YDUQS Participacoes SA
BOVESPA:YDUQ3
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YDUQS Participacoes SA
Earnings Call Analysis
Summary
Q2-2024
In Q2 2024, Yduqs reported results aligning with forecasts, showing steady growth despite challenges. Key highlights include a 27% YoY EBITDA increase in premium segments and a 9% rise in adjusted net income. The company maintained a strong cash position and decreased debt costs, allowing early dividend payouts. Although difficulties were noted in digital margin and Class C/D markets, growth continued. Yduqs confidently upheld its annual guidance, anticipating strong results in H2 2024, driven by disciplined cost management, positive financial trajectories, and strategic investments in premium education and digital transformation.
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Good morning, ladies and gentlemen. Welcome to Yduqs video conference to discuss the results for the second quarter of 2024. This video conference is being recorded, and the replay can be accessed on the company's website, www.yduqs.com.br. The presentation is also available for download.
[Operator Instructions] Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding the company's business prospects, projections and operating and financial goals are beliefs and assumptions of Yduqs' management and the current information available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists to take into account that events related to the macroeconomic environment industry and other factors could cause the results to differ materially from those in the respective forward-looking statements.
For the better view of the presentation, it is recommended to enable full screen mode. Present at this video conference are Mr. Eduardo Parente, CEO of Yduqs; and Mr. Rossano Marques Leandro, CFO and Investor Relations Director. I would now like to give the floor to Mr. Eduardo Parente, who will begin the presentation. Please, Mr. Parente, you may proceed.
Good morning, everyone. I hope you are all well. Thank you very much for the time you are dedicating here to us. Thank you very much for your trust. We are here today to present to you the results of the first half of 2024, the second quarter of 2024. The second quarter, a quarter very much in line with what we told you was going to happen, very much in line with what we had planned. A quarter that reinforces the strength of the portfolio that we have developed, reinforces the importance of operating discipline. The importance of our -- what we have built eventually to get to this moment at the time when we have a relevant market difficulty for Classes C and D. We continue our growth trajectory with a lot things ahead.
On the highlights page, we -- what we see here is the quarter very much in line with what we had planned in a path for the second half. Where do we see that on the left-hand side of the chart? The single-digit growth that we mentioned to you, both in terms of NOR and EBITDA, this is down stronger. We have average cost of debt falling and we see a very strong cash position with leverage with a very positive trajectory.
This allowed us to even anticipate dividends, which usually pay only in December, we paid a first installment now recently within this quarter. Adjusted net income, what did we tell you that there were not going to be major variations versus last year. In fact, there was not. We are 9% above, 4 million plus above last year. I think it's important Rossano will comment later with you this number would have been much higher if it were not for the negative effect of [indiscernible]. We were not defined for anticipating the payments of the debentures. Now the fact is that the result is totally within the plan with very similar to what it was last year.
Still on the positive side. Premium is a major highlight in these more difficult times. Classes A and B are much less. And here, we have a growth of 27% versus last year. The highlight within digital is that we had a margin loss versus last year. In the first quarter, that was very relevant because of several effects that I will discuss with you.
We -- this effect will be diluted. Will arrive in the second half with numbers similar to last year. In the second quarter, we already see this. And the highlight is on-campus, a higher -- higher intake than last year, again, despite the difficult moment with the second quarter in a row of growth in the student base, which we did not see before last semester for the last 10 years, 40 quarters in a row of organic loss based in the on-campus.
All of this, what we have to conclude here will reach the end of the presentation and show you a bit why we are excited about this. We are reinforcing our guidance for the year. Again, for the difficult year, much closer to the low range, the bottom of the guidance and the top half, but we are confident that we'll get there.
As always, following our order here, we start with the premium. Premium is a chart that is full of joy. We have a very important revenue growth in the semester of 18%. EBITDA growth of 27% in the semester, be a little careful with this comparison. Last year, we had a relevant FG-FIES impact here. So the growth of apples-to-apples is not 27%, it's much closer to 20% here on the table at 19%.
Same thing with the margin. We are returning to the margin that we had already practiced, which has been regular within this business. The student base is growing both at IB Mac and medicine highlight exceeding 9,000 students also price evolving in a very positive way. As always, in the 2 businesses, both [indiscernible] and IBMEC. Renewal here is never an issue. We're always high, varies a bit up and down. This percent point is a variation on the same theme.
Changing here to Page 5, e-learning. We have distance learning, both with revenue, EBITDA and student base, very similar to what we presented a year ago. I think it's been a difficult year, especially for Classes C and D. We're moving sideways here. There's a drop in EBITDA here. We've talked a lot about the reasons in the first quarter.
I wanted to draw your attention to this table that we've added here on the right top side when we showed you the results of first quarter. We said that this margin drop is a one-off issue that you look here line by line, you'll see here, especially in bad debt, the transfer is a large variation versus previous years, which is a phenomenon very large intake that leads us to have transferred to partners, partnering hubs that is different what happened within the second quarter, the 7 becomes 2.2.
