apresentação do powerpoint...15 r$ million and % 20181 2018 with ifrs162 guidance 2019 change...
TRANSCRIPT
4Q18 Results
March 2019
2
The following material is a presentation of general information on Kroton Educacional S.A. ("Kroton"). The information
herein is summarized and does not purport to be complete, and should not be construed by potential investors as a
recommendation. This presentation is strictly confidential and may not be disclosed to any other persons. We make no
representations or warranties as to the accuracy, adequacy or scope of the information presented herein, which
should not be used as the basis for any investment decisions.
This presentation contains forward-looking statements and information pursuant to Clause 27A of the Securities Act of
1933 and Clause 21E of the Securities Exchange Act of 1934. Said forward-looking statements are merely forecasts
and do not represent guarantees of future performance. Investors are cautioned that said forward-looking statements
and information are and will be, as applicable, subject to risks, uncertainties and factors related to the business
operations and environments of Kroton and its subsidiaries, and the actual results of said companies may differ
materially from the future results expressed or implied by said forward-looking statements and information.
Although Kroton believes that the expectations and assumptions contained in said forward-looking statements and
information are reasonable and based on the data currently available to its management, it cannot guarantee future
results or events. Kroton does not undertake any liability for updating any forward-looking statements or information.
This presentation does not constitute any offer, invitation or request to subscribe to or purchase any securities. This
presentation and its contents do not constitute the basis of any contract or commitment.
Disclaimer
OPENING
REMARKS
4
2018(Ex-Greenfields)¹
Guidance
2018 (Ex-Greenfields)1
Change2018
(Consolidated)
Guidance
2018 (Consolidated)
Change
Net Revenue R$ 5,507 R$ 5,440 +1.2% R$ 5,550 R$ 5,480 +1.3%
Adjusted EBITDA R$ 2,367 R$ 2,350 +0.7% R$ 2,301 R$ 2,275 +1.2%
Adjusted EBITDA Margin 43.0% 43.2% -0.2 p.p. 41.5% 41.5% 0.0 p.p.
Adjusted Net Income R$ 2,017 R$ 2,030 -0.6% R$ 1,945 R$ 1,940 +0.3%
Adjusted Net Margin 36.6% 37.3% -0.7 p.p. 35.0% 35.4% -0.4 p.p.
Total CAPEX (% Net Rev.) - - - 12.7% 13.5% -0.8 p.p.
Guidance x Actual Results
R$ million and %
1 Does not consider the impacts of the new On-campus units
Consolidated Revenue,
EBITDA and Income lines
above guidance
Results of the greenfields were above the Company’s original expectations, leading us to surpass
the guidance on a consolidated analysis
SOMOS
INTEGRATION
7
SOMOS Integration
5 new committees created
19 committees in the
combined Company
12 fronts being monitored:
4 operational fronts with completion in the first half of 2019:
CSC: Centralization of strategic areas of the Center of Shared Services in Valinhos
IT: Financial ERP
Supply chain: Integration of the graphic production, storage and logistics operation
Procurement: Ongoing contract renegotiations with suppliers
HR
PPMO
K12
Languages
Schools
M&A
CSC
Accounting
Procurement
IT
Budgeting
Logistics
Governance Rituals Integration Fronts
Synergies
8
Implementation of Kroton Methodology in SOMOS’
Budgeting Process
SOMOS 2019 Budgeting process
High complexity change in record time
Implementation of Kroton methodology
Zero-based budget
Matrix management by packages
Implementation of Kroton budget management
Monitoring and reporting governance
Portals for budget approvals
+200
people involved
2
workshops
3
committees
Treasury
Unified cash and debt management
9
Concept of K12 Platform totally implemented
10
New SOMOS Go-to-Market
Sales
Force
More consultants,
more pedagogical
advisors, more specialists per
school in the entire market
Extracurricular
Activities
Integrated offer of
extracurricular solutions(English,
socioemotional skills, etc.)
