YDUQS Participacoes SA
BOVESPA:YDUQ3
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YDUQS Participacoes SA
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[Foreign Language] Good morning, ladies and gentlemen. Welcome to Yduqs video conference to discuss the results of the third quarter of 2024. This video conference is being recorded and the replay can be accessed on the company's website at 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 Board of Directors and the current information available to the company.
Those statements may involve and uncertainties since they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts and journalists should take into account that events related to the macroeconomic environment, the industry and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. It is important to stress that for a better viewing 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 Officer.
I would now like to turn the floor over to Mr. Eduardo Parente, who will start the presentation. Please, Mr. Parente, you may proceed.
Good morning, everyone. I hope you're all fine. Welcome to Yduqs presentation of the third quarter and for the first 9 months of 2024. I'd like to start with the highlights of the presentation. The year has been gone in line with everything we said. We have 1-digit growth on revenue and EBITDA, very strong growth in the net income so far we had 9 months 26% versus same period last year of growth. We have a very important evolution within the third quarter, a growth of BRL 60 million net income with the highest adjusted net income since the world before the pandemic here for us. And this with a very important evolution in the cash flow for our shareholders driving BRL 300 million in the quarter, 3x the equivalent of the same period last year. Obviously we have several highlights here.
Rossano will share more with you the evolution of the cost of the debt is 1 highlight, an important part of this evolution both in net income and cash flow. An important highlight for our Premium unit reinforcing the strength of our portfolio. Those of you who are here with us remember that the great highlight was the evolution of distance learning, resumption of it on campus. The portfolio composing here with an important evolution of over 20% base evolution versus a year ago, an important evolution ticket both at IBMAC and Medicine and evolution in the EBITDA margin that we practice here. And people start asking us about capital allocation. And I think when we look, Rossano talks a lot about this, we see the opportunities we have. It's very difficult for us to find any opportunity that is so evident to our eyes as our own shares.
We firmly entered the buyback program. We bought [ 13 million ] shares. We canceled 200 million shares, some of this program and other programs. The program is underway ongoing still to go for 279 million shares currently. So you can see here why we are delivering this result that is so good. We have been working a lot on the things we control in-house and reinforcing [Audio Gap]. The reaction we expect is to become more evident that we are going and how we're going to get to the guidance we gave from BRL 1.6 to BRL 1.9 EPS for 2024. Important highlight is [ 6.9 ] and we are using the number of shares that we had at the time. Not the 279 that we have, it's probably going to be smaller at the end of the year, which would give a higher number than this [ 6.9 ].
Starting with the Premium unit, which is our highlight of the quarter and the year. We had an important evolution of net revenue 16% versus the same period last year, an important evolution both in Medicine and Ibmec. Greater evolution in EBITDA 24% vis-a-vis last year same period. We have the green balloon highlight of Ibmec that is within the Premium unit, but we have relevant impact here. We have -- people think about Premium and Medicine. Ibmec has practically a bit less, 1/5 of the EBITDA that we practiced this year. That evolved 120% in the past 3 years. We had an important margin recovery of the year 48% to 50%, 2.5 percent points; and an important evolution in the student base. Total student base growing 22%. Medicine has been -- well, it's gone beyond 9,000 students at Ibmec, 6,000 great success that we have at Ibmec, Faria-Lima, important driver for growth here.
And then a highlight to the increase of Medicine Castanhal. It's one of the Mais Medicos stores unit. We had great discipline there since the beginning choosing the markets where we had greater capability of growth for us to fulfill what was actually complying with the legislation. Ibmec has the same number of residency vacancies as the Federal University of Rio de Janeiro. We are contributing to society, contributing to the local health system, working along with city halls to ensure that there was space in bed so that our students had a good learning experience. All of this leads us to have this great success, much higher than the market average, much higher or practically double the market average of expanding vacancies or seats in Mais Medicos toys, which makes us excited for the process of Mais Medicos [indiscernible] that we have already. The document we had hope the results will come out early next year.
In terms of ticket, we're very much in line of what we have been practicing importantly in Ibmec and IDOMED renew that is always about 95%, 96%, 97% as we have seen. Moving to distance learning, we see revenue student base was in line with the loss of undergraduate student base. On the right side below we see ticket reduction, something we had already mentioned to you before and '23 was a year we saw strong elasticity in the market. We work with tickets of midterm that were smaller than we had been working previously. And these 2 things added lead to a loss of EBITDA, the operating leverage we talked about last year. So you grow, you have an increase in margin. This happened the other way around this year. We had a difficult market added to this, a drop in tickets we have for offers that we made consciously in the year of 2023, which brought us an important base, but they bring this issue of the average or midterm ticket.
When we look to the corner on the right, we have a renewal similar to what was last year, but intake was a bit worse. It's important to go in detail here. Many of you talk to us regularly. You know that every week we measure elasticity to see what happens in the market. In greater times of elasticity, we tend to be more aggressive in price. Times like now when we see market, it's worse in conditions than before. We see little elasticity, we prefer to work higher prices, which will give us results over next year and then suffer a bit more than the market in this part of intake. Our intake was 20% last year. We had prices in 7 -- we see impact last year 17% above previous years. The good news here is that what we see here in Q4, still a lot to complete. We see very similar numbers to what was Q4 last year keeping these prices higher than what we practiced in Q3.
