman with lower tickets in the ratio of the base greater because they have more quality, so they remain for a longer time. So, it's natural that the average ticket of the freshmen takes the other one to decrease. So that's why we have 3 points percentage lower in the average ticket. This is a different dynamic in KrotonMed presential and DL because it's different. And in this slide, I would like to talk about postgraduation because this business is growing strongly. In this quarter, it grew more than 18% in the base of students.
Going on to Slide 6. Now talking about the net revenue. Obviously, this 13% growth are pushed by the base growth. So, the base is growing 12.6% pushing the revenue up, and we can do repasses above the inflation due to the reasons that I mentioned with increase in engagement, improvement in the quality of the students. So, in fact, it's exceptional in my understanding to have this reenrollment process that we have 3% in efficiency, 3 more in the basis of reenrollment this year compared to last year, and we could do repasses above the inflation, which shows the strength of our work that it's not 2 or 3 quarters. This is something that we've been doing since the beginning of the project to restructure Kroton in 2020 with all the base cleaning and we rethought the renegotiation, reenrollment and credit model for the students. So, this growth is quite strong with a highlight to KrotonMed with a strong growth in the revenue pushed by the organic growth in the spots and by the repasses above inflation, as I mentioned.
Now going to Slide 7 with the financial performance. I emphasize and some questions we received are related to that about the perspective of gaining in gross profit. Well, this is one more quarter of that. We have 1.5% more. The strategy here is to focus in medicine and DL courses favoring this margin because these are product lines and better margins than the presential education. So, they are not only participating more in the total mix of revenue and gross profit. And individually, they are gaining margin, especially KrotonMed. So, 1.5% of margin with a growth in the gross profit, quite important in KrotonMed and relevant in DL in the quarter, 51% in KrotonMed in DL, 14% the same way accumulated quite strong 20% in KrotonMed and 16% in DL. As we've been saying, presential is still part of our scope, but it is focused in high LTV courses. So, it's natural that it loses a little relevance in the growth.
In the next slide, slide 8, we have good highlights. We had a reduction in the corporate expenses and operational expenses, corporate expenses decreasing 0.8% and operational improving 4.5% as a ratio of the net revenue. But as I mentioned before, I would like to emphasize that this is a reflect of all the redesign of processes and systems, gain in productivity with implementation of automation, implementation of AI, which allows us to generate this reduction. And the same way, we had a reduction in the PCLD with the proportion from 9.5% to 6.2%. It is important to mention that it's a reversal of approximately BRL 50 million in provisions because, in fact, the quality is higher. So, we understood that we should have this reversion in provisions. We work to improve our unpaid students and let's see the next quarters. It's natural that they are not capping 6.2%. It will grow a little, but the idea is that we keep gaining in PCLD with the ratio overall along the next quarters.
And the last highlight is selling and marketing expenses that increased 1.6%, nothing new here. I've said that many times that the odd quarters would be the ones with the greatest marketing expenses. We've said that the first quarter would be stronger and the second weaker. That's what happened. Now the third with more expenses in markets, more investments. But we know that the fourth quarter will also be with less expenses in the ratio of net revenue. So, nothing new here. It's part of our strategy. But I understand the results are quite positive from the point of view of gaining efficiency and gaining margin. In Slide 9, obviously, all those efficiencies should bring improvement in the EBITDA margin. And we see here 38% in the recurring EBITDA. And in the quarter, 6.4% in the year due to what I mentioned before, we understand that the company is very big. We have efficiencies that can be captured over the next quarters as we improve the processes and converge systems. So, I think this is a year evolution. So, every quarter, we improve a little the result.
Having that said, I now pass on the floor to Guilherme Melega, so that he comments the results of Vasta.
Thank you, Roberto. Starting with Slide 11 in Vasta net revenue. Remember that the third quarter is a quarter that is naturally weaker, but it's important because it finishes the commercial cycle. Remember that the Vasta cycle commercial starts in the fourth quarter of the previous year, supply in the schools for the school year and it finished in the third quarter. So, I'll focus my comments here on the commercial cycle because we reached a revenue of BRL 1.529 billion with a 6% growth with the highlight in our subscription revenues that we delivered a guidance of 12%, in fact, 12.5% of subscriptions. The emphasis in subscription is our complementary products that grew above 20%. In the third quarter, last year, we acknowledged BRL 40 million revenue in B2G. And as Roberto mentioned, we expect to acknowledge new revenues of new contracts in B2G starting in the fourth quarter.
