São Paulo, May 14th, 2018 SOMOS Educação S.A. (B3: SEDU3)

Transcription

1 SOMOS Educação 1Q18

2 São Paulo, May 14th, 2018 SOMOS Educação S.A. (B3: SEDU3) announces its results for the first quarter of 2018 ( 1Q18 ). The comments herein refer to the consolidated results and comparisons are with the same period in 2017 ( 1Q17 ), as indicated. Consolidated Key Indicators Quarter Change (%) (R$ mm) 1Q18 1Q17 1Q18/1Q17 Net Revenues 568,7 523,1 8,7% Adjusted Gross Profit (1) 364,2 365,4-0,3% Gross Margin (%) 64,0% 69,9% -6 p.p Adjusted EBITDA II (2) 260,3 232,1 12,1% EBITDA Margin (%) 45,8% 44,4% 1 p.p Adjusted Net Income (3) 129,4 101,2 27,8% Operating Cash Flow 110,8 76,1 45,7% Net Debt 1.253, ,6 15,2% (1) Adjusted Gross Profit: R$4.6 million of amortization costs from acquisitions goodwill in 1Q18 (vs. R$5.4 million in 1Q17). (2) Adjusted EBITDA II: R$7.5 million of non-recurring items in 1Q18 (vs. R$1.6 million in 1Q17) and R$0.6 million of stock-based compensation plan expenses in 1Q18 (vs. zero in 1Q17). (3) Adjusted Net Income: R$11.3 million of amortization costs and expenses from acquisitions goodwill in 1Q18 (vs. R$19.7 million in 1Q17); R$7.5 million of non-recurring items in 1Q18 (vs. R$1.6 million in 1Q17); R$0.6 million of stock-based compensation plan expenses in 1Q18 (vs. zero in 1Q17), and -R$3.1 million of temporary differences and other adjustments of income taxes in 1Q18 (vs. -R$1.5 million no 1Q17). Highlights Strategic In April 23 rd, 2018, a binding agreement was signed for the purchase and sale of equity stake representing the control of SOMOS. The Agreement has been executed between, Saber Serviços Educacionais Ltda. ( SABER ), a company under indirect control of Kroton Educacional S.A. ( Kroton ), and, on the other side, certain funds managed by Tarpon Gestora de Recursos S.A. ( Tarpon ) which are the controlling shareholders of SOMOS. The transaction has been agreed under certain conditions precedent, including approval by Conselho Administrativo de Defesa Econômica CADE. Until the closing of the transaction and the approval from CADE (Antitrust Authority), we will operate independently, according to the applicable law. In January 2018, we have launched a new school of Colégio Integrado, in the city of Goiânia. Since January 2018, we have concluded the acquisition of 3 schools in the States of Mato Grosso and Rio Grande do Norte, in which approximately 4.0 thousand students are enrolled for Financial Results Net Revenues of R$568.7 million in 1Q18 (+8.7% over 1Q17). Adjusted Gross Profit of R$364.2 million in 1Q18 (-0.3% over 1Q17). Adjusted EBITDA II of R$260.3 million in 1Q18 (+12.1% over 1Q17). 2

