UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

 

Form 6-K

 

 

 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2021

 

Commission File Number 001-39415

 

 

 

VASTA PLATFORM LIMITED

(Exact name of registrant as specified in its charter)

 

 

 

The Cayman Islands
(State of incorporation or organization)

 

Av. Paulista, 901, 5th Floor 

Bela Vista, São Paulo – SP 

01310-100, Brazil

+55 (11) 3133-7311
(Address of principal executive offices)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F  Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes  No

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes No

 

 

TABLE OF CONTENTS

 


EXHIBIT
 
99.1 Press Release dated August 13, 2021 – Vasta Platform Limited announces today its financial and operating results for the second quarter of 2021
   
99.2 Vasta Platform Limited Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2021, and for the three- and six-month periods ended June 30, 2021 and 2020

 

 

SIGNATURE

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

  Vasta Platform Limited
   
   
  By: /s/ Mario Ghio Junior
    Name: Mario Ghio Junior
    Title: Chief Executive Officer

 

Date: August 16, 2021

 

 

 

Exhibit 99.1

 

   

São Paulo, August 13, 2021 – Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or the “Company,” announces today its financial and operating results for the second quarter of 2021 (2Q21) ended June 30, 2021. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

HIGHLIGHTS

 

In the second quarter, net revenue expanded 17% versus the same quarter of 2020, owing to the growth in 2021 annual contract value (ACV) and revenue from non-subscription products. Net revenue from subscription products increased 12% in the quarter.

 

In the 2021 commercial cycle to date (4Q20-2Q21), subscription revenue ex-PAR increased 18%, while PAR, which revenue is concentrated in the two first quarters of the cycle (4Q and 1Q), was down 15% due to the higher re-use of textbooks. Within subscription revenue, we highlight the strength of complementary solutions, up 51% in the cycle. Despite all the challenges brought by the Covid-19 pandemic, we expect to record a low-double-digit organic growth in the subscription revenue ex-PAR in the 2021 cycle (from 4Q20 to 3Q21).

 

Adjusted EBITDA was negative in R$ 17 million in 2Q21, mostly driven by the unfavorable revenue seasonality of the second quarter, also affected by higher provision for doubtful accounts (PDA) and by the enhancement in our corporate structure following the IPO in July 2020.

 

The higher PDA reflects our conservatism in provisioning standards, amidst a difficult period for some of our partner schools and the textbook distribution channel (R$ 8.6 million is attributable to Covid-19 effects in 2Q21). Since the beginning of the pandemic, we have opted to support our partners by extending payment terms instead of granting discounts.

 

Vasta recorded adjusted net loss of R$ 25 million in the quarter. In the cycle, Vasta posted adjusted net profit of R$ 124 million, 29% up year-on-year.

 

On July 29, Vasta appointed Estela Maris Vieira de Souza to the board of directors as an independent member and as chairwoman of the audit committee. She will fill the vacancy in the board of directors and audit committee due to the passing of Francisco Henrique Passos Fernandes. We welcome Ms. Vieira and we believe that her vast experience in business and accounting matters will be a great fit to our board of directors.

 

On August 6, Vasta’s subsidiary Somos Sistemas de Ensino S.A. issued R$500 million in simple debentures, not convertible into shares, subject to compensatory interest of 100% of the DI Interbank Deposit rate (CDI), plus a spread of 2.30% per year. The debentures are aimed at reinforcing the company’s capital structure and elongating the debt maturity profile, which average maturity now stands at 29 months.

 

Today, we announce the acquisition of EMME – Produções de Materiais em Multimidia (EMME), which provides educational marketing solutions for schools, through a license of its “software as a service” platform. Founded in 2005, EMME has provided services to over 1,500 schools. EMME expects to record net revenue of R$ 7.6 million in 2021.

 

Vasta’s board of directors approved its first share repurchase program through which it may repurchase up to 1,000,000 Class A common shares in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on August 17, 2021, continuing until the earlier of the completion of the repurchase or February 17, 2022, depending upon market conditions.

 

 1 
   

MESSAGE FROM MANAGEMENT

 

During the second quarter, we continued to withstand the adverse effects that the second wave of Covid-19 caused to our business, particularly the lower-than-expected number of students enrolled at our partner schools and the greater volume of reuse and purchase of second-hand textbooks. Even with these challenges, we expect to record a high-single-digit organic growth in the subscription revenue in the 2021 commercial cycle (from 4Q20 to 3Q21), lower than the reported 2021 ACV growth due to higher reuse of textbooks in PAR, student migration to public schools and student dropout at the early years level. Excluding PAR, we expect to record a low-double-digit organic growth in the subscription revenue, with the sound increase in complementary solutions (+51% to date) as the main highlight.

 

Despite the challenging 2021, we see reasons to believe that the worst may be behind us. The rapid advance of vaccination in the main capitals of the country could favor the return of kids to school in 2022. Indeed, we have noticed increased activity in our partner schools recently, which has favored the current sales cycle for the 2022 school year. The successful go-to-market strategy that led us to deliver 23% 2021 ACV growth and 8% expansion in our school partners base is still in place and continues to bear promising intake results, now underscored by top-notch results of our students in the most-competitive university admission tests in the country. Our Plurall platform remains as the absolute leader in terms of web traffic, and will be even stronger for the 2022 sales cycle, with the launch of several new features. Lastly, we expect to add Eleva Plataforma de Ensino to our platform by the end of the year once we have the approval of Brazil’s Administrative Council for Economic Defense (CADE).

 

As we have already commented in previous quarters, we have continually expanded the range of digital solutions, either via complementary solutions offered through Plurall Store or by the recently launched Plurall My Teacher, our private classes platform. In the core education, we have launched the Fibonacci Learning System, in partnership with Colegio Fibonacci, a top-10 ranked school in Brazil’s National High School Test (ENEM). Within complementary solutions, we added essay review services through Redação Nota 1000, which may be embedded with the core product in premium brands or offered to our base of more than 4,500 partner schools. Still in this area, we proudly announce that we expanded our agreement with Macmillan for the development of a full bilingual educational platform, in complement to our existing offer of English products; this platform will be available from the 2023 sales cycle on.

 

Finally, our digital services platform begins to take shape with the launch of Somos Integra, a digital tool for connecting kindergarten schools and our partner schools, and the offering of marketing services provided by EMME, our newest acquisition. Founded in 2005, EMME has provided educational marketing solutions for more than 1,500 schools, and its business model is based on a monthly fee in which the clients contract a service package of custom advertising materials and marketing products. In addition to aggregating a digital solution and bringing in new clients, EMME will also improve the student acquisition and retaining process for the partner schools, supporting the Vasta’s portfolio growth. EMME expects to record net revenue of R$ 7.6 million in 2021.

 

These examples underscore our platform’s potential to continue expanding through a crescent number of solutions to our clients, ultimately increasing client loyalty and enhancing our long-term growth potential.

 

 2 
   

ESG HIGHLIGHTS

 

We take the opportunity of Ms. Vieira appointment to Vasta’s board of directors and audit committee to present a few highlights of our strong commitment with ESG standards:

 

With Ms. Vieira appointment, our board of directors is complete again, with three independent members (43% of total): Andres Cardo, Ann Williams, and Estela Vieira.

 

Two of our board members are women (28% of total), enabling Vasta to earn the Women on Board (WOB) certification. 49% of leadership positions in Vasta that are occupied by woman.

 

As per our by-laws, any related-party transactions must be exclusively approved by an independent committee, which is formed by our three independent board members.

 

Vasta is accredited by the Forest Stewardship Council (FSC), a globally recognized commitment with sustainable practices within the paper chain. We require that 100% of our supplies also possess this certification.

 

We buy energy in the free market from renewable sources like small hydro power plants, biomass, wind and solar.

 

100% of the waste generated in our distribution center is correctly treated.

 

Our corporate headquarters have the Leadership in Energy and Environmental Design (LEED) Silver certificate.

 

Somos Institute is a non-profit organization that promotes social impact programs in favor of education. Among its main initiatives, it has supported more than 1,000 students from 6 low-income preparatory courses in 2020, in partnership with Curso Anglo, having 172 students admitted in public universities. Among these courses, we highlight Fera, a free preparatory course for low-income students sponsored by Curso Anglo, which has benefitted more than 800 students.

