HIGHLIGHTS PRO FORMA MANAGERIAL ANALYSIS* HIGHLIGHTS MANAGERIAL ANALYSIS (EX-UNIASSELVI, FAIR and FAC/FAMAT¹) QUARTER HIGHLIGHTS:

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1 Belo Horizonte, November 10, 2017, Kroton Educacional S.A. (B3: KROT3; OTCQX: KROTY) Kroton or Company, announces today its results for the third quarter of 2017 (3Q17). The Company s financial information is presented on a consolidated basis and in Brazilian reais, in accordance with Brazilian Corporate Law and Generally Accepted Accounting Principles in Brazil (BRGAAP), and already conforms to International Financial Reporting Standards (IFRS), except where stated otherwise. HIGHLIGHTS PRO FORMA MANAGERIAL ANALYSIS* Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% 9M17 9M16 Chg.% Gross Revenue 1,717,295 1,588, % 1,938, % 5,396,679 4,990, % Net Revenue 1,323,546 1,223, % 1,519, % 4,208,059 3,883, % Gross Income 975, , % 1,131, % 3,168,894 2,789, % Gross Margin 73.7% 70.8% 2.9 p.p. 74.5% -0.8 p.p. 75.3% 71.8% 3.5 p.p. Operating Result 712, , % 850, % 2,377,074 2,216, % Operat ing Margin 53.8% 54.5% -0.7 p.p. 56.0% -2.1 p.p. 56.5% 57.1% -0.6 p.p. Adjusted EBITDA 576, , % 700, % 1,916,537 1,771, % Adjust ed EBITDA Margin 43.6% 43.5% 0.1 p.p. 46.1% -2.5 p.p. 45.5% 45.6% -0.1 p.p. Adjusted Net Income 529, , % 644, % 1,751,661 1,520, % Adjust ed Net Margin 40.0% 37.0% 3.0 p.p. 42.4% -2.4 p.p. 41.6% 39.2% 2.5 p.p. Adjusted Net Income /share % % % Operating Cash Generation (OCG) after Capex ¹ 415, , % 460, % 927,449 1,039, % OCG aft er Capex 1 / EBITDA (unadjust ed)² 79.7% 96.1% p.p. 71.9% 7.8 p.p. 52.8% 63.4% p.p. * As announced in 3Q16, due to delays in the opening of the Student Financing Fund Transfer System (SisFIES) during the reenrollment of FIES students for that period, the Company opted to analyze the 3Q16 financial performance (On Campus and Consolidated) on a pro forma basis based on the historical rates for FIES contract renewals to ensure a better comparison base. Therefore, the pro forma FIES revenue for 3Q16 translates as best as possible the actual amount that would have been recorded if reenrollments in SisFIES had been concluded within the historical periods. ¹ Excludes investments in M&A and Special Projects. ² EBITDA excluding the capital gain from the divestment of Uniasselvi, FAIR and FAC/FAMAT. Special note: 9M16 figures include two months (January and February) of Uniasselvi results. Furthermore, the figures for 3Q17 and 9M17 include only two and eight months, respectively, of the operations of FAIR and FAC/FAMAT. HIGHLIGHTS MANAGERIAL ANALYSIS (EX-UNIASSELVI, FAIR and FAC/FAMAT¹) Consolidated - Values in R$ ('000) 9M17 9M16 Chg.% Net Revenue 4,193,915 3,823, % Adjusted EBITDA 1,908,648 1,741, % Adjust ed EBITDA Margin 45.5% 45.5% 0.0 p.p. Adjusted Net Income 1,743,771 1,493, % Adjust ed Net Margin 41.6% 39.0% 2.5 p.p. ¹ Excludes figures from Uniasselvi for 9M16 (January and February), and from FAIR, FAC/FARMAT for 9M16 and 9M17. QUARTER HIGHLIGHTS: Despite the economic circumstances and still-challenging scenario of recent months, Kroton delivered a very satisfactory performance in student enrollments during the second semester of 2017 both in the On-Campus segment, where new enrollments were stable compared to 2S16, and particularly in the Distance Learning segment, where new enrollments rose 10% year-on-year. Four new units are already conducting their new enrollment process for 2018/1: Arapiraca (Alagoas), Tucuruí (Pará) Eunápolis (Bahia) and Serra (Espírito Santo). The expectation is for Kroton to launch operations in another 4 cities already in the first semester of 2018 and in 14 additional cities in the second semester, closing next year with 28 new units, from the 100 expected in the coming years. These new campuses are part of an important organic growth plan that should sustain the Company s entry into new cities and regions of Brazil over the coming years. In terms of financial performance in the quarter, net revenue grew 8.1% compared to 3Q16, reflecting the solid performances of the new enrollment and re-enrollment processes, the better program mix (including the offering of Premium DL programs) and the offering of tuition installment plans, such as PEP and PMT. In the first nine months of the year, net revenue came to R$4,208.1 million, increasing 8.4% from 9M16. Investor Carlos Lazar IRO Tel: +55 (11) / 7311 / 7314 Relations Pedro Gomes Manager dri@kroton.com.br Ana Troster Coordinator Website: 1

2 Adjusted EBITDA amounted to R$576.8 million in the quarter, advancing 8.4% from 3Q16, accompanied by EBITDA margin expansion of 10 bps. The improvement in profitability despite the still-challenging scenario and the impacts from the higher provisioning to support the tuition installment products is a clear indication that Kroton has been able to consistently capture efficiency gains that are paving the way to meeting its guidance for the year. In 9M17, adjusted EBITDA was R$1,916.5 million, with margin of 45.5%, also stable year-on-year. Adjusted net income came to R$529.7 million in 3Q17, growing 17.0% from R$452.7 million in the same period of 2016, with adjusted net margin expanding 300 bps. In the nine months to September, adjusted net income grew 15.2% to R$1.8 billion, with adjusted net margin expanding 250 bps. Excluding the figures from Uniasselvi, FAIR and FAC/FAMAT, adjusted net income grew even more substantially, by 16.8%. Operating cash generation after capex reached R$415.4 million in 3Q17, with an EBITDA-to-Cash conversion rate of 79.7%, once again demonstrating the strength of the Company s operations, despite all the challenges faced during the economic crisis and the expanded offering to students of tuition installment plans using own capital. In the nine months to September, operating cash flow after capex amounted to R$927.5 million, for a conversion rate of 52.8%. Including the FIES installment normally paid in January, but that this year was anticipated to December 2016, operating cash generation after capex in 9M17 exceeded R$1.1 billion, for a conversion rate of 63.7%. On August 31, Kroton concluded the sales of the institutions Faculdades Integradas de Rondonópolis (FAIR), Instituto de Ensino Superior de Cuiabá (FAC) and Faculdade de Mato Grosso (FAMAT) for R$48.9 million, in connection with the transaction involving CADE s decision in relation to the merger with Anhanguera. MESSAGE FROM MANAGEMENT As 2017 draws to a close, we realize just how many challenges we were able to overcome in yet another very positive year for Kroton. This was possible only because we refused to be held hostage by factors beyond our control, such as the macroeconomic scenario and regulatory environment. To the contrary, we worked constantly to innovate and create new opportunities to capture efficiency gains and increasingly maximize returns for our stakeholders. And there are many examples! The robust improvement in our performance on the latest national ENADE exam, with the share of satisfactory scores rising 28 percentage points, is irrefutable proof that the more our students use KLS 2.0, the more our regulatory indicators improve. The strong growth in the Conecta Channel, which now has over 80,000 jobs advertised by nearly 10,000 registered companies, continues to help our students to achieve their life projects. In addition to the consolidation of our installment payment plans (PEP and FEP), which separate Kroton from the competition through an offering that combine flexibility for students with conservative accounting practices. Meanwhile, progress on the organic growth projects is accelerating. In all, 10 new On-Campus units (greenfields) are already recruiting students for the first semester of 2018, with the potential for 4 more in the first semester and another 14 in the final phase of approval, with the possibility for implementation by the second semester of In the Distance Learning segment, the numbers are even more meaningful, with 200 centers inaugurated this quarter (3Q17) and another 200 slated to open in January 2018, as well as strong expansion in the offering of Premium DL programs. It is important to note that opening a DL center does not just mean obtaining regulatory approval and identifying any partner. At Kroton, we have a rigorous partner selection phase, robust processes and systems, and a comprehensive training program for partners that includes their administrative and sales teams to ensure alignment with our practices and organizational culture. This is a major competitive advantage built by Kroton over the years and that will certainly make a difference in a scenario of growth in the number of distance learning centers nationwide. Other fronts should continue to generate benefits, such as the Retention Program, which combines a series of initiatives dedicated exclusively to reducing dropout rates in the On-Campus and Distance 2

3 Learning segments, and the efficiency levers, which consolidate projects such as the latest wave of strategic sourcing and a specific action to improve collection practices. These efforts are all clearly reflected in the financial performance delivered in the first nine months of the year. We achieved net revenue of over R$4.2 billion and generated adjusted EBITDA of more than R$1.9 billion, with margin of 45.5%. Adjusted net income followed the same positive trend to surpass R$1.7 billion with net margin of 41.6%. But the highlight was the cash generation after capex, which totaled R$927 million, assuring Kroton an even more solid capital structure. We are very confident that we will continue to deliver strong results over the coming quarters and once again reach our official guidance. But 2017 also was a year of reflection. In a comprehensive Strategic Planning process, we reviewed our Mission, Vision and Values, defined our Purpose and drafted our Manifesto establishing the Company s guidelines and goals for the years ahead. This discussion of strategy considered 3 main business challenges: 1) How do we maintain our efficiency levels? 2) How do we grow sustainably (delivering quality and employability)? and 3) How do we win the Digital Journey and obtain competitive advantages? All Strategic Planning discussions were based around the perspective of creating a new company with a digital mindset, which does not just mean expanding the offering of digital services to our students, but, more importantly, adopting a new way of thinking, of acting and of managing the Company. New governance structures and new management models and methodologies are being implemented. It is a new world of opportunities that will take Kroton to another level of efficiency, quality and agility of deliveries to meet its business challenges. We know that new challenges lie ahead, but we are certain that we have all the attributes and intensely engaged people we need to keep us on the path of consistent academic, operational and financial results. We eagerly look forward to 2018! 3

4 OPERATING PERFORMANCE POSTSECONDARY EDUCATION Evolution in Number of Students The evolution in the number of Postsecondary students between 2Q17 and 3Q17 by product (Undergraduate and Graduate) and teaching format (On-Campus and Distance Learning) is presented below. On-Campus Distance Learning Students Undergraduate Graduate Total Undergraduate Graduate Total 3Q16 Base 425,246 8, , ,935 29, ,727 2Q17 Base 417,010 8, , ,250 25, ,851 New Students 65,606 2,018 67, ,875 7, ,464 Graduates (30,015) (718) (30,733) (54,663) (5,739) (60,402) Dropouts (52,739) (668) (53,407) (73,682) (657) (74,339) 3Q17 Base 399,862 8, , ,780 26, ,574 % 3Q17 Base / 3Q16 Base -6.0% 5.4% -5.8% 2.4% -10.1% 1.7% % 3Q17 / 2Q17 Base -4.1% 7.8% -3.9% -2.8% 4.7% -2.5% Students Total Undergraduate Total Graduate Total 3Q16 Base 915,181 38, ,253 2Q17 Base 933,260 33, ,960 New Students 179,481 9, ,088 Graduates (84,678) (6,457) (91,135) Dropouts (126,421) (1,325) (127,746) 3Q17 Base 901,642 35, ,167 % 3Q17 Base / 3Q16 Base -1.5% -6.7% -1.7% % 3Q17 / 2Q17 Base -3.4% 5.4% -3.1% The new enrollment and reenrollment processes for the second semester of the year delivered very satisfactory results, considering the challenging scenario marked by still-high unemployment and weak economic growth. New enrollments came to 179,500 in the On-Campus and Distance Learning formats, representing growth of 6% on the previous year, supported by an effective sales strategy, the strength of Kroton s brands and recognition of the quality education it offers. Factors contributing to the result include: (i) the new programs being launched in both the On-Campus and Premium DL segments that have helped to expand the program portfolio and to enhance the perception of the Company s brands; (ii) the offering of tuition installment products, such as the Private Special Installment Plan (PEP) and the Late Enrollment Installment Plan (PMT), which represent important competitive advantages; and (iii) the good performance of new students paying out of pocket. The reenrollment process (enrollments of students in the second to last academic semesters) was affected by the adverse economic scenario and by the 11% increase in graduations, declining by 3% from 3Q16, for a total of about 722,200 Undergraduate students. 4