We've had a strong year in prospection. The pipeline is quite heated, and we believe that now after the elections, we will celebrate new contracts and acknowledge new revenues in the fourth quarter. In Slide 12, invest expenses. We have the focus on the cycle, and I emphasize the margin gain or the reduction of 0.1% that we had with operational expenses and direct costs that altogether represent 5%. So, we could improve our productivity in direct costs and operational dispensing 5%. This is the result of the revenue growth and gain in efficiency in our costs, besides a more positive mix generating more margin. So, we have more revenue with less cost with the growth of the premium teaching systems. So, these 5 margin points, we use these 5 points. We used 2.3 points to finance our growth ACV in '25. So, the commercial and marketing expenses grew 2.3%, which represents an investment in the growth of the company. So, in this cycle, we delivered a growth in ACV of 12.5%.
We expect to acknowledge a growth for next year cycle greater than this 12.5%, result of more investments that we are doing, the quality of our portfolio and the penetration we can have. In the next slide, Slide 13. Talking about the Vasta EBITDA focusing on the closing of the cycle, we reached BRL 435 million EBITDA with a growth of 14.2% in the commercial cycle. And as important as the growth is the margin growth. We reached 28.4%, almost 2% above the margin of the previous cycle. So, we are financing our growth with our own generation of productivity and gaining margin. So we are in a very positive moment, very favorable for the company. And looking ahead, looking to the next cycle, we see a very robust ACV growth in the premium teaching systems and complementary products with gains in prices significantly supported by our technology. This year, we launched [indiscernible] which allowed us a good repricing of our portfolio. So, we have high expectations for the ACV in '25.
As I mentioned, in B2G, we also have a very heated pipeline, and we hope to acknowledge new contracts soon. Lastly, in the last avenue of growth of the company, we have a good start with 35 contracts signed, of which 2 units are operational in '24 and 7 will be operational in '25. So, we are growing in a very sustainable way also in our franchising business with a bilingual performance. I emphasize here and the enrollment campaign that we have to our flagship with a potential of more than 1,000 students in Sao Paulo.
Now I pass on the floor to Fred to mention the results of SAEB.
So good morning, everyone. I start SAEB presentation in Slide #15, showing the net revenue of the quarter, we've had a decrease in the net revenue of about 29%. This reduction was impacted mainly by the commercial calendar. The year '24 doesn't contemplate purchase and only repurchase and additionally, the delay in the repurchase of the national purchase of the direct books as you can follow via media, what is happening. However, we believe that it is only a delay, a temporal displacement that will happen in the fourth quarter. Additionally, we've had in the quarter an increase of BRL 24 million in the program Aera Brazil. So, I believe that we are speeding up. And additionally, in the quarter, a growth of 24% in the language revenue. Note that when I look from the quarter to the 9 months, we had a revenue with a slight decrease of 1.5%. And it's important to mention here that we sold in '24, our book businesses for high education. And excluding that, the revenue in 9 months, we would have a growth of about 7%.
Now in Slide 16, talking about the EBITDA. The EBITDA effect in the quarter, both in the accumulated -- the main effect was the decrease in the revenue. We had some compensation as we had a delay in the national program of the direct books in the revenue. So, we also had a cost compensation. But the message here is that there was only a delay here. So, it's a delay, a temporal effect. And we trust that with the guidance that we gave in Cogna Day, we would reach in our SAEB business an EBITDA adjusted of BRL 230 million. Now in the final part, talking about Cogna, Roberto Valério talked about the final messages. And in Slide 18, it's important to see the revenue of the quarter that we had a growth of 1%. But in the accumulated, we have a growth of 7%. In the quarter, our main positive impact was the strong growth of Kroton with 13.7%.
And this accumulation and displacement, as I mentioned and Guilherme Melega mentioned, we believe that the fourth quarter, this displacement that didn't come from the national program of direct books in SAEB and the growth avenue with business with the government in Brazil, and I think we will have this positive impact in the fourth quarter, which makes us quite happy. In Slide 19, leaving the revenue and considering the EBITDA, we had a growth in recurring EBITDA and EBITDA margin in the third quarter, reaching BRL 385 million with a 26% growth. And in the accumulated, we had a growth of 15%. So, we have a growth of double digits in the quarter and it accumulated. And here is our commitment to generate value to the company. Additionally, we've had a growth in the margin, both in the quarter and in the 9 months. So, we had a 6% growth in EBITDA margin in the quarter and 2.4% in the accumulated of the year.