And when we look at the second half of the year, we see numbers resuming what we had last year. So the message here at the top is a difficult year. Numbers moving sideways, EBITDA is falling, but a positive trajectory of margin that we see is even better in the second half. A surprise here to no surprise, we had already mentioned to you many times, 2022 was a year of little elasticity.
We pushed the price up in 2023. Elasticity returned. We were much aggressive. This year, again, is the price with more than 1 year so that we are not affected by the discounts we make in the first half of the year and have a discussion apples-to-apples.
So the 7% drop was expected. We talked a lot about it, and it's a reflection of actions that we took a year ago, the bill is coming. Now the trajectory probably for the second half is very similar in terms of ticket to what we see now. As for renewal as I told you, after a very strong year, you had a slightly higher drop out.
This is within expected the moment we are experiencing, especially in the even-numbered quarter because the dropout rate is higher than the odd-numbered ones and we have not yet reached the same level. As in terms of intake, as we said in the first quarter, we are seeing low numbers that we see last year because of this difficult situation. We see Classes C and D going through.
Let's move on to on-campus. We have here both revenue going sideways. We have some variations between quarters. But when we look at the semester itself, that's how we are. An important message here is the maintenance of the margin that we had versus the same semester last year. I think there's a very important message that the base is growing again, especially with the semi on-campus. And it's a great dilution of fixed costs of our campuses.
This is an important thing for our efficiency. And this total base growing by 2%, also grew last quarter. It is a base that had not grown for many years. On the right-hand side, we have ticket moving some ways. I think that we had been showing an increase above inflation every quarter in a sequence.
We brought here a chart to explain a little bit to you, those who follow more closely what is happening? We broke down into 3 classes, seasons or returns or ships whatever you want to cover the darker one, the darker screen is a ticket to pre-pandemic classes. Those have been with us for 4, 5 years with us. So the size of this box is the size of this class.
Then in the middle on the right, you have people that joined us during the pandemic. So they have -- they're not yet graduating the people on the pandemic here in person or on campus and the top in blue are the people who joined post-pandemic.
So why this number is lower? So it's because here, there are students who have been for 1 year with us. We take the effect for the first semester discount. So it was important here. So the 964, the dark green bottom shrank [indiscernible] a lot versus 952. So we have a relevant mix change that happened here within the semester.
On the other hand, the positive side, we have 722 people who joined a year later, they're paying 10% more than the people who joined during the pandemic and the 722 of the pandemic has an increase of 8%. So we're not only bringing people into our base with larger tickets or higher tickets than the previous classes, then we are also increasing the ticket to the people who are in here.
So what's going on? We are having a moment of mix that is likely to be replicated in the next 2 quarters. And we are building things that will generate when this pandemic group begins to graduate a very positive effect on to the system about renewal is what we've been talking about. The number is always around 82, 83, 84. So you know, major variations here.
And in terms of intake despite the difficulties of Class C and a bit of B as well. We had a much higher intake than last year in this first semester. I'm going to call Rossano here to talk to you about our financial part.
So to proceed with our presentation, we see the revenue side, we see the strengths, the diversity of our portfolio businesses units show a year-on-year growth and we highlight as always a greater penetration of premium and digital are 2 businesses that have highest margin, increasing their share of revenue.
This advance brings a very positive effect to the mix improving the margin of the organization as a whole. In view of expense cost, the main highlight is that we have now lower 2 factors that were negative in the first quarter, mainly for the digital market, reducing its impact in this quarter. So we bring this picture comparing second quarter against the second quarter of last year.
We also see the first half of the year, I guess, half of last year, which shows a reduction and the impact of both bad debt and in the line of cost, you saw the last year that we had big impact, last quarter had a great impact due to the growth and the pressure of transferred to the centers, which is reducing a lot this quarter. We have great lever for margin in the second half of the year, we had an even positive result. This slide looking ahead sales and marketing for our structure.
We have been commenting this year that we would be operating 1 percentage point above last year as a strategy tp strengthen our bench, strengthen our firm. Our intake, we adapt to market realities, demand elasticity, we should return in the second half to the levels close to what was previous one, bringing another margin recovery lever from now on.
And the great highlight G&A reduction here showing the strengths of our expense management and cost in general, being the big factor here, maintaining the money that we bring this quarter. We see this line continue to be one of the great levers now. We continue to work on this rental line. Once again stable, coming from post-pandemic period. We saw a strong negotiation. We had some expansion of campuses in the premium structures. And even so, we managed to keep, again, this red line stable once again as a percentage of revenue.
On the EBITDA side, it's a summary slide. Eduardo has already brought the details of each of the segments. We see how they're playing out in terms of dynamics of each of one of our bios. Obviously, the great highlight is for payment. The big factor that leads us to maintain margin quarter against quarter premium expanding almost 7 percent points year-over-year.
