YDUQS Participacoes SA
BOVESPA:YDUQ3
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YDUQS Participacoes SA
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Good morning, ladies and gentlemen. Welcome to Yduqs' video conference to discuss the results for the first quarter of 2024. This video conference is being recorded, and the replay will be available at the company's website at www.yduqs.com.br. The presentation will also be available for download.
We would like to inform you that at 11 a.m. Brazilian Time, we will have the presentation in English. We would like to inform that the all attendees will be watching the video conference during the presentation, and we will start the question-and-answer session when further instructions will be provided.
Before proceeding, we would like to clarify that any statements that may be made during this conference regarding the company's business prospects, operational and financial projections and goals are the beliefs and assumptions of Yduqs' Executive Board on the current information available to the company.
These statements may involve risks and uncertainties and as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should be aware that events related to the macroeconomic scenario, the industry and other factors could cause results to differ materially from those expressed in the respective forward-looking statements.
It is important to note that for better viewing the presentation, it is recommended to enable full-screen mode.
Present at this video conference, we have Mr. Eduardo Parente, CEO of Yduqs' and Mr. Rossano Marques Leandro, CFO and Investor Relations Officer.
I would like to hand the floor over to Mr. Eduardo Parente, who will begin the presentation. Please, Mr. Parente, you may proceed.
Thank you very much. Welcome to Yduqs' Presentation First Quarter 2024. Thank you for the presence, trust, I hope you're all well. We will see first quarter, we have another quarter of deliveries of our guidances. Another quarter of growth of net income of third quarter, we present and the growth of net revenue in the following consecutive quarters.
Looking to the left, we have a growth of 11% of net revenue or 7% of EBITDA, 11% adjusted net income. We follow our trajectory of reducing leverage of [indiscernible] Vis-a-vis 1.74 last year combined to the reduction that we have in the average cost of debt with showing that great trust that market has on us, along with the growing operations leads to the results we're showing you.
To the right of the chart, what we have, what I mentioned in the opening. Growth, every year in the past 3 years of net income, we had a great leap last year. This year, we have been able to continue a positive trajectory. Look at the green bubble. When we look at accumulated net income, BRL 360 million in the past 12 months is 80% higher than this number was 1 year ago. When we look business on business, on Premium, a growth of 18% year-over-year in the student base ticket at upper [indiscernible] of IBMEC, 9% important for our EBITDA and premium since we gave focus to this 5 years ago.
Digital intake similar to last year, within our guidance led to net revenue growth, and we follow on the trajectory of growth of the average ticket here. On-campus, we've been telling you how much we are excited about on-campus. This has been another quarter with positive growth, 2% points vis-a-vis last year, 20% EBITDA. Student base growing -- since 2014, the student base has been growing. Intake within guidance, 15% compared to last year and net revenue growth of 11%.
Let's look business by business, looking at Premium. We have some news that people have asked us to separate IDOMED and IBMEC results showing you the businesses, and they are still doing well. On the top left, net revenue growing 13%, important for IBMEC, great success that Faria-Lima campus opened 1 year ago, has had growing on the student base, relevant growth IBMEC, 25%; Medicine, 12%.
When we look at undergraduate students in the green bubble, you see 10% of Medicine and IBMEC, quite important growth for our Premium group. So on the bottom right, we have growth of ticket of IDOMED and IBMEC leads us to have this EBITDA growth and evolution that is quite important. From the very beginning, this is a business that has great resilience in rainy days, and we're showing growth, growth of 49% in IBMEC, 9% Medicine. And this is the first quarter and the greater discount of FG-Fies, where we didn't have that last year. And this year, we had if we compare apples-to-apples, the number would be a bit higher.
Keeping the margin we have, this is the renewal that varies a bit to this side, that side 95%, 96%. Speaking of digital learning, what we have initially, we attained the guidance. We had intake similar to the fantastic intake that we had in '23, showing history '22, we had little elasticity in the market. We worked much more on price and then volume. '23 we returned to elasticity. We were more aggressive, much more aggressive in terms of strategy. What we see here is the reflect of that. We see an increase of 11% in net revenue of the unit, 13% in undergraduate, increase in the 6% of the student base, the positive trajectory of price, and this has been -- we've been telling that. This is more conservative price of '22.
Now we see next the other one, the variations, much closer to 0 or a bit negative. When we look to the top right, what draws our attention is the drop of 7.5% points in the margin. This is not something that worries us ahead. I want to share this with you. When we look at the bad debt, well, first part is regarding this, we have a change in provision in the first quarter, last quarter, started second quarter last year from 15% to 20% of intake. And this very -- related to that, is actually related to this increase. The other part is the great intake we had last year.
