SOMOS Educação ER 4Q17

Transcription

1 SOMOS Educação ER 4Q17

2 São Paulo, February 20, 2018 SOMOS Educação S.A. (B3: SEDU3) announces its results for the fourth quarter of 2017 (4Q17) and fiscal year The comments herein refer to consolidated results in accordance with International Financial Reporting Standards (IFRS) and comparisons are with the same period in 2016, as indicated. Key Indicators Quarter Change (%) Annual Change (%) (R$ mm) 4Q17 4Q16 4Q17/4Q /2016 Net Revenues 748,0 782,5-4,4% 1.871, ,1 0,1% Adjusted Gross Profit (1) 418,9 462,3-9,4% 1.103, ,7-4,5% Gross Margin (%) 56% 59% -3 p.p 59% 62% -3 p.p Adjusted EBITDA II (2) 235,7 256,8-8,2% 570,1 501,9 13,6% EBITDA Margin (%) 32% 33% -1 p.p 30% 27% 4 p.p Adjusted Net Income (Loss) (3) 83,6 145,6-42,6% 169,4 188,4-10,1% Operating Cash Flow 208,9 648,7-67,8% Net Debt 1.274, ,8 18,9% (1) Adjusted Gross Profit: R$0.2 million of amortization costs from acquisitions goodwill in 4Q17 (vs. R$89.9 million in 4Q16); R$61.9 million of amortization costs from acquisitions goodwill in 2017 (vs. R$163.6 million in 2016) and R$0 million of non-recurring items in 2017 (vs. R$7.6 million in 2016). (2) Adjusted EBITDA II: R$14.7 million of non-recurring items in 4Q17 (vs. -R$4.9 million in 4Q16) and R$8.7 million of stock-based compensation plan expenses in 4Q17 (vs. R$20.6 million in 4Q16); R$16.5 million of non-recurring items in 2017 (vs. R$18.3 million in 2016) and R$8.7 million of stock-based compensation plan expenses in 2017 (vs. R$20.6 million in 2016). (3) Adjusted Net Income (Loss): R$12.0 million of amortization costs and expenses from acquisitions goodwill in 4Q17 (vs. R$105.2 million in 4Q16), R$14.7 million of nonrecurring items in 4Q17 (vs. -R$4.9 million in 4Q16), R$8.7 million of stock-based compensation plan expenses in 4Q17 (vs. R$20.6 million in 4Q16) and R$24.6 million of temporary differences and other adjustments of income taxes in 4Q17 (vs. R$3.3 million in 4Q16); R$116.6 million of amortization costs and expenses from acquisitions goodwill in 2017 (vs. R$221.8 million in 2016), R$16.5 million of non-recurring items in 2017 (vs. R$18.3 million in 2016), R$8.7 million of stock-based compensation plan expenses in 2017 (vs. R$20.6 million in 2016) and R$15.7 million of temporary differences and other adjustments of income taxes in 2017 (vs. R$2.1 million in 2016). Highlights Financial Results Net Revenues of R$748.0 million in 4Q17 (-4.4%) and R$1,871.6 million in 2017 (+0.1%). Adjusted Gross Profit of R$418.9 million in 4Q17 (-9.4%) and R$1,103.1 million in 2017 (-4.5%). Adjusted EBITDA II of R$235.7 million in 4Q17 (-8.2%) and R$570.1 million in 2017 (+13.6%). Adjusted Net Income of R$83.6 million in 4Q17 (-42.6%) and R$169.4 million in 2017 (-10.1%). Net Debt as of December 2017 of R$1,274.0 million (+18.9%). Operational Results Total of 998 thousand students under long-term contracts, in K12 Educational Solutions, distributed in 2,779 schools. In the end of 2017, we concluded the acquisition of Stoodi an online learning platform which offers school reinforcement and ENEM preparation for High School students; and the acquisition of Livro Fácil a digital and physical marketplace that delivers textbooks and literature books to K-12 schools. In Proprietary Schools, we launched the 2018 enrollment campaign, we advanced in the operational and IT integration of ph schools, in the city of Rio de Janeiro, and we entered into conditional binding contracts to acquired and/or open new schools in which approximately 9,000 students will be enrolled for