5 Considering these results, the Company ended the quarter with around 937,200 Postsecondary students (Undergraduate and Graduate) in the On-Campus and Distance Learning segments combined, representing a slight reduction of 1.7% from the same period last year and demonstrating the resilience of Kroton s operations in a still-adverse scenario. Compared to 2Q17, the student base contracted by 3.1%, explained by the aforementioned comments. By teaching format, 44% of the student base was enrolled in On-Campus programs and 56% in distance learning programs this quarter. Considering only Graduate programs, the student base grew 5.4% sequentially, supported by the enrollment of 9,607 students coming mainly from distance learning programs, which more than offset the significant number of graduations, which totaled approximately 6,500. Bear in mind that the LFG brand also offers Graduate programs, whose students are included in the above table. Note that the new enrollment and reenrollment processes for the first semester of 2018 already have begun and that the Company continues to focus on maintaining its high academic standards, while strengthening its organic growth strategies by opening new On-Campus units and new Distance Learning centers and strengthening its brands and sales actions to deliver growing results in student recruiting and retention. Evolution of Undergraduate Dropouts The above analysis shows the evolution in dropouts by students in the On-Campus and Distance Learning Undergraduate segments. In 3Q17, a negative trend was observed in both segments, which is a direct impact of the economic crisis and still-high unemployment levels. In the case of the On-Campus segment, this trend also was due to a change in the student profile after the graduation of FIES students who, given the program s original characteristics, were less likely to drop out. Moreover, the Company has been adopting stricter criteria in its policy for collections and the renegotiation of past-due amounts, which adversely affects this indicator, but benefits the Accounts Receivables line. Lastly, Kroton has been working and should accelerate new actions under the Retention Program, which aims to identify and determine the probability of dropping out and address the root causes even before a student decides to leave our institutions. The benefits of this program will be crucial for the Company to better serve this new student profile and reduce the dropout rates registered this quarter. In the case of Distance Learning, in addition to the factors mentioned above (excluding those related to FIES), the increase in the dropout rate is a consequence of the accelerated growth in recent admissions processes, given that students are much more likely to drop out in the first few semesters. Moreover, the increase in the number of students in the 100%-Online format also helped worsen this indicator, since the dropout rate for this product is higher than in other Distance Learning formats. 5

6 FIES Number of FIES Students Kroton ended 3Q17 with 148,171 students enrolled with FIES contracts, a reduction of 24.3% on a year earlier, in line with the downward trend in the program s representativeness in the last few student recruiting cycles and aggravated by the higher graduation rate of seniors. To illustrate this trend, in the student recruiting process for this semester, FIES accounted for only 8% of new students in the On-Campus segment and for less than 3% of total new students in the Company s Undergraduate programs. As a result, the penetration of FIES students has been declining gradually over recent cycles to 37.1% of the On-Campus Undergraduate student base, or 16.4% of the total Undergraduate student base. Private Special Installment Plan (PEP) and Late Enrollment Installment Plan (PMT) At the end of 3Q17, about 51,900 students were enrolled in PEP programs, of whom 37,800 enrolled in PEP30/PEP40 and 14,100 in PEP50. During the student recruiting process for 2S17, the Company made changes to how PEP is granted by restricting the cumulativeness of offerings, which ended up reducing the attractiveness of Kroton s own installment product. In 3Q17, only around 5,800 students enrolled under PEP contracts, accounting for 9% of total admissions in the On-Campus segment. Note that PEP offerings are being adjusted already for the next admission process, when exposure to the product should increase once again. Remember that Kroton adopts a conservative approach to revenue recognition and provisioning for PEP, which includes the Adjustment to Present Value (APV) of revenues and the provisioning for bad debt equivalent to 50% of the amount paid in installments by PEP students. The following analysis, as already presented during the admissions process in 1Q17, shows the evolution in the PEP30 student base, including the number of students who migrated from PEP30 (when they paid 30% of tuitions, during the first year of the contract) to PEP40 (paying 40% of tuitions, during the second year of the contract), in accordance with the program s rules. Likewise, students who re-enrolled and remained with PEP30 are those admitted in 1Q17 and who will migrate to PEP40 in 1Q18. Furthermore, note that the dropout curve is naturally higher during the first semesters of academic programs and that the actual dropout rate of PEP students is comparable to the dropout rates of students without financing plans from the same classes, which corroborates the product s sustainability. This behavior is also observed among PEP 50 students. 6

7 Evolution in the PEP student base PEP 30 PEP 40 PEP 50 61,537 15,403 17,546 4,636 2,213 8,554 10,624 46,134 12,910 5,760 1,209 4,551 51,894 14,119 16,747 16,747 33,367 16,477 21,028 2Q17 PEP Base PEP Dropouts PEP Re-Enrolled Base 3Q17 3Q17 PEP New Enrollments 3Q17 PEP Base PMT (or temporary PEP) is an alternative for the payment in installments of monthly tuitions related exclusively to periods during which new students were not yet enrolled because they were admitted after the start of classes, but still with sufficient time to complete the minimum classroom hours in the semester. Instead of exempting students from these monthly tuitions, Kroton started to offer this option to new On- Campus students as of the second semester of 2016, and to new DL students as of the first semester of Therefore, the Company continues to attract freshmen, enabling their late enrollment without foregoing revenues by granting scholarships or discounts. These outstanding installments, which are limited to 4 monthly tuitions, are repaid in the months after graduation. Note that Kroton adopts the same accounting practice for PEP and PMT, whereby revenues are adjusted to present value and provisions for bad debt are accrued for 50% of this amount. In addition, as with the policy adopted for PEP, the outstanding balance of these tuitions becomes due automatically if the student drops out before graduation. Preparatory Courses (LFG), Unregulated Programs and Language Courses Through the LFG brand, the Company offers preparatory courses focused on the examination of the Brazilian Bar Association (OAB) and on examinations for civil servant positions. Always positioned as a reference in preparatory courses, LFG registered an average of 25,391 students during 3Q17 (these students are not considered in the Postsecondary student base reported above), which represents growth of 12.5% from 3Q16. Kroton also offers short-duration open enrollment programs that allow students to increase their knowledge in various fields, such as Management, Education, Mathematics and Languages. In 3Q17, there were 63,515 students enrolled in these programs (also not considered in the total number of Postsecondary students reported above), up by 7.3% from the previous year. PRIMARY & SECONDARY In the Primary and Secondary Education business, Kroton's main activity is offering, through the Pitágoras Network, its Learning System, which comprises teaching book collections, teacher training, educational evaluations and other services, to private schools in the Pre-School, Primary and Secondary Education businesses. The segment also manages schools, especially for large companies, and operates Kroton s own school in Belo Horizonte, Minas Gerais. In 2017, the Company is serving 672 Associated Schools and around 220,000 students in the private segment, with these figures virtually stable in relation to last year. Kroton will continue to enhance the quality of its teaching model and to create competitive advantages for the Pitágoras Learning System. 7

8 FINANCIAL PERFORMANCE 1 3Q17 RESULTS CORPORATE On-Campus Education Distance Learning Primary and Secondary Education Kroton Consolidated Values in R$ ('000) 3Q17 % Net Rev. 3Q17 % Net Rev. 3Q17 % Net Rev. 3Q17 % Net Rev. Gross Revenue 1,337, % 354, % 24, % 1,717, % Gross Revenue Deductions (301,649) -29.1% (89,956) -33.9% (2,145) -9.6% (393,749) -29.7% Tax (34,566) -3.3% (7,353) -2.8% (1,212) -5.4% (43,131) -3.3% ProUni (177,469) -17.1% (60,747) -22.9% - 0.0% (238,217) -18.0% Returns - 0.0% - 0.0% (933) -4.2% (933) -0.1% Total Discounts (89,613) -8.6% (21,855) -8.2% - 0.0% (111,469) -8.4% Net Revenue 1,036, % 265, % 22, % 1,323, % Costs (COGS) (301,130) -29.1% (34,964) -13.2% (11,631) -52.1% (347,724) -26.3% Cost of Goods - 0.0% - 0.0% (4,434) -19.9% (4,434) -0.3% Cost of Services (301,130) -29.1% (34,964) -13.2% (7,197) -32.2% (343,290) -25.9% Faculty, Other Personnel and Third-Party Services (210,999) -20.4% (27,150) -10.2% (6,220) -27.9% (244,369) -18.5% Rent (81,505) -7.9% (4,136) -1.6% (266) -1.2% (85,907) -6.5% Materials (2,835) -0.3% (3,364) -1.3% - 0.0% (6,199) -0.5% Maintenance (3,722) -0.4% (238) -0.1% (84) -0.4% (4,044) -0.3% Other (2,070) -0.2% (76) 0.0% (626) -2.8% (2,772) -0.2% Gross Income 735, % 230, % 10, % 975, % Operating Expenses (108,593) -10.5% (27,094) -10.2% (3,563) -16.0% (139,250) -10.5% Personnel, General and Administrative Expenses (108,593) -10.5% (27,094) -10.2% (3,563) -16.0% (139,250) -10.5% Personnel Expenses (65,225) -6.3% (20,271) -7.6% (2,760) -12.4% (88,255) -6.7% General and Administrative Expenses (43,368) -4.2% (6,823) -2.6% (803) -3.6% (50,994) -3.9% Provision for Doubtful Accounts - PDA (140,915) -13.6% (24,426) -9.2% (179) -0.8% (165,520) -12.5% (+) Interest and Penalties on Tuition 26, % 14, % % 41, % Operating Result 512, % 193, % 7, % 712, % Sales and Marketing Expenses (69,112) -5.2% C Corporate Expenses (66,710) -5.0% o Adjusted EBITDA 576, % (-) Nonrecurring Items (32,407) -2.4% EBITDA 544, % Depreciation and Amortization (104,913) -7.9% Financial Result 24, % Income and Social Contribution Tax (5,483) -0.4% Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT (7,786) -0.6% Net Profit 450, % (+) Nonrecurring Items 32, % (+) Intangible Amortization (Acquisitions) 38, % (+) Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT 7, % Adjusted Net Profit 529, % 1 Note 1: As announced in 3Q16, due to delays in the opening of the Student Financing Fund Transfer System (SisFIES) during the reenrollment of FIES students for that period, the Company opted to analyze the 3Q16 financial performance (On Campus and Consolidated) on a pro forma basis based on the historical rates for FIES contract renewals to ensure a better comparison base. Therefore, the pro forma FIES revenue for 3Q16 translates as best as possible the actual amount that would have been recorded if re-enrollments in SisFIES had been concluded within the historical periods. Note 2: Corporate financial data for 9M16 include two months (January and February) of the operations of Uniasselvi in its various operating segments (On-Campus and Distance Learning). The financial data ex-uniasselvi exclude the operations of Uniasselvi in its various operating segments (On-Campus and Distance Learning) for all periods. Note 3: The corporate financial data for 3Q17 and 9M17 include two and eight months, respectively, of the operations of the units FAIR and FAC/FAMAT in the On-Campus segment, since the sale was concluded on August 31, Meanwhile, the financial data ex-uniasselvi, FAIR and FAC/FAMAT exclude the figures from these operations from On-Campus Learning for all periods. 8

