Cogna Educacao SA
BOVESPA:COGN3
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Cogna Educacao SA
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[Interpreted] Good morning, and thank you for waiting. Welcome to Cogna's conference call on the earnings in the fourth quarter 2022. We would like to inform you that this event is being recorded. [Operator Instructions] This event is also being broadcast simultaneously via the Internet in a webcast.
It can be accessed in the address [ webcastslides.mziq.com ], where you will also find the presentation. Slides will be controlled by you. The replay of this event is going to be available shortly after it's closed. We would like to inform you that webcast participants can also submit questions to Cogna. They will be answered after the conference by the IR officers.
Before proceeding, we would like to let you know that any statements that can be made during this conference call relative to the business outlook of Cogna, projections, operating targets and financial targets, are based on the company's beliefs and premises as well as information currently available. Future considerations are no guarantee of performance as they involve risks, uncertainties and premises, and as such, depend on circumstances that may or may not occur.
Investors and analysts should understand that general conditions, industry conditions and other operating factors may affect Cogna's outlook and lead to results that differ materially from those expressed in such future considerations.
Now I would like to turn the floor over to Mr. Roberto Valério, CEO of Cogna, who will begin the presentation.
[Interpreted] Good morning, everyone. Thank you for participating in today's conference call to talk about our results in the fourth Q '22. Today, with me on the call Frederico Villa, our Financial VP, Mario Ghio; Vasta CEO; Guilherme Mélega, current CEO and future CEO at Vasta; and [ Rodro Gonzaga ], our IRO and CFO.
Let me remind you today's call will last 1 hour: 40 minutes of our presentation and then we will have approximately 20 minutes for Q&A.
Let me begin today's meeting highlight that we are happy with our results of 2022, and also with the results of Q4 '22. It was a turning point for many of our result lines that already began in Q3, but now we see the annual consolidated numbers, not only Cogna, but most of our business units. Kroton and Vasta have grown revenue, EBITDA, EBITDA margin and cash generation. In the 4Q '22, this is our seventh quarter in a row where we've improved revenue and net income despite the challenging environment, inflationary pressure and the fact that we had the consequences of the pandemic, especially in Kroton.
Now let's move on to Slide 3 for some highlights. First, net revenue growth was 12.6% in Q4. We had already grown 11.7% in Q3. So not only are we growing, but we are growing faster comparing the fourth Q to the third Q. So the trend is consistent improvement in the future. In the year, Kroton had a growth of 3.6% in revenue, anticipating the results we expected for 2023. I mean we had already talked about better profitability and better cash generation in Kroton, but we expected to have revenue growth only in 2023. However, with a better intake, we have this performance earlier.
Now marketing expenses, although we are already a benchmark in terms of the cost to gain students. However, marketing expenses continued to gain efficiency as well as our provisions for doubtful accounts, showing the quality of our customer base after the restructuring.
Now recurring EBITDA growth 9.6% in the year with a gain of 1.6 percentage points in the margin. Further on, we will look into this number. Now student dropout, I mean, despite our consistent growth and a bigger intake in the last trade cycles, the dropout remains stable. We have more freshmen, so there is pressure for dropout. But the dropout remains the same, which shows the quality of our teamwork. Higher intake and stable dropout leads to a growth in student base.
Third quarter in a row, growing student base. We've grown 11.5% student base in 2022. KrotonMed, our carve-out that has been a highlight in all our conversations with the market, KrotonMed has overcome our plans in net revenue and recurring EBITDA; that is, KrotonMed is one of our avenues of growth. And as we have surpassed the guidance, it shows we are right and the execution is well done.
Now Vasta, Vasta had excellent results. Our net revenue grew 33%, showing the strength of the recovery in this business unit. In the quarter, we've grown almost 27%. We are confident that our ACV guidance, which is 20% growth in 2023, is perfectly feasible. As we look at the last quarter last year and the first quarter of this year, we are on the right track.
Now net revenue from subscription, which adds value and has a higher quality of revenue for us -- I mean it brings resilience, predictability -- it already accounts for 88% of our total net revenue.