Moving to on-campus. Revenue moving sideways vis-a-vis same period last year, the base growing 2%. This is very important. We had many quarters of decline. We see 2024 showing base growth versus the same period previous year. This is due a lot to our Semi On-campus strategy, right? It helps us dilute fixed cost on our campuses and better price our on-campus. We bring on-campus higher offering a person an alternative for those who cannot pay full price of our on-campus and this has been very successful. We have a share below our fair share in this universe of Semi On-campus where we're very excited ahead. When we look at the ticket here on the bottom right, last quarter this number was negative. We prefer to present the ticket of upper class vendors, people who have been with us for over a year who have gone through the whole period of discounts, et cetera. This becomes a fair comparison apples-to-apples.
What has been happening? We've been training people pre-pandemic who have a history of tickets of many readjustments. So this pre-pandemic base is leaving with people entering with higher tickets than the previous classes, but still below the pre-pandemic period. So there's an effect that cancels out people before the pandemic, forming people that we have the average of pre-pandemic and post-pandemic and this together, it kind of levels off. This number was negative last quarter and is being positive now. Our projections show in this part looking ahead until the moment that this group for the pandemic is graduated, we have a very strong leverage. Well, this leads to an EBITDA moving sideways compared to last year, but we have this margin of [ 23 ] is much higher. If you look short time away, we're looking at [ 19 ]. When we look at on-campus, there's a unit of ours that has idle capacity, operational leverage that is relevant.
And little by little we improve margin, managing to work on the base, optimizing our units that allows us to have this margin in line with the 9 months of last year, but much higher than it was recently. Well, renewal and intake very much in line with last year. Renewal is always 81%, 82%, 83% varies with the economic moment that we are experiencing and intake 1.6% below last year with higher prices, very much in line with what we expected for this year.
I'm going to turn over to Rossano, who will tell you about the financial indicators.
Thank you, Eduardo. Good morning, everyone. Moving to the revenue side. We see the power of our portfolio with all the business growing. Obviously Premium very strong quarter with greater part or stake in our mix. It's very positive for our profitability showing the resilience of our portfolio as a whole. We have been talking about our efforts to reduce expenses overall and we see this reflected very clearly in this slide. So when we look at the part of G&A, a very relevant reduction falling 1 percentage point of revenue, a result of all the work that has been carried out throughout the year. When we look at the bad debt and also other [ delights ], we see the slide where we see this what we said we were going to happen in this cost structure or expense structure over December that happened very much in line of what we see reinforcing our guidance delivery for 2024.
Everything we talked about cost lead to the next slide. We're going to talk about EBITDA. You see the expansion of our EBITDA year-over-year. very much on Premium, 3 percent points year-over-year. This greater participation of Premium is helping our mix. Profitability of the business as a whole is getting higher due to participation of our business of greater profitability within the total EBITDA. I should mention also the on-campus stable margin. Year-over-year margin is better in terms of the markets Eduardo mentioned and specific on campus levers that we have ahead. Ticket positioning forward at a high level, we take up more space, reducing idleness, fixed cost and on-campus, looking ahead makes us feel very confident about the future of this business.
On the next, this is a very important slide. We've been highlighting. Our guidance was very much focused on the expected profit results for the year as a whole. We are still very confident. I think the third quarter brings great strength increasing the confidence of the market as a whole and our ability to deliver. Very strong growth, net profit 53% year-over-year and it has been supported by EBITDA and very strong growth of financial results. As Eduardo said, we had been following our guidance. We had very relevant growth in terms of profit. This has been represented here on this slide. The financial results, some items here that are specific of the third quarter, a great point of view. This will continue at the end of the year still in 2025, reinforcing our belief in the guidance of '24 and the forthcoming years.
Our slide with the historical view, it's important to expand our time horizon when we look at 2019 up to now. So we have a CAGR of 8% of revenue. So Eduardo talks about the number of prices we had, but we still have an increase. Our revenue growth is impressive with the margin above 33% this year being helped by this multiplicity of our portfolio, the resistance that shows at different times and continue to return for shareholders. Since the IPO in 2007, every year we pay dividends; this year as in some others with a buyback program. So ensuring return for shareholders the value generated by the business. Now we come to another super important slide in this presentation, very strong generation of cash flow for shareholders, BRL 300 million showing a very important turning point for the business. Since the pandemic, this is a business that was reduced in capacity for cash generation. We pointed that the turning point was getting close.
Second semester was important to show this turnaround. This is a strong cash generator. It's clear in our long-term guidance. We're going to reduce our guidance from here. It's an important cornerstone of our strategy, this turnaround. Our cash generation close to BRL 300 million is a very positive sign for us to strengthen our strategic view. It comes from 2 lines that are super relevant; one of receivables even continuing to use [indiscernible] as a strong intake. We know this is a long-term revenue tool. So even if we continue to use it in strong levels, we have reduced our average time from 103 to 96 days. All this improvement comes from a better collection capacity or intake from collection, management of our receivables, the way in which this is done with our students, privileging the ability of retaining our students to renewing students has been greatly increasing our conversion rate and this is reflected here in the business.
Another important line is financial results and because of all the results I've already talked about and also benefited by these actions to improve our collection capacity. When we look at the right, we see CapEx heading towards guidance of BRL 470 million in the year. Still continuous CapEx focused on digital transformation and IT. We had our CapEx reach 12% in the middle of our transformation, but now we are close to our midterm guidance dedicating great part of our investment in technology and digital transformation. Moving on, we see our debt structure of our average cost of debt. In the long run, we are reducing our cost of debt. This shows the strength of the company, the recognition of the market, our capacity to generate cash, our capacity to generate value in the long term.