9 9M17 RESULTS CORPORATE On-Campus Education Distance Learning Primary and Secondary Education Kroton Consolidated Values in R$ ('000) 9M17 % Net Rev. 9M17 % Net Rev. 9M17 % Net Rev. 9M17 % Net Rev. Gross Revenue 4,204, % 1,078, % 113, % 5,396, % Gross Revenue Deductions (921,531) -28.1% (257,788) -31.4% (9,301) -8.9% (1,188,620) -28.2% Tax (117,517) -3.6% (24,086) -2.9% (3,723) -3.6% (145,326) -3.5% ProUni (516,846) -15.7% (166,685) -20.3% - 0.0% (683,530) -16.2% Returns - 0.0% - 0.0% (5,578) -5.4% (5,578) -0.1% Total Discounts (287,167) -8.7% (67,018) -8.2% - 0.0% (354,185) -8.4% Net Revenue 3,282, % 821, % 104, % 4,208, % Costs (COGS) (891,821) -27.2% (102,233) -12.5% (45,111) -43.3% (1,039,165) -24.7% Cost of Goods - 0.0% - 0.0% (18,548) -17.8% (18,548) -0.4% Cost of Services (891,821) -27.2% (102,233) -12.5% (26,563) -25.5% (1,020,617) -24.3% Faculty, Other Personnel and Third-Party Services (630,412) -19.2% (79,249) -9.7% (22,604) -21.7% (732,266) -17.4% Rent (241,092) -7.3% (12,327) -1.5% (819) -0.8% (254,238) -6.0% Materials (8,567) -0.3% (8,801) -1.1% - 0.0% (17,368) -0.4% Maintenance (5,867) -0.2% (1,118) -0.1% (181) -0.2% (7,166) -0.2% Other (5,882) -0.2% (738) -0.1% (2,959) -2.8% (9,579) -0.2% Gross Income 2,391, % 718, % 58, % 3,168, % Operating Expenses (340,055) -10.4% (75,495) -9.2% (13,172) -12.7% (428,722) -10.2% Personnel, General and Administrative Expenses (340,055) -10.4% (75,495) -9.2% (13,172) -12.7% (428,722) -10.2% Personnel (190,153) -5.8% (52,556) -6.4% (9,882) -9.5% (252,591) -6.0% General and Administrative (149,902) -4.6% (22,939) -2.8% (3,290) -3.2% (176,131) -4.2% Provision for Doubtful Accounts - PDA (394,831) -12.0% (80,606) -9.8% (833) -0.8% (476,270) -11.3% (+) Interest and Penalties on Tuition 86, % 25, % % 113, % Operating Result 1,743, % 588, % 45, % 2,377, % Sales and Marketing Expenses (271,701) -6.5% Corporate Expenses (188,836) -4.5% Adjusted EBITDA 1,916, % (-) Nonrecurring Items (135,807) -3.2% EBITDA 1,780, % Depreciation and Amortization (311,061) -7.4% Financial Result 64, % Income and Social Contribution Tax (35,051) -0.8% Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT (7,786) -0.2% Net Profit 1,491, % (+) Nonrecurring Items 135, % (+) Intangible Amortization (Acquisitions) 116, % (+) Income Tax / Social Cont. - Disposal FAIR and FAC/FAMAT 7, % Adjusted Net Profit 1,751, % 9

10 FINANCIAL PERFORMANCE ON-CAMPUS EDUCATION 2 On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% 9M17 9M16 Chg.% Gross Revenue 1,337,849 1,229, % 1,507, % 4,204,465 3,794, % Gross Revenue Deductions (301,649) (281,773) 7.1% (327,748) -8.0% (921,531) (841,268) 9.5% Tax (34,566) (34,859) -0.8% (43,398) -20.4% (117,517) (100,755) 16.6% ProUni (177,469) (170,924) 3.8% (173,530) 2.3% (516,846) (506,187) 2.1% Returns - - n.a. - n.a. - - n.a. Total Discounts (89,613) (75,990) 17.9% (110,820) -19.1% (287,167) (234,326) 22.6% FGEDUC (27,615) (30,219) -8.6% (34,541) -20.1% (92,527) (100,417) -7.9% FIES - Administratuve Fee (10,919) (11,689) -6.6% (12,296) -11.2% (35,984) (11,689) 207.9% Other (51,078) (34,082) 49.9% (63,984) -20.2% (158,656) (122,220) 29.8% Net Revenue 1,036, , % 1,180, % 3,282,935 2,953, % Net Revenue - Undergraduate 1,026, , % 1,167, % 3,246,967 2,908, % Net Revenue - Out-of-pocket 359, , % 384, % 1,055, , % Net Revenue - FIES (financed part net of APV) 447, , % 608, % 1,592,051 1,839, % Net Revenue - PEP (installment part net of APV) 158,732 83, % 134, % 439, , % Net Revenue - PMT (installment part net of APV) 60,480 34, % 40, % 159,979 34, % Net Revenue - Graduate, Unregulated Programs, Pronatec 9,491 10, % 12, % 35,968 44, % Net Revenue - Pronatec - 1,451 n.a. 1,916 n.a. 9,087 11, % Net Revenue - Graduate and Unregulated Programs 9,491 8, % 10, % 26,881 33, % Total of Costs (301,130) (306,166) -1.6% (330,090) -8.8% (891,821) (919,768) -3.0% Cost of Goods - - n.a. - n.a. - - n.a. Cost of Services (301,130) (306,166) -1.6% (330,090) -8.8% (891,821) (919,768) -3.0% Faculty, Other Personnel and Third-Party Services (210,999) (218,226) -3.3% (241,938) -12.8% (630,412) (649,615) -3.0% Rent (81,505) (74,142) 9.9% (79,572) 2.4% (241,092) (227,259) 6.1% Materials (2,835) (3,324) -14.7% (3,792) -25.2% (8,567) (8,537) 0.4% Maintenance (3,722) (2,709) 37.4% (1,916) 94.3% (5,867) (8,571) -31.5% Other (2,070) (7,767) -73.4% (2,872) -28.0% (5,882) (25,786) -77.2% Gross Income 735, , % 850, % 2,391,114 2,033, % Gross Margin 70.9% 67.7% 3.2 p.p. 72.0% -1.1 p.p. 72.8% 68.9% 4.0 p.p. Total Operating Expenses (108,593) (105,387) 3.0% (126,650) -14.3% (340,055) (336,861) 0.9% Personnel Expenses (65,225) (65,124) 0.2% (66,630) -2.1% (190,153) (189,644) 0.3% General and Administrative Expenses (43,368) (40,263) 7.7% (60,020) -27.7% (149,902) (147,217) 1.8% Provision for Doubtful Account - PDA (140,915) (84,851) 66.1% (122,443) 15.1% (394,831) (196,995) 100.4% (+) Interest and Penalties on Tuition 26,655 32, % 24, % 86,884 90, % Operating Result 512, , % 625, % 1,743,112 1,590, % Operat ing Margin 49.4% 51.1% -1.6 p.p. 53.0% -3.6 p.p. 53.1% 53.8% -0.8 p.p. 2 As mentioned above, the results for 3Q16 are presented on a pro forma basis to consider the historical rates of FIES re-enrollments. Furthermore, the figures for 3Q17 and 9M17 include only two and eight months, respectively, of the operations of FAIR and FAC/FAMAT. 10

11 Revenue and Deductions On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Revenue 1,337,849 1,229, % 1,507, % Gross Revenue Deductions (301,649) (281,773) 7.1% (327,748) -8.0% Tax (34,566) (34,859) -0.8% (43,398) -20.4% ProUni (177,469) (170,924) 3.8% (173,530) 2.3% Returns - - n.a. - n.a. Total Discounts (89,613) (75,990) 17.9% (110,820) -19.1% FGEDUC (27,615) (30,219) -8.6% (34,541) -20.1% FIES - Administratuve Fee (10,919) (11,689) -6.6% (12,296) -11.2% Other (51,078) (34,082) 49.9% (63,984) -20.2% Net Revenue 1,036, , % 1,180, % Net Revenue - Undergraduate 1,026, , % 1,167, % Net Revenue - Out-of-pocket 359, , % 384, % Net Revenue - FIES (financed part net of APV) 447, , % 608, % Net Revenue - PEP (installment part net of APV) 158,732 83, % 134, % Net Revenue - PMT (installment part net of APV) 60,480 34, % 40, % Net Revenue - Graduate, Unregulated Programs, Pronatec 9,491 10, % 12, % Deductions Deductions as a ratio of gross revenue decreased 0.4 p.p. in 3Q17 compared to the year-ago period, mainly due to the higher revenue in the period, as well as fewer FIES students in the base, which reduced the amount of contributions to FGEDUC and the program s administrative fee. These effects offset the expansion in the ProUni student base in the quarter. Compared to 2Q17, deductions as a ratio of gross revenue increased 0.8 p.p., reflecting the higher gross revenue in that quarter due to the delay in the normalization of FIES reenrollments. This effect more than offset the decrease in the total discounts line due to the seasonality of the Tuition Adjustment Process (PAM), which occurs primarily in even-numbered quarters. Net Revenue Net revenue advanced 9.3% in 3Q17 compared to 3Q16, despite the lower number of students in the period, which shows that the Company has been surmounting the difficult economic scenario with a portfolio of more-premium programs, with positive impacts on the segment s average ticket. Moreover, the growth in the base of students paying out of pocket also supported revenue growth in the period, while also mitigating the effects from the shift in the student profile, with the graduation of FIES students. Other products contributing positively to revenue performance in the period were the Private Special Installment Plan (PEP) and the Late Enrollment Installment Plan (PMT), which not only are important sales tools, but also have the added benefit of not being eligible to any type of discounts (even though their revenue is reduced by Adjustment to Present Value APV). In the quarter, PEP revenue accounted for R$158.7 million (net of APV), or 15.3% of total revenue from the On-Campus segment, while PMT revenue accounted for R$60.5 million (also net of APV), or 5.8% of the segment s revenue. Note that the positive amount of APV of PMT in the quarter for students paying out of pocket is due to dropouts of students with the plan and the consequent reversal of this adjustment. Compared to the prior quarter, the 12.2% decline in net revenue is mainly due to seasonality, which generates positive impacts in even-numbered quarters, with the recognition of 6 months of FIES tuitions in a single quarter, due to the delayed re-enrollments, as well as the recognition of up to 4 months of monthly tuitions from PMT. Net revenue in the first nine months of the year grew 11.2%, which attests to Kroton s resilience in a challenging economic environment and shows that it has effectively managed to maintain revenue growth sustainably. 11