And let me highlight, Complementary Solutions have grown more than 60% in Q4 '22. Of course, this is thanks to high quality work sustained by 3 pillars: expansion of complementary solutions, migration to subscription products and in addition, the team has been able to do upsell of educational systems. That is, schools are migrating to more premium educational systems.
Recurring EBITDA has grown 113% in the year and in the 4th Q, 27%. That's an excellent result.
Talking about Cogna, I've already mentioned that we believe we have had a turning point. I mean in 2022, we began a restructuring, and it was executed excellently according to the plan. So in 2022, we are closing the cycle. The restructuring has been completed, so Cogna is now in a different phase beginning in 2023.
Net revenue growth was 6.6% in 2022. But let me highlight the top quality of this revenue. I mean, when you look at that, if you look at our PDA, it's coming down because we feel confident that we will be able to receive our revenue. And Vasta has more revenue coming from subscription. So that brings a higher quality of our revenue.
Recurring EBITDA at Cogna has grown 15.8% in the year and we've gained 2.3 percentage points margin in the [ year ]. Now operating cash generation has grown 9.4% in the year, reaching BRL 540 million despite 2 effects, and let me talk about each one of them.
The first was an EBITDA reduction and also cash generation reduction at Saber, if we compare 2022 to 2021. And this is only the natural seasonal effect of the business. We already expected less cash and less EBITDA. But in addition, in the fourth Q '22, we did not receive part of the national textbook program. So -- but we received it in January and February.
And so if we -- I mean, of course, you cannot do this because the year ended, but if the government had paid in December, our cash generation would be very close to BRL 600 million because the National Textbook Program receivable was BRL 60 million. So again, it is a relevant growth. Although what you see in our numbers is BRL 54 million.
Now leverage, I believe the team has done great work in terms of liability management, I'll talk further about that. But above all, we feel confident in terms of cash generation in the company. In 2023, this cash generation is going to be enough, not only for us to pay for all the debt, but also for us to amortize the debt we have with payments due in 2023.
What do I mean by that? Well, we don't need any additional funding to be able to pay for all our liability in 2023. So to my view, this is an excellent scenario.
Now let's move on to Slide #5, we're going to talk about Kroton. So the first highlight our student base in undergraduate students has grown for the third quarter in growth. We are growing on both segments in high on-site attendance and also in low on-site attendance. So of course, we are focusing on hybrid products, but we continue to provide high on-site content programs. And -- but also low on-site attendants still have laboratories on site. Both segments are growing.
But while the growth is sustained by a number of different actions, but basically the expansion in our learning centers, new programs and new intake channels. We have been highly creative to include new student intake channels. I've already mentioned, but let me highlight dropout rate in undergraduate on both low on-site attendance and high on-site attendance, we have stable dropout rates.
Those of you who study this industry, when you have such a high growth, it is only natural for the dropout rate to grow. But not in our case, because our intake is top quality, we can see new enrollments of high quality and also enrollment renewals has improved processes. And so therefore, we have more out-of-pocket students as well, which helps us have a lower dropout rate.
Now something that I wanted to highlight, graduate programs grew 19%. It's not included in the slide, but this is the growth, 19% in 2022. So not only in undergraduate, but also graduate programs we're growing. Actually, graduate programs is growing faster than undergraduate.
Now on Slide 6, we can see our productivity increase by campus. When we began the restructuring in 2020, we now have 112 units that is 64 units fewer or 40% units fewer. But I've already said this, it does not mean that we are no longer operating on these locations. We continue to operate on these locations. But we are now a more asset-light company. So some of these students have moved to partner centers, usually other centers, other learning centers that are our partners. So we keep these students but we have reduced our fixed cost. Our partners are highly professional, so they can absorb this operation.
My final highlight here is that as we turned from 2022 to 2023 we've closed another 12 operations of our own units, and that brings great benefits to us. So in 2023, we have fewer units. So therefore, a lower cost, lower CapEx investment, lower infrastructure cost, which will bring results in 2023. But our fourth quarter of 2020, we had 1,450 students of high on-campus attendance. And now we have more than 2,000 students; that is, the number of students have grown 38.6%.