We are AAA recognized by the market and we have been capitalizing and generating opportunities to be able to capitalize on this situation in the current market moment. Once again average cost falling sequentially. And we're reducing our leverage even with the buyback program happening with the early payment of dividends that we made in the second quarter. So this is a super important topic. We reduced our leverage 1.56x even with this process of buyback. If it hadn't happened, we would have reached 1.51x. Moving to our long-term guidance, which is attain 1x of net debt EBITDA as we said at Yduqs Day in the second quarter. Looking to the right, super robust position BRL 170 million. Our net debt is very balanced and amortization program, as I said, makes us able to benefit from the market; super diluted program, a few [indiscernible] and almost nothing in the short term. Debt maturing at very low amount in 2025.
Our spread is dropping especially our leverage moving to our long-term guidance. This is a slide I mentioned in the past before. I bring exactly the phrases we used in the second quarter now. So we wanted to make the main levers we would use to generate the necessary value to reach the guidance of profit for the year. Let's see how each one performed. So in transfer, we said that reduction of intake that had happened in the first quarter 2024 was reduction in the weight of transfer in second semester. First semester, it was one of the funders of our results and we said that in the second semester, this would reverse. Our view is that it would be even below as a percentage of last year's revenue. It was the same, which is already a reduction of previous years. If it had fallen, it's an excellent news because of the renew or reason that excellent collection or intake that we had as part of the transfer focus on the amount collected and not the amount invoiced.
So when you have strong collection, you increase transfers as a percentage of revenue, which is excellent news to our business. In bad debt, as we said, we have an offender in the result just met given the profile of intake that happened in the first month last year. We saw the percentage moving to a percentage similar to what was last year. This quarter getting close to last year's percentage, we see this result improving even more in the fourth quarter to reach final result of second half with the percentage of revenue very similar to previous year. M&S, we gave clear guidance to market that we would get close to the percentage of revenue with what was the previous year. We performed the first half 1 percent point above last year. And this quarter, we're getting close to previous year with our positioning in the market and understanding the market conditions, elasticity of intake.
We decided strategically to position ourselves once again close to what was last year's percentage of revenue. G&A, as we said, we still have results of expense management, almost 1 percent point in financial results and we said one of the great levels to achieve the results of the year as a whole. What's missing? We see what we have reached, 1.44 or 1.6 that we had promised to deliver to the market. Eduardo highlighted on first slide that I continue using the number of shares that was the basis for the guidance of the disclosure, 291 million shares. Despite doing the buyback program, the result will be higher. But as compared to guidance, I will use the same base. So we have 0.16 to be attained in fourth quarter, a number that once again we're very comfortable that we will be able to deliver.
The level of the fourth quarter are not very different from what we had been pointing out in the second quarter. We continue with transfers, a trend of reduction vis-a-vis the previous year. Bad debt, we identify improvement movements. So we see here third quarter, well, it follows the same model as last year. G&A represents the benefits of reducing expenses that we have been collecting. And financial results on the same positive wave, reduction of the interest rate and spread in our leverage that we mentioned in the previous slides.
Moving on, I turn it over to Eduardo, who's going to talk about our ESG results in the third quarter.
Thank you, Rossano. So talking about ESG, which is a very dear topic to me. Last quarter, we brought here a photo of the Olympics and we showed the important participation we had in the Olympics and Paralympics. We're bringing photos of our leaders today. We entered Teva, which is an index of companies that have many women in their leadership. We are a company recognized for our diversity, which is not nothing. We are the mirror of our students. We have 80% of our employees, they have been our students at some point and we have a bit of that. Well, come with us because I've already been there, the commitment, this atmosphere, the sense of purpose and belonging, very strong here. So in addition, what do we have with news here. Conclusion of the CDP report on the environmental side.
The goals here in GHG. The renewal of our rating AA and MSI, very important recognition. Very few companies in the world have -- especially in the world of education have this recognition as leading companies in the part of ESG and Yduqs is one of them. Our program of black training is a fourth class, 11,000 people registered for our training program. It's a high number for exclusive program and great success. Kids are in the fourth group spread throughout the company as a whole. We had over 300,000 people impacted by the community services and social projects of our units. And there is something I'm particularly proud and [ Zeme ] Magazine gave us a prize for people. It's very difficult. Well, you don't have consultancy, you don't have support, you don't have help. It's a measure that is very difficult between what you say and what people perceive.
So our employees and many have been interviewed, many questionnaires filled out and the main topic here is the legitimacy and coherence in between what we do and what we say every day here in the company, walking our talk. So it is a source of great pride for us to have been recognized with this award. Well, for final remarks, much of what Rossano said, we are at a clear moment of recovery. 2023, we had an operating recovery, the very evident evolution in our EBITDA portfolio showing its strength and people say Premium is resilient. So we had a moment of improvement economy. We had distance learning, on-campus, great growth in 2023 revenue and EBITDA. Now recovery of net income and cash flow for our shareholders going back to that business that has always been, as Rossano said, structurally strong cash generator and a strong net profit.
So our highlights here: revenue growing in all businesses, EBITDA evolving, EBITDA margin evolving. Rossano mentioned our main growth driver is the highest margin and that helps us push looking forward to the net profit. Cost of debt, an important level, only one of them that we have in the evolution that we have below the EBITDA line, an important evolution. CapEx, as Rossano said, getting close to the guidance that we said we're going to get to the number here at 8.1% in the first 9 months of the year. Cash flow, as I've mentioned to you. And the concern especially for foreign investors, they keep us asking on capital allocation. So we will be a great dividend generator as we pointed in our guidance that we gave you at Yduqs Day in the first half. We look ahead and we see this guidance with great optimism, we're going to get there.