3 MESSAGE FROM THE MANAGEMENT We had, in 2017, another year of outstanding results at SOMOS, in several dimensions. From a financial perspective, even in the face of an unprecedented economic crisis in the Brazilian history, we ended the year with net revenues of R$1.9 billion and Adjusted EBITDA of R$570.1 million, 13.6% higher than in 2016, with a margin increase of 3p.p., reaching an EBITDA margin of 30% at the end of In the three-year period ended 2017, our EBITDA increased by 46.5% and our net revenue by 48.0%, compared to a nominal GDP growth of approximately 14.0%. In Proprietary Schools and Language, we have invested significantly in the enhancement of pedagogical quality, in the operational integration and the expansion of our network. In 2017, we concluded the TOTVs integration of Colégio Motivo (PE), Colégio Maxi (MT), ECSA (MT) and Colégio Integrado (GO), and started to integrate Colégio ph (RJ), our largest network of schools. In addition, we have entered into conditional binding contracts aiming at the acquisition and/or opening of new schools in which approximately 9,000 students will be enrolled in 2018, bringing the total number of students of our network to approximately 35 thousand (including preparatory courses). In K12 Educational Solutions, we have focused our strategy on increasing the number of schools under long-term contracts, reaching 998 thousand students, including PAR Educational Platform, which was launched in 2017 and consists of contracts with schools that adopt books. We have also focused on converting all Anglo and ph partner schools into an integrated educational platform, offering a digital application where students deliver their homework, enabling data collection and the generation of highly valued and detailed pedagogical reports to schools. Additionally, we have acquired Livro Fácil, a digital and physical marketplace that delivers books to K-12 schools in regions where we do not operate through distributors. Also in 2017, we have entered in the B2C K-12 market, through the acquisition of Stoodi, an online learning platform which offers school reinforcement and ENEM preparation for High School students. In the public segment, we celebrated another year of leadership on PNLD with a 38.4% market share in the purchase of books for High School. In Educational Solutions for Technical and Higher Education (SETS), we launched Saraiva Aprova, a digital platform that supports higher education students to prepare for the 1 st phase of the Exame da Ordem dos Advogados (OAB). Lastly, we created in 2017 the Instituto SOMOS, consolidating our impact investing iniciatives. We launched the program SOMOS Futuro, offering high quality education for high potential students with lower income. After a rigorous process, we selected 95 students from 32 cities, who will receive full scholarship at proprietary and partner schools of SOMOS network, during three years of High School. We begin 2018 confident that in 2017 we have taken another important step to build an integrated educational ecosystem, whose ambition is to provide pedagogical support for the nearly 48 million students in K-12 and higher education segments, improving the education quality in Brazil. 2

4 ANALYSIS OF FINANCIAL PERFORMANCE Net Revenues In 2017, net revenues totaled R$1,871.6 million, in line when compared to In K12 Educational Solutions, net revenues totaled R$1,230.2 million, a slightly reduction compared to 2016, mainly due to the postponement of part of the revenues from PNLD 2018, which will occur in the 1Q18. This postponement includes the revenues from the Art program for the High School segment, as well as part of the purchase of High School and the repurchase of Elementary and Middle School segments which FNDE is acquiring after the release of Scholar Census. In SETS, net revenues totaled R$151.2 million, an increase of 6.1% over 2016, which was driven by the launching of digital solutions, such as Saraiva Aprova. In Schools and Language, net revenues totaled R$504.7 million, an increase of 2.2% over 2016, jeopardized by the contraction of revenues coming from preparatory courses. Revenues Growth - 4Q17 vs. 4Q16 (R$ mm) 782,5 (44,9 ) 10,4 (3,2 ) 3,1 748,0 4Q16 K12 SETS Schools and Language Others 4Q17 Revenues Growth vs (R$ mm) 1.869,1 (15,6 ) 8,7 11,1 (1,6 ) 1.871, K12 SETS Schools and Language Others 2017 Adjusted Gross Profit In 2017, the adjusted gross profit totaled R$1,103.1 million, a 4.5% reduction compared to The consolidated gross margin reduced 3 p.p.. This change was concentrated in the K12 and is mainly related to the higher effect of Editorial Capex amortization, from production and content development for Learning Systems and Publishers, as a result of our increasing investment in pedagogical content and new lauchings. Moreover, the postponement of part of the revenues related to PNLD 18 for the 1Q18 has impacted the dilution of fixed costs in