When we had the leap we had from first quarter, second quarter. So freshmen drop off much more than upperclassmen. Well, after a few quarters, we have an increase in dropout that results in this number. The two, so we don't have leaps from 15% to 20%. The intake leap. We don't have other intake leaps. They tend to have a very smooth effect looking ahead.
When we look at Transfer, this is similar well goal for transfers of the hubs and when they capture more. So we have a greater there. We had great collection. Last year, the number is carried on ahead, and we have a normal number. This goes back to the second quarter or second half [indiscernible]. Well, marketing and sales is our option. We want to talk more about brand.
We have had a trajectory of great efficiency. So we decided to spend a bit more here looking at the present and future. On others, that's what we have to close on 7.5%. That's the result of the base growing and operational. To close on Digital, for intake, we actually went over, exceeded the guidance. So when we look at renewal, we had wonderful intake, and it tends to cause greater dropout with a greater number of freshmen in the base. So this is between 7.5%, 7.3%. This is very much within expected.
On-campus. This is a chart filled with good news. Well, it may be news for some people, people that know that we've been talking a lot about that. On the top, relevant net revenue growth, 11%. When we look at the student base, we have a growth for the first -- since 2014. We had growth of the student base in on-campus, very much anchored on semi on-campus were important for us to have operational leverage. So it should grow more essentially.
When we look at the student base of on-campus base, we had intake greater than last year. We have the prospect or excited to shortly have a change in the -- only on-campus. And looking to the right, it's more of the same quarter after quarter, we've shown you the evolution of our ticket since 2021.
This is something we look ahead what we have, hiring, what we're bringing, and we look ahead as a positive trajectory. With out of that, very relevant growth of EBITDA, 20% year-over-year and a growth of 2% points on the margin. This is natural fluctuation. The number is always between [indiscernible] variation that has great stability over the years, and we have exceeded our intake guidance of 50% or 5% vis-a-vis 6% last year or 15% actually intake.
I'm going to turn it over to Rossano to talk about financials.
Thank you, Eduardo. We're coming to the financial integration. We see robust growth of 11.5% year-over-year. Important to stress that this quarter, we have all the segments growing double digits. Premium as is traditional growth of 13.5% digital. And even with the student base growing very robustly in terms of revenue. And on-campus highlight here, as we've been talking for a long time. The base started growing after a long time. And with the continuity of the ticket growth, we got to this growth of 2 digits of on-campus revenue that makes us very happy.
Another highlight of Premium Plus digital reach 58% total, our 2 segments with greater margin, more representative in the total revenue of the company. On costs and expenses, we had a growth of 14% in total cost and expenses, very much focused on bad debt and M&S. We'll continue delivering good efficiency and all the others.
G&A rents and leasing, we're keeping -- that being stable. The cost line accounting [indiscernible] 0.3% points regarding revenue. One, again, demonstration of the discipline of kind of when we look at the growth lines of bad debt and M&S was a planned growth where we wanted to invest more in our brands. We believe this is very important in the midterm. We have -- efficiency deliveries year after years, put us in the place of greatest or very efficient players. And this year, we decided to increase investment, especially in our brands, and this will bring great results in the long term.
For bad debt, we have a growth of 2% points, but half of that comes from a different comparison basis. The second quarter last year '23, we decided to increase the initial provision increasing from 10% to 15% quarter-over-quarter that has an impact in this compared to that. You won't see that in the second quarter of '24. The remainder of the impact of bad debt comes with a greater drop out the grade intake we had last year, as Eduardo mentioned in Digital, when we had grade strong impact, it increases number of freshmen. And so there is greater drop out.
Third quarter and fourth quarter, we have intake in showing an impact on dropout and hence an impact in final bad debt considering this in the provision. So we have an increase of this in our general revenue as a result of greater intake.
Getting to EBITDA growth of 7% year-over-year. Premium and on-campus driving that excellent new showing all campus with 2% points in margin. We say this is great leverage business, great. So the increase of this base is we start seeing this expansion of margin on-campus segment that we continue betting a lot on.
Digital suffering a bit of margin this quarter. Eduardo explained in detail to you the basis of this impact. Almost the whole impact, we see it disappearing over the year. We don't see we're close to this negative impact you see here in the quarter in digital. Still very healthy business, operating at very high margins, we'll see that over the forthcoming quarters.
Adjusted net income, we attained our guidance, very important. We have been telling with the market to look at net income, we have had a trajectory of growth of net income year-over-year. You see that in the slides that showed you led by the better growth, we start seeing financial results, positive drop of interest rates or the work we've been carrying out in the financial results line. This results start showing an increase in net income comes after that. [indiscernible] has negative impact resulting of great investment we made in technology over the past years. The curve is getting to the end. We're going to start seeing positive -- well, neutral or positive contributions and income tax is slightly net over the period.