We go to the adjusted net income slide. As we have been commenting that quarter-over-quarter, we would bring a similar adjusted net income result. And this quarter, even with the very strongest [indiscernible] impact that we had BRL 15 million in the quarter of impact of our lines that are hedged, more impact of the dollar rotation, the variation of the yield curves or interest curve, bringing BRL 15 million of negative impact on the quarter.
This is not a cash effect. It will be offset over the time, thanks for a hedge, but it brings a very relevant impact on the quarter's result and also the impact of liability management, there is an anticipation such issuance of debentures that we made now in April, also bringing the impact of BRL 2 million negative in this quarter. Even so we expanded our profit, 9%.
We have been saying that the expansion of profit is something that we are envisioning. This is part of our guidance that we're getting to in the market. Only thing that you see negative the depreciation line. It is a line that giving our growth in CapEx curve until 2022. It has been bringing depreciation results to date. But this curve is starting. We already see at the end of this year, certainly, in the fourth quarter, a turn in this core depreciation, it will start to act positively as it has been the CapEx curve we've been following.
It takes a little longer. Now you know that although it is reducing total CapEx, the CapEx is more directed to technology, depreciation technologies much faster than depreciation of general investment, so you're investing less, but in items that depreciate faster, so the transfer of this CapEx reduction to depreciation takes a little longer, that would be natural, but we are getting the last jump or dip negative depreciation against previous periods.
Coming to the cash generation slide, we bring another quarter operationally. It was really strong in cash generation operationally, but it was impacted by extraordinary factors. We had concentration of this quarter payment of variable compensation regarding 2023, which you know was a strong year. We had already being advised that there would be a relevant cash outflow this quarter, cash of [ BRL 400 million ] here, variable compensation overall, the company's administrative staff that take place this quarter, and we already expect this cash outflow, and it is specific outflow for this quarter.
This quarter was also impacted by the sanction of the prepayment of debentures. So it envisages positive results going forward, but it brings this negative cash impact in the second quarter, adjusting for these 2 extraordinary impacts, we had an excellent quarter of cash again, showing this trajectory that we follow, becoming a company that is increasingly strong cash generated positive news here, very positive.
In fact, it's the reduction of the average received period, even in a challenging quarter in renewal following very strong intake in the past with an increase of dispenetration even so we reduced our average collection period. We were very careful management to receivables, which brings reduction impact against the previous years.
And we hope to continue on this path, as you see over the years is stable. In fact, actually, our average payment period, thanks to the very disciplined management to design CapEx is also within what we had been forecasting moving towards the guidance of reaching BRL 470 million this year. It is representing 7.5% of revenue, which is within the medium-term guidance that we have been giving.
We have been saying that we were going to stay between 7% and 8% of revenue. We're already running within this level. It may rise a little bit by the end of the year, but we already see next year that will be within this guidance, which was medium-term guidance, now reaching below 8%. As we said, they're starting to convert into depreciation, also helping the net income.
And we see strong concentration on digital transformation and IT, which are items that generate shorter depreciation. Important to look at this despite having reduced our total CapEx, we're not reducing our contributions to the future. We continue to invest in growth levels. We continue to invest in tools that will improve both student experience and our intake process.
We have been investing in innovation in several artificial intelligence initiatives within the organization, which continue to be funded by this CapEx from do. Moving on to our debt and debt in this slide. The main highlight here is the reduction of our spread. We have been reducing constantly quarter after quarter, a reduction of over 7 percentage points reaching the level 126 of our spreads.
Over CDI, the leverage adjustment for the payment of dividends happened now this quarter also BRL 80 million, it would have fallen once again. So even this one-off impact, you can see that the curve is very positive, standing towards our long-term guidance of reaching net debt EBITDA. Once again, we are going in that direction. We continue with a super comfortable cash position, a very favorable amortization schedule, which allows us to take advantage of a good market moments to have a good positioning and opportunities, which allows us to achieve this low cost of funding.
We have very low salaries or investments in the coming years. We have increased the average debt term from 2.1 to 3.1 in this period. So only very favorable results in this scenario. Moving on, I turn back the presentation to Eduardo who's going to talk about our ESG initiatives.
Thank you very much, Rossano. As you have seen with Rossano, revenue grew, EBITDA grew, net income grew a bit, as we said, but it would have been much more if you weren't for those extraordinary effects, which will help us later on. We have a cash situation that we had some extraordinary effects certainly within expectations.
And a lot of people wrote about them, but a strong cash generation, once again, and debt situation and cost of debt that reflects the confidence that the market has at the moment we are here.
On ESG, we have become a national reference in ESG. It's very difficult. Well, very unlikely for a week to go, that [indiscernible] team or myself not to get some company usually from different sectors and even sometimes people from the government to understand what we do. And sometimes, we have to choose what fits on the page, what we want to share with you here. I think the message is always that we are one of the world leaders in ESG according to SCI. And I think that's I think that if you want to know more, we have specific presentations about it. If we brought here good news.
So I think there is something we're -- that is very cool, and we are very proud of, our career transition program. We have a partnership with COB, the CPB and several other sports configurations throughout Brazil. We have over 2,000 student athletes with us. Of those 2,000 students athletes, 35 are in the Olympics, 42 are going to the Paralympics. This is almost 15% of all athletes that Brazil is taking to the Olympics.