5 462,3 Adjusted Gross Profit - 4TQ17 vs. 4Q16 (R$ mm) 29,9 (2,8 ) (67,0 ) (3,4 ) 418,9 4Q16 K12 SETS Schools and Language Others 4Q17 Adjusted Gross Profit vs (R$ mm) 1.155,7 (62,7 ) 12,7 3,2 (6,0 ) 1.103,1 SG&A Selling, General and Administrative Expenses In 2017, SG&A totaled R$773.1 million (which represents 41% of net revenues), a reduction of 10.6% compared to R$864.3 million (which represented 46% of net revenues) in This reduction is a result of the continuous process of integration and efficiency gains, maily related to the acquisition of Saraiva Educação, highlighted during 2016 with the optimization of distribuition network, back-office and business structures. In 2017, we started the year with several of the initiatives already in place, generating relevant efficiency operational gains. EBITDA 2016 K12 SETS Schools and Language Others 2017 Adjusted EBITDA II totaled R$235.7 million in 4Q17, compared to R$256.8 million in 4Q16. In 2017, Adjusted EBITDA II totaled R$570.1 million, compared to R$501.9 million in 2016, which represents a 13.6% growth. The EBITDA margin increased 3 p.p. in the period, from 27% in 2016 to 30% in Financial Income In 2017 we recognized net financial expenses of R$226.2 million which is slightly below to R$230.6 million reported in There was a reduction in financial expenses related to interest on loans in 2017 due to a lower interest rate SELIC (which is the main reference for our borrowing cost). However, the net financial result was partially offset due to financial costs of supply chain financing, which had a higher average balance in

6 (R$ mm) 4Q17 4Q Financial Results (42,7) (43,0) (226,2) (230,6) Financial Income 13,3 35,7 60,6 102,8 Financial Expense (56,0) (78,7) (286,9) (333,4) Investments Investments in 2017 totaled R$172.1 million, broken down as follows: (i) R$95.9 million in production and content development for Learning Systems and Publishers (R$87.9 million in 2016) and (ii) R$76.2 million for acquisitions of fixed and intangible assets, including maintenance CAPEX for schools, investments in digital platforms and operational and IT integration (R$63.9 million in 2016). Total CAPEX in 2017 was 13.4% higher than R$151.8 million in Operating Cash Generation Operating cash generation in 2017 was R$208.9 million compared to R$648.7 million in the previous year. The operating cash generation of 2016 was positively impacted by the late payments that were received in 2016 totaling R$153.8 million related to the PNLD cycle of In 2016 and 2017 there were no late payments related to the PNLD program. However, in 2017, there was a change in the payment terms, which became 45 days after invoice, instead of previous 15 days. This change has impacted our receivables which are concentrated in the 4Q and were postponed to the 1Q18, totaling R$164.6 million (all already received in full by this date). Capital Structure In December 2017, SOMOS Educação's consolidated net debt of R$1,274.0 million consisted of R$1,920,3 million gross debt and R$646.3 million cash and cash equivalents. Total gross debt consists of R$1,878.0 million financial debt and R$42.2 million in debt with the sellers of the acquired companies. Of the total debt, 75% corresponds to long-term liabilities. This increase in debt duration is a result of our recent public issuance of debentures, settled in the 3Q17. Net Debt (R$ mm) 1.676, , ,9 604,3 584,4 475, , ,3 672,7 646, , , , , ,0 4Q16 1Q17 2Q17 3Q17 4Q17 Net Debt Cash + Equivalents Gross Debt 5

7 APPENDIX I OPERATIONAL DATA Number of Students ('000) 4Q17 4Q16 % change K12 Educational Solutions Long-term Contracts (Learning Systems and Partnership Agreements) % "O Líder em Mim" (OLEM) % Proprietary Schools Total Students of Prop. Schools (does not include Prep. Courses) 19,4 19,8-2% Language Red Balloon 25,2 21,5 17% Number of Schools 4Q17 4Q16 % change K12 Educational Solutions Partner Schools (Learning Systems and Partnership Agreements) % Proprietary Schools Total Proprietary Schools (does not include Prep. Courses) % Language Red Balloon % 6