On the next slide, we have a lot of good news, operating cash, very strong here. You see a conversion of -- cash compared to last year, very much focused on accounts base payments that has distorted in the line of working capital with payables.
We have very stable receivables, even growth in intake that more greater penetration of this, we have stable terms of 3 historical lines showing the discipline we have in the management of our accounts receivable and all the capital structure of the company. CapEx, following the delivery of our guidance. So we follow the history of very disciplined 6% growth. So our CapEx has been very well results -- delivery results year after year.
Now we get into our midterm guidance. So below 5% or -- and so we're getting debt in our investments. Here, we see the results of our cash generation capacity and reduction of [indiscernible] showing a drop in leverage quite strong regarding last year, 1.56x our EBITDA. This is inline that is strong, great focus of our business is leverage reduction. We talk about capital allocation. We'll have the opportunity to discuss that in our Yduqs Day, but this is our strong trends of our business, working a lot on our leverage reduction in our business becoming stronger for cash generation for our shareholders.
Our debt average cost, well, CDI plus 132%. We had a great emission of debentures, BRL 1.2 billion. So we had an average term. So above 3 years of average term and this very competitive cost of market. So very confident in terms of liability. So I go back, turn it back to Eduardo to conclude the presentation.
Thank you, Rossano. This is a chart I like very much. It shows the evolution resilience, the beauty of our portfolio. Resilience goes back to where our portfolio keeps on evolving or developing. Resilience applies to difficult moments, and we see those moments being way back behind us.
So we see full line, we had BRL 6 million in on-campus. We started breaking down into business units. So we went down there to 400. We are recovering gradually. We've been telling you we move from BRL 400 million in the third quarter 2022 not so long ago to BRL 490 million LTM that we have this moment, premium that moved from -- when we started talking about premium had BRL 300 million EBITDA, we're getting to BRL 600 million now, twice as much in a very short period of time.
And Digital with very positive trajectory, moving slightly sideways in the past quarters because of the factors we mentioned the other 2 businesses doing, they are playing their role and showing that what we have on the left, net income showing a great evolution when we look at what we talked about the highlights.
We're talking about BRL 360 million LTM. A year ago, we were talking about BRL 199 million last year. It's a very important trajectory for the strength of our portfolio, quality of our brands. On the right in the chart, we see operating cash flow moving from this comfortable place of BRL 600 million some, moving BRL 1 million last year. We have a slight drop because of what also mentioned, accounts payable in March. It wasn't because -- if it were that, that's not going to happen over the year. We would be above what we were in the last quarter in terms of LTM.
Another very important chart for us. Since 2019, we have these results, we could go even back. We got the end of students under Fies, we had 2 waves of COVID, several economic crisis, elections, what we have growth every year on average since 2019, very difficult years, an average of 8% a year growing every year with margins always above 30%, enabling us that 2007 our IPO paid dividends every year, we made good capital allocations, did not make capital allocations that were poor over the period.
This shows the essence of our business. I would like to talk a bit about ESG. We have broad recognition of this from the market. There precision companies, our industry. Outside our industry, we have social tradition of almost 54 years. We've always looked around us, and -- so 4 years ago, we started talking much more about the market. Many people seeking us very clear case, clear recognition of that is our AA evaluation of MSCI.
Few companies are recognized at a -- few companies in the world that are AA in terms of ESG. We brought some news. We got this quarter or insertion in the [indiscernible]. The report that we've released audited by Pricewaterhouse according to market standards. The Institute Yduqs, we have bought new class with 479 enrolled in literacy and reading program, the hedge of lower our program that adds income to the ProUni students within medical students started in Rio. We've expanded to all our Northeast units. And we have companies of the institute recognizing as a good vehicle for social investment, the institute. It took 3 experts are related to the financial markets, center there Zurich and [indiscernible] institute, they have been with us in this journey around Brazil.
We were recognized at the UN, New York by [indiscernible] raised its priority movement of 50% of black and indigenous people and leadership positions and promotional education, qualification development of black and indigenous people within the organization.
This is what I'm saying, talking about what happened during the quarter. So the whole package is -- of course, mentioned, Yduqs Day on the 21st of May, I hope we can attend. There will be great things about our business, many cool things about our market and our country. I think it will be something that we are preparing with great care and people will remember for a long time. The next day will have the ESG forum, I'd like to invite you to attend it on the 22nd of May to be here at the Maracana stadium to follow us. It's part of it and much more that we have to show you.