Either they have or have been our students or are supported by us. We have supported a very strong move above social action, a very strong move and intent of what we do in our daily lives and what we leave in. Another cool piece of news, the value network or -- so the students, the Rede de Valor, which is a program that supports low income and high-performance students which is the [indiscernible] student chosen by the government who comes to study medicine with us.
And when they cannot work in the first year. So we give extra scholarships to those guys that are to be able to live there until the third year where he starts -- they start to earn and do monitoring, do internships that we start to have money. We had these 3 units in Rio de Janeiro. We have already taking it into 8 more in the Northeast. We have partnerships with Santander, Zurich Re, supporting this important growth.
For the first one, we had a national solidarity fund. And we day -- and we actually managed to collect over 3,000 blood bags in our ESG goals, we have brought to our board of 11% adverse people, a board of 22, which was our goal for 2024. And I end this picture by inviting you to watch on our ESG 4 on YouTube, which had more than 1,000 people present, and we already had more than 11,000 views in the first 2 days.
So great success for the people, for companies, government, people from the third tech coming to listen to coming to tell. I think this is a forum that has particularly particularity versus previous one. We talked a lot about what we did. Now the third become a big one and the open thing where people are using us to tell their projects to debate to come up with the new ideas a very nice trajectory.
Moving on to our final remarks we had the second quarter very much in line with what we had planned with what we had thought was going to happen well as in any market. We have things that we control, things that we don't. And have been working hard on things that we can control. But that has allowed us, despite the difficult mode for Class C, despite the swap that Rossano mentioned, despite the prepayment with a fine of the debentures deliver a semester, a quarter of growth.
The highlights here are the student base growing across all businesses. So well, revenue and both highlighting the premium EBITDA growing. It's just like income versus last year. This CapEx when we were back there at 12%, we said we would reach 7%, 8%. And that's where we are, 7.5%. We have next year running below 8%. All of this leads us to have a cost of debt being reduced over time, very competitive cost of debt in the group of resilient companies, especially in the world of education.
This quarter, we also acquired Newton Paiva, probably the main private label in Minas Gerais, a brand with a lot of history with a lot of tradition and academic strength, a brand that has a higher ticket than our average ticket [indiscernible]. One more step towards our making, more premium operations, less sensitive to market variations, a place in Brazil that we want to grow with an operation that has a mix of cost that is also very interesting for us.
It's similar to what we seek in our daily lives and operation that does not hinder our trajectory to reduce leverage, as Rossano mentioned earlier. But in addition, it generates a very interesting short-term return in 2025 with the EBITDA below this multiple of ours that is so depreciated today.
We decided to add a chart here. Last page, 15. Because when you do the math, you're good at math, you see that for us to deliver our guidance even if it is the [indiscernible] which is the growth of 30%, more than 30% of the previous year in terms of net profit. We have a very strong second half. The number comes close to almost doubling net profit of second half last year. People wonder where this has come from, how does it come? How does it happen? A difficult moment came in the market. It is not trivial. It is a difficult task. But we're excited about it and we wanted to share with you why we're excited.
First is transfers. We came with a fantastic intake in 2023. This increases the percentage of strength that we have to our partnering centers. This happened last year, second half of last year in the past and the first half of this year. So we see the second half of this year at a level of transfer as a percentage of revenue below what we had last year. Bad debt is similar. So the similar situation, a very strong capture and ends up generating an end of year considering loss effects. So we see the bad debt heading towards levels close to in the second half, what was second half of last year.
S&M, we see little market elasticity. So it's no use spending a lot. So we made an next conscious expenditure in the first semester. When we look at the second semester, we are also planning to return to levels of the previous year. Financial results, then here, there's also a relevant low. We had a lower CDI reduction in the debt spread reduction and leverage also underway. All of this has a relevant impact on the second half of the year.
Finally, costs and expenses. We have an efficiency program that has been carried out in the years. We have already started working on it March, April, throughout the second half of this year. It also has a lower result or relevant reduction as a percentage of revenue versus last year.
So all of this leads us to believe, again, it's not easy. It is a difficult task, and we have our sleeves rolled up for that, we'll deliver this year's guidance as a whole. And we maintain the guidance we have given on Yduqs Day for the following years as well, guys. That's it. Let's move on to our Q&A session. Thank you very much for your attention and trust.
[Operator Instructions]
I'd like to have the guidance that they have shared some [indiscernible] that you said that you're going to attain this is -- I'd like to understand the evolution of this profit in the third and fourth quarter, if we should weigh the seasonality of profit that we know it's much stronger third quarter vis-a-vis fourth quarter. I'd like to understand if there is a discussion of launching a buy back -- a share buyback program. Well, we see the share prices if we look at the bottom of the guidance. These are the 2 questions from my side.