12 Average Net Ticket On-Campus Postsecondary Education- Values in R$ 3Q17 3Q16 Chg.% 2Q17 Chg.% Total % % Calculation of the average net ticket considers Net Revenue after FGEDUC, FIES Administrative Fee, ProUni Scholarship and Taxes on all On-campus products (Undergraduate, Graduate, Research Degree and Extension), excluding revenue from Pronatec and the effects of APV. For a better understanding, the calculation of Kroton s average ticket considers the number of students effectively billed in the period (including ProUni students), since, due to retroactive contract amendments, a student could be billed more than once in a certain month. The net average ticket of On-Campus programs in 3Q17 was R$862.60, an increase of 8.6% from the year-ago period, reflecting the higher number of out-of-pocket students enrolled in recent admissions processes, as well as the annual adjustment of monthly tuitions and the increased share of programs with higher tuitions in the base. In this regard, note that the mid-year student recruiting process was the second consecutive process when new students enrolling in engineering and health programs accounted for more than 50% of total new enrollments. Another important factor that has supported ticket performance are the Company s installment payment products (such as PEP and PMT), since they are priced without any deductions on their final price, i.e. without scholarships or discounts. Breakdown of Average On-Campus Undergraduate Net Ticket Student Perspective by Product Since the beginning of the year, analyses of average ticket in the On-Campus segment include additional information based on the student perspective by product for the Undergraduate business. This perspective considers the different payment sources of each product separately, i.e., the ex-fies and ex- PEP average ticket is formed by the amounts of students paying 100% of tuition out of pocket and those contracting the PMT plan. Meanwhile, the PEP and FIES average tickets are divided into Out-of-pocket, Installment/Financing and PMT. The analysis of the combination of the Ex-FIES and PEP average tickets is called On-Campus Undergraduate Out-Of-Pocket (ex-fies and ex-prouni). This analysis enables a better understanding of the dynamics of the average ticket across the various types of students and of payment products offered by the Company. ON-CAMPUS UNDERGRADUATE 3Q17 3Q16 Chg.% Student Product Net Revenue APV NR Ex-APV ¹ Invoices² Net Ticket Net Revenue APV NR Ex-APV ¹ Invoices² Net Ticket Δ Net Ticket Δ NR Ex-FIES Ex-PEP 309,875 7, , ,629 7, , % 38.8% Ex-FIES e Ex-PEP Out-of-Pocket 250, , , , PMT 58,960 7,336 66, ,133 7,831 40, PEP 224,867 (35,461) 189, , ,614 16, , , % 19.9% PEP Out-of-Pocket 65,910-65, ,559-56, Installment 158,732 (34,732) 124, ,821 16, , PMT 224 (729) (504) - - 1,234-1, Out-of-Pocket On-Campus Undergrad. Ex-FIES Ex-Prouni FIES 534,742 (28,125) 506, ,243 24, , % 31.1% FIES 491,968 (2,023) 489, , ,327 (2,936) 572, , % -14.4% Out-of-Pocket 42,981-42, ,017-38, Installment 447,692 (1,947) 445, ,311 (2,936) 534, PEP+PMT 1,295 (76) 1, TOTAL On-Campus Undergradraduate³ ExProuni TOTAL On-Campus Undergradraduate³ 1,026,710 (30,148) 996,562 1, ,571 21, ,816 1, % 3.9% 1,026,710 (30,148) 996,562 1, ,571 21, ,816 1, % 3.9% ¹ Revenue used to calculate net average ticket; ² Amounts / 000; ³ On-campus ex Undergraduate/Unregulated /Extension/Language/Pronatec programs. As already observed in the first semester, an analysis of the above table shows the importance of offering student financing/installment plans to enable students to pursue careers with more expensive monthly tuitions, a policy adopted by the Brazilian government itself when offering FIES financing. Since there is no difference in the amounts of the base tuition among students in the same class, the differences in the average ticket observed among installment/financing products reinforces this point, given the higher share of students enrolled in more expensive programs. Accordingly, PEP is the segment s channel with the highest average ticket, of R$1,253.7 per student, in 3Q17. Next comes FIES, with an average ticket of R$1,186.0, followed by out-of-pocket student average ticket of R$

13 Costs On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs (301,130) (306,166) -1.6% (330,090) -8.8% Cost of Goods (CG) - - n.a. - n.a. Cost of Services (CS) (301,130) (306,166) -1.6% (330,090) -8.8% Faculty, Other Personnel and Third-Party Services (210,999) (218,226) -3.3% (241,938) -12.8% Rent (81,505) (74,142) 9.9% (79,572) 2.4% Materials (2,835) (3,324) -14.7% (3,792) -25.2% Maintenance (3,722) (2,709) 37.4% (1,916) 94.3% Other (2,070) (7,767) -73.4% (2,872) -28.0% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs -29.1% -32.3% 3.2 p.p % -1.1 p.p. Cost of Goods (CG) 0.0% 0.0% n.a. 0.0% n.a. Cost of Services (CS) -29.1% -32.3% 3.2 p.p % -1.1 p.p. Faculty, Other Personnel and Third-Party Services -20.4% -23.0% 2.7 p.p % 0.1 p.p. Rent -7.9% -7.8% 0.0 p.p. -6.7% -1.1 p.p. Materials -0.3% -0.4% 0.1 p.p. -0.3% 0.0 p.p. Maintenance -0.4% -0.3% -0.1 p.p. -0.2% -0.2 p.p. Other -0.2% -0.8% 0.6 p.p. -0.2% 0.0 p.p. In 3Q17, cost of services as a ratio of net revenue fell 3.2 p.p. compared to the same period in As observed in recent quarters, this improvement is explained by the optimization obtained from implementing the operational research (OR) software at Kroton units as of the second semester of 2015, which led to lower costs with faculty, other personnel and third-party services. Although the tool has yet to reach its full capacity in terms of scope, gains from the more efficient allocation of faculty and use of infrastructure remain the key drivers of gross margin expansion in the segment. Other positive factors are related to the growing share of digital content in the curriculum, coupled with ongoing strategic sourcing initiatives that are consistently streamlining the Company s costs. Compared to 2Q17, total costs as a ratio of net revenue increased 1.1 p.p. due to seasonality and to higher rental costs. Gross Income On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 735, , % 850, % Gross Margin 70.9% 67.7% 3.2 p.p. 72.0% -1.1 p.p. Gross income from On-Campus Education was R$735.1 million in 3Q17, increasing 14.6% from the same period last year. The increase was driven by the combination of revenue growth in the period and the ongoing efficiency gains at units, which supported gross margin expansion of 3.2 p.p. Compared to the prior quarter, the 1.1 p.p. gross margin contraction is explained by the lower revenue and seasonality in the period, since 2Q17 benefitted from the normalization of re-enrollments and the recognition of 4 months of PMT revenue. In the first nine months of the year, gross margin expanded 4.0 p.p. to 72.8%, reflecting revenue growth in the period and the efforts to ensure continuous efficiency improvement in the Company s various institutions. Operating Expenses On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses (108,593) (105,387) 3.0% (126,650) -14.3% Personnel Expenses (65,225) (65,124) 0.2% (66,630) -2.1% General and Administrative Expenses (43,368) (40,263) 7.7% (60,020) -27.7% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses -10.5% -11.1% 0.6 p.p % 0.3 p.p. Personnel Expenses -6.3% -6.9% 0.6 p.p. -5.6% -0.6 p.p. General and Administrative Expenses -4.2% -4.2% 0.1 p.p. -5.1% 0.9 p.p. 13

14 Personnel, General and Administrative Expenses This quarter, total personnel, general and administrative expenses as a ratio of net revenue decreased 0.6 p.p. from the same quarter last year, due to the efforts to control operating expenses, particularly personnel expenses. Compared to 2Q17, factors helping to explain the 0.3 p.p. decrease in this indicator include the strict control of expenses, the lower expenses with utilities due to the segment s seasonality and the higher reversals of provision for contingencies in the period. Provision for Doubtful Accounts (PDA) On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Provision for Doubtful Account - PDA (140,915) (84,851) 66.1% (122,443) 15.1% PDA / Postsecondary Net Revenues¹ -13.6% -9.0% -4.6 p.p % -3.2 p.p. PDA Out -of-pocket (27,326) (20,927) 30.6% (29,613) -7.7% PDA Out-of-pocket / Postsecondary Net Revenues Out-of-pocket¹ -7.4% -7.2% -0.2 p.p. -7.5% 0.1 p.p PDA FIES - Financed Part (4,029) (4,829) -16.6% (5,476) -26.4% PDA FIES / Postsecondary Net Revenues FIES¹ -0.9% -0.9% -0.0 p.p. -0.9% 0.0 p.p PDA PEP - Installment Part (79,320) (41,911) 89.3% (67,328) 17.8% PDA PEP / Postsecondary Net Revenues PEP¹ -50.0% -50.0% 0.0 p.p -50.0% 0.0 p.p PDA PMT - Installment Part (30,240) (17,184) 76.0% (20,026) 51.0% PDA PMT / Postsecondary Net Revenues PMT¹ -50.0% -50.0% 0.0 p.p -50.0% 0.0 p.p ¹ Net Revenue for the On-Campus excludes revenues from Pronatec Total PDA as a ratio of net revenue in the On-Campus segment increased 4.6 p.p. from the same period last year, to 13.6%. The performance is due to the higher share of PEP students, as well as to the impact from PMT, which also is provisioned at the rate of 50% of the total installment amount. Compared to the prior quarter, the 3.2 p.p. increase is explained by seasonality, due to the mid-year admissions process and the shift in the student mix. However, note that this was the first quarter since 2016 in which improvement was observed in out-of-pocket PDA, with growth in recoveries of past-due receivables. Accounts Receivables by Payment Form On-Campus Higher Education Values in R$ ( 000) net of APV and PDA 3Q17 3Q16 Chg.% 2Q17 Chg.% Net Accounts Receivable 1,713,483 1,468, % 1,710, % Out-of-Pocket 344, , % 339, % Tuition + FIES + PEP 343, , % 337, % Agreements to Receive 1,051 2, % 2, % Pronatec n.a - n.a Installments 566, , % 455, % PEP 441, , % 362, % PMT 125,227 30, % 92, % FIES 802,525 1,012, % 916, % PN23 365, , % 563, % Short Term 365, , % 199, % Long Term - 350,811 n.a. 363,837 n.a. Other FIES - Short Term 437, , % 353, % ¹ Amounts for 3Q16 adjusted on the same comparison base of 3Q17 and 2Q17, including accounts receivable from credit cards. Total Accounts Receivables Net of PDA increased by only 0.2% in 3Q17 compared to 2Q17. The reduction in FIES accounts receivable, due to the receipt, in August, of the second installment (25%) of the amount not received in 2015 due to PN23, was offset by the increased exposure to the Company s installment products, such as PEP and PMT, under which repayment occurs only after graduation. Another factor that has been pressuring accounts receivable is the higher balance of renegotiations of debt that had been written-off. Note, however, that this increase leads to a reduction in the total actual losses, directly improving PDA. Furthermore, as mentioned in the notice on enrollment results, the Company has adopted stricter practices for contract renegotiations during student reenrollments, which also should yield positive results in the short term. Lastly, note that the only FIES installment outstanding under PN23 is recorded in the short term line and corresponds to 50% of the amount not received in 2017 (adjusted to present value), which will be repurchased in August

15 Average Accounts Receivable Term For calculating the average term of accounts receivable in the Postsecondary business, Kroton presents four distinct analyses: 1. Accounts Receivable Total On-Campus - Average Accounts Receivable Term (days) 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable Total Net Revenue On-Campus Days Days Calculation base: net balance of short-term and long-term Accounts Receivable in the On-Campus Postsecondary business related to monthly tuitions, agreements and other academic services, divided by net operating revenue in the On-Campus Postsecondary business in the last 12 months, multiplied by 360 days. In 3Q17, the average receivables term decreased 6 days from the same period last year, mainly due to the normalization of FIES payments, which offset the larger base of PEP and PMT students and the higher amount of outstanding tuitions. Compared to 2Q17, the average term declined even more sharply (by 18 days), basically due to the payment of the second installment under PN23. The shorter average term this quarter is an important indicator and bodes well for the coming quarters, given Kroton s reduced flexibility when renegotiating contracts with its students and the creation of an executive department dedicated to improving this flow and the management of Accounts Receivables. 2. Accounts Receivable Out-of-pocket On-Campus - Average Accounts Receivable Term (days) 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable (Out-of-Pocket ex-pronatec) Net Revenue (Out-of-Pocket ex-pronatec) Calculation base: net balance of short-term and long-term Accounts Receivable (Out-of-pocket ex-pronatec) in the On-Campus Postsecondary business related exclusively to monthly tuitions, agreements and other academic services, divided by net revenue (Out-of-pocket ex-pronatec) in the On-Campus business in the last 12 months, multiplied by 360 days. In 3Q17, the average term of students paying out of pocket (without installment/financing plans) increased by 6 days from the same period of 2016, due to the growth in recoveries via renegotiations of portfolios that had already been written-off, which attests to the effective management of the collection process implemented in recent months. Additionally, an important highlight was the decrease of 4 days from 2Q17, reflecting the more restrictive policy for contract renegotiations, as already commented in the analysis of the dropout rate. 3. Accounts Receivable FIES Days Days On-Campus - Average Accounts Receivable Term (days) 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable (FIES) Net Revenue (FIES) Days Days Calculation base: net balance of short-term and long-term Accounts Receivable related solely to FIES, divided by net revenue from monthly FIES tuitions in the last 12 months, multiplied by 360 days. In 3Q17, the average term of FIES Accounts Receivables was 107 days, a reduction of 38 days from the same period of 2016 and of 37 days from 2Q17, which reflects the payment of the second portion of 25% of the installments not paid in 2015, due to PN23. The expectation is that, as of August 2018, when the government will repurchase the remaining 50% under PN23, the average term of FIES accounts receivables will return to pre-2015 levels. 15