And the question that remains from foreign investors is what about capital allocation Today, we see no better way of allocating capital rather than our own shares. We announced BRL 300 million of buyback and we are strong with that. There's a lot to come over the year and the cancellation that Rossano mentioned in line with that. So thank you very much for your time and I thank you very much for your trust. Let's move on to the questions. Wait a second.
We're going to have something different today. We always have 2 conference calls, one in Portuguese at 9 and another one in English at 11. Rossana and I, we talk very fast and it may be difficult to follow everything. So people ask us to do a call at 11 and we have very high attendance. Today, we're going to do something different. We're going to go to our computers, sit down to answer your questions and in parallel, the studio staff will play this presentation with artificial intelligence. And myself and Rossana will be here in front of those who want to watch at 11 speaking English, Spanish, French, German and Mandarin; the same presentation that we had now. Artificial intelligence is something we use every day here. On one hand, it is to work on our productivity, our efficiency and on the other hand to work on hyper personalization for each one of our students. And we are confident that the studio staff will work on this and we'll be back at 11 on our website in the language you wish.
Thank you very much and let's move on to questions now.
[Operator Instructions] First question comes from Mr. Caio Moscardini from Santander.
Two on my side. The first on distance learning. I'd like to understand the main initiatives that you're taking to resume growth in intake for distance learning and there was pressure this year. And a question for Parente, I'd like to understand a bit his vision on this new movements of M&A that we have. We had Galileo Global Education coming to Brazil. by [ multi pick ]. Clarence made a new acquisition made in October. I'd like to take a bit of your view on the new market players and if this potential new cycle of consolidation of the industry should be concentrated in the midsized small players or you expect more transforming consolidations?
Well, I'm going to turn over to Aroldo to answer the question whilst I prepare for the second because it's long.
Caio, thank you for your question. We have several actions taken, Eduardo mentioned some. Whilst we didn't see very much elasticity, we benefited to increase price 17% up. But there are 7 actions we're doing to actually increase the base reflecting in the fourth quarter as it's been shown in the presentation coming in Q4 in line with last year. What we've seen in the past is we've running a bit above. So this has had an effect. We captured price in line -- above actually last year and the base recovering above the previous year. Another relevant point in our case in Q1 is on-campus. When we compare to some competitors, sometimes it's on digital. We also had a great expansion of Semi On-campus. We are going to other places. We start having positive results, an important expansion of portfolio of Semi On-campus for new cities where we had not been before. So we have these 2 points starting to have effects on the pure digital, the modality that we call online and Semi On-campus with an important portfolio expansion. I don't know if I've answered your question, Caio.
Caio, I think it's very positive for you to see foreigners coming into the market strongly as Galileo as -- I forgot their name and this is a symptom that there are people looking towards Brazil and checking on the opportunities. This applies to us as well. I don't think we are the only ones. Many others are in buyback programs looking at the opportunities that we have within our own portfolio. The consolidation, I think it has 2 levels. It has a very important role of inorganic growth. When you look at Newton Paiva, that is an acquisition in terms of cash; little money that we put on this acquisition, interesting plan for those that sold it to us. The model is a very successful one. When you look at the money we've invested, that brings 1 percent point of growth in EBITDA next year. This is a bit symptomatic of what tends to happen not only to us, but to others.
You have organic growth that is smaller than previous years. But if you bring 3 or 4 acquisitions that are small, that bring 3 percent points or 4 percent points above for growth and this tends to channel to the last line in an important way. I assume that when you see what we gave of guidance, the growth we had this year is over 30% net profit and 25% next year and 25% beyond that. The guidance we gave in the first half. This is not news. This is growth based on organic growth. I'm not talking about inorganic. So you see what you have on top of that, what we can build on top of this reminding you that the difference in tax rates. So we have depreciation curve change we see from 12 to CapEx, this depreciation curve changes. So there are several factors that are contracted for strong increase of net profit, any growth of top line drops with that.
And with small acquisitions, you were able to have -- we were able to get to 2 digit. If we can get to 2 digit, then we have even faster growth than what we have mentioned to you supported by the buyback. I think we're going to move on. You see on-campus especially tools that in the hands of more efficient companies that can need much more quality technology to those students. It's kind of heated. We are very disciplined here. We have this broad market recognition of discipline in capital allocation. It's a phase we see in this leverage process having much more ability to do small businesses. For the big businesses, you must laugh at me. I've been talking about this for a long time. They make total sense. I've been talking about this for 2 years. They are not obvious to happen. We have to align the stars.
Well, we have conversations that are heated up, pulled up in a horizon of 2, 3 years, very unlikely they should happen well. Concentration in education compared with any other, you must follow health care. Look at ours in health care. Take any other industry, there is very low concentration giving little efficiency to the industry that ends up reflecting on quality, low cost so that we can attract more people to the industry. Things are aligning to small businesses, things are aligned for large businesses. What we lack is that final luck of this franchise. I said I was going to talk a lot. Sorry. I hope I have answered your question, Caio.
Our next question is from Mr. Andre Salles from UBS.
I have 2 on my side. First, you talked about the initial company, the distance you have of the fair share of the company, how you see it? I'd like to understand the size of this modality on-campus and if we have the dimension of operating or operational leverage you see. Second question is on ticket growth in medical growth. So it should have an effect of the base considering higher ticket at some campuses, et cetera. When we look ahead, this growth in medical school should come from the student base, ticket growth at these levels that we've seen?