Moving on to our final remarks. Okay, winning portfolio. Our strong operating leverage, another quarter of expansion in net income with guidance, achievements, average ticket of upper classmen growing all business Medicine 6, if I make 9, Digital 5, on-campus 5, intake achieved all guidances, great intake close to what we had last year, very important growth for us in the on-campus of 15%. Our net revenue grew, as Rossano mentioned, 2 digit or leading to a total of 11%. EBITDA growing by 7% in the quarter despite a drop in digital, strong locomotive of ours showing the strength of our portfolio, premium delivery on-campus bringing a growth that we hadn't seen for a long time with 20% of our EBITDA.
We look at net income. We want to encourage you to go to your net income and your projections, so with the projections you make about us. This is what we're going to say that the whole industry, we're going to look much more [indiscernible] we had a double-digit growth of 11% in the quarter. When we look at LTM, this quarter over the same quarter last year, we're talking about 81%, 199 to 360, great evolution.
Cost of debt along with leverage reduction, working hard on this development of cash generation of net income, average cost of debt of CDI plus 132 and we're getting to 1.6% in terms of leverage reduction. We've shown you great development of our business, the strength of our portfolio, bringing another quarter of positive development in net income, maintaining all the guidances we've given you.
Looking ahead, what would we see? Great development in net income and cash generation for shareholders next week [indiscernible] stay. We're going to talk about a lot about that. What do we want to tell you today. We look at the second quarter, we're going to see net income very much in line with what we saw last year. When we look at second half, we see a trend of this speeding up to me.
Thank you very much. Thank you very much for your time, your attention, your trust, and let's move on to our Q&A session. Before opening up to questions and answers, I'd like to turn over to Mr. Eduardo Parente.
Good morning, everyone. Before we start the Q&A session, I would like to turn over to Aroldo because we -- well, everybody is really worried and sad about the tragedy. So I'd like to share with you what we've been doing about it.
Thank you, Eduardo. Good morning, everyone. We're going to [indiscernible] everybody is following, it is a very difficult moment. We'd like to start by giving our solidarity to all of you impacted throughout the country, especially. We are going to [indiscernible]. We took some measures right in the beginning of what happened there, very worried about people. We have several associates impacted, 3 are being supported because they have been having psychological support and they are consistent of a lab and the units being sheltered. We have been paying her accommodation and hotel. She had nowhere to stay with her family. We are very close to taking -- collecting news, helping some with psychological support and with financial support for her accommodation. People have been very much impacted of partnering hubs.
We are closely following what has been happening and giving all the support possible to those families at such hard times. We have 2 weeks with no classes, all the support being done remotely. So students keep on being supported. So we have 80 of 140 hubs with no classes at the moment.
This is a region. It's not large, a small 1 compared to our student base. But in fact, we are very close to Rio [indiscernible] at the moment. Given those the numbers are not so high in terms of our total numbers, we're going to help them financially with a month of tuition fees in the cities [indiscernible], again, it's not so relevant to us, but it is very important for the people [indiscernible] very worried about the people, the partners in the various centers or hubs though they are not so much impacted. They live in higher regions. They have no water, but actually you could not have classes at the moment in those places. Well, this is it. We'll still hear very close and following closely to everything that is happening in the state.
Thank you, Aroldo. Let's move on to questions.
[Operator Instructions] Our first question comes from Marcelo Santos from JPMorgan.
First question I have is regarding Distance Learning. I'd like to understand from you if you think we're getting to a maturation point of the business. I know many people in Brazil still need to have higher education, but there is an aspect of income. Should we see more modest growth from now on? What we see this year is something one-off. First question.
Second question, you mentioned several times during the presentation, an increase in marketing and sales [indiscernible] and focusing on the brands. I'd like to understand what are the expected results for this increase in investment? How are you going to measure whether you've been successful or not? These are my 2 questions.
Thank you, Marcelo. I'm going to take the first and I'll turn to Marcel. Marcel, if you want to add to the first.
Actually, we look at our results and of the competition and we have similar intake in last year in Distance Learning. This is very centralized. We don't see it's a stagnated where we had 100,000 students growing 20%, 30% is 1 thing. When you have 500,000, the percent growth is different. On the other hand, what you said you make very -- made a very good report showing the impact in terms of income of people when they have higher education, the other report of those that have not completed higher education, they also have a development considered a number of years. This is not only restricted to us.
We see there is a great percentage of coming from public, high school, most people are in private education. So we have a year that there is strong recovery work of Portuguese and math, people to have ability to communicate, to understand text and reading and they have much more than people that don't. So we have a totally different situation in our society where we look at numbers, 32 million people that have high school and no higher education. My view is different from yours.
It's a matter of income. We're talking about depending on cost BRL 130, BRL 150, the insertion will happen through digital learning.
I found somebody at the weekend say that the person invested in 4G in the past. This is what the program had a program to take distance learning to the whole country. This is what's happening. There is a moment of great growth, lower growth.