Leadership
Optimizationand focus of the
commercialleadership of
integratedsolutions
Technology
Technological differentials are
integrated to the whole
portfolio on offer
ONE STOP PARTNER POWERED BY TECHNOLOGY
Integrated
Platform
Portfolio of integrated and
flexible solutions to
serve any necessity of the
schools
RESULTS
12
Summary of the Adjustments on SOMOS’ Results
Review of the amounts of punctuality discount over tuition from financial expense to reducing net revenue
Implementation of a new concept of provisioning for inventory obsolescence which is more adherent to the operation
Review of the criteria for provisioning for losses over accounts receivable
Write-off of assets and review of the criteria for the capitalization of costs and expenses
Write-off of deferred tax assets e prescribed taxes recoverable
Complement of the provision for suppliers
Changes carried out now help to equalize
the different accounting practices, so as to
ensure future results are more adherent
and comparable
Synergies were calculated on top of the
adjusted result
Neutral impact on cash
1
2
3
4
5
6
13
499.3 473.0
84.6
(26.3)(116.2)
(36.1)(11.4) (7.7) (27.9)
(165.4)
(23.7)
Ebitda Ant es dos Ajustes (-) Desconto Pontuali dade Ebitda Recorr ent e (-) Est oques (-) CR (-) Baixa Imobi lizado Intagível (-) Impostos (-) Revi são de Pr ovi sões / Outr os (-) Stock Grant s (-) Outr as despesas Nrec Ebitda Recorr ent e pós BA
Reconciliation of SOMOS 2018 EBITDA
EBITDA
before the
adjustments
Amounts
in R$ MM
Migration of
Punctuality
Discount to
Net Revenue
Recurring
EBITDA
Share
Remuneration
Plan
Inventory
Accounts
Receivable
Write-off of
Fixed &
Intangible
Assets
EBITDA
Taxes
Review of
Provisions
& Others
Other Non-
Recurring
Expenses
12
3
4 56
Adjustments of Balances and Practices with no Cash Effect
Non-Recurring
Expenses with
Cash Effect
2019 GUIDANCE
15
R$ million and % 20181 2018
With IFRS162
Guidance
2019 Change Comments
Net Revenue 1,867 1,867 1,933 3.5%Review of the Commercial Strategy and Go-to-
Market still do not impact 2019
Recurring EBITDA 473 556 670 20.5%
Recurring EBITDA Margin 25.3% 29.8% 34.7% 4.9 p.p.
EBITDA3 85 168 621 269.6%
EBITDA Margin 4.5% 9.0% 32.1% 23.1 p.p.
Adjusted Net Income4 -310 -326 100 n.a.
Adjusted Net Margin n.a. n.a. 5.2% n.a.
Net Income -399 -416 63 n.a.
Net Margin n.a. n.a. 3.3% n.a.
OCG after Capex (Before Expansion) -9 -9 150 n.a.
Conversion (with IFRS 16) n.a. n.a. 24.2% n.a.
Conversion (without IFRS 16) n.a. n.a. 28.7% n.a.
Cash Generation After Capex (Before Expansion)
Reversal of cash consumption in 2018 to cash
generation in 2019
Results
2019 results already demonstrate the start of
the results of the efficiency gains initiatives,
with the capture of part of the synergies,
mainly in costs and expenses.
SOMOS Guidance
1 After convergence of accounting practices2 Impact of IFRS 16 based on estimated. Audited figures will be published as of 1Q193 EBITDA considers interest and penalties on tuition and does not consider impact of inventory surplus4 Adjusted Net Income does not consider goodwill amortization
16
R$ 115 million in Synergies until Dec/19
536 556
670
20 19
95
2018 RecurringEBITDA Ex-Synergies
2018 Synergies 2018 RecurringEBITDA
2019 Guidance
Organic Evolution of
the Operation
Synergies / Efficiency
of the Transaction
1
1 Recurring EBITDA adjusted by non-recurring items and expenses with share-based remuneration plan, and considering the impacts of IFRS 16
1
+20.5%
17
Increase of total synergies to R$ 375 million
115
375245
15
Synergies captureduntil Dec/19
Synergies to be capturedas of 2020
Additional synergiesidentified as of 2020
Updated total synergies
360
+25%
3001st Estimate
2nd Estimate
KROTON EX-SOMOS
OVERVIEW OF
THE RESULTS
20
Consolidated Results
Net Revenue
Quarterly – R$ million
Adjusted EBITDA
Quarterly – R$ million
Adjusted Net Income
Quarterly – R$ million
All numbers are ex-FAIR, FAC/FAMAT and NOVATEC1 Performance does not consider new units
CO
NSO
LID
ATE
DEX
-GR
EEN
FIEL
DS1
1,349.7 1,410.7
4Q17 4Q18
+4.5%
534.6 509.6
39.6% 36.1%
4Q17 4Q18Adjusted EBITDA Margin
-4.7%
489.0 403.4
36.2%28.6%
4Q17 4Q18Adjusted Net Margin
-17.5%
1,349.7 1,396.1
4Q17 4Q18
+3.4%
534.6 538.9
39.6% 38.6%
4Q17 4Q18Adjusted EBITDA Margin
+0.8%
489.0 435.5
36.2%31.2%
4Q17 4Q18Adjusted Net Margin
-10.9%
PDA AND AVERAGE
RECEIVABLES TERM
22
9.1% 9.9% 10.0% 9.0% 9.7% 10.0%
22.9 23.9 26.4
22.6 23.4 26.2
8.1%13.5% 12.4%
7.4% 8.0% 8.2%
83.4131.0 127.3
29.2 36.4 38.6
Provision for Doubtful Accounts (PDA)
4Q17 4Q183Q18 4Q17
Out-of-
4Q18
Out-of-
3Q18
Out-of-
4Q17 4Q183Q18 4Q17
Out-of-
4Q18
Out-of-
3Q18
Out-of-
On-Campus
% Business NR and R$ million1
Distance Learning
% Business NR and R$ million
Primary & Secondary Education
% Business NR and R$ million
All numbers exclude FAIR, FAC/FAMAT and NOVATEC1 Does not include Pronatec
On-Campus PDA presented an increase of
4.3 p.p. year-over-year, and decrease of
1.1 p.p. over 3Q18, with the impact of the
seasonality of PMT. Analyzing only Out-
of-Pocket PDA, there was a slight upturn
of 0.2 p.p. in a quarterly comparison, as a
consequence of the still challenging
macroeconomic scenario.