I know you should not actually congratulate the sell side. You came up with a report that actually surprised us. You made very deep analysis. Of course there are several points that we still disagree with you and that's part of the game. But your arrival is really cool for us here and as the industry as a whole to have a different viewpoint, fresh view. Congratulations to you and your team for your arrival. So you came very well equipped. On the numbers, I won't remember you have [indiscernible]. So has 2 roles here. I think the question is really good. The first is when you have Semi On-campus that we have, we've always had. Well, actually since 2020, we brought this back. Semi On-campus has an important role on campus because the great point that we had was to start having Semi On-campus managed by on-campus.
Previously it was managed by distance learning when I taught. In 2019 when I started teaching, I saw the students looking kind of lost. They had no class, no engagement. And we managed that on Semi On-campus. They have the same co-ordinator. Aroldo has a phrase that I like very much. Semi On-campus is the on-campus for those that cannot afford it. So there's a complete integration. This helps us in many dimensions, a very important one and you're going to see. Yesterday, we're talking about one of our Board members with the evolution that we had on pricing so difficulty we have. In Rio de Janeiro, we had of course at BRL 600, a competitor at BRL 500. You had to go to BRL 500 or you had nothing to offer to that student and you would lose a bit of competitive capacity. But talking and giving you a hypothetical. When you bring a Semi On-campus BRL 300, BRL 400; you'll have space for the student that has less money.
That allows you to get to BRL 600, BRL 650 at a different level. This has important effect on our positioning. I've recently been with Professor Ada. I said one day, we're going to get that the guy studies business administration has started; they will be in power, they will be working more, having less time to study to go to campus. They will be on Semi On-campus, they'll make more money and will want to work harder on campus. They will be back. It will be final phase because they have to be on distance learning. So you have an ensemble at this portfolio. If you want to study business administration and it starts you have on-campus, Semi On-campus, in person or distance learning adjusting to your reality and your moment in life. It has this role of first helping diluting fixed cost on campus or second to help us price our courses. You have a different positioning.
You can get or you can fit at different times and different pockets in the life of students. What we're expanding very much now that we're starting to offer Semi On-campus at our centers. Our competition has done this for a long time. We have the fair share. We are far from the fair share precisely because we have much less capillarity we appreciate when we look at our budget next year and our strategic plan. When I was your age, we made 10-year strategic plans. Today, we have a horizon of 3 to 5. Semi On-campus has a very important role. There's a line that you've never seen before. You're going to have the line of transfer within the on-campus. That's an interesting modality from the service standpoint. Students have -- well, they like this modality and it has an economic financial role that is very important in our portfolio. I'm going to turn over to Silvio to talk about Medicine ticket.
Sure. Thank you, Andre, for your question. Actually in your question, you bring part -- a great part of the answer is precisely the mix today. When we observe the set of schools that we have, we have some markets that are more distant places with lower ticket compared to the big centers. So they are maturing and naturally the increase of relevance of those courses in the base as a whole ends up generating this effect that you've mentioned. Especially when we look at the global average ticket we've observed, as you've seen, upper class where we can. When the course is consolidating, we are able to have better conditions to correct the ticket during the maturing of the course. We've been able to transfer the ticket that is more above inflation to upper class men more consistently over the past years and this kind of balances off.
And you've asked about our view looking forward. We've observed this. We have seen an impact for this year. Our ticket on Medicine in the 17 markets where we operate. If this impact will arrive, it won't be linear. It should not be applied in all regions on an equal basis. It should happen more specifically depending on the region, the institution. There's some more variables that are going to determine who's going to suffer more or less. We've been preparing this with several actions that offset and mitigate possible pressure on tickets be it on cost structure and other lines of fundraising. This is our view. There's not yet a perception of market effects impacting our ticket here.
Let me add something to Silvio. Silvio is quite modest here. I think in these years he's been leading medical schools. We have had great differentiation repositioning of the brand not repositioning, but the strengthening in the academic area that is very strong that leads. Especially if you take Rio de Janeiro, the main doctors of Rio de Janeiro have their students -- have their children study with us and that allows us to have this differentiation and to be in medical schools to charge a premium in Rio de Janeiro. When you charge a premium, it applies to Rio de Janeiro and other markets. When you charge premium in a region, you're less impacted by greater competition and we are at this stage. We see very clearly at IDOMED an important evolution of Ibmec. Work being carried out here. We are keeping it on our radar, but it hasn't knocked on our door yet, but that's it.
[Foreign Language] Our next question is from Samuel Alves from BTG Pactual.
Two questions on our side. First is more specifically on the Q3 and the line of receivables, you've seen major improvement in this quarter. Just to understand whether there has been some extemporaneous factor, some early receivables, some one-off factor or the improvement has been all organic? First question. And the second question more specifically on Q4. Company is reinstating guidance of 2024 and it ends up being very important for this equation, the premise of cash flow for Q4 especially the one-offs, Q4 '23 was very much impacted by some extemporaneous factors. Want to hear from you whether you believe fourth quarter should be less polluted and if you assume that the cash generation should be perhaps not so negative as it was Q4 2023. This is it. And congratulations on the improvements shown in this quarter.
Samuel, very important coming from you. Let me turn over to Rossano first so he can start.
Great question. Gives us some opportunity to talk about this point that is very relevant to us. In addition to having strong cash generation in the quarter being supported with great improvement in receivables; there's no one-off, no early payment. We generally do not operate with the early receivable. Our capital is very low. We don't use this tool of early payments in any way I can recall. Nothing in this quarter. Three main factors for this improvement in receivable. One is the operational improvement in our process of collections happening since the beginning. Everything we launched in terms of cost from the first quarter, we dedicated great energy to improve this process of payment and collection. This has been in several from inactive students. We started having a performance that was very positive in [indiscernible] for government program, many actions focusing on recovering inactive students.