Last year, we had strong growth. And I think it's a matter of time, market trust, when we look at our industry and other industries around C class people and D plus are at the moment of lower consumption. We're not worried. So obviously 30% that we show last year was very difficult considering the student base we have. We don't think we are at a stagnant moment. We have a lot to grow ahead, Marcel.
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Since late last year, we've been signaling this well of resuming marketing investment. We're aiming at this 1% point above what we closed last year. We are very much on top of the plan. Our follow-up metrics, obviously are to the cost that we have basically on our book value. This is what we see in the market. And internally, what we do on our day-to-day in a reductions, mainly of pending paid traffic. When we talk about Performance Media, this is where we've seen an acceleration of inflation that is much higher compared to the other media.
We have constant control of this unit cost of acquisition. We believe that, first of all, we are a multi-brand business. We have investments that go to IDOMED, IBMEC, undergraduate, graduate and [indiscernible] within [indiscernible], we have a position of relevance in the market. It's a good brand. And in terms of search and size. We have a matter of defending growth. We have regions where we proactively are addressing more strongly. We've mentioned that before, see the growth we've had in Sao Paulo state, for example, and we have this work a follow-up of this relevance of [indiscernible] within the Brazilian market.
So basically, at those fronts, we are following up.
So I understood that the second metrics you mentioned is the reduction of the dependence of paid traffic. What is the first? I didn't quite get it.
We check a nominal or the book when we do the math of 1% point that we circulate, this is what we have in terms of basis. This nothing can escape this number as is set on stone that we already have that follows the revenue being following.
Our next question is from Samuel Alves from BTG Pactual.
Two questions on our side. The first is on transfer of the centers. Another reasons for lower margins in the Distance Learning segment. If you could explain a bit how seasonality should work of this transfer over the year. If it should be reduced especially in the second half after the performance of intake of this summer cycle, first question.
And the second is on the medicine ticket. We've seen a growth of 2% on consolidated and upper classmen growing by 6%. Just to understand the reasons for the lower ticket or weaker ticket on freshmen if you have something more related to seasons, seasonality.
Thank you, Samuel. I'm going to ask Rossano to answer both.
Thank you, Sam. I'm going to start with the second of Medical school, the ticket we had 6% is the best indicator of our ability of price transfer. It shows 2 students in the institution, that ticket is like semester after semester. When consolidated, we have a mix in the intake pace. We have greater concentration on the causes that are in the inner states in Brazil or countryside of Brazil.
We have a mix of base [indiscernible] lower smaller growth when you look at upper classmates. So freshmen have penetration in interstates. And we see the difference because in the inner states causes the there's a difference in the big cities. First question, I forgot. I didn't take note.
Well, the transfer of centers is recharted. We have the goals they have to attain based on the attainment of those goals, they will affect the percentage of the transit in the next semester.
In the first one, you've seen results of intake and great attainment of the centers last year, we reviewed the goals. [indiscernible] reviewed the calls every semester based on the levels of attainment will be following the pressure of the transfer line will be reduced over the year. Obviously, in the first quarter will be smaller second quarter and even last second semester.
The next question comes from Mauricio Cepeda from Morgan Stanley.
I'd like to go back to a question Marcelo started, but perhaps it was not very clear in Distance Learning. If we take the intake we had -- you had on Distance Learning, if you don't make the adjustment 2024, it wouldn't reach the guidance. So not precisely because of that, but a bit thinking a bit ahead, don't you see that this market may be deaccelerating now. This could be a trend that is a bit more midterm.
And connecting to my second question on marketing. I understand you're talking about marketing efficiency. The question is considering a scenario which competitiveness may be higher distance learning. Won't you start needing marketing that is structurally greater. So we see other players increasing investment in marketing. If isn't there some industry as we they require structurally more marketing?
Thank you, Mauricio. Something that is important to note, you and somebody else have written that we haven't changed the guidance. We look at the intake of the quarter. So there's a very clear moment in which we start bringing quarters from the next quarter. Last year, since we were flying intake, we anticipate at this moment it was ended up being in the first quarter when normally we advanced 1 week, 2 weeks and within April.
That was abnormal because we had very strong moment. We will compare apples-to-apples. Yes, we had the 186,000 students that I just mentioned in the presentation. The same answer I gave to Marcelo. We have a time that sometimes it's more, sometimes it's less. '22 we saw a year that which we evolved very little or did not evolve. In intake year-over-year, '23, we really had a boost compared to the previous year. Last year was quite similar, but it's a fantastic number. When you have 600,000 students, they bring 186,000 -- it's a very strong number that even being smaller than last year, allowed the increase in the base. The glimpse I had in the report of competitors is quite similar [indiscernible] similar intake and even so the base is growing.