Distance Learning PDA moved up by 0.9
p.p. compared to 4Q17, due to the
evolution in the 100% online student base,
in addition to the impacts of the
macroeconomic scenario. Out-of-Pocket
PDA also posted an increase of 1.0 p.p.
year-over-year, due to the same factors,
with an upturn of 0.3 p.p. in a quarterly
comparison.
Primary and Secondary Education PDA
reached 1.6% in 4Q18, 0.8 p.p. above both
in the annual and quarterly comparisons,
reflecting the incorporation of the
Leonardo da Vinci and Lato Sensu
schools.
0.8% 0.8%
1.6%
0.60.3
1.8
4Q17 3Q18 4Q18
23
Average Receivables Term
Days
All numbers exclude FAIR, FAC/FAMAT and NOVATEC1 Does not include Pronatec
On-Campus 4Q18 4Q17 Change Comments 3Q18 Change
Total 161 129 32 days- Evolution of the PEP/PMT products
- Increase of Out-of-Pocket term157 4 days
Out-of-Pocket1 111 94 17 days
- Still challenging macroeconomic scenario
- Greater volume of interest and penalties
renegotiations
107 4 days
FIES 64 91 -27 days Receipt of the last installment under PN23 78 -14 days
PEP and PMT 487 321 166 days Expected ramp up for these products 489 -2 days
Distance Learning 4Q18 4Q17 Change Comments 3Q18 Change
Out-of-Pocket 86 94 -8 days
Lower volume of settlements and greater
collection, despite the still challenging
macroeconomic scenario
85 1 days
PMT 522 140 382 days Maturation of the product 556 -34 days
Primary & Secondary Ed. 4Q18 4Q17 Change Comments 3Q18 Change
Total 137 153 -16 days Higher Net Revenue in the period 84 53 days
CAPEX AND CASH
GENERATION
25
Capital Expenditure
All numbers exclude FAIR, FAC/FAMAT and NOVATEC
Capex Capex + Special ProjectsR$ million and % NR1 R$ million and % NR1
206.6
109.6
15.3%
7.8%
4Q17 4Q18
-47%
506.4439.7
9.1%7.9%
2017 2018
-13%
232.0 235.0
17.2% 16.7%
4Q17 4Q18
+1%
579.4705.7
10.5%12.7%
2017 2018
+22%
In 4Q18, the Company invested R$109.6 million in
recurring Capex, equivalent to 7.8% of Net Revenue, of
which 55% was directed towards the development of
content and systems. Year-to-date, recurring Capex
reached R$439.7 million, totaling 7.9% of annual Net
Revenue.
Adding investments in special projects and greenfields,
total Capex was R$235.0 million in 4Q18, 16.7% of Net
Revenue. Therefore, total Capex in 2018 posted R$705.7
million, equivalent to 12.7% of Net Revenue, slightly
below the 13.5% guidance.
26
Operating Cash Generation (OCG)
Amounts in R$ thousands
Consolidado 4Q18 4Q17 Change 2018 2017 Change
OCG before Capex 372,928 567,262 -34.3% 1,434,130 1,755,051 -18.3%
OCG / EBITDA 88.2% 119.9% -31.7 p.p. 70.7% 78.7% -8.0 p.p.
OCG after Capex 263,363 392,208 -32.9% 994,407 1,319,658 -24.6%
OCG / EBITDA 62.3% 82.9% -20.6 p.p. 49.0% 59.2% -10.2 p.p.