Now going to Slide 12, talking about the adjusted net profit. So, the profit here with amortization. So, you see an evolution of the net profit in the quarter as well as the accumulated one. So, we've had here net profit last year Well, we had a loss adjusted of BRL 44 million. And this year, we disclosed a growth of 175%. So, with adjusted net profit of BRL 33 million and in the accumulated growth of 58% with adjusted net profit reaching BRL 144 million. The main effect here of the net profit that we mentioned before. Growth in the revenue. So, in Kroton, we grew the revenue and improved both in the corporate expenses and the improvement of dropouts. And remember that dropout, our PDD only improved with dropout. So, this is a cash improvement in fact and improvement in financial results. So, the financial result in the quarter had an improvement of 16% or BRL 44 million and also the nonrecurrent items reduction. So, this is one more indicator of a strong growth in the quarter and in the year.
And in Slide 21, we show the operating cash generation. So here is the cash, what enters. In fact, there is no adjustment, nonrecurrent. So, this is the money that enters. So, we've disclosed here the operating cash generation after tax of BRL 400 million with a growth of 57%. Here, the main effects are the growth of Kroton revenue and a better cash conversion with the improvement of dropouts and the compensation that is in our working capital. And in the 9 months accumulated in September, we reached BRL 707 million with 8.4% growth compared to the same period last year.
Now going to the next slide, Slide 22. We've talked internally. We discussed a lot to the market. And our leverage since the third quarter of last year would be 1.58x in the last 12 months. And this is a work that we carry out in the company constantly. So now in the third quarter, we reached 1.58x, reaching a net debt of BRL 3 million. So, with a reduction of the net debt of BRL 257 million, and this is our lowest level of leverage in the 22 quarters and one of the greatest impacts in our leverage besides the improvement in the cash that comes from operation, we also have a reduction in the financial expenses line, as I mentioned before, in the quarter of BRL 44 million or 16%.
In Slide 23, the cash position and indebtedness. It's quite clear to us the reduction of the net debt of the company from BRL 274 million or 7.8%. So, we understand that over the last quarters and years, we addressed, in fact, the level of leverage of the company. But here, it's a fact that we reduced the net debt. So, we generated cash in the operational one and in the post CapEx and the free one after the payment of interest and all the payments of the company. So, it shows that in the net debt, we have a gross debt of BRL 4.1 billion, minus our availabilities of cash BRL 1.1 billion, reaching the net debt of BRL 3.5 million. And we addressed in the last year compared, and I show in the graph, our agenda of amortization before the liability management that we have.
So, the liability management, besides reducing the debt cost, we enlarged our profile, and it shows that in 2025 in the fourth quarter of '23, we would have that in '25, we would have to amortize BRL 1.5 million. We renegotiated and we are committed to paying BRL 752 million. So, we show the displacement of the amortizations that were quite concentrated in the years '24, '25 and '26 and now we see more concentration in '27, '28. So besides addressing the leverage and reduction of interest, we also addressed our amortization schedule that is easier to reach for the next years.
With that, I finish my presentation of Cogna and pass the floor back to Valério.
Thank you, Fred. Now in Slide 24, the last one. The messages related to our strategic pillars, remember that we have 5 pillars: growth, experience of the client, of the student, efficiency, people and culture, innovation and ESG. So, I think from the point of view of growth, we are proving our thesis that it's effective and real. The freshmen are growing in revenue generating operational leverage in an important way. We've been doing that for a while, and we believe we can keep doing that despite the context of the competition and the macro and micro context. This is a strategy to us with better students or more engaged students that reduces our dropouts. Obviously, our experience is also improving. So, dropouts are decreasing. So, we believe we have space for small and consistent and continuous gains over time.
In Kroton, in Vasta with the opportunities, both in the subscription product and the migration of products, the mainstream products to premium teaching systems that we are doing quite efficiently, bringing more loyalty in the base of schools and improving the average ticket besides the new avenues of revenue in the B2G that we are learning a lot as well as starting that with opportunities of growth here. And we'll keep growing that and the seasonality that is quite positive in P&D, especially in the fourth quarter. In SAEB, we have opportunities, not only with the PNLD, but the team is also doing a great work both in languages with the brand as well as in sales to governments, not state governments, but municipal governments as well with quite positive results that we understand will increase the portfolio, which will also benefit us.