I think this thing is related to the moment. Enrollments in which we have mentioned that, we see low elasticity in '22 right after elections in 2022, this last came back. We brought more aggressive prices. We had intake that was quite strong. And we haven't -- we are at a time in which this elasticity has reduced again. We look at start wondering whether what we're going to bring in terms of price policies from now onwards.
It's not something that making us worried. We have a group of people that -- a large group of people that will come and study the access to for those that are out in statistics learning. Like last year, elasticity was only on distance learning. We are at a dry moment in on-campus for that. In 10 years, 40 quarters, we did not have a growth base in the base for on-campus is strongly considering semi on-campus is close to on-campus because ours is semi. 99% of it is within a campus.
It helps dilute fixed costs, the students have their class in which they are inserted within the on-campus content. If we report differences, perhaps it would be different. But we understand this is all together, managed within on-campus. That's a market question.
And Mauricio, I reinforced the strength of our portfolio. When you take the chart that I like very much showing. Well, you've been following us for a long time. You're not quite well. Those that don't know so well when they look at business, well, Premium not [indiscernible] share move sideways because we had great retention of FG-Fies and Digital was stronger.
Now Digital moved sideways and on-campus is increasing strongly. So we built a portfolio. We have 3 businesses that are very strong that helped bad times. We have great leverage as we head in 2023. As we show that will have other moments ahead. So the very long [indiscernible] you know, we are not worried. We don't think it's stagnated. When you look at it, you have large cities with representations and a much higher than small towns. We haven't reached this. They haven't taken part of it.
As I've mentioned, in Marcelo's report, people -- it's very important for people to be in higher education regarding marketing. And we plan spending more this year. That was -- we felt that in 2023, we spent too little. We tested, tested. And then when you look at careful with CIC getting [indiscernible] marketing and sales. So we have call centers. A lot of people report differently. When we look at our comparison, obviously, any business manager, we compare our business line in line with competitors to identify opportunities. We seek the line of publicity. And we may find that in our results, publicity pursued our booth regarding the market. So we had made a mistake. So 1.2 that you saw within distance learning of more publicity. It's not actually a reaction to the market "that is worse," not growing so much.
We had planned that from the beginning. That's very much in line with the planning we had. So no, I'm not going to stop. This is something that we're looking ahead. Perhaps it's not in this magnitude where we're planning to spend more indeed.
Our next question is from Mirela Olivera from Bank of America.
I have 2 questions on our side. Regarding bad debt, if you could talk a bit what you expect for the year, both on consolidated and distance learning and understanding that this is a policy that the company intends to go, if you could give some details on internal initiatives to improve in this drop out of this students.
Second question is regarding the second quarter. The company this quarter has given [indiscernible] on net income, what are you expecting for the second quarter? What you can talk about?
I'll start inversely, I ask Rossano to talk about bad debt, he can give you more details. Regarding the second quarter, I think we talked about all the sell sides on Friday evening, people were a bit annoyed, are not giving our guidance for the second quarter, what happens in the second quarter?
Second quarter is because of accounting nature of the business is naturally the worst quarter of the year. So the even numbers, even numbered quarters are worse. Well, our net income last year was BRL 50 million. We have several effects that are external effects from hedge, change in interest rates that impact interest late, well, our net income, actually, we've been telling you a lot about net income from now onwards. This is a bit part of the nature of the business, where we look at the growth that we had last year, 80%, 20%.
It is not what we see ahead. We've been looking at it. We're going to talk a lot about this next week in our Yduqs Day. We've been looking ahead and the revenue growth margin business EBITDA not changing in a relevant way, but the revenue growth being much closer to single digit or mid to high single digits than what we had in the recent past. On the other hand, we'd like to draw your attention to cash generation and net income, which is the nature of our business. This applies to the business as a whole.
We are a bit ahead of the industry in this process of inversion and going back to be a cash generation business, but this is a future as a whole of the industry. When we look at second quarter last year, it was BRL 50 million of net income. When you look plus 10%, plus 5%, or minus 5%, you have variations that are a bit embarrassing for us to give you guidance. My guidance is more or less 20% of last year. So I think this is -- this would even be respectful towards you, giving you guidance in size, this is just like not giving guidance. What do we see? Similar net income to last year?
Second quarter, and second semester, very good. Strong growth, because we particularly have well, fourth quarter, if I'm -- if I remember correctly, it was BRL 11 million net income. Now, we see that as a chance of exceeding that in a relevant way, same thing applying to the third quarter. The nonguidance for the second quarter -- the guidance is similar to last year, and it's what we can deliver. And we have a tradition of looking ahead -- this is going to be good. This is going to be bad. This is going to be good. And we have -- we are in this trajectory in a very consistent way.