 

Another key social initiative is Somos Futuro, a program that has supported more than 500 talented low-income students that came from public schools, providing integral high-school scholarship, didactic materials, online tutorship, mentorship, and psychological support. In 2020, a first group of 78 students concluded the high school, with 22 admitted in public universities so far. More than 6,000 hours of mentoring were offered to this group of students by Somos employees.

 

More than R$ 10 million in products and services were offered to the community in the context of Covid-19, benefitting more than 94 thousand people directly.

 

 3 
   

OPERATING PERFORMANCE

 

Student Base – Subscription Models

 

    2021 Cycle   2020 Cycle   % Y/Y
Partner Schools of Core Content   4,508   4,167   8.2%
Partner Schools of Complementary Solutions   1,114   636   75.2%
Students of Core Content   1,335,152   1,311,147   1.8%
Students of Complementary Solutions   307,941   213,058   44.5%

 

As we complete the devolution period in the second quarter, we update the actual number of partner schools and students that are served by our products. Even with lower numbers than expected at the ACV formation, our base of partner schools and students using our core content solutions increased 8% and 2%, respectively. In complementary solutions, the increases are still impressive, with 75% more client schools and 45% more associated students.

 

FINANCIAL PERFORMANCE

 

Net Revenue

 

Values in R$ '000   2Q21   2Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
Subscription   117,280   104,552   12.2%   644,501   586,075   10.0%
   Subscription ex-PAR   111,908   100,264   11.6%   522,436   442,680   18.0%
      Traditional Learning Systems   108,623   99,044   9.7%   459,085   400,784   14.5%
   Complementary Solutions   3,285   1,220   169.3%   63,350   41,896   51.2%
PAR   5,372   4,288   25.3%   122,065   143,395   -14.9%
Non-subscription   23,856   15,681   52.1%   121,028   289,424   -58.2%
Total Net Revenue   141,136   120,233   17.4%   765,529   875,499   -12.6%

 

In the second quarter, net revenue expanded 17% versus the same quarter of 2020, owing to the growth in the 2021 ACV and non-subscription products. In the 2021 cycle to date (4Q20 to 2Q21, the “cycle”), subscription revenue ex-PAR increased 18%, while PAR, which revenue is concentrated in the two first quarters of the cycle (4Q and 1Q), was down 15% due to the higher re-use of textbooks. Within subscription revenue, we highlight the strength of complementary solutions, up 51% in the cycle. In the cycle to date, we recognized nearly 76% of the 2021 ACV. Non-subscription revenue decreased 58% in the cycle, reflecting the impacts of the pandemic in the purchase of textbooks during the 2021 back-to-school period, in addition to the migration of former non-subscription clients to our subscription products, leading to the 13% total net revenue decline in the same period.

 

 4 
   

Adjusted EBITDA

 

Values in R$ '000   2Q21   2Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
Net (loss) profit   (62,197)   (54,938)   n.m.   (45,466)   13,014   n.m.
(+) Income tax and social contribution   (29,266)   (27,696)   n.m.   (21,285)   5,157   n.m.
(+) Net financial result   14,975   28,294   -47.1%   40,833   109,674   -62.8%
(+) Depreciation and amortization   50,314   43,534   15.6%   143,853   119,185   20.7%
EBITDA   (26,174)   (10,806)   n.m.   117,936   258,432   -54.4%
EBITDA Margin   -18.5%   -9.0%   (9.6)   15.4%   29.5%   (14.1)
(+) Non-recurring expenses   785   8,300   -90.5%   11,236   8,300   35.4%
(+) IPO-related expenses   -   -   n.m.   50,580   -   n.m.
(+) Share-based compensation plan   8,182   900   n.m.   22,629   2,180   938.0%
Adjusted EBITDA   (17,207)   (1,606)   n.m.   202,381   268,912   -24.7%
Adjusted EBITDA Margin   -12.2%   -1.3%   (10.9)   26.4%   30.7%   (4.3)

Note: n.m.: not meaningful

 

Adjusted EBITDA was negative in R$ 17 million in 2Q21, mostly driven by the unfavorable revenue seasonality of the second quarter. Additionally, our operating performance was adversely affected by higher provision for doubtful accounts (PDA) incurred in the quarter, by the enhancement in our corporate structure following the company’s IPO in July 2020, while 2Q20 had been helped by savings of R$5.3 million in personnel expenses captured from reduced work journeys allowed by the provisional measure 936. Regarding the PDA increase, we estimate that nearly R$8.6 million is related to effects originated by the Covid-19 (R$ 14.5 million in the cycle). In the cycle, our adjusted EBITDA totaled R$ 202 million, a drop of 25%, driven by the net revenue decline of 13% and by the adverse effects previously mentioned.

 

Adjusted net income

 

Values in R$ '000   2Q21   2Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
(Loss) Profit before taxes   (62,197)   (54,938)   n.m.   (45,466)   13,014   n.m.
(-) Taxes paid   (1,167)   -   n.m.   (1,167)   (4,611)   n.m.
(+) Non-recurring expenses   785   8,300   -90.5%   11,236   8,300   35.4%
(+) Share-based compensation plan   8,182   900   809.1%   22,629   2,180   938.0%
(+) Provision for risks of tax, civil and labor losses   -   -   0.0%   -   922   n.m.
(+) IPO-related expenses   -   -   0.0%   50,580   -   n.m.
(+) Amortization of intangible assets(1)   29,216   25,808   13.2%   85,807   75,717   13.3%
Adjusted net (loss) profit   (25,181)   (19,930)   n.m.   123,619   95,522   29.4%

(1) From business combinations. Note: n.m.: not meaningful

 

Adjusted net loss totaled R$25 million in 2Q21. In the cycle, Vasta posted adjusted net profit of R$124 million, 29% up year-on-year.

 

 5 
   

Accounts receivable and provision for doubtful accounts

 

Values in R$ '000   2Q21   2Q20   % Y/Y   1Q21   % Q/Q
Gross accounts receivable   336,958   368,962   -8.7%   517,478   -34.9%
Provision for doubtful accounts (PDA)   (37,898)   (30,715)   23.4%   (30,986)   22.3%
Coverage index   11.2%   8.3%   2.9   6.0%   5.3
Net accounts receivable   299,060   338,247   -11.6%   486,492   -38.5%
Average days of accounts receivable(1)   119   120   (1)   198   (79)

(1) Balance of net accounts receivable divided by the last-twelve-month net revenue, multiplied by 360.

 

The greater amount of provision for doubtful accounts (PDA) recognized in the 2Q21 reflects our conservatism in our provisioning standards. Consequently, the coverage index increased to 11.2% in 2Q21 from 8.3% in 2Q20, while the average days of receivable stayed flat in the yearly comparison, at 119 days.

 

Since the beginning of the pandemic, our approach to credit issues faced by our school partners have been to extend payment terms instead of granting discounts. With the expected normalization of school activities in the upcoming school year, we expect a normalization in the payment cycle of this client segment in 2022. The textbook distribution channel has also been hurt by the rapid deterioration in sales, causing some of our clients to fall back in payments. Our commercial strategy for the 2022 sales cycle has been to foster even more the migration from textbooks to learning systems and to PAR Digital platform; therefore, we expect to reduce our exposure to the textbook distribution channel in the next business cycles.

 

Financial leverage

 

Vasta ended the 2Q21 with a net debt position of R$155 million, 0.7x the adjusted EBITDA of last twelve months.

 

Values in R$ '000   2Q21   1Q21   4Q20   3Q20  
Financial debt   505,951   687,203   793,341   787,131  
Accounts payable from business combinations   65,201   62,973   48,055   43,550  
Total debt   571,152   750,176   841,396   830,681  
Cash and cash equivalents   335,098   415,093   311,156   1,024,998  
Marketable securities   81,090   259,581   491,102   -  
Net debt   154,964   75,502   39,138   (194,317)  
Net debt/LTM adjusted EBITDA   0.72   0.33   0.14   (0.72)  
 6 
   

CONFERENCE CALL INFORMATION

 

Vasta will discuss its second quarter 2021 results on August 13, 2021, via a conference call at 11:00 a.m. Eastern Time. To access the call (ID: 3386226), please dial: +1 (833) 519-1336 or (914) 800-3898. A live and archived webcast of the call will be available on the Investor Relations section of the Company’s website at https://ir.vastaplatform.com.