So, in this growth item, there is no silver bullet. There is many different works and initiatives, but our journey over the years is showing that, yes, it's possible to have consistent improvement. From the point of view of experience, we are quite happy with the progression, the increase in NPS in graduation and post-graduation is consistent over the years. We are also gaining evolution and winning awards. And this year, we were awarded many times as the company offering the best experience to the client, and we are quite happy with the important evolution in the level of satisfaction of the partner schools and the B2B clients of us after a process of evolving systems that we did over the years, especially in the last year. So, we were quite happy with the evolution with the NPS, and it shows that we are having a good work and evolving as well as other brands that we also have like Red Balloon with a good level of experience.
So, experience, focus on clients in the center, in the core is a value with good services and qualities with good training and usability as in the higher education and good approval in SATs like the teaching systems that are our focus, and we'll keep following that from the point of view of efficiency. I mentioned as Melega and Fred as well that we are working in changing the operational model and evolving it and governance and processes, the system convergence is that we are faster and more agile and waste less so that we don't invest in so many systems at the same time. We have a lot of opportunities besides the implementation of new technologies. I've been talking a lot about artificial intelligence. We have more than 100 projects of artificial intelligence from the content production to tutoring or back-office work. So, it will all bring efficiency in an important way so that we dedicate our team to different things generating new values.
From the point of view of people and culture, we keep focusing in this culture of owners and partners with very engaged partners and focused in progressing with the company and collaborating and trying to integrate many benefits and use developments or applications of products with the BU in another one. So, it brings a lot of synergy and opportunity for growth as well besides many initiatives focusing on the development of people and competencies of leadership that are quite important for a company that wants to keep growing and working in many segments considered we have this scope of offering education products from 2 to 100 years. This is our competence. We'll keep doing that. From the point of view of innovation besides artificial intelligence, and we are investing a lot in the corporate venture building, not necessarily in a fund, but with methods and initiatives to create new businesses.
So, we have some projects among which the technical courses and professional courses the info producers’ platforms and some others that we are fostering in our environment with small businesses from the point of view of revenue that we understand over the years can contribute a lot to our growth. From the point of view of ESG, we are focused on the 14 commitments of Cogna improving our indicators, and we are awarded by many magazines and institutions, and we are very happy to know that external people acknowledge our quality. And this month, we were awarded once again as one of the companies of IBL 100 with at least 30% in the Board management, which make us very happy.
With that, I finish my presentation, and we open for the Q&A.
[Operator Instructions]. The first question is from Lucca Marquezini, Itaú BBA.
I have 2 regarding Kroton. First, regarding ticket in the presential, we see a growth of almost 6% in the average ticket. And I understand it's a mix effect. But can you comment on the ticket in the intake maybe in the basis of same courses so that we understand better if there is a forecast of something stable and how it's in terms of competition? And second point about commercial expenses because we've seen a growth of the commercial expenses in Kroton that is in line with the strategy that you are mentioning. So, if you can mention how long we'll see this increase and what level will be if it will be stable? If you can talk about this commercial strategy, it helps a lot.
So, Luca, thank you for your question. I'll answer them from the point of view of ticket. I think especially in the presential ticket, that is what you emphasized here. It has an important effect here in our focus on greater LTV courses. So as the semesters go on and the cycles, we improve our competencies to improve the conversion of courses of students that are in the funnel of sales of greater LTV courses. But I would say that this is an aspect. And today, we are facing a level of sophistication that the lead even is on the Internet without passing the whole conversion process, and we can identify the interest of the student. Like, for example, an ontology or student with higher average ticket, we make more efforts and energy. We have a specific team for the conversion and this lead go faster to the call center so that we can ensure a greater conversion rate.
So, the focus is to bring not only volume, but revenue in the intake. So obviously, we privilege the courses with a higher ticket. As the presential naturally has a greater ticket, it has more participation in the mix. So, I can tell you that we are not necessarily gaining tickets in the freshmen, as your question mentioned, course compared to course. So just to give Fred's example, last cycle and this cycle, does it have a real increase? No, but more participation in the mix of intake, which is helping. Obviously, as the new students are becoming part of the student base, they contribute so that the base grows as well. It is little by little, but it is happening. Regarding commercial expenses, I think my answer to you is as a ratio of the net revenue, we are stable. We don't hope to have growth in the net revenue in marketing over net revenue.