Now it does not impact EBITDA, but when you talk about cash generation now that we have fewer units, it means we have fewer rental expenses. And with the high inflation, this is important for us to manage our cost. I have said this, some units, we would like to have closed earlier, but we had long-term contracts, and we had fines to pay if we had terminated the contracts earlier. But now as these contracts expire, we begin to rationalize the number of learning centers.
Now Slide 7, talking about average ticket, let me highlight that our strategy focuses on revenue growth. Let me remind you that our operation is increasingly more digital. We have great operational leverage because with digital operation, our variable cost structure is much lower for each new student on the base. What you add in terms of additional cost is very little. So of course, the average ticket is important, but more important than the average ticket is for us to make sure that the revenue is growing. And if we have operational leverage, then we have gains with this strategy.
Now to explain here, you have both blocks, high attendance and low attendance. Average ticket of high attendance has grown 4% as a result of our strategy to focus on this cost, especially on high attendance. So you can see this in the average ticket. It's not in the chart but it's in the release. So the average ticket for high attendance students -- out-of-pocket students has grown more than 12%. And because we have fewer FIES or PEP students, then this has a bigger impact.
So the students that we are now focusing with fewer FIES. And as we do not offer PEP, and out-of-pocket average ticket is growing 12%, when you look at the whole mix, your average growth only 4%, right, from 756 to 786. But in the future, we'll have more out-of-pocket students and fewer FIES impact.
Now low attendance, we've grown also, and you can see the direct reflection on revenue. So our revenue has grown more than 10%. Just to give you a reference in the number of students. Despite students have grown, the number of students have grown 5.8%, out of pocket [ have ] grown 12% and FIES and PEP have declined. So all of that helps us attain this excellent result.
And now looking at low attendance. The average ticket has fallen 8.6%, as I mentioned, from 212 to 194. And in low attendance, we have 2 different types of students. The premium distance learning, so he comes to our center once a week, and the other segment is 100% digital. Now in the last few years, the 100% digital portfolio has grown. So it's gaining more share in our mix. So this is not really a reduction of average tickets, because it's not comparable. You cannot compare students who are premium distance learning to those students who are 100% virtual. And now that we have more students, 100% online, that is why you see this effect on the average ticket.
Our strategy has always been the same: grow revenue. So despite a lower ticket, the number of students has grown more than 15%. So it translates into a 5.5% revenue. So the revenue is up 5.5%, but the costs only had a marginal increase. So a good portion of this revenue is translated into EBITDA and net income.
Now Slide #8 to talk about revenue. Kroton's net revenue grew 12.6% in Q4. So after a number of quarters where our revenue was down because of our restructuring efforts, we are now in the second quarter where revenue is growing, which makes us really happy. And we believe we'll continue to have revenue growth in 2023. And the last time we had revenue growth was in 2018. So it really shows we have passed our turning point.
In Slide 9, we talk about cost. The first chart with the gray background, I'd like to highlight that the first bar, direct cost, that you get -- so despite we've grown a number of students, the revenue has grown as well, the cost remains practically stable. So as a portion of revenue, it's only -- that's really positive because we are gaining margin.
So this slide is showing that because we have more distance learning, and because the marginal additional costs for each additional student is very small, that is why we've had this improvement in Q4. We've had improvement in the gross margin because of this dilution. This is what we call operational leverage.
Now a comparison year-on-year, despite inflation pressure, our total direct cost has remained stable. 21.1% compared to 21.2% -- 21.8%, I'm sorry, of our revenue. But corporate expenses, operating expenses, selling, marketing expenses and PDA, we've actually gained a few margin points. That's why our EBITDA has grown.
Final highlight, talking about operating expense, we've had a 1.9 percentage point increase in operating expenses. So this is where we have cleaning, electricity. So it reflects that we are having more operations in our centers. We have more students in our centers.
Now in the next slide, we talk about the recurring EBITDA that has grown in the quarter and also in the year in 2022, and 9.6% with a margin gain of 1.6 percentage points.