 

ABOUT VASTA

 

Vasta is a leading, high-growth education company in Brazil powered by technology, providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment, ultimately benefiting all of Vasta’s stakeholders, including students, parents, educators, administrators and private school owners. Vasta’s mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. Vasta believes it is uniquely positioned to help schools in Brazil undergo the process of digital transformation and bring their education skill set to the 21st century. Vasta promotes the unified use of technology in K-12 education with enhanced data and actionable insight for educators, increased collaboration among support staff and improvements in production, efficiency and quality. For more information, please visit ir.vastaplatform.com.

 

CONTACT

 

Investor Relations

ri@somoseducacao.com.br

 

 7 
   

FORWARD-LOOKING STATEMENTS

 

This press release contains forward-looking statements that can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. Forward-looking statements appear in a number of places in this press release and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including (i) general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business; (ii) fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future; (iii) our ability to implement our business strategy and expand our portfolio of products and services; (iv) our ability to adapt to technological changes in the educational sector; (v) the availability of government authorizations on terms and conditions and within periods acceptable to us; (vi) our ability to continue attracting and retaining new partner schools and students; (vii) our ability to maintain the academic quality of our programs; (viii) the availability of qualified personnel and the ability to retain such personnel; (ix) changes in the financial condition of the students enrolling in our programs in general and in the competitive conditions in the education industry; (x) our capitalization and level of indebtedness; (xi) the interests of our controlling shareholder; (xii) changes in government regulations applicable to the education industry in Brazil; (xiii) government interventions in education industry programs, that affect the economic or tax regime, the collection of tuition fees or the regulatory framework applicable to educational institutions; (xiv) cancellations of contracts within the solutions we characterize as subscription arrangements or limitations on our ability to increase the rates we charge for the services we characterize as subscription arrangements; (xv) our ability to compete and conduct our business in the future; (xvi) our ability to anticipate changes in the business, changes in regulation or the materialization of existing and potential new risks; (xvii) the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors; (xviii) changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes; (xix) changes in labor, distribution and other operating costs; our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us; (xx) the effectiveness of our risk management policies and procedures, including our internal control over financial reporting; (xxi) health crises, including due to pandemics such as the COVID-19 pandemic and government measures taken in response thereto; (xxii) other factors that may affect our financial condition, liquidity and results of operations; and (xxiii) other risk factors discussed under “Risk Factors.” Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

 8 
   

NON-GAAP FINANCIAL MEASURES

 

This press release presents our EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio, Adjusted Net (Loss) profit are information for the convenience of investors. EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio are the key performance indicators used by us to measure financial operating performance. Our management believes that these Non-GAAP financial measures provide useful information to investors and shareholders. We also use these measures internally to establish budgets and operational goals to manage and monitor our business, evaluate our underlying historical performance and business strategies and to report our results to the board of directors.

 

We calculate EBITDA as Net profit (loss) for the period / year plus income taxes and social contribution plus/minus net finance result plus depreciation and amortization. The EBITDA measure provides useful information to assess our operational performance.

 

We calculate Adjusted EBITDA as EBITDA plus/minus: (a) share-based compensation expenses, mainly due to the grant of additional shares to Somos’ employees in connection with the change of control of Somos to Cogna (for further information refer to note 23 (a) to the Consolidated Financial Statements); (b) Bonus IPO expenses, share based payments offered to certain employees and executives as result of IPO process and (c) other non-recurring expenses composed substantially by restructuring provisions. We understand that such adjustments are relevant and should be considered when calculating our Adjusted EBITDA, which is a practical measure to assess our operational performance that allows us to compare it with other companies that operates in the same segment.

 

We calculate Free Cash Flow as the net cash flows from operating activities as presented in the statement of cash flows of our financial statements adjusted by debt-like instruments (reverse factoring instruments) less cash flows required for: (i) acquisition of property, plant and equipment; (ii) addition to intangible assets; and (iii) acquisition of subsidiaries. We consider Free Cash Flow to be a liquidity measure, therefore, we adjust our Free Cash Flow metric with amounts that directly impacted the cash flows in the period in addition to the operating activities. The Free Cash Flow measure provides useful information to management and investors about the amount of cash generated by our operations, deducting for investments in property and equipment to maintain and grow our business.

 

We calculate Adjusted Cash Conversion Ratio as the cash flows from operating activities divided by Adjusted EBITDA for the relevant period.

 

We calculate Adjusted net (loss) profit as the net (loss) profit from the period as presented in Statement of Profit or Loss and Other Comprehensive Income adjusted by the same Adjusted EBTDA items, however, added by (a) Amortization of intangible assets from M&A, that included goodwill and other assets and (b) taxes paid composed by cash effect over Income tax and social contribution expenses.

 

We understand that, although Adjusted net (loss) profit, EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio are used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS. Additionally, our calculations of Adjusted net (loss) profit, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio may be different from the calculation used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

 

 9 
   

REVENUE RECOGNITION AND SEASONALITY

 

Our main deliveries of printed and digital materials to our customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials we provide in the fourth quarter are used by our customers in the following school year and, therefore, our fourth quarter results reflect the growth in the number of our students from one school year to the next, leading to higher revenue in general in our fourth quarter compared with the preceding quarters in each year. Consequently, in aggregate, the seasonality of our revenues generally produces higher revenues in the first and fourth quarters of our fiscal year. Thus, the numbers for the second quarter and third quarter are usually less relevant. In addition, we generally bill our customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half.

 

A significant part of our expenses is also seasonal. Due to the nature of our business cycle, we need significant working capital, typically in September or October of each year, to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of our teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year.

 

Purchases through our Livro Fácil e-commerce platform are also very intense during the back-to-school period, between November, when school enrollment takes place and families plan to anticipate the purchase of products and services, and February of the following year, when classes are about to start. Thus, e-commerce revenue is mainly concentrated in the first and fourth quarters of the year.

 

KEY BUSINESS METRICS

 

ACV Bookings is a non-accounting managerial metric and represents our partner schools’ commitment to pay for our solutions offerings. We believe it is a meaningful indicator of demand for our solutions. We consider ACV Bookings is a helpful metric because it is designed to show amounts that we expect to be recognized as revenue from subscription services for the 12-month period between October 1 of one fiscal year through September 30 of the following fiscal year. We define ACV Bookings as the revenue we would expect to recognize from a partner school in each school year, based on the number of students who have contracted our services, or “enrolled students,” that will access our content at such partner school in such school year. We calculate ACV Bookings by multiplying the number of enrolled students at each school with the average ticket per student per year; the related number of enrolled students and average ticket per student per year are each calculated in accordance with the terms of each contract with the related school. Although our contracts with our schools are typically for 4-year terms, we record one year of revenue under such contracts as ACV Bookings. ACV Bookings are calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. Since the actual rates of returned goods from sales during the period may be different from the historical average rates and the actual volume of merchandise ordered by our customers may be different from the contracted amount, the actual revenue recognized during each period of a sales cycle may be different from the ACV Bookings for the respective sales cycle. Our reported ACV Bookings are subject to risks associated with, among other things, economic conditions and the markets in which we operate, including risks that our contracts may be canceled or adjusted (including as a result of the COVID-19 pandemic).

 

 10 
   

FINANCIAL STATEMENTS

 

Consolidated Statements of Financial Position

 

Assets  June 30, 2021  December 31, 2020
       
Current assets          
Cash and cash equivalents   335,098    311,156 
Marketable securities   81,090    491,102 
Trade receivables   299,060    492,234 
Inventories   249,451    249,632 
Taxes recoverable   18,858    18,871 
Income tax and social contribution recoverable   10,297    7,594 
Prepayments   29,071    27,461 
Other receivables   1,443    124 
Related parties – other receivables   1,118    2,070 
Total current assets   1,025,486    1,600,244 
           
Non-current assets          
Judicial deposits and escrow accounts   173,377    172,748 
Deferred income tax and social contribution   116,309    88,546 
Property, plant and equipment   192,160    192,006 
Intangible assets and goodwill   4,939,253    4,924,726 
Total non-current assets   5,421,099    5,378,026 
           
Total Assets   6,446,585    6,978,270 
 11 
   

Consolidated Statements of Financial Position (continued)

 

Liabilities  June 30, 2021  December 31, 2020
       
Current liabilities          
Bonds and financing   199,405    502,882 
Lease liabilities   21,732    18,263 
Suppliers   195,165    279,454 
Income tax and social contribution payable   -    1,761 
Salaries and social contributions   76,666    69,123 
Contract liabilities and deferred income   30,678    47,169 
Accounts payable for business combination   18,348    17,132 
Other liabilities   6,362    4,285 
Other liabilities - related parties   33,862    135,307 
Loans from related parties   -    20,884 
Total current liabilities   582,218    1,096,260 
           