In the second semester, it will be even a little less than the second semester of '23 with this ratio of net revenue, maybe 0.5% or 1%. It's stable. We don't hope to be working with a 25% in the increase of this ratio. And I reinforce that we are trying to invest more in the odd quarters that are the beginning of the intake cycle to bring quality students and so that it reflects the quality of the student base.
The next question comes from Lucas Nagano from Morgan Stanley.
Two questions as well. The first one, I'd like to know about the ticket, but with another approach because over the year, we see an oscillation in the income of the ticket in the revenue with the digit and acceleration and deceleration. And considering that the base doesn't suffer this kind of oscillation, what explains this behavior of what you gain per student? You mentioned the freshmen and the courses, but I would like to understand if there is some kind of seasonality, some accountability, something like that. This is the first question. The second is regarding the capital allocation. The leverage has reached a more controlled level, but even strong, and you mentioned that the goal is to deleverage to look at the future opportunities. So, we would like to understand how close you are from this moment of reaching the good level of leverage? And what are the opportunities we see for the shareholders, M&A and medicine, I don't know. That's it.
Well, I'll start with the second one that is on my mind about capital allocation. As you mentioned, we are here with the leverage of net revenue over EBITDA of 1.58x. So, we are closer to a scenario of a great leverage. And here, in fact, we have a discipline in the better allocation of capital. And we understand that the best one today is the prepayment of debt. So, this is what we are doing. And with the scenario of interest, it is still the best allocation. However, I'd like to mention that the company is starting a cycle quarter after quarter of improvement in the net profit. So, we expect an accounting net profit. And with that, we also have a return to the shareholders via the payment of dividends in the minimum that is obliged. So, this is to answer your first question about the allocation of capital.
The second one about the ticket. as a whole, we have here some effects. We have a little of anticipation of FIES. And why? Because FIES has a lot to do with the medicine because we would acknowledge the accounting revenue here of FIES only when the payment was made and not when we had the contract signed. And we understand that FIES is set when we signed the contract. So, this was a displacement of revenue. Comparing the years, it's the same. However, there was a displacement that happened in this quarter. Regarding additionally the ticket, we also have an effect here of PMT. So, we have this effect that also helps positively in the ticket, but it's not a change in the structure. So, remember that our PMT here is a program that we receive every month. It's not receiving only after graduation. So, this Lucas is reflected in our PDD because it reflects in payment.
So, if they have the PMT in the period and they didn't pay, I will be improving. So, it shouldn't be an effect looking that and we had the PMT in the first semester. So, this is not an effect in the cash. So, the effect in the cash is positive.
Yes, just to complement in the 2 questions regarding the capital allocation and reduction of debt. This is our focus. We can have strategic M&A and invest in a medicine school here or start up there in line with our innovation strategy. So, remember that we are now dealing with net profit, and this is our expectation for next year to distribute the dividend. So, this is a little bit of our mind, but Fred mentioned the focus is reducing the debt because it disturbs a lot with the payment of interest. And regarding the explanation of ticket, Fred mentioned quite well the seasonality of FIES. So, you see in the second semester that there is some greater stability. So, we had a strong growth in the third quarter and also in the fourth one. So, the seasonality that happened in the first semester won't happen in the second one due to what Fred mentioned.
Next question is from Marcelo Santos, JPMorgan.
Two questions. First, a comment on the competition environment in DL and what you see and deal with the tickets, how it behaved. And specifically, about medicine courses, how do you see the medicine tickets over the next years, considering the expansion of sports that we see and even with [indiscernible].
Well, regarding the competition environment in DL, we are living in a very interesting moment. I think all the players saw and everyone knew that, but now we see effectively in actions of each one of the players that reducing the ticket doesn't generate more students. This elasticity is not there. We've been saying that, I don't know, for more than 2 years, but we hear more players now talking about it. And I understand that everybody understood that reducing the ticket makes no sense. And that's why we see more difficulties and, in some cases, even a decrease in the intake because I understand both us and the companies are more focused on bringing revenue than volume. Now looking at the numbers, we clearly see that the first quarter was better to the sector. I mean, the level of interest to the sector or searching on the Internet and lead generation in the first quarter was quite positive. In the second and third quarters, this interest was reduced.