Thank you for your questions. Regarding guidance, last year, let me try to remember everything. Third quarter, about 120 net profit and fourth, about 10. Obviously, the fourth is what we have most want, vis-a-vis, the previous one. And net profit issue. Well, a lot of what happens below it sometimes it's positive, sometimes negative, a bit outside control, especially when we talk about quarter. When we talk about the year, we are quite comfortable. You see the effect of the swap revert somewhere ahead in a broader horizon. It's easier within the quarter, it's more difficult.
So we came here, as Rossano mentioned, we came here to this result. We felt that we were going to have profit at about 80, 85. And then we had the swap effect and the final repayment of the debt. Things that we were not expecting there. It was similar to last year then. And we felt that we would have it more there. So what do we expect ahead? Again, 1.6, we're going to do it. And the third quarter with 120 in comparison tends to be a bit better than last year.
How much better, but certainly better. And the fourth quarter will be much better than last year. With regards to the buyback, I think Rossano has disclosed the tip of his tongue that will -- I will allow him to share it with you.
Thank you for your question. As we've been saying, our priority of test generating generation and strategically, deleveraging and being a strong dividend. Well, I always mentioned on our Yduqs Day that we'll be open to opportunities -- so the share buyback seems to be interesting. As we've been discussing that in how along with other opportunities that, again, that we are keeping on our radar. Strategically, we are looking at the opportunities, understanding which are the best moves to take in the short term and buyback is certainly 1 of the things that is on the table. And as part of our strategic view in short midterm.
Our next question is from Mr. Samuel Alves from BTG Pactual.
Two questions on our side. The first is a bit on business learning. Could you talk about cycle of intake in the segment for the second quarter -- second semester actually. Another question we have heard from players in the market competition dynamic is very strong in this cycle of intake, especially in distance learning.
The question is more whether you intend to use a bit more [indiscernible] calibrate marketing business to face this intake cycle that apparently is a bit more difficult. This is it.
Excellent. I'm going to hit them both. Well, intake cycle is not good, both on on-campus and distance learning when I tell you about the guidance of this year and we have to do in the second half, that we think we can do. We're considering lower intake than previous year. Our on-campus is a bit smaller from distance learning is a bit more -- a bit worse than on-campus year-over-year. What do we see in the market? We see slight differences from what you heard there.
We see a poor market when the market is not doing well, it's no use. You're being super aggressive, et cetera. So much on the contrary, we are raising prices taking a bit. Our from this, okay, slowing down this. So it's a bit similar to 2022. It's a bit different than to do, you had a product portfolio that had a gap regarding the rest of the market. If you look at 2022, there are people that grew and we move sideway. It's not the reality today.
We had a big catch-up of product portfolio regarding competition. But we see a market that is difficult. So at the moment we see no elasticity. We spent more on marketing. I think I mentioned that on the last chart in the first half on purpose, where our A+ was more than competition. We are much more aggressive in marketing than us and we had planned to spend more this year. Second half, we actually reviewed that. We haven't reviewed what we're looking for next year. We'll follow the same pace as November, December. This is not negotiable.
We cannot sacrifice next year because of what we see this year. But what we see now August, September, a great month of spending. July has been like this and very similar to last year. So it is controlling what we control. Take a deep brath. We have to slow down, people coming into education, these cycles happen. Sometimes, we have great leaps as last year. Sometimes we have more stable moments as this year. So we are not concerned, and we control what we can control, much on the contrary, I see less aggressiveness on part of the competition. Every Tuesday morning, we look at everyone's website, people enrolling to see what's happening. We see at the moment that is wait and see. Not so much aggressive.
Our next question from Mr. Marcelo Santos from JPMorgan.
I have one question. You've shown a slight evolution of -- with different tickets, prepandemic, pandemic and post-pandemic. If you project that ahead, how do you project the phaseout of those turns? When do you change or turn the ticket because now it's hindering because there will be a time when it will start helping. When we -- will you have this point?
Can somebody put it on the screen? Excellent question. I think this is a very important I'm going to revisit it. I don't know if I've been very fortunate in my explanation. Talking about this part here on the bottom right, these 2 cover bonds what do we have? The size of these bars is the number of students we have. So what is this moment that we move sideways. So this great graduation of 952 to 964 students that joined 2020 before, students that are in their fifth, sixth, seventh year with us, whilst the 722 and 779 are '21, '22 students. You observed it quite well, Marcelo that we're getting hit by the mix. So people pay 964 and we have people going or paying 796, we should be getting hit both, people that are joining are paying higher prices than those that are leaving. What happened. Those people are actually graduating, dropout after first year, we're talking about 2%, 3%, 4%. These are graduation. You see the green are very similar. People have not graduated yet. The light green in the middle.
So we still have this 964 to graduate that will worsen our mix. The trend is that this should be very fast. When we look at second half, we look at move that is sideways as it's been in second quarter, and we have the contrary effect when you see those students graduating. You have a 10% growth, 779 is the increase we gave to the 772 so they had 8% price increase above inflation. And 796 is the guy that is at the same stage as the 722, 1 or 2 years later, we're putting 10% of increases for the people that are joining.