Non-current liabilities          
Bonds and financing   306,546    290,459 
Lease liabilities   152,634    154,840 
Accounts payable for business combination   46,853    30,923 
Provision for tax, civil and labor losses   623,283    613,933 
Contract liabilities and deferred income   5,227    6,538 
Total non-current liabilities   1,134,543    1,096,693 
           
Shareholder’s Equity          
Share capital   4,820,815    4,820,815 
Capital reserve   51,183    38,962 
Accumulated losses   (142,174)   (74,460)
Total Shareholder's Equity   4,729,824    4,785,317 
           
 Total Liabilities and Shareholder's Equity   6,446,585    6,978,270 
 12 
   

Consolidated Income Statement

 

   Apr 01, to Jun 30, 2021  Jan 01, to Jun 30, 2021  Apr 01, to Jun 30, 2020  Jan 01, to Jun 30, 2020
             
Net revenue from sales and services   141,135    421,967    120,233    512,651 
Sales   127,688    402,572    111,625    500,713 
Services   13,447    19,395    8,608    11,938 
                     
Cost of goods sold and services   (67,547)   (181,529)   (48,422)   (215,755)
                     
Gross profit   73,588    240,438    71,811    296,896 
                     
Operating income (expenses)                    
General and administrative expenses   (97,930)   (207,806)   (83,260)   (182,294)
Commercial expenses   (35,584)   (85,093)   (42,803)   (80,596)
Other operating income (expenses)   (963)   1,504    1,176    1,988 
Impairment losses on trade receivables   (15,599)   (18,208)   (1,264)   (11,583)
                     
(Loss) Profit before finance result and taxes   (76,488)   (69,165)   (54,340)   24,411 
                     
Finance income   5,798    11,261    3,567    8,637 
Finance costs   (20,773)   (40,488)   (31,861)   (76,545)
Finance result   (14,975)   (29,227)   (28,294)   (67,908)
                     
(Loss) Before income tax and social contribution   (91,463)   (98,392)   (82,634)   (43,497)
                     
Income tax and social contribution   29,266    30,678    27,696    16,204 
                     
(Loss) for the period   (62,197)   (67,714)   (54,938)   (27,293)
                     
Total comprehensive (loss) for the period   (62,197)   (67,714)   (54,938)   (27,293)
(Loss) per share                    
Basic   (0.75)   (0.82)   (0.66)   (0.33)
Diluted   (0.74)   (0.81)   (0.66)   (0.33)
 13 
   

Consolidated Statement of Cash Flows

 

   For the six months ended June 30
   2021  2020
       
CASH FLOWS FROM OPERATING ACTIVITIES          
Loss before income tax and social contribution   (98,392)   (43,497)
Adjustments for:          
Depreciation and amortization   98,899    85,618 
Impairment losses on trade receivables   18,208    6,546 
Provision for tax, civil and labor losses   (849)   (4,331)
Interest on provision for tax, civil and labor losses   10,275    10,564 
Provision for obsolete inventories   8,647    1,985 
Interest on bonds and financing   12,940    39,414 
Refund liability and right to returned goods   3,802    (2,256)
Imputed interest on suppliers   2,783    3,379 
Interest on accounts payable for business combination   (623)   39 
Share-based payment expense   12,221    1,629 
Interest on lease liabilities   8,060    7,592 
Interest on marketable securities incurred and not withdrawed   (8,077)   - 
Disposals of right of use assets and lease liabilities   -    (705)
Residual value of disposals of property and equipment and intangible assets   76    1,415 
           
Changes in          
Trade receivables   176,293    49,044 
Inventories   (10,831)   3,670 
Prepayments   (1,610)   (24,881)
Taxes recoverable   (2,690)   10,192 
Judicial deposits and escrow accounts   (629)   1,829 
Other receivables   (918)   4,325 
Suppliers   (87,072)   (70,348)
Salaries and social charges   7,418    2,231 
Tax payable/Income taxes and social contribution   2,064    7,218 
Contract liabilities and deferred income   (19,239)   399 
Other receivables and liabilities from related parties   (94,125)   129,959 
Other liabilities   (772)   7,840 
Cash from operating activities   35,859    228,870 
           
Income tax and social contribution paid   (1,167)   (5,234)
Interest lease liabilities paid   (8,022)   (7,616)
Payment of interest on bonds and financing   (12,243)   (17,576)
Payment of provision for tax, civil and labor losses   (76)   (6,779)
Net cash from operating activities   176,293    49,044 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Acquisition of property and equipment   (6,344)   (2,166)
Additions to intangible assets   (19,468)   (25,701)
Acquisition of subsidiaries net of cash acquired and payments of business combinations   (40,231)   (23,526)
Realization of investment in marketable securities   418,089    - 
Net cash applied in investing activities   352,046    (51,393)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Suppliers - related parties   (6,368)   (44,112)
Loans from related parties   -    65,600 
Payments of loans from related parties   (20,884)   (29,092)
Lease liabilities paid   (10,359)   (5,797)
Parent Company's Net Investment   -    12,252 
Payments of bonds and financing   (288,087)   - 
Payments of accounts payable for business combination   (16,757)   - 
Net cash applied in financing activities   (342,455)   (1,149)
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   23,942    139,123 
           
Cash and cash equivalents at beginning of period   311,156    43,287 
Cash and cash equivalents at end of period   335,098    182,410 
           
 14 

 

 

 

Exhibit 99.2

 

VASTA Platform Limited

 

Unaudited Interim Condensed Consolidated Financial Statements
Six-months period ended
June 30, 2021

 

 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

Six-months period ended June 30, 2021

 

Consolidated Statement of Financial Position

 

In thousands of R$, unless otherwise stated

 

Assets  Note  June 30, 2021  December 31, 2020
          
Current assets         
Cash and cash equivalents  8   335,098    311,156 
Marketable securities  9   81,090    491,102 
Trade receivables  10   299,060    492,234 
Inventories  11   249,451    249,632 
Taxes recoverable      18,858    18,871 
Income tax and social contribution recoverable      10,297    7,594 
Prepayments      29,071    27,461 
Other receivables      1,443    124 
Related parties – other receivables  20   1,118    2,070 
Total current assets      1,025,486    1,600,244 
              
Non-current assets             
Judicial deposits and escrow accounts  21   173,377    172,748 
Deferred income tax and social contribution  22   116,309    88,546 
Property, plant and equipment  12   192,160    192,006 
Intangible assets and goodwill  13   4,939,253    4,924,726 
              
Total non-current assets      5,421,099    5,378,026 
              
Total Assets      6,446,585    6,978,270 

 

The accompanying notes are an integral part of this Unaudited Interim Condensed Consolidated Financial Statements

 

2 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

Six-months period ended June 30, 2021

 

Consolidated Statement of Financial Position

 

In thousands of R$, unless otherwise stated

 

Liabilities  Note  June 30, 2021  December 31, 2020
          
Current liabilities         
Bonds and financing  14   199,405    502,882 
Lease liabilities  16   21,732    18,263 
Suppliers  15   195,165    279,454 
Income tax and social contribution payable      -    1,761 
Salaries and social contributions  19   76,666    69,123 
Contract liabilities and deferred income  17   30,678    47,169 
Accounts payable for business combination  18   18,348    17,132 
Other liabilities      6,362    4,285 
Other liabilities - related parties  20   33,862    135,307 
Loans from related parties  20   -    20,884 
Total current liabilities      582,218    1,096,260 
              
Non-current liabilities             
Bonds and financing  14   306,546    290,459 
Lease liabilities  16   152,634    154,840 
Accounts payable for business combination  18   46,853    30,923 
Provision for tax, civil and labor losses  21   623,283    613,933 
Contract liabilities and deferred income  17   5,227    6,538 
Total non-current liabilities      1,134,543    1,096,693 
              
Shareholder's Equity             
Share Capital  23   4,820,815    4,820,815 
Capital reserve  23   51,183    38,962 
Accumulated losses      (142,174)   (74,460)
Total Shareholder's Equity      4,729,824    4,785,317 
              
 Total Liabilities and Shareholder's Equity      6,446,585    6,978,270 

 