3 Adjusted Net Income of R$129.4 million in 1Q18 (+27.8% over 1Q17). Operating Cash Flow of R$110.8 million in 1Q18 (+45.7% over 1Q17). Net Debt, as of March 31 st, 2018, of R$1,253.9 million (+15.2% over March 31 st, 2017). Operational Results Total of 1.2 million students under long-term contracts, in K12 Educational Solutions as of March 31 st, 2018, including 113 thousand students in the program O Líder em Mim (OLEM) (+22.2% over March 31 st, 2017). We ended the 1Q18 with 20.4 thousand students enrolled in our Proprietary Schools, in 29 units, including the new school of Integrado, in Goiânia (GO), and the Colégio CIE, in Rondonópolis (MT), which was acquired in March 2018 (+5.4% over 1Q17). Red Balloon ended the 1Q18 with 27.5 thousand students (+11.5% over 1Q17), distributed in 132 units, among proprietary units, franchises and In School (+13.8% over 1Q17). MESSAGE FROM THE MANAGEMENT In the first quarter of 2018, we posted a growth of 8.7% in net revenues and 12.1% in Adjusted EBITDA II in comparison to 1Q17. The adjusted EBITDA II totaled R$260.3 million in 1Q18, compared to R$232.1 million in 1Q17, and the EBITDA margin has increased 1 p.p., from 44.4% in 1Q17 to 45.8% in 1Q18, due to the continuous process of integration and efficiency gains, which we have been implementing in the past three years. In Proprietary Schools, we concluded the TOTVs integration of our ph schools network in Rio de Janeiro, and the acquisition of schools in the States of Mato Grosso and Rio Grande do Norte with approximately 4.0 thousand students enrolled for In the Language business, we have followed our expansion plan and ended the first quarter with 132 units of Red Balloon, a 13.8% growth over 1Q17. In K12 Educational Solutions, we reached a total of 1.2 million students under long-term contracts, through our offerings that include learning systems, OLEM and PAR Educational Platform (an increase of 22.2% over 1Q17). ANALYSIS OF FINANCIAL PERFORMANCE Net Revenues In 1Q18, net revenues totaled R$568.7 million, an 8.7% growth over 1Q17. In K12 Educational Solutions, the growth was 14.4% (R$49.9 million increase), mainly due to Livro Fácil s marketplace and the revenues from PNLD 2018 Arts subject. In Proprietary Schools and Language, the net revenue growth was 5.5% (R$7.3 million increase) over 1Q17, mainly due to the higher number of students and higher average ticket at the Schools. In Educational Solutions for Technical and Higher Education (SETS), the reduction in net revenues in the first quarter of 2018 is mainly explained by the fact that we are no longer 3

4 controlling shareholders in Alfacon and, consequently, we are not consolidating its results anymore. Revenues Growth - 1Q18 vs. 1Q17 (R$ mm) 523,1 49,9 (12,1 ) 7,3 0,5 568,7 1Q17 K12 SETS Schools and Language Others 1Q18 Adjusted Gross Profit Adjusted Gross Profit totaled R$364.2 million in 1Q18, in line when compared to R$365.4 million reported in 1Q17. The reduction in the adjusted gross margin was mainly due to the K12 Educational Solutions business, as a result of a mix effect, as we had higher share of revenues coming from PNLD 2018, compared to 1Q17, besides the consolidation of Livro Fácil s marketplace results. 365,4 Adjusted Gross Profit - 1Q18 vs. 1Q17 (R$ mm) (2,4) (4,4) 2,0 3,6 364,2 1Q17 K12 SETS Schools and Language Others 1Q18 SG&A Selling, General and Administrative Expenses In 1Q18, SG&A totaled R$149.4 million (which represents 26% of net revenues), a reduction of 15.5% compared to R$176.8 million (which represented 34% of net revenues) in 1Q17. This reduction is a result of the continuous process of integration and efficiency gains, which we have been implementing in the past three years. EBITDA Adjusted EBITDA II totaled R$260.3 million in 1Q18, compared to R$232.1 million in 1Q17, which represents a 12.1% growth. The EBITDA margin increased 1 p.p. in the period, from 44.4% in 1Q17 to 45.8% in 1Q18. 4

5 232,1 Adjusted EBITDA II - 1Q18 vs. 1Q17 (R$ mm) 11,0 23,3 260,3 (5,1 ) (1,0 ) Financial Income In 1Q18 we recognized net financial expenses of R$46.4 million, compared to R$62.3 million reported in 1Q17. The reduction in financial expenses is related to interest on loans reflecting a lower interest rate SELIC (which is the main reference for our borrowing cost) and a lower spread after the debt refinancing we performed (see debt profile graph on the next page). Investments 1Q17 K12 SETS Schools and Language Others 1Q18 (R$ mm) 1Q18 1Q17 Financial Results (46,4) (62,3) Financial Income 17,9 20,8 Financial Expense (64,4) (83,1) Operational CAPEX in the first quarter of 2018 totaled R$69.1 million. Investments in production and content development for Learning Systems and Publishers totaled R$30.7 million in 1Q18 (vs. R$14.6 million in 1Q17). This increase was mainly due to changes in PNLD 2019 schedule, which has impacted the 1Q18 with an investment carry-on of R$8.3 million which started in Investments for acquisitions of fixed and intangible assets totaled R$38.4 million in 1Q18 (vs. R$15.4 million in 1Q17). This growth is a result of higher investments in digital platforms such as Plurall and Stoodi, besides significant non-recurring investments in updating and remodeling of some school units of Colégio ph in Rio de Janeiro and Curso Anglo in São Paulo, which totaled approximately R$18.0 million in 1Q18. Operating Cash Generation Operating cash generation in 1Q18 was R$110.8 million compared to R$76.1 million in 1Q17. The operating cash generation was positively impacted by the payments received regarding PNLD 2018, as we mentioned in the earnings release of 4Q17. 5