This is reorganization of margin that is happening in the industry as a whole, not only ours, we provide discounts and this attraction students first so that they realize the quality we have here. And this features that are discount way of attracting when you evolve, then we have higher prices than the competition, and we can note the llow dropout rate that we measured in the second year of students when they're here. They see the value on it.
Very long answer to your question, but I think the second, well, 964, you have a lot of people, students graduating not second half. Well, actually, what happened by the third, fourth quarter will be a similar effect to this. But for next year, we have already contracted or increases that are much higher than inflation. The question is, is it going to be a bit now, a bit further ahead. At some point, we believe that we have to do the math. So that's the first half we have contrary effect that will be quite strong here. Have I answer your question?
Yes, you have.
Sorry, too long.
Next question is from Ms. Mirela Oliveira from Bank of America.
Two questions actually. First regarding on-campus ticket if you could comment on it on the drop that we've seen in difference in mix or competitive environment, how you see this moving ahead. A follow-up regarding distance learning. If you think this reduction of volume of intake is more at a reflection of regulatory environment, a macro impact that has been impacting on campus, if you comment on the reasons that you think have been keeping the volumes from growing more.
Thank you, Mirela. Last year, we were more aggressive. So this is something that we look with very positive eyes. So we have less than our fair share on the semi -- our semi till recently was exclusively a part in our units. Students are having classes with the on-campus students and we have reduction of fixed cost road something unlike semi, on-campus students cannot afford it. It's a campus experience class, the peer after-class networking center. So we sped up last year, and we became more aggressive in terms of price. So we had a market repositioning, yes. And now we're starting semi-product more similar, a bit more similar to competition with semi in our centers and there's a trend of bringing this price a bit down.
To your second question, actually I have no answer. I don't know the answer for that. We have several hypothesis here from moment, competition, what applies to us applies to the whole market, a strong year last year, this year more difficult. So we do saw this year, and the answers have not been very different from other years. So there are things -- well, people [indiscernible] I cannot afford, I have no money now. I have no money. It was very strong in 2022, less strong in '24, but still present, but it has been very much around financial issues.
So at this point that you mentioned, a regulation government. I think this has not impacted. This is not present in any of the service we conduct, why people have no money. When you look at market, Brazil, retail has suffered a bit, but a bit less than us, people from retail markets talk about, sometimes we communicate with them, sometimes they're better, doing better than us. And sometimes the opposite why people have no money at the moment. It's still a question mark in our heads.
Next question Mauricio Cepeda, Morgan Stanley.
And let me add to what you're mentioning the fact that it is not time to be aggressive to have more marketing, more to -- my question is what indicators that you monitor to make this decision. I understand that in the past, the answer would have been contrary to the industry. The industry would have responded more aggressively at some point, is doing less, more funding, they did more marketing. And this confusion that it's not worth even trying. We see you monitor to see that you have this turn in the decision. That's first question.
The second question is more regarding numbers, the ticket that you followed quite a bit. Why was this then observed now in the second quarter and this effect of worsening mix and portfolio being observed in the first quarter.
Excellent, Mauricio. I believe that the market has learned about aggressiveness. I'm talking a lot about distance learning. There are 2 very different market strategy. On campus, the competition, very local, we see a move, so it's price increase. So we don't see any aggressive answer or response. Everybody has very low margins. We are super efficient. We have low margin. Imagine those that do not have the efficiency we have, the scale we have. So price dynamics in on-campus is quite different from distance learning, and it is very responsible.and careful.
Many people should be telling you this and where we were unable to see the other calls. But well, Distance Learning is a bit different. So what do we have? We've always done a lot of AV tests. We did that in the past. So you're taking one place, another place. So when we implement it here, we can have 1 person exit, they are going to the website showing them different things from price to massive types of office not only the person, the reaction of the person, the order, so we test things all the time. It's real time.
It's not something that -- well, I'm going to run a test here. Sometimes you have to wait for a certain volume. It takes a week for you to have relevant -- statistics particularly relevant or significant response and not what's going to generate enough, don't get the answer as to what's going to generate revenue this semester. It's reality. Now what's happening to IPCA indicator, we test things all the time. So we have lots of tools. We started working with this company last year, November. And so we have great tools to work with this within a very similar audience.
Regarding ticket, your question is very good. We have something here that we haven't mentioned and I think it's worth mentioning because your question, we work much better in renewal. It's an important part there, understanding who's who, what kind of discount to apply? And from the second quarter last year, we have been giving much less discount compared to what we gave previously, we created 4 quarters of an increase for advancement that is based on nondiscount for renewal.
And then we had a stronger [indiscernible] long-term prices that were strong, that were offsetting the exit. We had students leaving, they're paying more and those coming in were paying higher prices that was offsetting that addition that was comparability of healthier renewal year-over-year this quarter that was quartery comparable to last year when we had these new tools apply here. This delta was not seen what will happen that Marcelo was saying to the previous question, we have some assets that will move some ways because of this leaving prepedemic students, and then we have post-pandemic students, then we have the postpandemic offsetting well, and we're going to get back to levels that you saw previously. Is it clear or not? .