Now in Slide 11, we talk about the quality of our revenue, the quality of our AR or accounts receivable average collection period or ACP. We began our restructuring in the fourth Q of 2020. Our ACV were 78 days, today, 54 days. That's the average collection period, 54 days. So this is a great improvement and -- but it's important to say that the coverage ratio remains stable, 68.8%.
Now in terms of a percentage of our net revenue, in 2021, PDA represented 15% and this year, 12.2%, as I mentioned a few slides ago.
Finally, KrotonMed. We're very happy with the results, with our medical programs. This is a carve-out from Kroton that has increasingly more independence from Kroton. We had a guidance for revenue and EBITDA. We have surpassed both. We have 580 medical seats and a number of organic seats that will be our organic growth in terms of [ seats ].
With that, let me now give the floor to Mario Ghio, Vasta CEO. He'll talk about Vasta.
Thank you very much. Well, this is a very special call for me because I'm retiring next. I would like to start on Slide 14 in which we'll discuss net revenue in the fourth quarter 2022. Just to remind you, the fourth quarter in a year is always the first quarter in the new trade cycle of all subscription products. The non-subscription products all have their own cycle, but with subscription products, this is always the beginning of a new cycle.
So in 4Q '22, revenue increased almost 27%, reaching a little above BRL 500 million, and it's very important to highlight again what Roberto said, our Complementary Solutions revenue grew more than 60%, which demonstrates the company's ability to penetrate and introduce new products that complement the hourly based products that we offer.
Now on the next slide, turning to recurring EBITDA. We reached almost BRL 200 million last year. This was basically flat in comparison to the previous year. But in this margin, we have to account a judicial reorganization that, as you know, is taking place. This was an extraordinary event. And when we look at the whole year, then we can see the result of all levers to -- can be used to improve our EBITDA and margin, reaching a number above 27% and a margin that is almost twice as much as in 2021, even though the margin in '21 also showed the effects of the pandemic.
In Slide 16, I would like to say a few words about this gain in margins. Where did it come from? Starting with the fact that the consolidated revenue for 2022 was more than 33% higher than in '21 and our cost and expenses grew far below that at 17%.
Now to focus on the second chart in the slide, because in the comparison 4Q '21 to 4Q '22, we see the impact of the judicial reorganization. So it's very important that we focus on the right side of the slide, where we have clustered all the major costs and expenses.
So there were reductions everywhere in corporate expenses and operating expenses, so the percentage was minus 2.1%. In fact, and the PDA went up, but owing to the judicial reorganization, the bankruptcy and this took place while we were still crunching the numbers. So we decided to provision 100% of the amount. So excluding this effect, our PDA would be at approximately 4%. And this has shown a decrease. It was over 4%.
And so excluding this extraordinary event that I mentioned, it would be at 2.4%. So we are indeed moving closer to our traditional PDA, below 2%. In general, our selling and marketing expenses dropped, together with other operating expenses. So this is what enabled us to secure the margins improvements that we discussed in the previous slide.
Now moving on to Slide 17. I think that the key message here is that we are reaffirming and that ACV grew 20% in comparison with 2022. And in this slide, we just wanted to give you a little more color on how this revenue will be recognized every quarter. Underscoring that this is ACV revenue; that is, subscription revenue. So in 4Q '22, we recognized ACV slightly at a higher level than ACV 2021. There will always be small variations because the academic calendar is never the same as in the previous year because of the holidays such as Carnival and the [ NE ] exam date as well.
So in terms of orders of magnitude and percentages, they are very similar. So since ACV is a given, and we recognized more ACV in the fourth quarter '22, we expect that in proportion, we'll recognize less than we did in the first quarter '22.
On the lower half of the slide, you can see a range of revenue expectations for the first semester, just to show you, and reinforcing that we are feeling very confident that ACV and the guidance will be met.
So with this, I close my presentation. Later, of course, I will be available for your questions. And let me take this opportunity to thank my colleagues here, market analysts and all of our investors who are listening to us, for all of the support throughout these years. Thank you.
[Interpreted] Good morning, everyone. Good morning to you. I would like to start the presentation focusing on Saber. Saber comprehends the National Textbook Program business together with other lines. So starting on Slide 19, in which we have the financial highlights.