6 Capital Structure As of March 31, 2018, SOMOS Educação's consolidated net debt of R$1,253.9 million consisted of R$2,579.3 million gross debt and R$1,325.4million cash and cash equivalents. Total gross debt consists of R$2,538.8 million financial debt and R$40.5 million in debt with the sellers of the acquired companies. Of the total debt, 84% corresponds to long-term liabilities. The increase in cash and cash equivalents is a result of our recent public issuance of debentures, settled in March 2018, in the total amount of R$800.0 million. In April 2018, we have prepaid debentures issued in 2014 whose balance totaled R$603 million. Net Debt (R$ mm) 2.579, , ,9 584,4 475, , ,3 672,7 646, , , , , , ,9 1T17 2T17 3T17 4T17 1T18 Net Debt Cash + Equivalents Gross Debt Debt Profile 53% 45% 47% 55% 74% 75% 84% 26% 25% 16% 1T17 2T17 3T17 4T17 1T18 % Short-term Debt % Long-term Debt 6

7 APPENDIX I OPERATIONAL DATA Number of Students ('000) 1Q18 1Q17 % change K12 Educational Solutions Long-term Contracts (Learning Systems and PAR) % "O Líder em Mim" (OLEM) % Proprietary Schools Total Students of Prop. Schools (does not include Prep. Courses) 20,4 19,4 5% Language Red Balloon 27,5 24,7 11% Number of Schools 1Q18 1Q17 % change K12 Educational Solutions Partner Schools (Learning Systems and PAR) % Proprietary Schools Total Proprietary Schools (does not include Prep. Courses) % Language Red Balloon % (1) 1Q18: includes students enrolled in Colégio CIE (aquired in Mar/2018) and students enrolled in the new unit of Integrado (launched in Jan/2018). 7

8 APPENDIX II INCOME STATEMENT BY BUSINESS UNIT By Business Unit - R$ mm 1Q18 Results K12 SETS Schools and Language Others Consolidated Net Revenue 396,8 35,5 139,8 (3,4) 568,7 (-) Cost of Goods Sold (COGS) (134,2) (9,7) (70,7) 5,5 (209,1) (=) Gross Profit 262,6 25,8 69,0 2,1 359,6 Gross Margin (%) 66% 73% 49% -62% 63% (-) Selling, General and Administrative Expenses (77,8) (16,7) (41,2) (13,8) (149,4) (=) Operating Income (Loss) 184,9 9,1 27,8 (11,7) 210,1 (+) Depreciation and Amortization 9,6 0,4 3,0 10,9 23,8 (+) Amortization of Publishing Investment 16,6 1,7 0,0 (0,1) 18,3 (=) Adjusted EBITDA I 211,0 11,3 30,8 (0,9) 252,3 (+) Non-recurring expenses 0,0 0,0 1,0 6,4 7,5 (+) Stock-based compensation plan 0,0 0,0 0,0 0,6 0,6 (=) Adjusted EBITDA II (recurring) 211,0 11,3 31,8 6,2 260,3 EBITDA Margin (%) 53% 32% 23% N/A 46% By Business Unit - R$ mm 1Q17 Results K12 SETS Schools and Language Others Consolidated Net Revenue 346,9 47,6 132,5 (3,9) 523,1 (-) Cost of Goods Sold (COGS) (81,9) (18,1) (65,4) 2,4 (163,1) (=) Gross Profit 265,0 29,5 67,1 (1,5) 360,0 Gross Margin (%) 76% 62% 51% 39% 69% (-) Selling, General and Administrative Expenses (106,6) (24,1) (40,8) (5,3) (176,8) (=) Operating Income (Loss) 158,5 5,3 26,3 (6,9) 183,2 (+) Depreciation and Amortization 18,8 4,7 5,0 2,1 30,6 (+) Amortization of Publishing Investment 10,1 6,7 0,0 0,0 16,7 (=) Adjusted EBITDA I 187,3 16,7 31,3 (4,8) 230,5 (+) Non-recurring expenses 0,4 (0,3) 1,6 0,0 1,6 (+) Stock-based compensation plan 0,0 0,0 0,0 0,0 0,0 (=) Adjusted EBITDA II (recurring) 187,7 16,4 32,9 (4,8) 232,1 EBITDA Margin (%) 54% 34% 25% N/A 44% 8