The accompanying notes are an integral part of this Unaudited Interim Condensed Consolidated Financial Statements

 

3 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

For the three-and-six-month periods ended on June 30, 2021 and 2020

 

Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income

 

In thousands of R$, except for earnings for share

 

   Note  April 01, to June 30, 2021  June 30, 2021  April 01, to June 30, 2020  June 30, 2020
                
Net revenue from sales and services  24   141,135    421,967    120,233    512,651 
Sales      127,688    402,572    111,625    500,713 
Services      13,447    19,395    8,608    11,938 
                        
Cost of goods sold and services  25   (67,547)   (181,529)   (48,422)   (215,755)
                        
Gross profit      73,588    240,438    71,811    296,896 
            -44%   -40%   -42%
Operating income (expenses)                       
General and administrative expenses  25   (97,930)   (207,806)   (83,260)   (182,294)
Commercial expenses  25   (35,584)   (85,093)   (42,803)   (80,596)
Other operating income (expenses)  25   (963)   1,504    1,176    1,988 
Impairment losses on trade receivables  10 and 25   (15,599)   (18,208)   (1,264)   (11,583)
                        
(Loss) Profit before finance result and taxes      (76,488)   (69,165)   (54,340)   24,411 
                        
Finance result                       
Finance income  26   5,798    11,261    3,567    8,637 
Finance costs  26   (20,773)   (40,488)   (31,861)   (76,545)
       (14,975)   (29,227)   (28,294)   (67,908)
                        
(Loss) before income tax and social contribution      (91,463)   (98,392)   (82,634)   (43,497)
                        
Income tax and social contribution  22   29,266    30,678    27,696    16,204 
                        
(Loss) for the period      (62,197)   (67,714)   (54,938)   (27,293)
                        
                        
Total comprehensive loss for the period      (62,197)   (67,714)   (54,938)   (27,293)
Attributable to Controlling                       
                        
Loss per share                       
                        
Basic      (0,75)   (0,82)   (0,66)   (0,33)
Diluted      (0,74)   (0,81)   (0,66)   (0,33)

 

The accompanying notes are an integral part of this Undaudited Interim Condensed Consolidated Financial Statements

 

4 

 

Vasta Platform Limited

Unaudited Condensed Consolidated Interim Financial Statements

For the six-month periods ended on June 30, 2021 and 2020

  

Consolidated Interim Statement of Changes in Equity

 

In thousands of R$, unless otherwise stated

 

      Share Capital  Capital Reserve      
   Parent Company's Net Investment  Share Capital  Share issuance costs  Share-based
compensation
reserve (outorgated)
  Share-based
compensation
reserve (vested)
  Accumulated
losses
  Total
Equity/ Net Investment
                      
Balances as of December 31, 2019   3,100,083    -    -    -    -    -    3,100,083 
                                    
Net investments   12,252    -    -    -    -    -    12,252 
Share based payment contributions   1,629    -    -    -    -    -    1,629 
Net loss for the period   (27,293)   -    -    -    -    -    (27,293)
                                    
Balance as of June 30, 2020   3,086,671    -    -    -    -    -    3,086,671 
                                    
Balance as of December 31, 2020   -    4,961,988    (141,173)   38,962    -    (74,460)   4,785,317 
                                    
Share based compensation granted and issued (Note 23c)   -    -    -    12,221    -    -    12,221 
Share based compensation vested (Note 23a)   -    -    -    (31,043)   31,043    -    - 
Net loss for the period   -    -    -    -    -    (67,714)   (67,714)
                                    
Balance as of June 30, 2021   -    4,961,988    (141,173)   20,140    31,043    (142,174)   4,729,824 
                                    

The accompanying notes are an integral part of this Unaudited Condensed Consolidated Interim Financial Statements

 

5 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

For the six-month periods ended on June 30, 2021 and 2020

 

Consolidated Interim Statement of Cash Flows

 

In thousands of R$ unless otherwise stated

 

      For the six-months period June 30,
   Notes  2021  2020
          
CASH FLOWS FROM OPERATING ACTIVITIES         
 Loss before income tax and social contribution      (98,392)   (43,497)
 Adjustments for:             
Depreciation and amortization  12 and 13   98,899    85,618 
Impairment losses on trade receivables  10   18,208    6,546 
Provision for tax, civil and labor losses  21   (849)   (4,331)
Interest on provision for tax, civil and labor losses  21   10,275    10,564 
Provision for obsolete inventories  11   8,647    1,985 
Interest on bonds and financing  14 and 26   12,940    39,414 
Refund liability and right to returned goods      3,802    (2,256)
Imputed interest on suppliers  26   2,783    3,379 
Interest on accounts payable for business combination  18   (623)   39 
Share-based payment Expense  23c   12,221    1,629 
Interest on lease liabilities  16   8,060    7,592 
Interest on marketable securities incurred and not withdrawed  26   (8,077)   - 
Disposals of right of use assets and lease liabilities      -    (705)
Residual value of disposals of property, plant and equipment and intangible assets  12 and 13   76    1,415 
              
Changes in      67,970    107,392 
 Trade receivables  10   176,293    49,044 
 Inventories  11   (10,831)   3,670 
 Prepayments      (1,610)   (24,881)
 Taxes recoverable      (2,690)   10,192 
 Judicial deposits and escrow accounts  21   (629)   1,829 
 Other receivables      (918)   4,325 
 Suppliers  15   (87,072)   (70,348)
 Salaries and social charges  19   7,418    2,231 
 Tax payable / Income taxes and social contribution      2.064    7,218 
 Contract liabilities and deferred income  17   (19,239)   399 
 Other receivables and liabilities from related parties      (94,125)   129,959 
 Other liabilities      (722)   7,840 
 Cash from operating activities      35,589    228,870 
Income tax and social contribution paid      (1,167)   (5,234)
Interest lease liabilities paid  16   (8,022)   (7,616)
Payment of interest on bonds and financing  14   (12,243)   (17,576)
Payment of provision for tax, civil and labor losses  21   (76)   (6,779)
Net cash from operating activities      14,351    191,665 
CASH FLOWS FROM INVESTING ACTIVITIES             
Acquisition of property and equipment  12   (6,344)   (2,166)
Additions to intangible assets  13   (19,468)   (25,701)
Acquisition of subsidiaries net of cash acquired and payments of business combinations      (40,231)   (23,526)
Realization of investment in marketable securities      418,089    - 
 Net cash from (applied in) investing activities      352,046    (51,393)
              
 CASH FLOWS FROM FINANCING ACTIVITIES             
              
Suppliers - related parties  20   (6,368)   (44,112)
Loans from related parties      -    65,600 
Payments of loans from related parties      (20,884)   (29,092)
Lease liabilities paid  16   (10,359)   (5,797)
Parent Company's Net Investment      -    12,252 
Payments of bonds and financing  14   (288,087)   - 
Payments of accounts payable for business combination  -   (16,757)   - 
 Net cash applied in financing activities      (342,455)   (1,149)
              
 NET INCREASE IN CASH AND CASH EQUIVALENTS      23,942    139,123 
              
 Cash and cash equivalents at beginning of period  8   311,156    43,287 
 Cash and cash equivalents at end of period  8   335,098    182,410 
              
NET INCREASE IN CASH AND CASH EQUIVALENTS      23,942    139,123 

 

The accompanying notes are an integral part of this Unaudited Interim Condensed Consolidated Financial Statements

 

6 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

Notes to the Interim Condensed Consolidated Financial Statements

 

(Amounts expressed in thousands of R$, unless otherwise indicated)

 

1.The Company and Basis of Presentation

 

1.1The Company

 

Vasta Platform Ltd. (herein referred to as the “Company”, or previously named “Vasta Platform”, “Vasta’s Parent Company” or “Business”) is a publicly-held company incorporated in the Cayman Islands on October 16, 2019, with headquarters in the city of São Paulo, Brazil. The Company is a technology-powered education content providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment. Vasta’s fiscal year begins on January 1 of each year and ends on December 31 of the same year.

 

The Company has built a “Platform as a Service,” solution or PaaS, with two main modules: Content & EdTech Platform and Digital Services. The Company’s Content & EdTech Platform combines a multi-brand and tech-enabled array with digital and printed content through long-term contracts with partner schools.

 

Since July 31, 2020, VASTA Platform Ltd. is a publicly-held company registered with SEC (“The US Securities and Exchange Commission) and its shares are traded on Nasdaq Global Select Market under ticker symbol “VSTA”.