Obviously, we are not economists. It's more difficult to understand this dynamic, but we see clearly 3 factors impacting that, and there is the hypothesis of the bet that is strong, especially after the study that the consultancy brings regarding the number of students that is interested in going to college, but gave up because somehow invested or put money on bets and it is, in fact, impacting. So, it is very difficult for us to talk about what is necessarily impacting the whole sector, but we know there is less demand I don't think it's structural. The families and people know that investment in education has an important return that tends to stabilize. But given the context, I see good competition from the point of view of competition and price reduction in a more aggressive way because it's not taking companies anywhere.
This is a very difficult environment, not necessarily due to competition, but obviously, the sector is competitive with many players, and it's not only more competitive than it has always been in my understanding. Regarding medicine, well, I think we are a player with a number of spots and geographic distribution smaller than other ones. So, it's difficult to talk about the sector as a whole. Our medicine colleges have 2 characteristics. They either are old ones. I mean, traditional in the regions with strong brands with the competition that is historically high despite reducing over the years, but we fill our spots. And our new colleges are especially in regions where the repressed demand was very high. So, we have an amount of competition for spot that is huge. So obviously, the increase in spot will generate more competition and will make it more difficult in some cases.
I don't think it is as strong as it was in the presentation in the DL because the offers are different, but I believe it's much more a reality locally. So, each medicine college depending on the context and so on can suffer more. So, I look at Bahia, for example, with a huge offer in medicine with Mis Magic offer there with 13 or 15 new opportunities in medicine. So, this is a region that will suffer more. But even though there will be a lot of opportunities in Brazil. And I think the competition is more local and some will suffer. And we will have a tier of colleges that are desired and another one that is not that much, and these will suffer more on our side. And you see that in numbers, Marcelo showed that we can repass the tickets even above inflation, not necessarily to freshmen, but to the graduated students.
Next question is from Eduardo Resende from UBS.
Congratulations on the results. I would just like to know regarding the DL basis, we saw more intake in the first semester, which contributed to all the numbers for this quarter. I would like to understand from you what to expect in the first quarter next year. And if you can talk about the strategy of the company for next year, it would be very interesting to us.
Eduardo, thank you for your question. Our strategy, as I mentioned, we changed some processes, which took to some changes in the organizational structure, specifically in Kroton. We have a change in the leadership. We, in fact, redistributed some of the leadership. I understand that, obviously, it is positive by nature because new leaderships come with many ideas and excited. So, I am more optimistic in this front, not because of the previous leadership, but because there is a new team coming. And part of the leadership that was here is in another challenge that is quite important to us as well in terms of growth. So, on the one hand, that's it. On the other hand, we are evolving in some processes and strategies.
Well, we don't work with a micro or macro scenario with competition, but we search for more productivity and ensuring our units have commercial teams given they have highly rotation, so that they are better selected and keep for a longer time working, generating more results, our processes of moving the students from one stage to the other that it's faster and with better conversion rates. And we are also having this brand work with brand concentration like Anhanguera as a national brand with a local action. So, there is no change. I mean, something that I can say, well, this is the silver bullet. Well, we have, in fact, the small changes that will make a difference to us. The intake cycle is in the beginning, basically 2 weeks. We are growing compared to the previous year, but it's relevant because we couldn't reach even 2% of the total amount of intakes. But I would say that I'm not pessimistic. I'm optimistic regarding this cycle for '25. This is how we are working. This is how we are thinking about the budget for '25.
The next question is from Yan Cesquim from BTG Pactual.
I have 3 questions. The first one is about guidance. Fred soon mentioned the guidance to SAEB despite the delay in the repurchase. If you reiterate this guidance for '24 in the consolidated. The second question is about the PCLD in Kroton. I'd like to understand after the reversion of PCLD and with the improvement in the average credit profile of the student, what you imagine should be recurrent in the provisions looking ahead? And the last question about the recoverable fiscal credits, and we see that it helped the cash generation in the quarter. And we've also seen that you still have BRL 350 million for acknowledgment. I'd like to know if you work today with the expected schedule for this.
I'll answer the first one, just to reinforce Fred's point, and then Fred talks about PCLD and fiscal credits. Yes, we reinforce the credit for EBITDA and cash. As we said before, the second quarter is the strongest one. And within that, the fourth quarter is the strongest one. So, I reinforce here not only on SAEB side specifically, but also in Cogna, we reinforce our guidance for cash EBITDA. We are sure that we reach these numbers.
And now I pass on to Fred for PCLD and credit.