Net revenue in the quarter showed a reduction of 3.6%, year-to-date 18.9%. This was a natural effect, reflecting the seasonality of our business. It's important to mention that in the year, the other Saber business units that are not subject to seasonality, grew their net revenue in approximately 30% collectively.
Now going to recurring EBITDA, the effect of net revenue, of course, also has an impact on the business. The recurring EBITDA in the quarter presented a reduction of 7.7% and year-to-date, a decrease of 41.9% approximately. As a result, the EBITDA for 2022 reached BRL 100 million. This decrease was caused by the seasonality of the National Textbook Program, a national program and historical fact. And also considering seasonality, we have now a more favorable calendar for larger purchases with higher tickets, and this will drive growth for next year.
Now turning to the conclusions on Cogna that Mario Ghio and Roberto Valério have talked about, about the effects in cost and revenue. But I would like to recap net revenue and recurring EBITDA, starting in Slide 21.
This was a year with accumulated growth of revenue of 6.6%. It's an inflection point in revenue, thanks to the excellent results obtained by Kroton and Vasta. They offset the seasonal impact. And besides reaching this growth level of 6.6% in the year, in the quarter we closed the fourth quarter growing approximately 13.2% at BRL 1.6 (sic) [ 1.7 ] million.
Now to close in the end of 2022, we had EBITDA of BRL 1.460 billion and margins -- EBITDA margin of 28.7%, up 3 percentage points in margin and in monetary terms of BRL 200 million. This is something that we witnessed in the quarter too, growth of 3% in margins. So as such, our business both in Kroton and Vasta have led Cogna to see this growth both in EBITDA and net revenue.
Now moving on to the following Slide 21 (sic) [ 22 ], our operating cash generation in the fourth quarter showed a slight reduction. But since in the opening, Roberto mentioned that there is a mismatch in the fact that the National Textbook Program of approximately BRL 600 million was not received, but it was received only in January and February 2023. However, year-to-date operating cash generation was positive at BRL 540 million, up 9.4%.
So what can explain this? Well, firstly, better collection at Kroton, better delinquency behavior and reduction of marketing expenses. Growth of BRL 183 million in Vasta's recurring EBITDA offset the reduction in Saber's EBITDA, as we have seen.
Now speaking of operating cash generation and moving to Slide 23. Let's take a look at leverage and debt. In the last 5 quarters, in spite of hiking interest rates, we started from -- with an average rate of 44%. And now we're [ co here of ] 12%, in December interest rate reached 13.75%. We maintained our leverage at a stable level. In the fourth quarter, we closed the quarter at 2.1x net debt over adjusted EBITDA, which is the formula we use to measure our leverage.
The average cost for new funding in the chart below is now at 2.15% and in '21 and '22, we implemented several liability management activities because leverage is something that matters to us. And all of our [ offices ] are very interested in that. And strong operating cash generation that we have seen throughout 2022, we will reinforce in 2023, making the company deleverage naturally.
Okay. Now on cash position and debt, in December 2022, we grow both here with gross debt of BRL 5.462 million and BRL 2.122 (sic) [ 2.129 ] million in cash, and net debt of BRL 3.333 million. So the reduction amounted to 23% and -- 23.5% versus 4Q '21. And we also engaged in liability management to ensure that our amortization schedule will be met. So from the first to the third quarter, we lengthened the debt profile by using our banks. We raised BRL 500 million at an interest rate of 2.15%. And also, in January we also had an extension of BRL 500 million in debt to be paid off in 96 months.
And as we can see in the chart below, the amortization schedule starts with a cash position of BRL 2.1 billion in August 2023. We have to amortize our debentures at BRL 1.62 billion. In January, we have already repurchased BRL 1 million in debentures. They were being traded below par and they mature in August. And all of this generated BRL 10 million for us as very opportunistically. So all actions have been taken and our robust programs enable us to reduce our debt with no need for taking other loans in 2023.
With this, I close Cogna's presentation, and I turn it over to Roberto Valério.