9 APPENDIX III INCOME STATEMENT PERIODS ENDED MARCH 31 (Amounts in R$ thousands) March 31, 2018 Consolidated March 31, 2017 Net revenue Cost of goods and services ( ) ( ) Gross profit Selling expenses (89.305) ( ) General and administrative expenses (79.631) (74.343) Other income (expenses), net (277) Operating profit Financial income Financial expenses (64.562) (83.048) Foreign exchange variation 170 (39) Profit (loss) before ownership interest Equity in the results of subsidiaries Profit (loss) before income taxes Income taxes and social contribution (53.524) (39.693) Net income (loss) for the period Attributable to Owners of the Parent Non-controlling interest Basic earnings per share from continuing operations- R$ - 0, ,30850 Diluted earnings per share from continuing operations- R$ - 0, ,

10 APPENDIX IV BALANCE SHEET PERIODS ENDED MARCH 31 (Amounts in R$ thousands) ASSET March 31, 2018 Consolidated December 31, 2017 CURRENT ASSETS Cash and cash equivalents Trade receivables Inventories Taxes recoverable 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

11 APPENDIX IV (cont.) BALANCE SHEET PERIODS ENDED MARCH 31 (Amounts in R$ thousands) LIABILITIES AND SHAREHOLDERS EQUITY March 31, 2018 Consolidated December 31, 2017 CURRENT Trade and other payables Trade payables - withdrawn Loans, financing and debentures Taxes and contributions payable Income tax and social contribution payable Dividends payable 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 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) (23.634) Equity valuation adjustments (61.918) (61.918) Accumulated losses ( ) ( ) Non-controlling interests Total Shareholders Equity Total Liabilities and Shareholders Equity

12 APPENDIX V CASH FLOW STATEMENT PERIODS ENDED MARCH 31 (Amounts in R$ thousands) March 31, 2018 Consolidated March 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME (LOSS) FOR THE PERIOD Adjusted by: Depreciation and amortization Sale of fixed and intangible assets Equity income (2.928) (199) Provision for contingencies (1.895) Deferred income tax Investment gains (losses) (351) Allowance for doubtful accounts (1.665) Provision for impairment of inventories Stock Option Amortization of transaction costs of debentures Aquisition price adjustment gains (losses) Amortization of goodwill Change in working capital Accounts receivable (17.417) (91.884) Inventories (2.377) (37.248) Recoverable taxes (27.541) (11.051) Other assets (9.799) Judicial deposits Suppliers and other accounts payable (81.060) Taxes and contributions payable (1.434) Income tax and social contributions payable Income tax and social contributions paid (7.691) (3.200) Interests paid (53.537) (35.625) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES Purchases of: Property and equipment (19.352) (7.142) Intangible assets (18.999) (8.249) Acquisition of subsidiary in the period, net of cash acquired - (9.792) Organizational reestructuring (2.122) - Payment due to the acquisition of subsidiary - prior period (6.281) (4.774) Loans received from related parties - - Loans granted to related parties - - NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (46.754) (29.957) CASH FLOW FROM FINANCING ACTIVITIES Addition of loans and financing Repayment of loans and financing (99.668) (22.599) Buyback Shares - (7.119) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (27.218) INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS (19.945) 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 (19.945) 12

13 Contact SOMOS Educação S.A. ri.somoseducacao.com.br 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