 

1.2Corporate reestructuring and business acquisitions

 

VASTA Platform, from October 11, 2018 until July 23, 2020, was not a separate legal entity. The Business (here mentioned when the company presented its financial statements combined with other entities) comprised combined carved-out historical balances of certain assets, liabilities and results of operations related to the delivery of educational content for private sector basic and secondary education (“K-12 curriculum”) previously carried out by the legal entity Cogna Educação S.A. and its subsidiaries (hereinafter referred to as “Cogna” or “Parent Entity”, or in combination with its subsidiaries, “Cogna Group”).

 

On October 11, 2018, Cogna (the ultimate Parent Entity) acquired control over Somos Educação S.A (hereinafter referred to as “Somos” or in combination with its subsidiaries, which included Somos Educação S.A. and Somos Sistemas de Ensino S.A (“Somos Sistemas” or “Anglo”) hereinafter referred to as “Somos Group”) for a consideration of R$6.3 billion (the “Acquisition”) comprised of R$5.7 billion in cash and R$0.6 billion which was deposited in a restricted escrow account. In addition, R$ 3.3 billion of this 6.3 billion was allocated to K-12 Business of the Somos Group for purpose of the combined carve-out financial statements. As a result of the Acquisition, VASTA Platform Limited represents the combination of the K-12 curriculum acquired and held by Somos (“Somos – Anglo”) and the K-12 Business held by Cogna (“Pitagoras” (operations included in the legal entity Saber Serviços Educacionais S.A.) or in combination with Somos – Anglo.

 

As part of an effort to streamline its operations, Cogna Group performed a comprehensive corporate restructuring concluded on December 31, 2019, to enhance the corporate structure (i.e. reducing the number of legal entities in the Cogna Group and improving overall synergies). As all entities that were involved in the corporate restructuring are under common control, this reorganization was accounted for using the historical basis of the related assets and liabilities as recorded by Cogna Group and did result in an overall change in the shareholding structure.

 

Beginning January 1st, 2020, the business activities were restructured in the legal entity Somos Sistemas de Ensino S.A (“Somos Sistemas”). On January 7, 2020, the Company concluded the acquisition of the entire ownership interest in Pluri. On February 13, 2020, the Company concluded the acquisition of the entire ownership interest in Mind Makers, see Note 5.

 

On July 23, 2020, prior to the completion of the Initial Public Offiering – IPO, the Board of Directors’ Meeting approved the Contribution Agreement formalizing by Vasta’s Parent Company and the Cogna to contribute 100% of the shares issued by Somos Sistemas held by Cogna to Vasta Platform’s share capital. After the contribution, Somos Sistemas became wholly owned by Vasta’s Parent Company, which, in turn, continued to be controlled by Cogna. In addition, Cogna contributed with shareholders capital on amount R$ 2.426 in cash on July 23, 2020.

 

7 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

On July 31, 2020 the Company held its public offering at amount of US$ 19.00 per Class A common share, pursuant to the U.S. Securities Act of 1933 (the “Offering”), reaching the total amount of US$ 333,522 (R$ 1,836,317) with the issuance of 18,575,492 Vasta’s class A common shares. The Company incurred incremental costs directly attributable to the public offering in the amount of R$ 141,173, net of taxes.

 

On November 20, 2020, the Company acquired an ownership interest in Meritt Informação Educacional Ltda. See Note 5.

 

On March 2, 2021, the Company acquired an ownership interest in Sociedade Educational da Lagoa Ltda.(“SEL”) through its wholly owned subsidiary Somos Sistemas de Ensino S.A. See Note 5.

 

On May 27, 2021, the Company acquired an ownership interest in Nota 1000 Serviços Educacionais S.A (“Redação Nota 1000”) through its wholly owned subsidiary Somos Sistemas de Ensino S.A.. See Note 5.

 

The Consolidated Financial Statements are comprise by the following entities, which are all fully owned by Company:

 

Company   June 30, 2021   December 31, 2020
    Participation %   Participation %
Vasta Platform Ltd. ("Vasta's Parent Company")   100%   100%
Somos Sistemas de Ensino S.A ("Somos Sistemas")   100%   100%
Livraria Livro Fácil Ltda. ("Livro Fácil")   100%   100%
A & R Comercio e Serviços de Informática Ltda. (“Pluri”)   100%   100%
Mind Makers Editora Educacional (“Mind Makers”)   100%   100%
Colégio Anglo São Paulo   100%   100%
Meritt Informação Educacional Ltda (“Meritt”)   100%   100%
Sociedade Educacional da Lagoa Ltda (“SEL”)   100%   -
Nota 1000 Serviços Educacionais S.A ("Redação Nota 1000")   100%   -

 

1.3Initiatives carried out by the Company and impacts of Covid-19 pandemic

 

It is well accepted now that the global Coronavirus (“COVID-19”) pandemic changed the world growth prospects and added risks to Companies in an unprecedent scenario. In Brazil, as elsewhere, government at municipal and state-wide levels-imposed restrictions to contain the contamination, including social distancing, school shutdowns, travel restrictions, lockdowns, closure of non-essential businesses, among others. This caused major disruptions in the economy, affecting supply, demand, and logistics chains, as well as employment and, most importantly, impacting society as a whole.

 

In response to this scenario, the Company established a Crisis Committee and developed plans to protect the business, the health of its employees and its customer base. We highlight below the main initiatives carried out by the Company since the beginning of COVID-19 pandemy in 2020 up to June 30, 2021:

 

1) Preserved employees’ health and safety organizing and coordinating remote work, reducing operations or closing down distribution centers and adopting protective equipment and social distancing rules.

 

2) Ensured educational content and services delivery through online platforms.

 

3) Implemented measures to ensure adequate liquidity and cash position.

 

4) Implemented short-term restructuring measures, including but not limited to temporary reduction in wages and working hours, seeking to preserve jobs and payroll continuity.

 

5) Planned and executed organizational changes, specifically management positions, and operational activies through process review to face with mid-term impact for the post-COVID.

 

6) Strategic Plan for opportunities generated by the crisis.

 

7) Philanthropic actions that contributed to mitigate the impacts on COVID-19 on our Company segment; and

 

8 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

8) Provided on-line campaigns to promote our products to potential new customers.

 

9) Negotiated access to credit lines granted to certain customers which have been highly affected by COVID-19, in order to keep sustainable our business network.

 

As a result of our actions, despite school lockdowns and social distancing restrictions, the majority of our customers have been able to continue providing their educational services through our virtual platforms. As a result, the Company has not recorded any interruption in the sales and service levels contracted by our customers.

 

Despite continuity of educational services, the continuing restrictions on business are affecting the Brazilian economy and, consequentely, increasing the uncertainty in our operations.

 

2.Basis of preparation and presentation of Unaudited Interim Condensed Consolidated Financial Statements

 

Unaudited Interim Condensed Consolidated Financial Statements of Vasta Platform, the reporting entity, have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations as issued by the International Accounting Standards Board (“IASB”).

 

a.Declaration of Compliance and Preparation Basis

 

The Company’s Interim Condensed Consolidated Financial Statements included in the SEC - 6K Form pertaining to the quarter ended 30 June 2021, encompasses the consolidated interim accounting information prepared pursuant to the “International Accounting Standard (“IAS”) 34 - Interim Financial Reporting”, issued by the International Accounting Standards Board (IASB).

 

The Company’s management confirms that all relevant information in the interim accounting statements, and only this information, is being disclosed, and it corresponds to the information used in the development of its business management activities. The interim accouInnting information was prepared based on the historical costs, except for certain financial instruments measured by their fair value, as described in the accounting practices.

 

The main accounting policies used in preparing this consolidated interim accounting information are disclosed in explanatory note No. 4.2 of the Company’s financial statements, pertaining to the fiscal year ended 31 December 2020, issued on 30 April 2021. The same policies apply for comparison of the six-month period ended 30 June 2020, and (ii) practical expedient application to rent concessions in lease contracts which occurred as a direct consequence of the Covid-19 pandemic.

 

The information on explanatory notes did not go through significant changes in comparison to 31 December 2020, which is why it is not fully presented in this interim accounting information and must, therefore, be read jointly with the last annual financial statement.