16 4. Accounts Receivable - Installment Payment Products On-Campus - Average Accounts Receivable Term (days) 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable (PEP/PMT) Net Revenue (PEP/PMT) Calculation base: net balance of short-term and long-term Accounts Receivable related exclusively to PEP and PMT, divided by net revenue from monthly PEP and PMT tuitions in the last 12 months, multiplied by 360 days. In 3Q17, the average term of installment products increased by 50 days and 17 days compared to 3Q16 and 2Q17, respectively, reflecting the maturation of PEP and PMT students in the Company s student base and the mid-year student recruiting process. Operating Result Days Days On-Campus Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 735, , % 850, % (-) Total Operating Expenses (108,593) (105,387) 3.0% (126,650) -14.3% (-) Provision for Doubtful Account - PDA (140,915) (84,851) 66.1% (122,443) 15.1% (+) Interest and Penalties on Tuition 26,655 32, % 24, % Operating Result 512, , % 625, % Operat ing Margin 49.4% 51.1% -1.6 p.p. 53.0% -3.6 p.p. The operating result (before marketing expenses) in 3Q17 amounted to R$512.2 million, with operating margin of 49.4%, down 1.6 p.p. from the prior-year period. This result is explained by the higher provisioning to support conservatively the Company s installment payment products and by the lower impact from inflation adjustment (accrual method of accounting) on the interest and penalties on tuitions line related to the agreement to receive the overdue FIES installments (PN23), which this quarter came to only R$ 317 thousand, compared to the R$8.1 million recognized in the same period last year. Excluding these effects, the efficiency gains captured in recent quarters would become more clear, in line with the trend observed in gross margin. Compared to 2Q17, operating margin contracted by 3.6 p.p., which was exclusively due to the positive impact from seasonality on even-numbered quarters. In the nine-month period, the operating result was R$1,743.1 million, with operating margin of 53.1%, down 0.8 p.p. from the same period of 2016, which is the natural consequence of the impact that a responsible provisioning policy has on the segment s results, despite the operating efficiency gains in the period. RESULTS EX-UNIASSELVI, FAIR and FAC/FAMAT The following table presents the main P&L lines excluding data from Uniasselvi, FAIR and FAC/FAMAT for both periods (9M16 and 9M17): On-Campus - Values in R$ ('000) 9M17 9M16 Chg.% Net Revenue 3,268,791 2,922, % Gross Income 2,380,479 2,011, % Gross Margin 72.8% 68.8% 4.0 p.p. Operating Result 1,734,739 1,573, % Operat ing Margin 53.1% 53.8% -0.8 p.p. Excluding Uniasselvi, and the recent divestment of FAIR and FAC/FAMAT from the results for both periods, the figures for the On-Campus segment were even stronger, with net revenue growth of 11.8%. Gross income in 9M17 grew 18.4%, accompanied by margin expansion of 4.0 p.p. from the same period of Operating margin, however, remained slightly below (0.8 p.p.) the ex-divestments performance observed in 9M16. 16

17 CORPORATE FINANCIAL PERFORMANCE DISTANCE LEARNING Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% 9M17 9M16 Chg.% Gross Revenue 354, , % 382, % 1,078,842 1,061, % Gross Revenue Deductions (89,956) (81,240) 10.7% (87,893) 2.3% (257,788) (257,031) 0.3% Tax (7,353) (7,948) -7.5% (9,081) -19.0% (24,086) (24,979) -3.6% ProUni (60,747) (51,584) 17.8% (56,583) 7.4% (166,685) (166,369) 0.2% Returns - - n.a. - n.a. - - n.a. Total Discounts (21,855) (21,707) 0.7% (22,228) -1.7% (67,018) (65,683) 2.0% Net Revenue 265, , % 294, % 821, , % Net Revenue - Undergraduate 248, , % 278, % 773, , % Net Revenue - Out-of-pocket 245, , % 267, % 747, , % Net Revenue - PMT (installment part net of APV) 3,283 - n.a. 10, % 26,060 - n.a. Net Revenue - Graduate, LFG and Unregulated Programs 16,310 18, % 16, % 47,984 61, % Total of Costs (34,964) (37,710) -7.3% (39,295) -11.0% (102,233) (118,645) -13.8% Cost of Goods - - n.a. - n.a. - - n.a. Cost of Services (34,964) (37,710) -7.3% (39,295) -11.0% (102,233) (118,645) -13.8% Faculty, Other Personnel and Third-Party Services (27,150) (30,038) -9.6% (31,110) -12.7% (79,249) (92,474) -14.3% Rent (4,136) (4,478) -7.6% (4,119) 0.4% (12,327) (14,559) -15.3% Materials (3,364) (2,537) 32.6% (2,710) 24.1% (8,801) (9,669) -9.0% Maintenance (238) (210) 13.2% (866) -72.5% (1,118) (705) 58.5% Other (76) (446) -83.0% (489) -84.4% (738) (1,237) -40.3% Gross Income 230, , % 255, % 718, , % Gross Margin 86.8% 85.1% 1.7 p.p. 86.7% 0.1 p.p. 87.5% 85.3% 2.3 p.p. Total Operating Expenses (27,094) (23,055) 17.5% (25,448) 6.5% (75,495) (73,872) 2.2% Personnel Expenses (20,271) (19,283) 5.1% (16,203) 25.1% (52,556) (53,120) -1.1% General and Administrative Expenses (6,823) (3,772) 80.9% (9,245) -26.2% (22,939) (20,752) 10.5% Provision for Doubtful Account - PDA (24,426) (19,704) 24.0% (29,444) 17.0% (80,606) (61,039) 32.1% (+) Interest and Penalties on Tuition 14,598 6, % 2, % 25,622 20, % Operating Result 193, , % 203, % 588, , % Operat ing Margin 72.9% 70.6% 2.2 p.p. 69.0% 3.9 p.p. 71.7% 71.1% 0.6 p.p. 17

18 Revenue and Deductions Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Revenue 354, , % 382, % Gross Revenue Deductions (89,956) (81,240) 10.7% (87,893) 2.3% Tax (7,353) (7,948) -7.5% (9,081) -19.0% ProUni (60,747) (51,584) 17.8% (56,583) 7.4% Returns - - n.a. - n.a. Total Discounts (21,855) (21,707) 0.7% (22,228) -1.7% Net Revenue 265, , % 294, % Net Revenue - Undergraduate 248, , % 278, % Net Revenue - Out-of-pocket 245, , % 267, % Net Revenue - PMT (installment part net of APV) 3,283 - n.a. 10, % Net Revenue - Graduate, LFG and Unregulated Programs 16,310 18, % 16, % Deductions In the Distance Learning business, the main deduction items are the discounts granted and ProUni, which combined corresponded to 23.3% of total gross revenue in 3Q17, up 1.3 p.p. from the same period last year, which reflects the larger ProUni student base after the mid-year student recruiting process. The effect reflected the Company s continued full compliance with the rules of POEB. Meanwhile, the total discounts line was virtually stable between periods. Net Revenue In 3Q17, net revenue was R$265.0 million, or 4.9% higher than in the same period of 2016, driven by the solid results of the enrollment and reenrollment processes during the year and the positive effect from the offering of PMT, which offset the increased number of students enrolled in 100%-online programs and the deterioration in the results of LFG and unregulated programs. Compared to the prior quarter, net revenue in the distance-learning segment fell 10.1%, due to the higher number of students enrolled in 100%-online programs and the fact that even-numbered quarters include seasonally higher revenues from PMT, since 4 months of tuitions are recognized in a single period. On the other hand, net revenue in the first nine months of the year grew 2.0% from the same period of 2016, despite the two fewer months of Uniasselvi revenue this year. Average Net Ticket Distance Learning - Values in R$ 3Q17 3Q16 Chg.% 2Q17 Chg.% Total (Student) % % Calculation of the average net ticket considers Net Revenue before Transfers to owners of the centers and after ProUni scholarships and Taxes for all DL products (Undergraduate, Graduate, Unregulated Programs and LFG) and excludes the effects of APV. For comparison purposes, Kroton reports only the effective ticket paid by the student, without discounting the transfers to the partners of the centers. To enable a better understanding, when calculating the average ticket, Kroton uses the number of invoices effectively recognized as revenue in the period, including ProUni sales. As a result, considering 100% of revenue and the DL Undergraduate, DL Graduate and LFG businesses combined, the average ticket stood at R$266.86, up 3.6% from 3Q16, despite the expansion in the number of students enrolled in programs with the 100%-online format (which has a lower average ticket). The result reflects the annual tuition increase and the expansion of the program portfolio, especially via Premium DL programs, whose strategic importance is due not just to its competitive advantage, but also because tuitions in this segment are sometimes twice as high as those in the blendedlearning format. Compared to the prior quarter, the average ticket increased 2.0%, also reflecting the tuition increases implemented in the mid-year process. 18

19 Breakdown of Average DL Undergraduate Net Ticket Student Perspective by Product Since the beginning of the year, analyses of average ticket in the distance learning segment include additional information based on student perspective by product for the Undergraduate business. This perspective considers the different payment sources of each product separately, i.e., the DL average ticket is formed by the amounts of students paying 100% of tuition out of pocket and those contracting the PMT plan. The combination of the Out-of-pocket and PMT average ticket is called DL Undergraduate Out-Of-Pocket (ex-prouni). This analysis enables a better understanding of the dynamics of the average ticket across the various types of students and of payment products offered by the Company. DISTANCE LEARNING UNDERGRADUATE 3Q17 3Q16 Student Product Net Revenue 1 APV NR Ex-APV 2 Invoices 3 Net Ticket Net Revenue 1 APV NR Ex-APV 2 Invoices 3 Net Ticket Distance Learning Out-of-Pocket 385, ,019 1, , ,647 1, % 4.2% PMT 4, , TOTAL DL UNDERGRAD. OUT-OF-POCKET⁴ Ex-ProUni 389, ,902 1, , ,647 1, % 5.5% TOTAL DISTANCE LEARNING UNDERGRAD⁴ 389, ,902 1, , ,647 1, % 5.5% ¹ Revenue ex-transfers; ² Revenue used to calculate average ticket; ³ Amounts / 000; 4 Undergraduate Only (ex-graduate, unregulated programs, etc.) Δ Net Ticket Chg.% Δ NR The above analysis illustrates the impact of PMT on the performance of average ticket in the period. Since the offering of this product is still not very representative, only a small difference is perceived in the outof-pocket average ticket in relation to the consolidated figure shown in the above table. Costs Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs (34,964) (37,710) -7.3% (39,295) -11.0% Cost of Goods - - n.a. - n.a. Cost of Services (34,964) (37,710) -7.3% (39,295) -11.0% Faculty, Other Personnel and Third-Party Services (27,150) (30,038) -9.6% (31,110) -12.7% Rent (4,136) (4,478) -7.6% (4,119) 0.4% Materials (3,364) (2,537) 32.6% (2,710) 24.1% Maintenance (238) (210) 13.2% (866) -72.5% Other (76) (446) -83.0% (489) -84.4% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs -13.2% -14.9% 1.7 p.p % 0.1 p.p. Cost of Goods (CG) 0.0% 0.0% 0.0 p.p. 0.0% 0.0 p.p. Cost of Services (CS) -13.2% -14.9% 1.7 p.p % 0.1 p.p. Faculty, Other Personnel and Third-Party Services -10.2% -11.9% 1.6 p.p % 0.3 p.p. Rent -1.6% -1.8% 0.2 p.p. -1.4% -0.2 p.p. Materials -1.3% -1.0% -0.3 p.p. -0.9% -0.4 p.p. Maintenance -0.1% -0.1% 0.0 p.p. -0.3% 0.2 p.p. Other 0.0% -0.2% 0.1 p.p. -0.2% 0.1 p.p. In 3Q17, cost of services (CS) amounted to R$35.0 million and as a ratio of net revenue decreased 1.7 p.p. from the same period of The decrease is mainly due to the optimization of the online tutoring process since the start of the year, which seeks to improve the quality of the services and responses given to students and to boost the operation s productivity. Efficiency gains also were captured from the expansion in the student base in recent years and from the ongoing initiatives to improve performance in the DL segment, such as the conversion from the Anhanguera commercial model to the Unopar model. Furthermore, as observed in recent quarters, the expansion in the base of 100%-online students also had a positive impact on this line, since its cost structure is lower compared to the blended-learning model. Compared to the prior quarter, costs as ratio of net revenue also fell, by 0.1 p.p., which is mainly explained by the lower costs with faculty and other personnel arising from the economies of scale resulting from the strong mid-year student recruiting process. 19