Well, regarding PCLD, what happened here was that this reversion in PCLD is for cash effect. So, there is no reversion in PCLD. It's an improvement in nonpayment due to reenrollment. So, it happens when I have a student that should be unpaid and for the reenrollment, he had to pay. So, when he paid, he paid the previous credit, and I am reverting the amount that was provisioned. So, it is important to mention that it's not reverting PCLD. It is dealing with our inadequacy and this metric that we have on the PCLD about the net revenue in the last quarter is about 10% and 11%. Structurally, we should be closer to 10%. But it is an event that happened. We have to monitor, and we still trust that we decrease that. And if you look at the receivables, the gross receivables, we reduced that. So, we see cash in fact. And I don't think it is a change looking ahead from 10% to 7%, but it is a gradient, and we are improving our unpaid and therefore, the PCLD. But structurally, I believe it would be closer to 10%.
The second question about fiscal credit. Well, it happens in any company. And in fact, it is in the working capital. So, in this quarter, we had a restitution of this credit that is different from what we were doing before. So commonly, we do the credit compensation. So, in the year '21 and '22 and '23, we've had that. However, this year, we could restitute this is cash as the tax credit is taxes that I paid above. So, it is also cash and it's in the working capital. So that's why I don't understand it's a nonrecurring item. It is in our operations. But we have in our balance, as you mentioned, in our release, BRL 349 million, and we believe we will compensate in the next years. We have compensation in the fourth quarter naturally.
And how will the year '25 be? We believe that our compensation in the credits in '25 won't be lower than what happened in '24. So, this is ongoing in the operation as I also increase the tax credits because, for example, the tax credit comes from the income tax that is paid. So, it's in my balance. So, to conclude, it is an operation that to the next years, I will have a compensation, and I don't believe it will be lower than 2024.
The next question is from Flavio Yoshida from Bank of America.
You mentioned that you are quite happy about reaching the EBITDA guidance. I'd like to understand if you have a specific leverage to reach this guidance because we understand the operational improvement that you're showing, but to understand if there is an extra point in this guidance. And my other question is regarding PDD. We see an effort with good results regarding the improvement in the quality of the basis. And I'd like to understand what do you see as the new level of PDD of the company in a more sustainable way in the medium, long term with all the revenue.
I'll take your first question here, and Roberto will conclude then because why we reinforce our commitment with guidance? Well, I'd like you to think that we have 9 months over in '24. We have the recurring EBITDA of BRL 362 million, okay? So, what was our recurring EBITDA in the fourth quarter of the fourth quarter of 2023, it was BRL 552 million. So, if we take it to account, it's more than BRL 1.8 million. So as Roberto mentioned and I mentioned and Guilherme mentioned as well, our fourth quarter is the one with growth. If we look at the growth that we've had in our fourth quarter in '23 and '22, we had a growth in EBITDA in all our businesses. We don't believe our growth in revenue and EBITDA in the fourth quarter of '24 compared to '23 will be lower than '23 to '22. So, this is a math we make here. I cannot give the guidance of the quarter, but Melega reinforced that here, we reached our ACV.
We had an ACV of BRL 12.5 I don't believe our ACV to the next year will be lower. We are not giving the guidance, but it won't be lower than 12.5%. So, I'm inferring here a growth in the revenue. And the Kroton revenue, we had a growth in the third quarter of 13%. The revenue of Kroton in the fourth quarter shouldn't reduce. And in SAEB, I had a temporal displacement. So, what comes from here is from the number that we reached plus the growth we believe we'll have in the fourth quarter that shouldn't be different from what happened in from '23 to '22. So, this is something that I would like to make it clear.
Roberto, any comments?
Well, very briefly, I would reinforce Fred's point. So, let's think about Kroton. Kroton is strong in the fourth quarter. So, this is a business that in the seasonality of the semester. No. Let's say what is done in the third quarter brings to the fourth quarter. So, if the third one was good, the student is there, enrolled, both the new and the old one. So, I'm pretty sure it will be a strong result in the fourth quarter. And considering Fred's point, Vasta will have the first quarter of the cycle with the schools quite strong, growing more than 12.5% potentially, and we believe that with new government contracts, we have everything to keep growing. And SAEB is another unit business that will be concentrating PNLD with opportunities in B2G. So, there is no new leverage. So, we know that we are sure that this happened in the fourth quarter. So just to reinforce it.