Not only recovering the credit that was due, but bringing them back to our student base. Sometimes we managed to get the students back. They were in debt. We renegotiated, brought them to the student base and to the current base improving payment, cards and installments, they have improved our recovery overall. Tapping into this moment that was positive for credit especially for inactive students. Second point, good side of not having great intake were the basics when you don't have such strong intake growth linked to DIS. DIS improves our working capital more well, faster growth. DIS actually is the working capital we had less intake and this increases the receivable. We have a mix, a greater presence of our Premium, both Ibmec and Medicine shorter receiving terms. The increase in [ trainer ] part of the revenue helps at this point. For Q4, I'll let Eduardo talk about that.
On your topic, we expect results are increasingly you use the term polluted or something like this. We have been reducing year-over-year our spending classified as nonrecurring. This will continue in the Q4, the predictable ones, something that has been different from what we usually do was solidarity with Rio Grande Sul offering relevant discounts in the tuition fees and re-enrollment for our students in Rio Grande Sul. Apart from that, we've been dropping main items of nonrecurring. We do expect, as you mentioned, a quarter of cash generation higher than Q4 last year, very negative in terms of cash generation. We're going to improve a lot regarding last year. Turn over to Edu to complete the answer.
Before I continue, I'd like to highlight the quality of the question because I think we had last year. Well, this year the insight saying well, this is the history. It's not our, of the industry. If you take everyone's results so far, strong cash generation is seen. But that's the story of recomposing our capability generation of net income. Before the pandemic, we had very strong and we were the first to draw the entire debt and this is where we differentiate the guide. As you can see as an analyst, you can see below the EBITDA. All this land slide that is being hired in here. So for receivables after all, everything is cash generation. Well, cash flow is important for that and as well as Q4. As Rossano said, our Q4 last year was not a difficult one to be overcome. It was very bad cash generation and we have much better numbers from that.
And we see -- well, net income, we're going to have a much better number. So we're reinforcing the guidance. It's going to be a better number in what we call the pollution or something like that of the results. In these 3 points and I think all the rest that we see in the Q4, I think it will be very positive when we look at Q4 last year and once again it will reinforce what we're going to bring to you when we present Q4 the confirmation of delivering our guidance, reinforcing our belief. Our belief is here. Your belief that we're going to have the delivery of our guidance so we're going to push that further. Well, looking at buyback we're going to have a result that is cleaner in terms of nonrecurring, much more relevant in this way compared to last year. Thank you for your questions. I think we've answered them.
Our next question is from Mr. Marcelo Santos from JPMorgan.
The first question would be to Silvio. You've mentioned your performance in Mais Medicos. That's very good as an indicator of future performance. I'd like to better understand your evaluation in your current rules of Mais Medicos. Do you think we're going to have such great concentration in the great groups or are we're going to see Mais Medicos more diluted? How do you consider these rules that we have today, several rules for Mais Medicos or doctors? Second question for perhaps for Parente or Aroldo. You talked a bit about distance learning macro, how you see price elasticity. If you could make a few comments on the competitive environment, a view outwards would be very useful for investors?
Silvio, go ahead.
Thank you for your question. It's a very recurring question. Doubt regarding applying the criteria of Mais Medicos. This would drive consolidation. Actually after the government made some isolated institutions local, regional; we'll have the opportunity of having your proposal being chosen as the best. But what happens with the groups is less being a group, but more on the previous strategy as to how you dealt with Mais Medicos 1 & 2 and the choice of municipalities. How many residents were able to get an accreditation? So it's important to have accreditation maintained in the offer despite being at a deficit the regulatory indicators issue. I'd say that a group, higher number of schools of course, ends up having greater strength regarding their capillarity. In our case for example, we have medical schools in various regions of the country in addition to the medicine having health courses or keeping high quality, having medical schools in the portfolio.
You're having the obligation of having residency because of the previous notices put to at a differentiated competitive advantage in several places, you're going to have isolated institutions, universities and higher education schools that can have a good score. People who did their homework well in the previous notices have the opportunity of gathering more variables to get higher scores and be ahead. In our case, this is what we usually observe. Today, we have very favorable positioning in various regions not only because of our medical schools, but for the health care courses that are in those maintained and maintaining schools for the [indiscernible]. This is more on that than being a group brings more a chance. It's more on the quality, on the history and the capillarity of course we have on campus that is well penetrated with great positioning in various places with academic excellence that will give us a favorable score. Certainly the expectation is that we are able to present the best proposal in various marketplaces where we are competing based on those public notices.
On distance learning, what do we see? Price dynamics of the industry has suffered a lot because of the [ FIAS ] boom in 2014, '13-'14 and actually the undermining on campus. We had 10 years that have not been enough for us to reorganize ourselves well. To reorganize ourselves is get to a profitability level that allows us long-term sustainability of the business. We are very efficient. We have a level that was 90%. We're getting to 23% of profitability and the less efficient suffering even more. So there's something of you're not getting to the level. So the whole industry understands that; basics of macroeconomics, cost curve, et cetera. But we see this movement since it's a very diluted industry. We have very low concentration, one of the largest on campus and we should not have 12%, 11% of share. It's very difficult. This movement evolves according to the press or capacity of markets.