OCG afte Capex and Special Projects 137,919 376,073 -63.3% 728,469 1,245,279 -41.5%
OCG / EBITDA 32.6% 79.5% -46.9 p.p. 35.9% 55.8% -19.9 p.p.
Free Cash Flow 1,397 87,970 -98.4% -427,128 382,305 n.a.
Operating Cash Generation After Capex of R$263.4 million, with an EBITDA-to-Cash of 62.3%, reductions of 32.9% and 20.6 p.p.
year-over-year, with the impacts of working capital consumption due to the change in the profile of the student base, with a higher
representativeness of Out-of-Pocket and PEP students, in addition to the deterioration in On-Campus Out-of-Pocket receivables
term.
In this way, annual OCG After Capex totaled R$994.4 million, with a conversion of 49.0%, decreases of 24.6% and 10.2 p.p. in
relation to 2017, with the same impacts described above.
Free cash flow was impacted by the acquisition of controlled companies and the payment of dividends, and benefitted from the
receipt of the 1st installment for the Uniasselvi sale in the amount of R$130 million, ending the quarter in positive R$1.4 million, and
2018 in negative R$427.1 million.
27
994.4
(427.1)
(206.0)
(60.0) (76.5)
(193.7)
(638.9)
(12.3) (234.2)
GCOapós Capex
Expansão Orgânica Transf or mação Digit al Aquisiçõesde Contr ol adas
Recompr a de Ações/Stock Opti ons
Distr bui çãode Dividendos
Outr os Captação/Amor ti zação Fluxo deCaixa Livre
Evolution of Free Cash Flow in 2018
Amounts in
R$ MM
OCG
after
Capex
Acquisition of
Controlled
CompaniesShare
Buybacks /
Stock
Options
Payment of
Dividends
Debt Issue /
Amortization
Free
Cash
Flow
Organic
Expansion
Others
Digital
Trans.
Expansion and Special ProjectsValue Generation to
Shareholders
R$342.5 MM R$832.6MM
KROTON
CONSOLIDATED DEBT
29
Net Debt
Amounts in R$ thousands
1 Considers only bank obligations.2 Considering all short- and long-term obligations related to the taxes paid in installments and the acquisitions, including the amount to be paid within 5 years related to the Uniasselvi acquisition.3 Considers the receivables related to 50% of the FIES installments not paid in 2015, due in 2018, and receivables related to the Uniasselvi, FAIR and FAC/FAMAT divestments, with installments to be earned from 2018 to 2022 adjusted to
present value (excluding the earn-out amounts).
At the end of 4Q18, Kroton had a total of R$2.6 billion in cash and cash equivalents, increase of 49.7% year-over-year, mainly due
the increase in gross debt in R$5.0 billion, compared to R$4.1 billion consumed until now in the acquisition of SOMOS.
Including all other short and long term obligations and accounts receivables, which consist of taxes and contributions payed in
installments and obligations and rights related to the acquisitions and alienations carried out, the Company’s net debt was R$ 5.0
billion on December 31, 2018, with the impact of the debenture issue, in the amount of R$5.5 billion.
Consolidated 4Q18 4Q17 Change 3Q18 Change
Cash and Cash Equivalents 2,595,570 1,733,269 49.7% 6,793,655 -61.8%
Loans and Financing 7,683,622 303,881 n.a. 5,703,559 34.7%
Net Cash (Debt)1 -5,088,052 1,429,388 n.a. 1,090,096 n.a.
Other Short and Long Term Debt² 367,617 171,191 114.7% 309,108 18.9%
(1) Net Cash (Debt)2 -5,455,669 1,258,197 n.a. 780,988 n.a.
(a) Short Term Accounts Receivables 132,854 498,120 -73.3% 134,085 -0.9%
(b) Long Term Accounts Receivables 361,551 456,520 -20.8% 483,271 -25.2%
(2 = a + b) Other Accounts Receivablesᶟ 494,405 954,640 -48.2% 617,356 -19.9%
(1)+(2) Pro Forma Net Cash (Debt) -4,961,264 2,212,837 n.a. 1,398,344 n.a.
CLOSING REMARKS
CLOSING REMARKS
+12 new campuses in 2019.1
TOTAL: 167 CAMPUSES AT THE END OF 2019
+12 new campuses in 2019.2
+100 new centers in 2019.1
TOTAL: 1,510 CENTERS AT THE END OF 2019
+100 new centers in 2019.2
Status of the Enrollment
and Re-enrollment
Processes
Approval of the distribution
of dividends of R$ 43.0
million (R$ 0.03 per share),
maintaining payout at 40%
Organic Growth
Status of the Digital
Transformation process
INVESTOR RELATIONS
Carlos Lazar
Pedro Gomes
Ana Troster