8 APPENDIX II INCOME STATEMENT BY BUSINESS UNIT QUARTER By Business Unit - R$ mm 4Q17 Results K12 SETS Schools and Language Others Net Revenue 602,9 30,2 117,2 (2,4) 748,0 (-) Cost of Goods Sold (COGS) (246,3) (5,6) (71,3) (5,9) (329,2) (=) Gross Profit 356,6 24,6 45,9 (8,3) 418,7 Gross Margin (%) 59% 81% 39% 346% 56% (-) Selling, General and Administrative Expenses (193,5) (31,5) (59,1) (19,0) (303,1) (=) Operating Income (Loss) 163,2 (7,0) (13,2) (27,4) 115,6 (+) Depreciation and Amortization 23,1 6,8 5,2 (0,2) 35,0 (+) Amortization of Publishing Investment 60,1 1,6 0,0 0,0 61,6 (=) Adjusted EBITDA I 246,3 1,4 (7,9) (27,6) 212,2 (+) Non-recurring expenses 2,3 2,8 2,8 6,9 14,7 (+) Stock-based compensation plan 0,0 0,0 0,0 8,7 8,7 (=) Adjusted EBITDA II (recurring) 248,6 4,2 (5,1) (12,0) 235,7 EBITDA Margin (%) 41% 14% -4% N/A 32% By Business Unit - R$ mm 4Q16 Results K12 SETS Schools and Language Others Net Revenue 647,8 19,8 120,5 (5,6) 782,5 (-) Cost of Goods Sold (COGS) (287,0) (52,0) (71,7) 0,6 (410,1) (=) Gross Profit 360,9 (32,2) 48,7 (5,0) 372,4 Gross Margin (%) 56% -163% 40% 90% 48% (-) Selling, General and Administrative Expenses (228,5) (19,6) (46,2) 0,9 (293,4) (=) Operating Income (Loss) 132,3 (51,8) 2,5 (4,1) 79,0 (+) Depreciation and Amortization 64,2 40,4 2,5 8,4 115,5 (+) Amortization of Publishing Investment 44,2 1,6 0,0 0,7 46,5 (=) Adjusted EBITDA I 240,7 (9,7) 5,0 5,0 241,0 (+) Non-recurring expenses 14,9 9,9 0,3 (29,9) (4,9) (+) Stock-based compensation plan 0,0 0,0 0,0 20,6 20,6 (=) Adjusted EBITDA II (recurring) 255,6 0,2 5,3 (4,3) 256,8 EBITDA Margin (%) 39% 1% 4% N/A 33% 7

9 APPENDIX II (cont.) INCOME STATEMENT BY BUSINESS UNIT ANNUAL By Business Unit - R$ mm 2017 Results K12 SETS Schools and Language Others Net Revenue 1.230,2 151,2 504,7 (14,6) 1.871,6 (-) Cost of Goods Sold (COGS) (462,3) (89,2) (283,3) 4,5 (830,4) (=) Gross Profit 767,9 62,0 221,4 (10,2) 1.041,2 Gross Margin (%) 62% 41% 44% 69% 56% (-) Selling, General and Administrative Expenses (470,6) (106,9) (174,1) (21,5) (773,1) (=) Operating Income (Loss) 297,4 (45,0) 47,3 (31,7) 268,1 (+) Depreciation and Amortization 94,0 58,9 20,2 (0,0) 173,2 (+) Amortization of Publishing Investment 82,5 21,3 0,0 (0,0) 103,7 (=) Adjusted EBITDA I 473,8 35,2 67,6 (31,7) 544,9 (+) Non-recurring expenses 6,2 5,3 6,1 (1,1) 16,5 (+) Stock-based compensation plan 0,0 0,0 0,0 8,7 8,7 (=) Adjusted EBITDA II (recurring) 480,0 40,5 73,7 (24,1) 570,1 EBITDA Margin (%) 39% 27% 15% N/A 30% By Business Unit - R$ mm 2016 Results K12 SETS Schools and Language Others Net Revenue 1.245,9 142,5 493,7 (13,0) 1.869,1 (-) Cost of Goods Sold (COGS) (508,5) (109,3) (275,5) 8,8 (884,5) (=) Gross Profit 737,4 33,2 218,2 (4,2) 984,6 Gross Margin (%) 59% 23% 44% 32% 53% (-) Selling, General and Administrative Expenses (584,5) (93,2) (166,4) (20,3) (864,3) (=) Operating Income (Loss) 152,9 (60,0) 51,8 (24,5) 120,2 (+) Depreciation and Amortization 153,1 67,0 9,9 33,5 263,5 (+) Amortization of Publishing Investment 65,2 13,3 0,0 0,7 79,2 (=) Adjusted EBITDA I 371,1 20,4 61,7 9,7 462,9 (+) Non-recurring expenses 40,7 18,2 1,0 (41,6) 18,3 (+) Stock-based compensation plan 0,0 0,0 0,0 20,6 20,6 (=) Adjusted EBITDA II (recurring) 411,9 38,6 62,7 (11,2) 501,9 EBITDA Margin (%) 33% 27% 13% N/A 27% 8

