SOMOS Educação ER 4Q17

SOMOS Educação ER 4Q17

São Paulo, February 20, 2018 SOMOS Educação S.A. (B3: SEDU3) announces its results for the fourth quarter of 2017 (4Q17) and fiscal year 2017. 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 4Q17/4Q16 2017 2016 2017/2016 Net Revenues 748,0 782,5-4,4% 1.871,6 1.869,1 0,1% Adjusted Gross Profit (1) 418,9 462,3-9,4% 1.103,1 1.155,7-4,5% 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 1.274,0 1.071,8 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 2018. 1

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 2017. 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

ANALYSIS OF FINANCIAL PERFORMANCE Net Revenues In 2017, net revenues totaled R$1,871.6 million, in line when compared to 2016. 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 - 2017 vs. 2016 (R$ mm) 1.869,1 (15,6 ) 8,7 11,1 (1,6 ) 1.871,6 2016 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 2016. 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 2017. 3

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 - 2017 vs. 2016 (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 2016. 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 2017. 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 2016. 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 2016. 4

(R$ mm) 4Q17 4Q16 2017 2016 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 2016. 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 2015. 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) 1.676,2 1.673,0 1.628,9 604,3 584,4 475,2 1.941,0 1.920,3 672,7 646,3 1.071,8 1.088,6 1.153,7 1.268,3 1.274,0 4Q16 1Q17 2Q17 3Q17 4Q17 Net Debt Cash + Equivalents Gross Debt 5

APPENDIX I OPERATIONAL DATA Number of Students ('000) 4Q17 4Q16 % change K12 Educational Solutions Long-term Contracts (Learning Systems and Partnership Agreements) 883 858 3% "O Líder em Mim" (OLEM) 115 123-6% 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) 2.779 2.630 6% Proprietary Schools Total Proprietary Schools (does not include Prep. Courses) 28 28 0% Language Red Balloon 120 95 26% 6

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

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

APPENDIX III INCOME STATEMENT PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) 2017 2016 Net revenue 1.871.583 1.869.054 Cost of goods and services (830.427) (884.501) Gross profit 1.041.156 984.553 Selling expenses (411.735) (547.403) General and administrative expenses (371.599) (348.996) Other income (expenses), net 10.250 32.083 Operating profit 268.072 120.237 Financial income 60.617 102.785 Financial expenses (287.147) (333.688) Foreign exchange variation 296 267 Profit (loss) before ownership interest 41.838 (110.399) Equity in the results of subsidiaries 45 759 Profit (loss) before income taxes 41.883 (109.640) Income taxes and social contribution (29.986) 35.153 Net income (loss) for the period 11.897 (74.487) Attributable to Owners of the Parent 11.394 (70.948) Non-controlling interest 503 (3.539) 11.897 (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

APPENDIX IV BALANCE SHEET PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) ASSETS 2017 2016 CURRENT ASSETS Cash and cash equivalents 646.266 604.338 Trade receivables 588.751 364.865 Inventories 416.982 457.233 Taxes recoverable 142.743 113.884 Dividends and interest on capital receivable - - Loans with related parties - - Other assets 23.459 28.605 Total current assets 1.818.201 1.568.925 NON-CURRENT ASSETS Taxes recoverable 4.157 4.157 Deferred income tax and social contribution 195.233 199.962 Judicial deposits 5.815 6.337 Other assets 8.286 10.385 Investments 130 7.537 Intangible assets 1.575.251 1.552.479 Property and equipment 142.096 126.498 Total non-current assets 1.930.968 1.907.355 Total Assets 3.749.169 3.476.280 10

APPENDIX IV (cont.) BALANCE SHEET PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) LIABILITIES AND SHAREHOLDERS EQUITY 2017 2016 CURRENT Trade and other payables 435.541 397.594 Trade payables - withdrawn 330.875 325.207 Loans, financing and debentures 468.871 685.179 Taxes and contributions payable 10.672 13.921 Income tax and social contribution payable 5.110 597 Dividends payable 818 289 Loans and other receivables with related parties - - Payables for the acquisition of ownership interest 10.770 15.212 Total current liabilities 1.262.657 1.437.999 NON-CURRENT Trade and other payables 1.952 34.250 Payables for the acquisition of ownership interest 31.467 30.548 Loans, financing and debentures 1.409.153 945.220 Taxes and contributions payable 2.652 3.053 Provision for contingencies 27.396 37.110 Provision for loss - - Deferred income tax and social contribution 164.948 145.175 Total non-current liabilities 1.637.568 1.195.356 Total Liabilities 2.900.225 2.633.355 SHAREHOLDERS EQUITY Attributable to owners of the parent company Share capital 862.887 852.868 Capital reserves 537.718 531.487 Legal reserves 570 - Treasury shares (23.634) (62) Equity valuation adjustments (61.918) (70.212) Accumulated losses (469.304) (480.128) 846.319 833.953 Non-controlling interests 2.625 8.972 Total Shareholders Equity 848.944 842.925 Total Liabilities and Shareholders Equity 3.749.169 3.476.280 11

APPENDIX V CASH FLOW STATEMENT PERIODS ENDED DECEMBER 31 (amounts in R$ thousands) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME (LOSS) FOR THE PERIOD 11.897 (74.487) Adjusted by: Depreciation and amortization 56.513 41.670 Sale of fixed and intangible assets 791 1.712 Equity income (45) (759) Provision for contingencies (6.204) 4.881 Deferred income tax 8.319 (63.639) Investment gains (losses) - (88) Allowance for doubtful accounts (1.828) 21.899 Provision for impairment of inventories (6.954) 19.977 Stock Option 8.684 - Amortization of transaction costs of debentures 11.218 6.261 Aquisition price adjustment gains (losses) - (36.581) Amortization of goodwill 116.644 221.793 Interest and foreign exchange variation, net 188.031 243.066 Change in working capital Accounts receivable (225.059) 40.078 Inventories 21.103 (54.998) Recoverable taxes (23.067) (21.988) Other assets (4.539) (3.915) Judicial deposits (826) 1.722 Suppliers and other accounts payable 46.530 275.089 Taxes and contributions payable (3.392) 3.670 Income tax and social contributions payable 11.075 5.802 Income tax and social contributions paid (13.773) (7.753) Interests received from investments - 17.551 Interests paid (170.284) (235.963) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 24.834 405.000 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 - 5.500 Payment due to the acquisition of subsidiary - prior period (14.413) (405.780) Financial assets - 395.462 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (165.588) (87.834) CASH FLOW FROM FINANCING ACTIVITIES Addition of loans and financing 904.699 59.334 Repayment of loans and financing (685.340) (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 182.682 17.873 INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS 41.928 335.039 Cash and cash equivalents at the beginning of the year 604.338 269.299 Cash and cash equivalents at the end of the year 646.266 604.338 NET CHANGES IN CASH AND CASH EQUIVALENTS 41.928 335.039 12

Contact SOMOS Educação S.A. http://ri.somoseducacao.com.br/ E-mail: ri@somoseducacao.com.br Tel.: +55 (11) 4383-8262 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