I think so. I think the second part is about renewal. But there's also a question that the students who would graduate, they could have graduated before. We don't see that in the first quarter.
Right. You're right, this delta class. Are you talking no? But what happens, the mix -- if you take out the effect of more sophisticated renew in the first quarter, you see something very similar to second quarter. This is the point. Getting -- making the average the renewal is every semester. If you see 962, 952 to 964, yes. So second half or second quarter, things are more similar because the previous one, things were different.
Our next question is from Mr. Vinicius Figueiredo from Itau BBA.
If you can talk a bit about well, I have 2 follow-ups regarding the stronger margin recovery that you mentioned for the second half that reinforces the guidance. I'd like to understand if you have any comments that end up hindering, some that end up helping. And I'd like to understand the effect of this sort of reduction in speed, as Rossano mentioned, second half at this point may have some kind of additional impact regarding ticket. And then another point would be in the bad debt within acceleration. If we can imagine margin at cost as a percentage of revenue speeding -- accelerating second half and helping margins when we look year-over-year.
Thank you, Vinicius. I have a clear margin recovery for the second last semester. Nothing is getting worse. Everything is improving. Let me remind you [indiscernible] was much smaller than last year. Intake in the first half increased the level of transfers and this last year that has ended now. We're going to have low transfer levels in the next 12 months with lower intake. Bad debt, considering first semester improves, and it goes to similar levels to last year. M&S, little elasticity.
So what we did in this semester did not view the results. So we're going to go to the last year's levels, financial results, lower CDI and reduction in debt spread and significant -- will have an impact. Quite significant than last year, cost and expenses the same thing. Will have an effect of cost and expenses that we've been working on our day-to-day. And we have an effect of bonus. And in 2023, we had provisioned a strong number that was paid in the second quarter 2024.
We're not provisioning the same numbers as last year, smaller number that you're going to see in the cash flow of 2024 for a student number, vis-a-vis, what was 2023. Again, these are the things that we control. So this is quite important to deliver the guidance for the year, we count on the second half intake that is worse than last year, but working very much on what we can control. This has no relevant effect here. You will see no relevant this effect here in the second half, vis-a-vis, what was in previous years. As bad debt is a percentage of the debt. I don't know if you're going to get the same numbers as last year, but not the same distance that you saw in the first semester. Anything else?
No, nothing to add. So I think Rosanna has approved me in his test, nothing to be added.
Next question is from Leandro Bastos from Citi.
I have 2 questions. The first, to get a message of cash flow for the second half, you mentioned some efficiency levers that you've been working on. On the other hand, so we have intake and ticket should follow that in the path of revenue, especially on-campus and distance learning. In this net how do you expect the cash flow, you won't have the effective bonus. There's -- what kind of message for the first semester. That's the first question.
Second question, considering expectation of lower transits to partners. I'd like you to talk about the financial help of partners. So difference in on-campus, if this lower transfer at some point could concern the return of people or not.
I'm going to give the first 1 of cash flow to Rosano and the other 1 about the hubs to Eduardo to tell us about the net profit. I think it's important to talk about it.
Sure. Thank you for the question, Leandro. Well, you've already mentioned the important factors for cash generation in the second half. The main impact of NOR from intake and where we have intakes [indiscernible] converting more long-term cash and the impact to cash is less relevant in terms of NOR. As we see the levers that we have are spending cash conversion is faster. We also are positive in terms of cash generation for the second half as Eduardo asked, so for the swap, we've been very impacted by this market to market in this hedge tour in the second quarter.
We see an opening of curve -- future curve of interest is we have a hedge of debt protecting us putting into CDI plus we have debt that for the market are pre-fixed and we do the head protecting us putting to CDI. Plus the risk that we decide to run as an industry and once this interest curve opens and you increase that, the future curve and CDI in the mark-to-market, you have negative impact in the second quarter, impact of negative BRL 50 million in second quarter when you have stable interest felt, you see 0 impact in the second half, reverting. Well, if there's a reversion in the interest curve, we may have positive results, any measurement. So there is impact to the cash, the cash. The cash will reflect the CDI at the moment. So we have our debt. Well, the payment is CDI plus cash spread. I turn over to Eduardo for the second.
So thank you for the question. Thank you. We have been commenting for some time that all our partner management is not on transfer, but actually on profitability. We have that well controlled. Perhaps we follow partners' profitability more than themselves. We simulate, we made the communication of all the percentage of transfer for the second half. We see that is super granular, and we don't see that as a major problem. This happened in the past, and we will see minimum in history with a historical peak of efficiency that we have in our partners.
So this is not the control. This has been communicated, no crisis. And this new transfer is reviewed quarterly according to the intake of previous half, and we know that we have to hit the goals to get to the transfers. So it's not a super issue. Everything has been communicated and we've been following the profitability monthly for each month.