 

b.Vasta Platform’s Interim Condensed Combined Financial Statements

 

The Interim Condensed Combined Financial Statements were prepared until July 23, 2020 (completion of corporate restructuring described in note 1.2) which included the three and six-months period ended as of June 30, 2020 were prepared applying the Combined Financial Statements guidance. After July 23, 2020, the Company applied the guidelines presented in the item c.

 

The Combined Financial Statements have been prepared to present the Business’ historical financial condition, the performance of its operations and its respective cash flows. The Combined Financial Statements materially reflect the financial statements of the “K-12 curriculum” private business as if it were operated as a separate entity from the Parent Entity. The entities that were part of these combined financial statements were Somos Sistemas, Livro Fácil, Colégio Anglo, Mind Makers and Pluri.

 

9 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

The combined assets, liabilities and results of operations of the Business are based on the historical accounting records of the Parent Entities. The balances in trade receivables, inventories, property plant and equipment, intangible assets and goodwill, suppliers, bonds and financing, provision for risks of tax, civil and labor losses, financial expenses related to said bonds and financing, revenue and costs of goods sold and services relating to the Business were individually identified.

 

c.Vasta’s Unaudited Interim Condensed Consolidated Financial Statements

 

Since July 23, 2020, the Company has prepared the Consolidated Financial Statements which include the accounts of the Company and its subsidiaries. Since all entites were under common control as of the date of the initial public offering, the results for the three and six-months period ended June 30, 2020 are presented as if consolidated for the entire period.

 

d.Functional and Presentation Currency

 

The Interim Condensed Consolidated are presented in thousands of Brazilian Reals (“R$”), which is the Company functional currency. All financial information presented in R$ has been rounded to the nearest thousand, except as otherwise indicated.

 

e.Measurement basis

 

The Interim Condensed Consolidated Financial Statements were prepared based on historical cost, except for certain assets and liabilities that are measured at fair value, as explained in the accounting policies below.

 

3.Significant accounting policies

 

As mentioned in the Note 2.a, the Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2021 should be read in conjunction with Consolidated Financial Statements as of December 31, 2020, considering that its purpose is to provide an update on the activities, events and significant circumstances in relation to those disclosed in the Consolidated Financial Statements. Therefore, Unaudited Interim Condensed Consolidated Financial Statements focus on new activities, events and circumstances and do not duplicate the information previously disclosed, except when Management judges that the maintenance of the information is relevant. The accounting policies have been consistently applied to all consolidated companies. There are no new accounting policies that could be applicable since January 1, 2021 or early adopted in the Interim Condensed Consolidated Financial Statements.

 

4.Use of estimates and judgements

 

There aren’t changes on such estimates calculation and methodologies applied in judgements even new accounting policies that could be applicable since of January 1, 2021 or earlier adopted in the Interim Condensed Consolidated Financial Statements.

 

5Business Combinations

 

As mentioned in Note 1.2 the Company concluded some acquisitions to improve its portfolio of educational solutions as presented below:

 

·January 7, 2020 – Pluri

·February 13, 2020 – Mind Makers

·November 20, 2020 - Meritt

·March 2, 2021 – SEL

·May 27, 2021 –Redação Nota 1000

 

10 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

The Company’ business combinations are described below:

 

Business Combinations during 2020

 

A & R Comercio e Serviços de Informática Ltda. (“Pluri”)

 

On January 7, 2020, the Company concluded the acquisition of the entire ownership interest of Pluri for R$ 26,000. Pluri is an entity based in the State of Pernambuco specialized in solutions such as consulting and technologies for education systems. This acquisition is in line with the Company’s strategy of focusing on the distribution of its operations to another region. The agreement is also subject to certain additional earn-outs, associated with achievements defined in the agreement, such as revenue and profit, that could increase the purchase price by an additional R$ 1,706 over the life of the earn-out period.

 

Mind Makers Editora Educacional (“Mind Makers”)

 

On February 13, 2020, the Company concluded the acquisition of the entire ownership interest of Mind Makers, a company that offers computer programming and robotics courses and helps students develop skills relevant to their educational progress, such as coding and product development, as well as entrepreneurial and social and emotiona soft skills including teamwork, leadership and perseverance. The total purchase price was R$ 18,200, R$ 10,000 of which was paid upon signing the agreement, with half of the remaining balance payable in 2021 and the other half of the remaining balance payable in 2022, with the 2021 and 2022 payments subject to certain adjustments. The agreement is also subject to certain additional earn-outs, associated with achievements defined in the agreement, such as revenue and profit, that could increase the purchase price by an additional R$ 5,421 over the life of the earn-out period.

 

Meritt Informação Educacional Ltda (“Meritt”).

 

On November 20, 2020, the Company acquired the ownership interest of Meritt Informação Educacional Ltda. in order to improve its current integrated educational platform of educational assessments, which will allow the Company to monitor students’ performance and educational tests in real time, as well as improvements in randomization in test questions and alternatives. The purchase price was R$ 3,500, of which R$ 3,200 was paid in cash and R$ 300 in installments that are still outstanding and accrue contractual charges according to the Interbank rate (CDI). The agreement is also subject to certain earn-outs, that could increase the purchase price by an additional R$4,030 over the life of the earn-out period.

 

Business Combinations during 2021

 

Sociedade Educacional da Lagoa Ltda. (“SEL”)

 

On March 2, 2021, the Company announced the execution by its subsidiary, Somos Sistemas de Ensino S.A. (“Somos Sistemas”), of a Purchase Agreement to acquire (the “Acquisition”), subject to certain conditions precedent, Sociedade Educacional da Lagoa Ltda. (“SEL”). SEL provides technical and pedagogical services to education platforms, including the maintenance of such platforms, development and improvement of contents and training of professionals. Founded in 1997, SEL currently serves, direct or indirectly, 441 schools, 272 thousand K-12 students and approximately 503 thousand students in the post-secondary and continuing education segment.

 

The consideration paid was R$ 65,000, of which R$ 38,124 was paid in cash. The remaining balance, R$ 26,876 is subject to certain post-closing price adjustments. The consideration will be divided in installments over a 4-year period (each installment adjusted by the positive variation of 100% of CDI ).

 

Nota 1000 Serviços Educacionais S.A. (“Redação Nota 1000”)

 

On May 27, 2021, the Company acquired through its subsidiary, Somos Sistemas de Ensino S.A. (“Somos Sistemas”) the entity Redação Nota 1000, which provides essay review services as a service platform, through its proprietary software. The Redação Nota 1000’s users may choose their essays reviewed under different approachs as follows: (i) solely by essay-review specialists (manual); (ii) on an automated basis by the company’s software, with a final review by a specialist (semi-automated); or (iii) exclusively on an automated basis by the company’s software. Founded in 2014, Redação Nota 1000 has provided services to over 270 schools and 700,000 students, with more than 1.3 million essays reviewed.

 

11 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

The consideration was R$ 11,387, of which R$ 4,093 was paid in cash and the remaining balance of R$ 4,644 will be paid in installments with final due date on December 24, 2026 (each installment adjusted by positive variation of 100% of CDI index).

 

In addition, the Company recognized a contingent consideration of R$ 2,650 subject to certain post-closing price adjustments.

 

Assets and liabilities involved in the Business Combinations and Consideration transferred

 

The acquisitions were accounted for using the acquisition method of accounting, i.e. the consideration transferred, and the identifiable assets and liabilities acquired were measured at fair value, while goodwill is measured as the excess of consideration paid over those items.

 

The following table presents the assets and liabilities acquired for each business combination in 2021:

 

   SEL  Redação Nota 1000  Total of  Combination
Current assets         
Cash and cash equivalents   1,461    525    1,986 
Trade receivables   -    1,327    1,327 
Other receivables   180    -    180 
Total current assets   1,641    1,852    3,493 
                
Non-current assets               
Property and equipment   611    -    611 
Other intangible assets (iv)   -    1,099    1,099 
Intangible assets - Customer Portfolio (ii)   18,783    -    18,783 
Intangible assets - Software (iii)   1,296    5,692    6,988 
Total non-current assets   20,690    6,791    27,481 
                
Total Assets   22,331    8,643    30,974 
                
Current liabilities               
Suppliers   -    180    180 
Salaries and social contributions   1    124    125 
Taxes Payable   17    207    224 
Income tax and social contribution payable   33    -    33 
Other liabilities   -    1,673    1,673 
Total current liabilities   51    2,184    2,235 
                
Non-current liabilities               
Provision for tax, civil and labor losses   -    908    908 
Total non-current liabilities   -    908    908 
                
Total liabilities   51    3,092    3,143 
                
Equity   2,201    (1,240)   961 
                
Total liabilities and Equity   2,252    1,852    4,104 
                
Net assets (A)   22,280    5,551    27,831 
Total of Consideration transferred (B)   65,000    11,387    76,387 
Goodwill (B – A) (i)   42,720    5,836    48,556 

 

(i) Goodwill is recognized based on expected synergies from combining the operations of the acquirees and of the acquiror, as well as an expected increase in the Company’s market-share due to the penetration of the Company’s products and services in regions where the Company did not operate before. Also, the current tax law allows the deductibility of the acquisition date goodwill and fair value of net assets acquired when a non-substantive action is taken after acquisition by the Company (i.e. when the Company merges or spins off the companies acquired) and therefore the tax and accounting bases of the net assets acquired are the same as of the acquisition date.