Well, a challenge that you have on campus is to compete with some. We very likely have competition with Cogna or Anima in some market. So this is happening in a less accelerated way than a natural cost curve would indicate. We haven't gotten to the marginal cost curve. So when we look at distance learning, this is different to market comparing to health care or medical; very little concentrated, but more concentrated when we had the release of opening centers. Everybody is going to go into distance learning. Now I'd like to mention that it's not that it's a game. You have to have great scale, great technology, great capillarity. The centers have a key role for you to be competitive on distance learning. So it's not something easy to enter. So great players in distance learning had the difficulty of getting their fair share to the market because of the size of necessary investments for you to be competitive.
You have to fit in the students' pocket, typical audience of distance learning not exclusive people in distance learning are working. They can't afford it, but the typical distance learning are people that have less money. What we see? Well, we see healthy margin on distance learning. As we have become more sophisticated with elasticity and pricing, we see the competition. We have a slight advantage in this aspect. We have these new students every quarter. Whilst most competitors have biannual; well, students join twice a year. So we see competitors elasticity award applies to all our businesses and we see price increases in this change of cycle of competitors. So I think there's a thing of measuring elasticity and we're charging more than what we charged 6 months ago, a year ago, much more than a year ago. And this move is that of what we drove here with this numbers starting with 230 that we see on the website.
So as Aroldo said, we are at a time that is similar to last year. When you take the accumulated past weeks, we have weeks of 8%, 10% above last year with prices that are much higher. We see a very interesting moment. When we look at 2025, what do we see? A year that may be similar to '23 that was fantastic for us because I'm not saying that it's going to be -- it may be. What we have contracted for '25, a major growth for IDOMED and Ibmec both in student base and price. So we run that twice compared to 2023. We have higher prices in distance learning and on-campus contracted and it's too early to say that to make any kind of evaluation, but we have this sort of image of recovery of distance learning with over 50% intake coming all right with the base compared to '24 that is pretty bad. So we are quite excited about 2025, Marcelo. So it's 2 teachers -- 2 professors here, we give you long answers. Sorry.
Our next question is from Mr. Flavio Yoshida from Bank of America.
Congratulations on your results. I have 2 questions on my side. First is on the Premium segment of Medicine. You've made some comments. I'd like to understand a bit better regarding Ibmec, the expansion potential in Sao Paulo and other regions that you see any potential? I think this brand is strong, has been showing very good numbers of growth. Just to understand the dynamics that potentially we should expect. And my other question is regarding DIS. I'd like to understand your mindset regarding DIS, if there is any effort to reduce the dependence on DIS intake?
I'm going to turn over to [indiscernible] to answer your question.
Flavio, thank you for your question on Ibmec. We see very positive trend of future growth. I think our main trends in addition to maturing our current campuses, we see great space for growth in Sao Paulo. Our main priority in terms of growth of on-campus footprint would be in the Sao Paulo market. We study the market. We look positively at the market that is very consolidated. We have more immediate basis for Sao Paulo. We have some strategies that impact all our operations in parallel whilst we are positioning ourselves here. We've been focusing in positioning of businesses. We are thinking about expanding that both for law and technology and this tends to contribute to growth in all markets. We've seen that quite strongly; Brasilia, Rio, Belo Horizonte. In addition, Ibmec online is certainly a great opportunity. It's a product we have handled a lot in the past years. We're reaping very positive fruits of the strengthening more national operations and we have a very optimistic avenue ahead. We still see great growth potential and consolidation in this Premium segment.
Flavio, thank you for your question. Another new analyst coming to the industry. Well, this is becoming increasingly stronger on the sell side of education. On your point on DIS, we had a growth in DIS with total revenue. We don't see this expanding next year. Most possible scenario is that should be reduced in 2025 considering our pricing and positioning strategy, evolution of ticket that is more stable and the trend is for DIS to lose relevance slowly. We like the tool. I think it's important and strong to attract students. Students need to experiment what it is to be a higher education student. It's very strong. They can do that without spending so much money. Well, in terms of price potential, it's very likely we've reached the top of DIS penetration and that should be reduced in the forthcoming years.
Our next question is from Mr. Mauricio Cepeda from Morgan Stanley.
Two questions. I'm going to resume receivables here. From another viewpoint, you can clearly see that you had free cash generation that was very strong and strong evolution in DIS generation very much related to operations and in turn it has to do with receivables. Quite abrupt variation in the term of receivables that was very positive. Well, every time this happens, obviously you have a great contribution to the cash flow. My question would be the following. If you still see this possibility of reducing the cycle of receivables and hence this could be for some time contributor to the cash flow or if you think that in these levels that you are at receivables that you would have a regime status, you wouldn't have this help in the cash flow in the same magnitude?
Second question is a bit on the debate on the student base, more sectorial. You see that in terms of sectors although there has been less intake, there's been an improvement in dropout rates in payments, tickets adjustment. If you could comment on whether this is actually what's been happening in market. Why are you a bit away from these levels of retention and bad debt and the strategy ahead if it's more qualified with fewer students, better price and less delinquency. We had this abated previous quarters with lack of elasticity in the market. And well, if you -- well, this comment of Rossano of DIS how this fits in the scenario if the M7 ticket of distance learning has to do with the party. Just putting together the puzzle pieces of party of the base in your positioning.
I'm going to turn over to Rossano for the first and I'll answer the third.
Well, good questions. Yes, you're going to have fun, be prepared. On receivables, no doubt great part of this evolution of the year is captured in the second half so we have greater share of enrollment. So we have more space to see that in the second half. Also a result of the maturity of the actions. We started designing this last wave of improvement, payment or collection at the turn of '23 to '24. It's the maturing of this business happening now. We see ability or possibility to improve. We have a plan for '25 in which we can have improvements on this line. Obviously this will depend on several economic conditions, external factors. We have room for improvement compared to the level we've attained. Turning back to Edu.