20 Gross Income Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 230, , % 255, % Gross Margin 86.8% 85.1% 1.7 p.p. 86.7% 0.1 p.p. Gross income was R$230.1 million in 3Q17, with gross margin of 86.8%, expanding 1.7 p.p. from the same period last year, due to operating efficiency gains, particularly in cost management. Compared to the previous quarter, the 0.1 p.p. gross margin expansion was mainly due to lower costs with faculty and other personnel due to seasonality and the mid-year student recruiting process. In the year to September, gross income was R$718.8 million, with gross margin expansion of 2.3 p.p., which attests to the effective management of the DL operations, despite the scenario of growing competition and still-weak macroeconomic indicators. Operating Expenses Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses (27,094) (23,055) 17.5% (25,448) 6.5% Personnel Expenses (20,271) (19,283) 5.1% (16,203) 25.1% General and Administrative Expenses (6,823) (3,772) 80.9% (9,245) -26.2% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses -10.2% -9.1% -1.1 p.p. -8.6% -1.6 p.p. Personnel Expenses -7.6% -7.6% 0.0 p.p. -5.5% -2.2 p.p. General and Administrative Expenses -2.6% -1.5% -1.1 p.p. -3.1% 0.6 p.p. Personnel, General and Administrative Expenses In the quarter, personnel expenses as a ratio of net revenue in the segment were stable compared to 3Q16. The growth in headcount to support the expansion of centers was offset by efficiency gains from the expansion of the student base in recent years and by the initiatives being implemented to optimize the performance of distance learning. Compared to the previous quarter, personnel expenses as a ratio of net revenue increased by 2.2 p.p., due to the startup of new centers. General and administrative expenses as a ratio of net revenue increased by 1.1 p.p. from 3Q16, reflecting higher expenses with collection advisory services. However, compared to the previous quarter, general and administrative expenses fell 0.6 p.p., demonstrating the better management of these expenses and higher reversals of provision for contingencies. Provision for Doubtful Accounts (PDA) Distance Learning (DL) - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Provision for Doubtful Account - PDA (24,426) (19,704) 24.0% (29,444) -17.0% PDA / Distance Learning Net Revenues -9.2% -7.8% -1.4 p.p % 0.8 p.p. PDA Out-of-pocket (22,784) (19,704) 15.6% (24,174) -5.7% PDA Out-of-pocket/ Out-of-pocket DL Net Revenues -8.7% 0.0% -8.7 p.p. -8.5% -0.2 p.p. PCLD PMT - Installment Part (1,641) - n.a. (5,270) -68.9% PDA PMT/ PMT DL Net Revenues -50.0% n.a. n.a % 0.0 p.p. Provisioning in the DL business stood at 9.2% in 3Q17, increasing 1.4 p.p. from the same period last year, reflecting the launch of PMT for DL students, which, like PEP, adopts the conservative provisioning policy of accruing 50% of the installment portion of tuitions. Excluding this effect, a gradual increase in this indicator was observed, as already expected and in line with the deterioration in unemployment indicators and with the expansion in the 100%-online student base, which has a higher dropout rate. Accounts Receivable Distance Learning - Values in R$ ('000) net of APV and PDA 3Q17 3Q16¹ Chg.% 2Q17 % AH Net Accounts Receiveble 272, , % 280, % Tuit ion and Agreements to Receive - Short term 260, , % 268, % PMT 11,345 n.a n.a 12, % ¹ Amounts for 3Q16 adjusted to the same comparison base of 3Q17 and 2Q17, including accounts receivable from credit cards. 20

21 In 3Q17, net accounts receivables in the Distance Learning business amounted to R$272.0 million, increasing by 21.0% from the same period of 2016, due to the following factors: (i) the longer receivables term of PMT; (ii) the expansion in the base of receivables-generating students; and (iii) the impacts from the more adverse economic scenario and the higher number of 100% online students. The decline compared to the prior quarter was due to the seasonality of the business and the stricter policy for contract renegotiations adopted since mid-year. 1. Average Accounts Receivable Term - Out-of-pocket Distance Learning - Days 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable (Out-of-Pocket) Net Revenue (Out-of-Pocket) Calculation base: net balance of short-term and long-term out-of-pocket Accounts Receivable in the DL business, divided by net out-of-pocket revenue in the DL business in the last 12 months, multiplied by 360 days. The average receivables term of out-of-pocket DL students was 15 days higher than in the year-ago period, due to a combination of the deterioration in the macro scenario with the higher number of renegotiations and expansion in the base generated by the last enrollment and reenrollment process, especially in the 100%-online student base. The decrease of 3 days compared to 2Q17 is due the lower volume of PMT this quarter and to the seasonality of the business, which is in line with that observed in Average Accounts Receivable Term - PMT Calculation base: net balance of short-term and long-term Accounts Receivable related exclusively to PMT in the DL business, divided by net revenue from monthly PMT tuitions in the DL business in the last 12 months, multiplied by 360 days. The average receivables term of PMT in the DL segment was 200 days, remembering that students who opted for the product in the last admissions cycle will repay the outstanding monthly tuitions only after they graduate from their program. Operating Result Days Days Distance Learning - Days 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable (PMT) Net Revenue (PMT) 200 n.a. n.a Days Distance Learning - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 230, , % 255, % (-) Total Operating Expenses (27,094) (23,055) 17.5% (25,448) 6.5% (-) Provision for Doubtful Account - PDA (24,426) (19,704) 24.0% (29,444) -17.0% (+) Interest and Penalties on Tuition 14,598 6, % 2, % Operating Result 193, , % 203, % Operat ing Margin 72.9% 70.6% 2.2 p.p. 69.0% 3.9 p.p. The operating result (before marketing expenses) of the DL segment in 3Q17 was R$ million, with operating margin expanding 2.2 p.p. from the same period of 2017, despite the lower revenue contribution from the LFG operations, the higher provisioning to subsidize the offering of PMT and the more competitive scenario. The result reflects not only the solid performance of the student recruiting process, but also all the initiatives implemented to increase efficiency in the segment. The result also benefited from improvement in the recovery and renegotiation of past-due debt, already reflecting the Company s new collection policies. Compared to 2Q17, operating margin increased even more substantially, by 3.9 p.p. due to the aforementioned factors and to the seasonality of the business segment. In the year to September, the operating result was R$588.3 million, with operating margin of 71.7%, expanding 0.6 p.p. from the same period last year, even though the 2016 figures included two months of the Uniasselvi results, which shows the Company has been able to surmount the current challenges, such as higher competition, the economic crisis and industry deregulation, with a more robust and efficient operation and is poised to embark on a new cycle of organic expansion with an ever broader offering of programs. 21

22 RESULTS EX-UNIASSELVI* *FAIR and FAC/FAMAT operated only in the On-Campus segment The following table presents the main P&L lines excluding data from Uniasselvi for 9M16: Distance Learning - Values in R$ ('000) 9M17 9M16 Chg.% Net Revenue 821, , % Gross Income 718, , % Gross Margin 87.5% 85.9% 1.7 p.p. Operating Result 588, , % Operat ing Margin 71.7% 71.5% 0.1 p.p. Excluding Uniasselvi, net revenue in the nine-month period grew 5.9% from 9M16, which is explained by the results achieved in the enrollment and reenrollment processes during the year. Meanwhile, gross income advanced 7.9%, with gross margin of 87.5%, representing expansion of 1.7 p.p. from 9M16. The operating result in the nine-month period advanced 6.0%, with operating margin expansion of 0.1 p.p. from the same period of

23 CORPORATE FINANCIAL PERFORMANCE PRIMARY AND SECONDARY Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% 9M17 9M16 Chg.% Gross Revenue 24,470 25, % 47, % 113, , % Gross Revenue Deductions (2,145) (1,910) 12.3% (3,571) -39.9% (9,301) (8,930) 4.2% Tax (1,212) (1,140) 6.3% (1,364) -11.2% (3,723) (4,162) -10.5% ProUni - - n.a. - n.a. - - n.a. Returns (933) (771) 21.1% (2,207) -57.7% (5,578) (4,768) 17.0% Total Discounts - - n.a. - n.a. - - n.a. Net Revenue 22,325 23, % 44, % 104, , % Management Contracts and Own Operations 14,522 14, % 15, % 45,471 44, % Associated Schools Network 7,803 9, % 28, % 58,600 80, % Total of Costs (11,631) (13,521) -14.0% (18,085) -35.7% (45,111) (55,703) -19.0% Cost of Goods (4,434) (4,276) 3.7% (8,344) -46.9% (18,548) (25,473) -27.2% Cost of Services (7,197) (9,245) -22.2% (9,742) -26.1% (26,563) (30,230) -12.1% Faculty, Other Personnel and Third-Party Services (6,220) (7,949) -21.7% (8,662) -28.2% (22,604) (22,844) -1.1% Rent (266) (292) -8.7% (296) -10.1% (819) (847) -3.3% Materials - - n.a. - n.a. (0) - n.a. Maintenance (84) (198) -57.4% (82) 3.4% (181) (601) -69.9% Other (626) (806) -22.4% (701) -10.7% (2,959) (5,937) -50.2% Gross Income 10,694 10, % 26, % 58,959 69, % Management Contracts and Own Operations 7,695 5, % 6, % 20,401 18, % Associated Schools Network 2,999 4, % 19, % 38,558 51, % Gross Margin 47.9% 42.7% 5.2 p.p. 59.2% p.p. 56.7% 55.6% 1.1 p.p. Management Contracts and Own Operations 53.0% 41.8% 11.1 p.p. 41.1% 11.9 p.p. 44.9% 41.5% 3.3 p.p. Associated Schools Network 38.4% 44.1% -5.6 p.p. 69.0% p.p. 65.8% 63.3% 2.5 p.p. Total Operating Expenses (3,563) (5,310) -32.9% (4,939) -27.9% (13,172) (14,891) -11.5% Personnel Expenses (2,760) (4,191) -34.1% (3,312) -16.6% (9,882) (11,907) -17.0% General and Administrative Expenses (803) (1,119) -28.3% (1,627) -50.7% (3,290) (2,984) 10.3% Provision for Doubtful Account - PDA (179) (185) -3.6% (355) -49.7% (833) (1,029) -19.1% (+) Interest and Penalties on Tuition % % % Operating Result 7,245 4, % 21, % 45,622 54, % Operat ing Margin 32.5% 20.5% 12.0 p.p. 47.6% p.p. 43.8% 43.2% 0.6 p.p. 23