So not to give you something that wouldn't mean anything or that would be so conservative to be restore that is we decided to share with you that is going to be similar to last year with strong growth in the second half. Before Rossano talked about bad debt, I'd like to talk about DIS. The DIS dropout is not higher to the dropout of non DIS student similar -- the numbers are similar. [indiscernible] is the way that we, in 2018, there are several cycles, we know very well this product.
So we had this -- we and the market as a whole of bringing the people that think that they cannot afford, have little pocket money in the pocket or a little drive of BRL 49 for the entrance -- BRL 49 was a bit kind of state like that. We understood that there was an opportunity for us to keep on talking about BRL 49, but actually charging the full price of the tuition fee and funding or financing debt over time. There is no greater DIS drop out than this. This is our way of charging the full price from the beginning and diluting that the life of students along with us. It's not a matter of product, nonproduct, DIS students and non DIS student.
We have -- your question is very relevant, is the high dropout rates of freshmen? It's a relevant part in terms of impulse enrollment. Should we take that into consideration at the beginning? We cannot tell. We don't know whether students are going to be successful. People think it's not for them and they sit down first day of class, they go home, and they love it and people take longer to get people. We're very excited about good grade, et cetera. They cannot afford anymore or have no discipline to follow distance learning that requires greater discipline. You have other students taking study in distance learning. So it's not something that we have so much ability of selecting our forecasting, who is going to succeed? Who're going to go to the end or not. One of our saying [indiscernible] stay freshmen, great focus on that, a lot of AI working to understand what kind of support freshmen need if it is a person that has payment difficulties or have difficulty using the system. It's 1 conversation.
We need call center to help them understand the system. If people have difficulties, it's another kind of support they need. So we have been fine-tuning and working, moving ahead with the use of technology into that where we would call them. So there is -- the person is delinquent. We call them so today, we have fine-tuned that much more than we used to be. Rossano, bad debt?
Thank you, for the question. Bad debt, the effect of first quarter, mainly important effect is important to reinforce is the effect of change in provision policy. We are more conservative in the initial provision from the time the student is enrolled.
First quarter when you compare to first quarter last year, we have initial provision of 20% against a provision of 15% first quarter last year. From the second quarter, the basis are comparable. Second quarter, last year, we made the change. So this impact specific for second quarter disappears in the consolidated of the year. So great part of greater bad debt you see in first quarter is eliminated over the year.
But we still have higher bad debt because of dropout of students intake that of last year's Eduardo mentioned, it was excellent intake with this participation. So we have the impact of dropout of the students, first quarter, and they have higher intake because of DIS penetration last year, and it impacts our budget. We see no greater works in when we see the year-over-year, '24 over -- so we have a slight different points in the year-over-year comparison, nothing comparable to what is happening in first quarter for the reasons I've just described.
Our next question comes from Leandro Bastos from Citi.
We have 2 questions on our side. First, adding to the last answer on the guidance of profit. In line for the second quarter, I'd like to explore the qualitative aspect of this information thesis. Last year, you had more effective FG-Fies in the second quarter, the growth of the company. What are the offenders here for you not to have so much significant income growth in the second quarter?
Second one, talking about distance learning, if you could tell us how you see intake in terms of distance learning, in terms of volumetrics and price?
Let me start with the question and then Rossano will take the first. Very good question, Leandro. On distance learning, it's very much in the beginning. And very similar to the first quarter, both in terms of the price and volume, very similar to last year as well. So great news here. Second quarter last year, we had 80 over 90 first quarter, less relevant, but very much in line. Second half is when we have -- what we have that are smaller compared to the last year, we're going to bring better news from now on.
Well, thank you for your question, Leandro. On the second quarter, FG-Fies is no longer a relevant factor for the second quarter. What we see for the second quarter, again, as the mentioned, second quarter is a harder quarter in education, any variation and the profit is a leverage number operationally, any relevant variation of which drops or strengths to the net income. So this maintenance of net income seeing some pressure of operating results and some lines below EBITDA. That's for some variation quarter-over-quarter.
Specifically, our second quarter. Second quarter, we see a great relevant expression. That won't feature when we see results of second quarter -- there is a point below the line that I can highlight on the second quarter, we structured the debt. We stretched the term of the debt to reduce cost. This will have -- great impact second half this quarter, we have the operation, we have the fees that incur also anticipated debt and new emissions that caused some impact below the line, and you have some other financial expenses that increased in second quarter.
We don't see that carrying over second half. Two specific factors of second harbor below EBITDA, you see that disappearing second have stronger in net income in comparison to the previous year.
Well, have a good day. Let me add something because I think your question has been very good. Look, there is something of devaluation or depreciation conversation we had last -- on Friday, people were out of the rate of 12% of our revenue with CapEx in 2021, moving to getting to 108 when the [indiscernible] was the long term, that became midterm now. We're practically reaching that. In short -- so this has a reversion of depreciation between EBITDA and net income. So this probably DIS effect will start in the second semester.