[Interpreted] Thank you. Let's move on to Slide 25. I want to talk about ESG. We continue to focus on ESG. Let me remind you, we are the first Brazilian educational company to launch public goals. So we are leading the industry. We launched 14 goals in 2014 in an effort to accelerate our agenda for a better world. I'm not going to give you details in each one of the 14 goals, but I think the important message here is that we have been able to attain 2022 goals.
So we launched the program. And this was the first part of this long-term effort. We delivered excellent results in all 14 goals that we have committed to. One of them that I want to highlight is diversity. So we want to have equal number of men and women in top positions. So we're increasing the number of women leaders.
And only last night, we got this award: our company was recognized as one of the best companies for women to work in Brazil. And so this is a ranking of hundreds of companies, and we ranked #28 as the Best Brazilian companies for Women to Work. So we feel proud. And this was only last night, so we still can feel the thrill this is news.
Now let me move on to the next slide. So you can look at our frameworks in ESG. So we comply with most of the main frameworks. We have voluntary commitments with a number of partners, including the UN ODS, the UN SDGs, Sustainable Development Goals. We received a certification as a great place to work. So that's in terms of recognition and certifications. We believe this is really important to take the company where we want that company to be.
And when you look at ratings and indexes, we lead all of the ratings: Sustainalytics, the S&P Global, Refinitiv, which is another important index in the educational industry where we also rank as leaders. So we are the only educational company in Brazil that's part of the ISE, the Brazilian B3 Stock Exchange Sustainability Index. And today, we're also part of the CO2 index and the IGPTW Index in this Brazilian Stock Exchange or B3.
Now let's move on to our last slide for the final considerations in this call, by segment. First, Kroton, we have a positive outlook for the first half 2023 intake cycle, we will have a growth in our student base. And so revenue will also grow. We had this reduction of 12 own units, also initiatives for productivity gains, good management of direct costs.
As you've seen the unification of national brands, we tried to unify our national brand moving from Kroton into Anhanguera. We are in no hurry, but we are now orienting our efforts to this brand, which is going to bring us synergy gains and more efficiency.
We've also improved on-time payments. And again, all of this will sustain our EBITDA margin improvement and also a healthier operating cash generation.
Let me highlight CapEx, the investment we have made. As the share of net income, it remains stable. We expect that to remain stable in 2023, but we're focusing on technology and digital transformation. As you know, we want to improve our students' experience and the productivity of our teams, which will bring more productivity in the medium term.
On Vasta, we've been able to deliver our 1 billion guidance. So this is a very clear result, which reinforces our optimism in this segment. Recurring EBITDA grew 113% in 2022, also with margin gains. So we believe this strategy, we can continue to execute this strategy consistently. It will help us again in 2023.
As Ghio mentioned, the trade cycle has started really strong, which means we feel confident we will deliver the guidance. Now Cogna, we have finished a restructuring initiative. So we will now turn the page. We are past our inflection point with growth. Of course, we will continue to focus on the execution of core operations, large operations, Kroton, Vasta, Saber, but more and more, we focus on new opportunities for growth in education which, as you know, do not mature in only a few quarters.
These are long-term initiatives. But of course, we have to take the first step, and the company is now concentrating efforts on new opportunities and new initiatives.
Now in terms of cash generation, we posted BRL 540 million in the year, which means our leverage has remained stable. If we had received the payment of the National Textbook Program in 2022, then we would have reached BRL 600 million, which would be a significant result compared to 2021. Anyway now, because we are confident we have turned the page and that the company will show a growth in cash generation in 2023, our initiatives in liability management, not only the ones we have implemented but once we will still be implementing, will help us be able to have a balanced level of liquidity and lower financial expenses.
With that, I think we can conclude our presentation. Let me open the floor for questions.
[Operator Instructions] Our first question is from Lucca Marquezini, Itau Bank.
We have 2, in fact. In relation to the intake in the first quarter, and how do you view the competitive scenario? Especially in low on-site attendance, we have seen some more aggressive players. And also in relation to marketing expenses, I think that it was an expressive result in relation to the net revenue of BRL 22 million. And also, we have the migration to marketing -- digital marketing. So you believe that there is more space for growth along this avenue?