10 APPENDIX III INCOME STATEMENT PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) Net revenue Cost of goods and services ( ) ( ) Gross profit Selling expenses ( ) ( ) General and administrative expenses ( ) ( ) Other income (expenses), net Operating profit Financial income Financial expenses ( ) ( ) Foreign exchange variation Profit (loss) before ownership interest ( ) Equity in the results of subsidiaries Profit (loss) before income taxes ( ) Income taxes and social contribution (29.986) Net income (loss) for the period (74.487) Attributable to Owners of the Parent (70.948) Non-controlling interest 503 (3.539) (74.487) Basic earnings per share from continuing operations- R$ - 0,04383 (0,35725) Diluted earnings per share from continuing operations- R$ - 0,04301 (0,34759) 9

11 APPENDIX IV BALANCE SHEET PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) ASSETS CURRENT ASSETS Cash and cash equivalents Trade receivables Inventories Taxes recoverable Dividends and interest on capital receivable - - Loans with related parties - - Other assets Total current assets NON-CURRENT ASSETS Taxes recoverable Deferred income tax and social contribution Judicial deposits Other assets Investments Intangible assets Property and equipment Total non-current assets Total Assets

12 APPENDIX IV (cont.) BALANCE SHEET PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) LIABILITIES AND SHAREHOLDERS EQUITY CURRENT Trade and other payables Trade payables - withdrawn Loans, financing and debentures Taxes and contributions payable Income tax and social contribution payable Dividends payable Loans and other receivables with related parties - - Payables for the acquisition of ownership interest Total current liabilities NON-CURRENT Trade and other payables Payables for the acquisition of ownership interest Loans, financing and debentures Taxes and contributions payable Provision for contingencies Provision for loss - - Deferred income tax and social contribution Total non-current liabilities Total Liabilities SHAREHOLDERS EQUITY Attributable to owners of the parent company Share capital Capital reserves Legal reserves Treasury shares (23.634) (62) Equity valuation adjustments (61.918) (70.212) Accumulated losses ( ) ( ) Non-controlling interests Total Shareholders Equity Total Liabilities and Shareholders Equity

13 APPENDIX V CASH FLOW STATEMENT PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME (LOSS) FOR THE PERIOD (74.487) Adjusted by: Depreciation and amortization Sale of fixed and intangible assets Equity income (45) (759) Provision for contingencies (6.204) Deferred income tax (63.639) Investment gains (losses) - (88) Allowance for doubtful accounts (1.828) Provision for impairment of inventories (6.954) Stock Option Amortization of transaction costs of debentures Aquisition price adjustment gains (losses) - (36.581) Amortization of goodwill Interest and foreign exchange variation, net Change in working capital Accounts receivable ( ) Inventories (54.998) Recoverable taxes (23.067) (21.988) Other assets (4.539) (3.915) Judicial deposits (826) Suppliers and other accounts payable Taxes and contributions payable (3.392) Income tax and social contributions payable Income tax and social contributions paid (13.773) (7.753) Interests received from investments Interests paid ( ) ( ) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES Purchases of: Property and equipment (37.283) (27.896) Intangible assets (58.878) (40.409) Acquisition of subsidiary in the period, net of cash acquired (25.514) (14.711) Acquisition of minority stake (29.500) - Cash increased by the split of MSTech Payment due to the acquisition of subsidiary - prior period (14.413) ( ) Financial assets NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ( ) (87.834) CASH FLOW FROM FINANCING ACTIVITIES Addition of loans and financing Repayment of loans and financing ( ) (31.661) Buyback Shares (36.677) (6.318) Acquisition of minority stake - (2.600) Dividends paid non-controlling shareholders - (882) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year NET CHANGES IN CASH AND CASH EQUIVALENTS

14 Contact SOMOS Educação S.A. Tel.: +55 (11) Disclaimer Any forward-looking statements in this document are exclusively related to the Company's business prospects, estimated operating and financial results and growth prospects, and therefore do not amount to any assurance as to the Company's future performance or results. These statements are only projections and as such are based exclusively on Management's expectations for the future of the business. The purpose of using words such as "anticipates," "desires," "expects," "forecasts ", "intends," "plans," "predicts," "projects", "aims" and other similar written words is to identify statements that necessarily involve known and unknown risks. The Company is not responsible for any operational or investment decisions taken based on information herein. Management's financial information should be considered for informational purposes only and not instead of an analysis of our audited consolidated individual and consolidated financial statements or annual statements reviewed by independent auditors for the purpose of deciding whether to invest in our shares or for any other purpose. 13