Yes, and reinforcing the PCLD, Flavio, we've had here in our third quarter, the effect of enrollment that was quite positive. So, this positive effect in underpayment is reflecting in the improvement and reduction of our gross receivables. So, in fact, we had an improvement in the PCLD. I don't believe it is structural at this point. We need to see that happening for more quarters. So, remember that this level of PDD on revenue was quite closer to 17% than 13%. In the last year, we were saying that it was closer to 11% and now we are closer to 10%. So, this is natural. We see this recurrence. The fourth quarter, we will have this response in terms of cash and inadequacy. So, I can tell you if you have an improvement for less than 10%.
Next question is from [indiscernible] from Citi.
Just briefly, because there was representative growth in KrotonMed with the tickets and bus and so on. So, I would like to know what is driving this growth among the different units of KrotonMed and a brief follow-up about the seasonality of the quarters because you mentioned that the fourth quarter of Kroton shouldn't be seasonal as we see in the first quarter due to acknowledging the revenue of FIES. So, I would like to be clearer on what are these movements in the second semester that should bring more stability in the growth of revenue. So that's it.
I'll consider the first one and if Fred wants to complement, well, KrotonMed has some factors that are helping. Well, the first one is that we have some new courses that were recently approved. So, there are some that was recently approved with 110 spots and some that were approved in the medium term. They are still maturing. So, the maturing of these spots that were not completely filled, especially in Mais Medicos, it is helping regarding the number of students. The second item is that we are also improving the average ticket going above inflation due to a series of reasons. I mean, we are investing in the colleges. We are improving their experience with the systems and academic processes. So, these investments are also improving the engagement of students. And if we believe we can do more inflation, that's okay. So, these are the 2 main points to push the growth of the KrotonMed revenue as we have new meds in schools with 110 new spots coming, this growth in the revenue will keep happening.
And regarding FIES, that was your question. FIES was only a displacement with anticipation in the fourth quarter of last year, second semester last year, the revenue of FIES was more concentrated in the fourth quarter. Now this revenue is more concentrated in the third quarter because as I mentioned before, we only acknowledge with the payment of FIES and now with the signing of the contract, which is more correct because the students signed and is studying. So now we are acknowledging correctly by competence and not cash. So, this is just an anticipation that happened in the fourth quarter last year and now in the third quarter this year. So, in the semester as a whole, there is no impact to the seasonality.
The next question is from Caio Moscardini from Santander.
I would like to ask about the provision rules and receivables, what you are observing, if you have any study to change this provisioning rules? And the second question, thinking about the guidance of this year, if this guidance would take into consideration the restitutions, I believe so, after Fred's response to other questions, but I would like to check from you this understanding.
Caio, thank you for your questions. I'll answer if Roberto wants, he will answer as well. Regarding the provisioning rules, the improvement we can see and analyze in your cash is due to the best quality of the student and not with the change in the criteria. So, if I have a better quality of the student, then the payment will improve and I have more provisioning. So, we have no study to change the provision criteria because we understand our provision is correct.
Can I just add something, Caio, when we started the restructuring when Fred came here in 2020, he carried out a study here with the team in an exhaustive way about provisioning and PDD and how to do and what are the methods, so we overcame this step. We are quite comfortable with our provisioning model because we studied a lot about that over the last 4 years. So, we understand we are quite adequate. We need no adjustment, and we don't like to make adjustments because we miss the reference. We understand we have a good model that we can keep so that we can have a clear tracking. Regarding the second question about the operational cash generation, when we had this guidance, we were in the end of 2020. So, we were foreseeing the compensation of tax credits, okay. But the amount we could we couldn't foresee in 2020. We couldn't foresee in 2020, what we would have in '24.
So, as I mentioned, we wouldn't see some anticipation of payments or displacement of the national program of the direct books. So, it's natural in our operations. So, some things are more positive, other more negative. But the important here is that regardless of everything, this is the operation of the cash. It is here we received. It's always been here in all operations and in the working capital. So, we have a specific line, and you can see both via the balance and the cash flow directly that we disclosed in the movement that you see it's exactly this movement of tax credits.
Okay. The Q&A session is over. We will now pass on the floor to the final considerations of the company.
So, I'd like to thank once again, our team, Cogna team with more than 24,000 workers that are working hard so that we can improve the lives of our students and clients and deliver results to our shareholders. Thank you all. And the RI team is available for any doubts the investors might have. I wish you all a nice weekend. Thank you very much.
The teleconference of results regarding the third quarter of '24 of Cogna is over. Thank you to all participants. Have a nice day.