Lucca, thank you very much for your questions. Well, student intake cycle. We are optimistic about the cycle. The results are very much in line with our budget. Of course, you're not familiar with our budget, but we are expecting revenue growth for the year. In the third and fourth quarter, we grew. So our expectation is that we'll continue growing throughout 2023. So it's a positive outlook.
To give you a little color, in February, March, results were a little flatter than the previous quarters, I think this is probably a macroeconomic effect, but we are looking at the site in a very positive light. And we'll be announcing this together [Technical Difficulty] now we still have 4 days to take on more [ students ] until the end of April.
In relation to marketing expenses, we were able to optimize them, thanks to the efforts of our team. They are very creative in diversifying intake channels. We identify opportunities for improvement. But as I said in previous calls, we are efficient enough and we know that the cost of acquisitions is -- in our business is something that's very efficient. And so we believe that we'll spend a little more in marketing, but late in the year.
So we are saying that we are willing to spend a little more in marketing but seeking efficiencies to try to strike a balance. There's still a lot to happen in this channel not only affecting our industry, but to be the final answer. So of course, yes, there are opportunities to improve our marketing efficiency. And if you invest in marketing and [ results campus ] is always positive because it will help us with our long -- our medium-term growth goals.
Our next question is from Marcelo Santos, JPMorgan.
The first question I have is about Kroton's margins. What should we expect? What are the elements that will influence the margins in the comparison to '22, '23. Since you were talking about the company's consolidated CapEx, do you want to fuel your growth with revenue? I just wanted to clarify what we can expect in terms of CapEx for 2023.
Marcelo, in relation to Kroton's margins, it's no secret that we are managing these drivers for a while. [ We have ] some opportunities in direct costs, [ why ], because as we grow, our distance learning student base. It has variable cost and proportionately much lower than [ growth ] revenue. So we believe that we have a chance of leaving indirect costs by investing in DL, but thinking of our corporate expenses, we also detect some opportunities, not too many because our results are very reasonable.
Information CapEx, I think that the point here is the net revenue percentage this stabilities including in the long-term model, as we gain more efficiency and thanks to our investments in technology we will close the gap in time, so in fact we don't expect revenue to grow, but in absolute terms we'll manage as needed. So after we finish the investments in technology, so just [ making ] today we have some work being done in the legacy systems, but we are building an entirely new one. So CapEx is really accelerating because we have to sustain these 2 development projects. I hope it was clear in my answer, Marcelo.
Our next question comes from Lucas Nagano from the Morgan Stanley.
We have 2 questions on our side. The first one about Kroton margin in Q4. Although the margin improved during the year, we could see an effect related to GNH in this quarter. We'd like to know a bit more about that. And about infrastructure, in this quarter, you shut 12 down units. I'd like to know a bit more about the strategy. And are you going to continue to shut down units next year? Looking at the prospects in the current scenario, and if FIES would come back, do you believe you could still have more students with a high On-Campus attendance if FIES would come back?
Lucas, I was not able to hear your question. I heard the first one about Kroton margin in Q4. This one I understood. But your second question, I was not able to hear that. Can you repeat, please?
Yes. The reason why you have reduced your own units. And are you going to continue to reduce units in the future?
Yes. All right. So about your question on Kroton margin. Kroton margin in Q4 increases because of a higher On-Campus attendance. So we have higher operating expenses. These are expenses related to electricity bill, security agents, all of these costs related to On-Campus activities. So they had a bigger impact in Q3 and 4.
Now about the reduction of units, I would say the following. Our restructuring has ended, however, our long-term strategy continues, and it focuses on more digital programs and hybrid programs. So therefore, when we have more students on digital, and the rental agreements expire, in places where we believe we don't need a big campus, we can migrate to a smaller campus or we can migrate to a partner campus, we will be doing that but not as much. Not as much as we did in 2021 and also not as much as we did in 2022. I mean fewer than 12 units.
If we are to reduce more units, it will be more in units, not in tens of units.
Another question, if FIES would come back, can you still accept more students for high On-Campus content?
Yes, Lucas. Yes, because our occupational -- our occupation rate is about 50% in our centers, in our schools. I mean, that is assuming that FIES will be only for high-attendant students. We always make these decisions thinking about a potential growth. We always factor in a possible comeback of the FIES program.