24 Revenue and Deductions Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Revenue 24,470 25, % 47, % Gross Revenue Deductions (2,145) (1,910) 12.3% (3,571) -39.9% Tax (1,212) (1,140) 6.3% (1,364) -11.2% ProUni - - n.a. - n.a. Returns (933) (771) 21.1% (2,207) -57.7% Total Discounts - - n.a. - n.a. Net Revenue 22,325 23, % 44, % Management Contracts and Own Operations 14,522 14, % 15, % Associated Schools Network 7,803 9, % 28, % Deductions In 3Q17, deductions as a ratio of gross revenue increased by 1.3 p.p. compared to the same period of 2016, basically due to the lower gross revenue in the period given the lower number of collections sold, and to the higher volume of returns in the period. Compared to the previous quarter, deductions as a ratio of gross revenue increased 1.4 p.p., which is explained by seasonality, since sales of book collections are concentrated in even-numbered quarters, with a positive impact on revenue in these periods. Net Revenue Net revenue in 3Q17 was R$22.3 million, down 5.5% from the same period in 2016, due to a slight reduction in commercial activity in the period. However, in a separate analysis of the management contracts and own operations line, net revenue in the segment increased 2.4% compared to 3Q16. Compared to 2Q17, the 49.7% decrease is explained by the seasonality of the business. In the nine months to September, net revenue came to R$104.1 million and, though down 17.0% on the same period of 2016, the expectation is for the Company to recover this result in the last quarter, with the sale of book collections for the 2018 academic year. Average Net Ticket In the Primary and Secondary Education business, the average annual amount charged for the sale of textbooks to the Associated Schools in 2017 was R$ per student, or 6.2% higher than in Costs Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs (11,631) (13,521) -14.0% (18,085) -35.7% Cost of Goods (CG) (4,434) (4,276) 3.7% (8,344) -46.9% Cost of Services (CS) (7,197) (9,245) -22.2% (9,742) -26.1% Faculty, Other Personnel and Third-Party Services (6,220) (7,949) -21.7% (8,662) -28.2% Rent (266) (292) -8.7% (296) -10.1% Materials - - n.a. - n.a. Maintenance (84) (198) -57.4% (82) 3.4% Other (626) (806) -22.4% (701) -10.7% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total of Costs -52.1% -57.3% 5.2 p.p % p.p. Cost of Goods (CG) -19.9% -18.1% -1.8 p.p % -1.1 p.p. Cost of Services (CS) -32.2% -39.2% 6.9 p.p % p.p. Faculty, Other Personnel and Third-Party Services -27.9% -33.7% 5.8 p.p % -8.3 p.p. Rent -1.2% -1.2% 0.0 p.p. -0.7% -0.5 p.p. Materials 0.0% 0.0% 0.0 p.p. 0.0% 0.0 p.p. Maintenance -0.4% -0.8% 0.5 p.p. -0.2% -0.2 p.p. Other -2.8% -3.4% 0.6 p.p. -1.6% -1.2 p.p. In 3Q17, cost of goods sold as a ratio of net revenue in the business increased 1.8 p.p. from the prior-year period, explained by the higher costs with distribution logistics this quarter. Compared to 2Q17, the 1.1 p.p. increase reflects the seasonality of the business, with sales concentrated in even-numbered quarters and with a consequently positive impact on revenue in these periods. Likewise, compared to the prior quarter, the ratio of cost of services to net revenue was also affected by the different revenue recognition schedule, since nominal costs were significantly lower than in 2Q17. Compared to 3Q16, cost of services decreased 6.9 p.p. as ratio of net revenue, due to the efforts to capture operating efficiency gains, combined with the partial anticipation of faculty vacations to June. 24

25 Gross Income Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 10,694 10, % 26, % Management Contracts and Own Operations 7,695 5, % 6, % Associated Schools Network 2,999 4, % 19, % Gross Margin 47.9% 42.7% 5.2 p.p. 59.2% p.p. Management Contracts and Own Operations 53.0% 41.8% 11.1 p.p. 41.1% 11.9 p.p. Associated Schools Network 38.4% 44.1% -5.6 p.p. 69.0% p.p. Gross income in 3Q17 grew 6.0% from the same period last year, with gross margin expanding 5.2 p.p., due to the higher cost efficiency, which offset the lower commercial activity. Gross income in the nine months to September was R$59.0 million, with gross margin of 56.7%, up 1.1 p.p. from 9M16. Operating Expenses Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses (3,563) (5,310) -32.9% (4,939) -27.9% Personnel Expenses (2,760) (4,191) -34.1% (3,312) -16.6% General and Administrative Expenses (803) (1,119) -28.3% (1,627) -50.7% % of Net Revenues 3Q17 3Q16 Chg.% 2Q17 Chg.% Total Operating Expenses -16.0% -22.5% 6.5 p.p % -4.8 p.p. Personnel Expenses -12.4% -17.7% 5.4 p.p. -7.5% -4.9 p.p. General and Administrative Expenses -3.6% -4.7% 1.1 p.p. -3.7% 0.1 p.p. Personnel, General and Administrative Expenses Personnel, general and administrative expenses as a ratio of net revenue decreased by 6.5 p.p. compared to 3Q16, which is mainly explained by lower personnel expenses due to the initiatives to streamline headcount in the segment. Furthermore, personnel expenses in 3Q16 were adversely affected by higher provisioning under the profit sharing program. Compared to the prior quarter, operating expenses as a ratio of net revenue increased 4.8 p.p., reflecting the different schedule for revenue recognition. Provision for Doubtful Accounts (PDA) Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Provision for Doubtful Account - PDA (179) (185) -3.6% (355) -49.7% PDA / Primary and Secondary Education Net Revenues -0.8% -0.8% 0.0 p.p. -0.8% 0.0 p.p. This quarter, PDA stood at 0.8% of net revenue, stable compared to both the same period last year and the prior quarter, attesting to the assertive provisioning policy adopted for the primary and secondary education segment. Accounts Receivable Primary and Secondary Education 3Q17 3Q16 Chg.% 2Q17 Chg.% Net Accounts Receivable 23,468 26, % 42, % In 3Q17, the lower volume of accounts receivables compared to 3Q16 reflects the lower sales of book collections in the quarter and the uncertainties regarding the economic scenario. Meanwhile, the strong decline compared to the prior quarter is due to the new seasonality of the business, with the anticipation of the sales calendar to odd-numbered quarters. 25

26 Average Accounts Receivable Term Primary and Secondary Education - Days 3Q17 3Q16 Chg.(Days) 2Q17 Chg.(Days) Net Accounts Receivable Net Revenue Days Days Calculation base: net balance of short-term Accounts Receivable in Primary and Secondary Education, divided by the net revenue in Primary and Secondary Education in the last 12 months, multiplied by 360 days. As mentioned in the analysis of accounts receivable, the decrease of 7 days in the average accounts receivable term in the Primary and Secondary Education business in 3Q17 compared to 3Q16 is associated with the lower sales activity in the period. Operating Result Primary and Secondary Education - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Gross Income 10,694 10, % 26, % (-) Total Operating Expenses (3,563) (5,310) -32.9% (4,939) -27.9% (-) Provision for Doubtful Account - PDA (179) (185) -3.6% (355) -49.7% (+) Interest and Penalties on Tuition % % Operating Result 7,245 4, % 21, % Operat ing Margin 32.5% 20.5% 12.0 p.p. 47.6% p.p. In 3Q17, the operating result (before marketing expenses) reached R$7.2 million, with a margin of 32.5%, expanding 12.0 p.p. on the year-ago period. Despite the lower sales volume in the quarter, the Company was able to implement a rigorous policy for managing costs and expenses that supported this substantial profitability gain in the period. Compared to 2Q17, the 15.2 p.p. decrease in operating margin mostly reflects the seasonality of the business segment. In the first nine months of the year, the operating result was R$45.6 million, with operating margin expansion of 0.6 p.p. 26

27 FINANCIAL PERFORMANCE KROTON Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% 9M17 9M16 Chg.% Gross Revenue 1,717,295 1,588, % 1,938, % 5,396,679 4,990, % Gross Revenue Deductions (393,749) (364,923) 7.9% (419,212) -6.1% (1,188,620) (1,107,228) 7.4% Tax (43,131) (43,947) -1.9% (53,843) -19.9% (145,326) (129,895) 11.9% ProUni (238,217) (222,508) 7.1% (230,114) 3.5% (683,530) (672,556) 1.6% Returns (933) (771) 21.1% (2,207) -57.7% (5,578) (4,768) 17.0% Total Discounts (111,469) (97,698) 14.1% (133,049) -16.2% (354,185) (300,009) 18.1% Net Revenue 1,323,546 1,223, % 1,519, % 4,208,059 3,883, % Total of Costs (347,724) (357,397) -2.7% (387,470) -10.3% (1,039,165) (1,094,115) -5.0% Cost of Goods (4,434) (4,276) 3.7% (8,344) -46.9% (18,548) (25,473) -27.2% Cost of Services (343,290) (353,120) -2.8% (379,126) -9.5% (1,020,617) (1,068,642) -4.5% Faculty, Other Personnel and Third-Party Services (244,369) (256,212) -4.6% (281,710) -13.3% (732,266) (764,933) -4.3% Rent (85,907) (78,912) 8.9% (83,988) 2.3% (254,238) (242,665) 4.8% Materials (6,199) (5,861) 5.8% (6,502) -4.7% (17,368) (18,206) -4.6% Maintenance (4,044) (3,117) 29.8% (2,864) 41.2% (7,166) (9,878) -27.4% Other (2,772) (9,019) -69.3% (4,063) -31.8% (9,579) (32,960) -70.9% Gross Income 975, , % 1,131, % 3,168,894 2,789, % Gross Margin 73.7% 70.8% 2.9 p.p. 74.5% -0.8 p.p. 75.3% 71.8% 3.5 p.p. Total Operating Expenses (139,250) (133,752) 4.1% (157,037) -11.3% (428,722) (425,623) 0.7% Personnel, General and Administrative Expenses (139,250) (133,752) 4.1% (157,037) -11.3% (428,722) (425,623) 0.7% Personnel Expenses (88,255) (88,597) -0.4% (86,145) 2.5% (252,591) (254,671) -0.8% General and Administrative Expenses (50,994) (45,154) 12.9% (70,892) -28.1% (176,131) (170,952) 3.0% Provision for Doubtful Account - PDA (165,520) (104,740) 58.0% (152,242) 8.7% (476,270) (259,063) 83.8% (+) Interest and Penalties on Tuition 41,545 39, % 27, % 113, , % Operating Result 712, , % 850, % 2,377,074 2,216, % Operat ing Margin 53.8% 54.5% -0.7 p.p. 56.0% -2.1 p.p. 56.5% 57.1% -0.6 p.p. Selling and Marketing Expenses (69,112) (71,748) -3.7% (91,852) -24.8% (271,701) (252,641) 7.5% Corporate Expenses (66,710) (63,164) 5.6% (58,394) 14.2% (188,836) (192,235) -1.8% Adjusted EBITDA 576, , % 700, % 1,916,537 1,771, % Adjust ed EBITDA Margin 43.6% 43.5% 0.1 p.p. 46.1% -2.5 p.p. 45.5% 45.6% -0.1 p.p. (-) Non-Recurring Items (32,407) (40,673) -20.3% (58,881) -45.0% (135,807) 173,273 n.a. EBITDA 544, , % 641, % 1,780,731 1,944, % EBITDA Margin 41.1% 40.2% 1.0 p.p. 42.2% -1.1 p.p. 42.3% 50.1% -7.8 p.p. Depreciation and Amortization (104,913) (104,498) 0.4% (103,409) 1.5% (311,061) (301,514) 3.2% Financial Result 24,649 11, % 17, % 64,827 (25,017) n.a. Income Tax / Social Contribution (18,477) (37,539) -50.8% (23,981) -23.0% (87,508) (53,393) 63.9% Deferred Income Tax / Social Contribution 12,993 6, % 15, % 52,457 (6,209) n.a. Income Tax / Social Cont. - Disposal of Uniasselvi - - n.a. - n.a. - (71,772) n.a. Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT (7,786) - n.a. - n.a. (7,786) - n.a. Net Income 450, , % 547, % 1,491,660 1,486, % Net Margin 34.1% 30.1% 4.0 p.p. 36.0% -1.9 p.p. 35.4% 38.3% -2.8 p.p. (+) Non Recurring Items 32,407 40, % 58, % 135,807 (173,273) n.a. (+) Intagnible Amortization (Acquisitions) 38,682 43, % 38, % 116, , % (+) Income Tax / Social Cont. - Disposal of Uniasselvi - - n.a. - n.a. - 71,772 n.a. (+) Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT 7,786 - n.a. - n.a. 7,786 - n.a. Adjusted Net Income 529, , % 644, % 1,751,661 1,520, % Adjust ed Net Margin 40.0% 37.0% 3.0 p.p. 42.4% -2.4 p.p. 41.6% 39.2% 2.5 p.p. 27