We still have to confirm that appropriately, but that is the trend. So someone else is giving me positive or thumbs up. So Leandro, I think this is a very important point for all of you to -- it hasn't been -- except for 1 or 2, there hasn't been a migration to look at this '25/'26. There's a lot when we project that we're going to talk a lot about that at the Yduqs Day next week. We're going to show some of our projections when we start looking what is coming ahead '25/'26 of cash generation and net income.
We have a lot of growth. Again, if we have a new 2023 ahead, well, it's going to be great. If we have smaller growth than we had last year, maintenance of margin and things coming below, I think the tone of all conversations in your reports will change a lot. We'll be celebrating growth of high single digit, low double digit, but with great impact between net income and cash generation and the great [indiscernible] of our with you will be much more of capital allocation. What we'll be doing without this money that will be generated from now onwards. This is something that foreign shareholders particularly focus so much, and they are totally right to do so.
Our next question is from Lucca Marquezini from Itau BBA.
More sort of add-on on net income. Thinking about second semester, you mentioned that we should see an acceleration that is stronger regarding net income. If you could delve in to leverage if this comes from cash generation from the business unit specifically, could you comment on that would help us, please?
I'm going to start here, Rossano will add. The net income delta comes naturally "to all businesses." as I said, we had depreciation reduction. We have an increase in rate reduction, as Rossano mentioned a while ago. We had a leverage reduction -- we have many things between the 2. So between EBITDA and net income, quite strong. In addition, we have an effect. I don't know how much you know, you all demand from the industry, retail, health care, et cetera, we have a peculiarity in education that EBITDA practically all of it becomes net income. When you -- well, let me make it up, BRL 30 million, BRL 40 million in EBITDA, it's not a huge variation. It's a huge variation when it all goes down to net income.
I think there are many things that will happen that are good within the business, considering the strength of our portfolio, of our mix. And when we look at our businesses that grow the most of those that have greater margin, this has been constantly moved to 3 years ago, as I've just shown you a margin of 30% to 33.3%, if I'm not mistaken, closing last year. This quarter was 35%. This is something that is part of the portfolio. And we had quite interesting, look, we were commenting on our business. We talked about growth, growth in Distance Learning, Medicine.
We had the strong trajectory offsetting a loss in on-campus as Rossano showed, we had 3 businesses growing double digit total, double-digit growth and mix growing. Importantly, as I've just mentioned, the loss in margin in Distance Learning, it's not something that we see that worries us ahead.
When we look at the year, we see margins in each 1 of the businesses that are similar in line with margins as compared to last year, but we see an evolution. In terms of the net income, it's not a matter of changing business -- growth of the business. Well, I can have a year like '23, well, moving at the top line, so there is something that is naturally important for you, all to do your homework, natural thing between EBITDA and net income that I will talk about cash generation for shareholders. Rossano, would you like?
Sure. Perfect. Eduardo, as you mentioned, operating results make great leverage for our profit. We have no negative effect when you look at year-over-year lines are below EBITDA. Much on the contrary, start having positive results in all lines practically added to operating results bring great relevant results to net income. Well, results of quarter -- first quarter financial depreciation.
There are items that are going to be very positive second half depreciation reached its peak by now. After the CapEx peak, 2022, we've been reducing CapEx gradually, and this starts showing a depreciation. Second half should be a relevant factor that will help our results in low on EBITDA. Likewise, expenses that we could have a comparable base that is positive with CDI and our debt cost has been very used with operating results that is better second half helped by below the line more positive with the impact on net income is big.
The net income in the second half last year was much lower than first half last year. This year, we don't see reason for this to happen much on the country, we see an acceleration in the operating results and strong acceleration in the lines below EBITDA. This is why we're so positive looking at net income second half.
The Q&A session is closed. I'd like to turn over to Mr. Eduardo Parente for the company's final remarks.
Well, once again, another quarter of net income growth with the strength of our portfolio, with operating leverage quite strong, a time that is not the most exciting for the industry. We see show, once again, we're growing BRL 360 million net income LTM. Last year, we were talking about $199 million. We have a trajectory that is very positive.
Well, since 2014, reinventing the business, sometimes crossing the [indiscernible] see very interesting moments from now onwards. I'd like to restate the invitation to Yduqs Day [indiscernible] ESG on the 22nd, we're talking about different things, talking about Brazil, the business, we will enable the increase in understanding of what it is.
Education and higher education, all the brands from the [indiscernible] education. We're going to talk a lot about inclusive education and ESG form. Once again, showing why we are reference here. Okay. I thank you very much for your trust, your attention and your time. Thank you. Have a good day.
Yduqs' video conference is now closed. We thank you for your participation, and wish you all a very good day.