Our next question comes from Yan Cesquim from BTG Pactual.
Valerio. I have 2 questions on my side. The first is a follow-up on the first question. Talking about the first trade cycle of 2023. I'd like to hear more about that. What is the rationale behind pricing? Because talking to your peers, we could see a more conservative pricing policy, both for higher On-Campus content and also for more digital programs. And also talk about the effect on your student mix, if you are also considering more rationalization in terms of pricing. This is the first question.
Now the second question is about the National Textbook Program calendar. In 2023, the calendar seems to be more favorable. But please let me know when you begin sales for the 2023 National Textbook Program. So maybe in the first quarter or in the first half of the year, what would you expect?
Yan, thank you for your questions. About intake, student intake at Kroton, I agree with your comment. Yes, other players are having perhaps more rational pricing. The prices are more stable. But if you look at our trade cycle, the tickets remain stable on comparative programs, right? So looking at the mix, the average ticket has remained stable, and this is good for the industry. We have already been talking about this topic. I mean, more important than growing volume or growing enrollments, we want to grow revenue.
So -- and I also see now that other players are going on the same path. So we do see a more rational offering on the market. But this is a competitive market. So although there is more rationality, we have a large number of players, and we all face challenges. About the National Textbook Program, yes, it does have seasonal effects, as you mentioned, but even the negotiation has seasonal effects. We close sales usually in the second half of the year. And so therefore, I do not really have significant expectation to see good numbers in the first half of '23.
[Audio Gap]
Hello, Pedro, answering your first question. I will answer it, and then I'll turn it over so that it can be explained better. Well, about the premium high on-site attendance. Well, tickets are stable, both for medical programs and other on-site programs. We have been focusing on high LTV programs. So they tend towards stability and some can be including some ticket improvements is not as competitive as DL.
Medical studies are naturally less competitive, so we can hold onto the prices better. And when we think of high LTV, high on-site content, it's a sector in which we can hold onto our ticket levels as well. So this is our expectation also for the second cycle of the year.
Thank you very much for the question. While speaking about PDA and stability in the comparison based on semesters. I think that something that could serve as a good indication for the market is PDA over ROL. This number was 12.5% versus 15.5%, an improvement of 3 percentage points.
And what we can observe is that today, we manage defaulting students and we don't see really that the -- what we see now is something that actually occurred back in 2021. So we -- by looking at the numbers, we don't believe that there was a one-off effect in 2022. What we believe is that since we are constantly tracking default levels, a good target would be to look and have PDA over our OL at above 12%. This is how we manage our business, and 2023 should be no different than what we saw.
Our next question is from Marcelo Santos, JPMorgan.
Thank you very much for the followup. Just to clarify something that Roberto Valério said about ticket stability. What do you mean? Well, you mentioned that it's ticketed year on year. [Technical Difficulty] price? Or could you please clarify that?
Nominal stability, not in real terms.
So do you see nominal stability in the medical programs? We believe that it would be higher than inflation?
No, in medical, yes, we can go above inflation, for sure.
I thought that you were just referring to high on-site attendance programs.
But definitely with medicine, we can outstrip inflation. We can grow more than inflation. Just as a correction on my comment about CapEx, my answer was based in the long-term model rather than 2023. For '23, we expect stable CapEx in the comparison, 2022-23 in nominal terms. And also as a percentage of net revenue, it will be smaller because we have that different effect. But for '23, [ it's ] nominal stability, I'm sorry for this confusion. I just want to make sure that we are on the same page.
We are now closing our Q&A. I would like now to turn the floor over to Mr. Roberto Valério for his final remarks. You may proceed, sir.
Well, first of all, I would like to thank you all for participating and congratulate the Cogna and Vasta teams for the results obtained. And thank you, Guil, for your dedication and your efforts in these 30 years. He will be part of the Strategic Committee and the Board, but I thank him very much. And we will be happy to take any other questions that we might have at the IR team, and we'll see you now next on the first quarter earnings conference call.
We are now closing Cogna's conference call. 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.]