28 SELLING AND MARKETING EXPENSES Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Selling and Marketing Expenses (69,112) (71,748) -3.7% (91,852) -24.8% % of Net Revenue 3Q17 3Q16 Chg.% 2Q17 Chg.% Selling and Marketing Expenses -5.6% -5.9% 0.2 p.p. -6.0% 0.4 p.p. Selling and marketing expenses as a ratio of net revenue declined 0.2 p.p. and 0.4 p.p. compared to 3Q16 and 2Q17, respectively. As commented at the start of the year, this decline was already expected and reflects the anticipation of part of the marketing campaigns to the first semester of the year, consolidating the Company s new strategy of streamlining costs with advertising and media agencies, as part of the strategic sourcing project. CORPORATE EXPENSES Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Corporate Expenses (66,710) (63,164) 5.6% (58,391) 14.2% Personnel Expenses (56,380) (56,846) -0.8% (45,093) 25.0% General and Administrative Expenses (10,330) (6,319) 63.5% (13,298) -22.3% % of Net Revenue 3Q17 3Q16 Chg.% 2Q17 Chg.% Corporate Expenses -5.0% -5.2% 0.1 p.p. -3.8% -1.2 p.p. Personnel Expenses -4.3% -4.6% 0.4 p.p. -3.0% -1.3 p.p. General and Administrative Expenses -0.8% -0.5% -0.3 p.p. -0.9% 0.1 p.p. The ratio of personnel expenses to net revenue within corporate expenses fell 0.4 p.p. from the year-ago period, due to the positive results of the initiatives to control expenses. Compared to the prior quarter, the 1.3 p.p. increase in this ratio is explained by the fact that this period included the reversal of amounts related to the variable compensation program, in addition to a lower impact from expenses with the stock option plans offered to the Company s executives. When analyzing solely general and administrative expenses as a ratio of net revenue, there was a 0.3 p.p. increase from the prior-year period, since 3Q16 benefitted from a reversal of provision for contingencies. Compared to 2Q17, the 0.1 p.p. decline reflects the greater budget discipline achieved in the quarter, coupled with the progress made on implementing the strategic sourcing project, which also has a positive impact on this line. NONRECURRING EVENTS Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Severance (11,731) (13,521) -13.2% (10,904) 7.6% Restructuring of units (8,155) (12,060) -32.4% (9,312) -12.4% M&A and expansion (9,604) (5,236) 83.4% (31,723) -69.7% Other projects (25,818) (17,064) 51.3% (6,942) 271.9% Subtotal ex-capital gain from Uniasselvi (55,308) (47,880) 15.5% (58,881) -6.1% Capital Gain - Uniasselvi - 7,207 n.a. - n.a. Capital Gain - FAIR and FAC/FAMAT 22,901 - n.a. - n.a. Total Nonrecurring (32,407) (40,673) -20.3% (58,881) -45.0% As reported since the divestment of Uniasselvi, non-recurring items are divided into two groups, as shown in the above table: (1) nonrecurring events that generated nonrecurring costs and expenses; and (2) the capital gain recorded from the sales of Uniasselvi and of FAIR and FAC/FAMAT, which were concluded in 1Q16 and 3Q17, respectively. The non-recurring events in the first group, which amounted to R$55.3 million, include expenses with other projects, especially work plans and the Strategic Planning currently under development by Kroton to support the growth plan for the next five years and the digital 28

29 transformation initiatives. In addition to the aforementioned items, total non-recurring items include: (i) severance charges, especially those related to the reduction in classroom hours generated by the initiatives to capture efficiency gains, such as the operational research software; (ii) M&A activity, especially with regard to the assets under analysis in the primary and secondary education segment; and (iii) the restructuring of On-Campus units, including campus deactivations. On the other hand, the capital gain from the divestment of FAIR and FAC/FAMAT had a positive impact of R$22.9 million on the result. In all, nonrecurring items in the quarter came to R$32.4 million. In the first nine months of the year, nonrecurring expenses, excluding the capital gain from the divestment of FAIR and FAC/FAMAT, amounted to R$158.7 million. FINANCIAL RESULT Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% (+) Financial Revenues 43,675 49, % 47, % Interest on Financial Investment 35,311 41, % 33, % Others 8,364 8, % 13, % (-) Financial Expenses (19,026) (37,737) -49.6% (30,124) -36.8% Banks Expenses (5,678) (1,776) 219.7% (4,163) 36.4% Interest on Loans (6,384) (21,089) -69.7% (9,096) -29.8% Interest and Tax on Late Payment (806) (2,903) -72.2% (916) -12.0% Interest on Loans for Acquisitions (1,762) (5,246) -66.4% (2,969) -40.7% Restatement of Contingencies (2,080) (6,390) -67.4% (4,201) -50.5% Others (2,316) (333) 595.5% (8,779) -73.6% Financial Result 1 24,649 11, % 17, % ¹ Excludes interest and fines on late monthly tuition payments. Since the end of 2016, Kroton has been holding a significant cash balance, which has had a direct positive impact on the line interest from financial investments. However, the lower financial income compared to 3Q16 reflects the significant decline in interest rates in recent months. Nevertheless, net financial income in 3Q17 amounted to R$24.6 million, more than twice as much as in the same period of Compared to 2Q17, the increase of 40.8% in the net financial result is mainly explained by lower bank expenses related to collection and negative-credit-report fees (which were particularly high last quarter, with an impact on the line Other ), as well as lower expenses with interest on borrowings. NET INCOME Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Operating Result 712, , % 850, % (+) Selling and Marketing Expenses (69,112) (71,748) -3.7% (91,852) -24.8% (+) Corporate Expenses (66,710) (63,164) 5.6% (58,391) 14.2% (+) Depreciation and Amortization ex-intangible (66,231) (60,658) 9.2% (64,553) 2.6% (+) Financial Result 1 24,649 11, % 17, % (+) Income Tax / Social Contribution (18,477) (37,539) -50.8% (23,981) -23.0% (+) Deferred Income Tax / Social Contribution 12,993 6, % 15, % Adjusted Net Income 529, , % 644, % Adjust ed Net Margin 40.0% 37.1% 2.9 p.p. 42.4% -2.4 p.p. (+) Nonrecurring Items (32,407) (40,673) -20.3% (58,881) -45.0% (+) Intangible Amortization (Acquisitions) (38,682) (43,840) -11.8% (38,855) -0.4% (+) Income Tax / Social Cont. - Disposal of FAIR and FAC/FAMAT (7,786) - n.a. - n.a. Net Income 450, , % 547, % Net Margin 34.1% 30.2% 3.9 p.p. 36.0% -1.9 p.p. ¹ Excludes interest and fines on late monthly tuition payments. Adjusted net income (adjusted for the amortization of intangible assets, nonrecurring events and taxes related to the divestment of FAIR and FAC/FAMAT) amounted to R$529.7 million, with adjusted net margin of 40.0%, expanding 2.9 p.p. from the same period of The result is explained by the solid performance of the student recruiting processes during the year and the efficiency gains continued to be captured by the Company through a combination of austerity in terms of costs and expenses with rigorous budget discipline. This combination enabled the Company to offset pressures from the change in the profile of Kroton s student base and from the higher provisioning to support the offering of installment options to students. In the nine-month period, adjusted net income advanced 15.2% compared to the same period of 2016, to R$1,751.7 million, with adjusted net margin of 41.6%, expanding 2.5 p.p. In the analysis of the result excluding Uniasselvi, FAIR and FAC/FAMAT, which excludes the impact of the latest divestments, adjusted net income posted even stronger growth, of 16.8%. 29

30 PRO FORMA: EX-UNIASSELVI, FAIR AND FAC/FAMAT: Excluding the adjustments for nonrecurring items, amortization of intangible assets and taxes on the sale of FAIR and FAC/FAMAT, net income amounted to R$450.8 million in 3Q17 and R$1,491.7 million in 9M17. Given the significant impact from these adjustments, the Company recommends the pro forma and adjusted result as the best metric for accompanying financial performance. EBITDA Consolidated - Values in R$ ('000) 3Q17 3Q16 Chg.% 2Q17 Chg.% Net Income (Loss) 450, , % 547, % (+) Depreciation and Amortization 104, , % 103, % (+) Financial Result 1 (24,649) (11,990) 105.6% (17,503) 40.8% (+) Income Tax / Social Contribution 26,263 37, % 23, % (+) Deferred Income Tax / Social Contribution (12,993) (6,692) 94.2% (15,686) -17.2% EBITDA 544, , % 641, % EBITDA Margin 41.1% 40.3% 0.8 p.p. 42.2% -1.1 p.p. (+) Nonrecurring Items 32,407 40, % 58, % Adjusted EBITDA 576, , % 700, % Adjust ed EBITDA Margin 43.6% 43.5% 0.1 p.p. 46.1% -2.5 p.p. ¹ Excludes interest and fines on late monthly tuition payments. Adjusted EBITDA was R$576.8 million in 3Q17, increasing 8.4% from 3Q16, with adjusted EBITDA margin expansion of 0.1 p.p. This margin expansion in a still-challenging economic scenario with negative pressures on both sales and PDA is a clear sign that the Company has been able to consistently generate solid efficiency levers in order to create value for its shareholders and pave the way for delivering its guidance for the full year. In the nine months to September, adjusted EBITDA advanced 8.2% to R$1,916.5 million, with margin virtually stable in relation to the same period of Excluding the figures from the latest asset divestments (Uniasselvi, FAIR and FAC/FAMAT) from this period, Kroton s adjusted EBITDA in 9M17 advanced by 9.6%. 30

31 PRO FORMA: EX-UNIASSELVI, FAIR AND FAC/FAMAT: Excluding the adjustment for non-recurring events, the Company reported EBITDA of R$544.4 million in 3Q17 and of R$1,780.7 million in 9M17, increasing 10.7% from 3Q16 and decreasing 8.4% from 9M16, given that the result for 2016 benefited from the capital gain from the Uniasselvi divestment, which was significantly higher than the gain recorded this quarter from the divestment of FAIR and FAC/FAMAT. INVESTMENT (CAPEX) In 3Q17, Kroton invested R$112.2 million, allocated as follows: (i) information technology and library equipment: R$21.5 million (19%); (ii) content and systems development and software licenses: R$43.4 million (39%); (iii) laboratory and related equipment: R$17.9 million (16%); (iv) expansions construction and improvements: R$29.5 million (26%). In 3Q17, investments corresponded to 8.5% of net revenue, with the largest portion allocated to projects involving content and systems development and software licensing, as well as to the expansion and improvement of existing facilities, with the objective of preparing the units for the for the second half of the year and for the change in the portfolio of programs currently being implemented by the Company. In the nine months to September, capex amounted to R$301.1 million, which corresponds to 7.2% of the Company s net revenue in the period. 31