This is something. The briefness in Rossano's answer is not what you're going to find in my answer plus you said something that drew my attention. Well, we are after retention and bad debt. When you look at bad debt, there is structural thing of the DIS itself the way we have our intake, it's conscious and managed. What we look very much at here is the receivables, we have a stability and this quarter we had a drop and we have much less than receivables and people that have [ TIZ ]. Well, people we have receivables from people with no TIZ. It shows that the thing as a whole has a model of intake that is aggressive that works. When you look at -- when you take any student or any NOR per student and you see we stand out with players that have a similar student base. Well, yes, quality of the bases may be slightly dangerous because one thing is for you to think well, I want this guy that pays more.
Well, quality of base from a financial standpoint. Well, we want to include more people in higher education. This is a very strong feeling of purpose that we have here. Over 30,000 Brazilian students that do not attend or have higher education, only middle school, the impact is relevant to their lives. If they stop at some point, if they incorporate in their activities at some point, study and the tool of distance learning is very relevant. This Brazilian person usually has a basic education than on-campus or even the average of distance learning. Well, this is a fallacy we see. Well, public education was much better in the past. Well, today, we have many more people. Well, public schools of excellence continue. You brought more people and obviously the average drops.
The great effort that the Minister has been doing, the whole government and all the administrations, is to hike the education attainment level. So same happens to distance learning, you bring more people to the base and essentially people on average with lower school education attainment and with less payment capabilities. So here we have this movement of M&S is tapping into a market momentum. I assure you that if we see a strong return of elasticity next year, we won't be working on price increase. We will be working on bringing more people. And then the debate will be people say well, the base is growing, going up. The base is not the endpoint of the business. The endpoint of the business is combination of base, price and margin reflected in the intake especially when we talk about M&S. When we make decisions here it's not having more or less base. The question is that the additional person is bringing to me.
So the test is that the LTV that I'm going to get. So how much can I lose in terms of base. So with that, we build a stronger LTV. When you look at our revenue, it's very close to the competitor that has much bigger base than ours and we have more profitability in the market in percent terms and absolute terms looking at distance learning as a whole. So the set of decisions have been historically very good. Having said that, I think that overall the educational industry is coming back. As I've answered in Marcelo's question and on-campus coming up, having better prices, Semi On-campus finding its space and distance learning had this balance. Distance learning cycle is very short. On-campus students usually remain 4.5 years some and distance learning students stay with us for a shorter period of time. Overall, we have been able to charge more in the market as a whole and I think this is very positive for us to resume profitability of the past that is not yet so healthy today.
Our next question is from Mr. Leandro Bastos from Citi.
I'd like to explore the topic of financial results, important lever and improving results. You've highlighted several structural points being worked on on discounts, new intakes and there are some light here that are a bit more nervous contingency. Just take a few things what is heavy or not? Can you give me some -- shed some light on what you're viewing from now on?
Thank you for your question. Well, good question. Financial results has been one of the levers as we had expected, we had been communicating. It was an important lever. It was going to be stronger second quarter, the liability management that boosted the future results, they give a kind of a blur in the results of Q2 and Q3 will start benefiting from this improvement process that we saw in the bond. The most obvious line is the line of interest payment, 3 blocks as this improvement. We're capturing the improvement of interest rates in detail although it seems to be transitional, I cannot expand that very well captured results in Q3. We expect it last longer than the market expects from now on. And the other 2 blocks under our control, strong spread reduction. We've been reducing sequentially for a long time and the reduction of gross debt.
Second block of this improvement of the processes of collection and penalties and interest that go under EBITDA amongst players. It's another block that helps a lot on this line and that's recurring. We see results happening from now onwards. But let's classify that the improvement that we see in the quarter, close to half of it are consistent and recurring improvements. What's left? Half of it is linked to SELIC or the official interest rate and the last quarter of specific actions. We had a negative effect of the market and then we had 15% in Q4, is 15% positive in Q3? They kind of offset. And that's why we saw the Q2 did not show those improvements. So these kinds of things are specific. We're migrating to a hedge accounting model. We tend to see a great reduction getting close to 0 on these variations of swap models from now on, closer to what we see in the results that will be actually disbursed in terms of cash. Another action that puts financial results of cash output at the end closer. So I hope I've answered your question.
Our Q&A session is closed. We'd like to turn over to Mr. Eduardo Parente to make the company's final remarks.
Thank you, everyone. Thank you for your time, your trust and I believe we're clearly showing you that after an operational recovery in 2023, we're recovering cash generation in 2024. This applies to the industry as a whole. That will enable us to pay dividends and pay our dividends, resume our trajectory of higher dividends. We had a trajectory since 2007 paying BRL 80 million plus BRL 130 million for the buyback and positioning ourselves in a different way. We need consolidation. The consolidator at appropriate price tends to generate a lot of value and this growth comes down fully. We have a company today, if you think 5 years ago, it's a company that was analog with touches of premium. Today we have an essentially digital company with a lot of premium, with a lot of premium things helping the portfolio as a whole and with a lot of capital allocation discipline, which will enable us to pay out dividends at higher growth points that will generate great joy to our bottom line. Once again, thanks for your trust, for your time. In parallel, we have Cogna's call. Well, you could go there and there are some good news. Lots of good things happening in the industry. Thank you very much.
Yduqs video conference is now closed. We thank everyone for their participation and wish you a good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]