Our next question is from Marcio Osako from Bradesco BBI.
I have 2 questions. One would be on guidance. The first actually is guidance for profit of 2025. Well, what do you see in terms of levers to deliver the guidance of 2025, considering the on-campus intake scenario that is more difficult. And you have a more streamlined cost base, if you should reduce variable expenses, bad debt is more under control. The drop in -- what do you see as the levers to deliver the guidance for 2025, the part of cost and expenses, considering that the base is leaner. If you have more space for cost reduction, if you count on some readjustments of [indiscernible] prices to offset a bit less space for a reduction that you are making to deliver the guidance of 2024?
The second question is on the cash generation guidance. Cash flow for shareholders that you gave of BRL 8 billion for the next year. If it makes sense for us to think about an FCO for next year, the guidance you gave of BRL 1.4 billion. If it is that why perhaps 2024 should be much different in terms of operating cash flow of '25 in 12 months, you're running at BRL 950 million of operating cash flow, quite distant from this BRL 1.400 billion next year. These are my questions.
Look, when we look at 2025, what have we been telling you? The trajectory, distance learning, M&A, medicine 5 years and that technology 5 years following that, and I think we delivered all the story very well of business learning medicine, we have 70-some percent of our EBITDA something that hardly existed in 2017. So what we've seen something interesting. Let me start philosophy saying a bit. I know you have to the other call when we look at the education industry, education should grow with the population to go with the GDP, whatever it is.
But the indicators that grow little. We have moved to 1 side and the other should never decrease their movement of regulatory anomalies. So yes comes up, it grows a lot and then it removes that. So you open hub, it goes a lot, then you will release medical or medicine seats that we had a reinvention, it's not ours. It goes to the industry as a whole. Each 1 follow their own track. Our path has been particularly fortunate we came to a moment of stability.
When we look ahead, both in terms of revenue, especially in revenue, we see growth of 1 digit. We have -- we sat down last year. We looked at what was going to happen organically. That was good what was going to happen with a possible margin increase because of our having our businesses of higher margin, growing more when we have a dilution of fixed costs coming in.
This is the reality, and this has a great impact in net income for several reasons. So what you have is increase in revenue goes directly to net income. So you have sometimes interest or transfer, but at what comes from EBITDA goes to net income, an effect, financial effect of interest, we had depreciation. We had 7% CapEx now at 7.5%. And these things have net income that is depreciated. The way of looking at our business is that when we look into 2025, the point you raised is fair.
What do we see in terms of revenue growth, 1 digit margin growth. Then we have a bit of our great growth driver, medicine and very high margins that have this contracted growth, an analysis that I haven't seen any of you making is the age of our medical causes. If you take the number of students and the number of seats over a number of seats, you have to see, we have a number 4.5, in other words, there is a contracted growth regardless of the increase in seats and we have a trajectory of great success in increase in seats.
So there is a very healthy growth that is contracted for next year within the universe of our premium as we have been always showing you, we have a price growth in on-campus that comes in as we commented on Marcelo's question that at this moment, there is a reversion and it will be stronger. Then we have a scale increase in this business. So we tend to have a 1-digit growth in revenue, positive pressure of margin for next year. And all of this converts into a very strong net income. All of this happening. And in addition, deleveraging, reduction of depreciation, several things that happened below the EBITDA line that are very positive to us.
So we are confident what we promised to you for next year. We're being very conservative to what we're doing this year. Somebody asked me, "Well, are you going to anticipate expense, big expenses later?" So what happens within the year, stays within the year, and this is how we work. The cash generation, as you -- I'm not very comfortable to discuss this now. We have migrated guidance of [indiscernible] the quarter to guidance of net income for the year. It's the way people should look at our business. We did the math and we had this conversation previously, our calculation is somewhat conservative. If you look to the math, you have the projection, growth as 1 digit revenue, maintaining margins, this generates those numbers that you've seen.
And obviously, there are things that will years that do better than 1 digit that we told to. And there are -- well, there are things that are inorganic that are always on our agenda. And you know, now we've been very careful regarding that. And so we have no concern regarding the guidance we gave everyone ahead. We're going to talk much more about cash ahead. Let us include the deliveries for this half and reconfirm the confidence you have in us and we'll talk about that.
The Q&A session has concluded. We'd like to turn over to Mr. Eduardo Parente for the final remarks of the company.
Well, we have delivered a quarter as we told you we will do despite having had negative moves below the EBITDA line, negative the market is worse than we had expected. We have been very disciplined regarding that. We are delivering results. We've [indiscernible] regarding last year, trajectory has been good to that over the second half. We are confident regarding second half, again, with the things that are in our hand. any post positive move of the market effect this year, it will be quite small for 2025, Possibly, yes, but not for this year. And this is it. Let us keep on well, we have organized ourselves, we know that award we got for having been well organized, having a good portfolio is proven now when we are going through a difficult time and what we're delivering to you. Okay. Thank you very much for your trust, for your time. I wish you all good day.
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