 

(ii) As result of purchase price allocation, the Company identified R$ 18,873, customer portfolio (“SESI”), based on custome portfolio receivales expectancy arounding 8% per year. see Note 13.

 

12 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

(iii) As result of purchase price allocation, the Company identified R$ 6,988, Educational Software applied in the “SESI” learning system and Writing Correction Software for Education System “Redação Nota 1000, see Note 13.  

 

(iv) As result of purchase price allocation, the Company identified R$ 1,o99, non compete “Redação Nota 1000, see Note 13.  

 

From the date of acquisition to June 30, 2021, SEL and Redação Nota 1000 contributed to the Interim Condensed Consolidated Financial Statements net sales and services in the amount of R$2,442 and 823, respectively, and net profit in the amount of R$ 1,641 and R$ 450, respectively. If the acquisitions had been concluded on January 1, 2021, the Company estimates its combined (include Company and the acquistitions of SEL and Nota 1000) net revenue from sales and services would have been R$ 427,311 and Net loss of R$ (67,883) for the year period June 30, 2021.

 

6Financial Risk Management

 

The Company has a risk management policy for regular monitoring and managing the nature and overall position of financial risks and to assess its financial results and impacts on its cash flows. Counterparty credit limits are also periodically reviewed or whenever the Company identifies significant changes in financial risk.

 

The economic and financial risks reflect the behavior of macroeconomic variables such as interest rates as well as other characteristics of the financial instruments maintained by the Company. These risks are managed through control and monitoring policies, specific strategies, and limits.

 

The Company maintained its approach and strong cash and marketable securities position, as well as its treasury policy, during the crisis caused by the COVID-19 pandemic.

 

a.Financial risk factors

 

The Company’s activities expose it to certain financial risks mainly related to market risk, credit risk and liquidity risk. Management and Group’s Board of Directors monitors such risks in line with their capital management policy objectives.

 

This Note presents information on the Company’s exposure to each of the risks above, the objectives of the Company, measurement policies, and the Company’s risk and capital management process.

 

The Company has no derivative transactions.

 

a.Market risk - cash flow interest rate risk

 

This risk arises from the possibility of the Company incurring losses because of interest rate fluctuations that increase finance costs related to financing and bonds raised in the market and obligations for acquisitions from third parties payable in installments. The Company continuously monitors market interest rates in order to assess the need to contract financial instruments to hedge against volatility of these rates. Additionally, financial assets also indexed to the CDI and IPCA (broad consumer price index) partially mitigate any interest rate exposures.

 

Interest rates contracted are as follows:

 

   June 30, 2021  December 31, 2020  Interest rate
Bonds         
  Private Bonds – 5th Issuance - serie 1   -    100,892   CDI + 1.15% p.a.
  Private Bonds – 5th Issuance - serie 2   103,209    102,868   CDI + 1.00% p.a.
  Private Bonds – 6th Issuance - serie 2   207,412    206,733   CDI + 1.70% p.a.
  Private Bonds – 7th Issuance – single   194,352    381,850   CDI + 1.15% p.a.
Financing and Lease Liabilities - Mind Makers   978    998   TJPLP + 5% p.a.
Financing and Lease Liabilities   174,366    173,103   IPCA
Accounts Payable for Business Combination   65,201    48,055   100% CDI
Loans from related parties   -    20,884   CDI + 3.57%
    745,518    1,035,383    

13 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

b.Credit risk

 

Credit risk arises from the potential default of a counterparty to an agreement or financial instrument, resulting in financial loss. The Company is exposed to credit risk in its operating activities (mainly in connection with trade receivables, see Note 10 and financial activities that includes reverse factoring deposits with banks and other financial institutions and other financial instruments contracted.

 

The Company mitigates its exposure to credit risks associated with financial instruments, deposits in banks and short-term investments by investing in prime financial institutions and in accordance with limits previously set in the Company’s policy. See (Notes 8 and 9).

 

To mitigate risks associated with trade receivables, the Company adopts sales policy and analysis of the financial and equity condition of its counterparties. The sales policy is directly associated with the level of credit risk the Company is willing to accept in the normal course of its business.

 

The diversification of its receivable’s portfolio, the selectivity of its customers, as well as the monitoring of sales financing terms and individual position limits are procedures adopted to minimize defaults or losses in the realization of trade receivables. Thus, the Company does not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristic.

 

Furthermore, the Company reviews the recoverable amount of its trade receivables at the end of each reporting period to ensure that adequate credit losses are recorded (Note 10). The Company limits its exposure to credit risks associated with financial instruments, bank deposits and financial investments by making its investments in financial institutions for which credit risk is monitored, according to limits previously established in the Company’ policy. When necessary, appropriate provisions are recognized to cover this risk.

 

c.Liquidity risk

 

Covid 19 - Impacts

 

In order to cover possible liquidity deficiencies or mismatches between cash and cash equivalents and short-term debt and financial obligations, the Company continues to operate with reverse factoring as long as this credit line is offered by banks and accepted by Company suppliers.

 

This is the risk of the Company not having enough funds and or bank credit limits to meet its short-term financial commitments, due to mismatching terms in expected receipts and payments.

 

The Company continuously monitors its cash balance and the indebtedness level and implemented measures to allow access to the capital markets, when necessary. It also endeavors to assure they remain within existing credit limits. Management also continuously monitors projected and actual cash flows and the combination of the maturity profiles of the financial assets, liabilities and takes into consideration its debt financing plans, covenant compliance, internal liquidity targets and, if applicable, regulatory requirements.

 

Cash surplus generated by the Company is handled in short-term deposits being those investments composed by enough liquidity providing to the Company the appropriate undertake with going concern presumption.

 

The table below presents the maturity of the Company’s financial liabilities.

 

Financial liabilities by maturity ranges

 

June 30, 2021  Less than one year  Between one and two years  Over two years  Total
Bonds and financing (Note 14)   199,405    306,546    -    505,951 
Lease Liabilities (Note 16)   21,732    30,527    122,107    174,366 
Accounts Payable for business combination (Note 18)   18,348    6,832    36,979    62,159 
Suppliers (Note 15)   89,406    -    -    89,406 
Reverse Factoring (Note 15)   105,759    -    -    105,759 
Other liabilities - related parties (Note 20)   33,862    -    -    33,862 
    468,512    343,905    159,086    971,503 

14 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

Financial liabilities by maturity ranges

 

The table below reflects the estimated interest rate based on CDI for 12 months (4,15% p.a) extracted from BACEN (Brazilian Central Bank) on June 30,2021, being its amounts payable for principal and interest based on undiscounted contractual amounts and, therefore, do not reflect the financial position presented as of June 30, 2021:

 

June 30, 2021  Less than one year  Between one and two years  Over two years  Total
Bonds and financing   207,680    319,268    -    526,948 
Lease Liabilities   23,547    33,076    132,303    188,926 
Accounts Payable for business combination   19,109    7,116    38,514    64,739 
Suppliers   89,406    -    -    89,406 
Reverse Factoring   112,729    -    -    112,729 
Other liabilities - related parties   33,862    -    -    33,862 
    486,333    359,460    170,817    1,016,610 

 

On June 30, 2021, the Company had positive working capital of R$ 443,268 (R$ 503,984 on December 31, 2020) mainly due to suppliers and accounts payables with related parties, such as bonds outstanding, suppliers, loans, and other liabilities.

 

Capital management

 

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

In order to maintain or adjust the capital structure of the Company, management can make, or may propose to the shareholders when their approval is required, adjustment to the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce, for example, debt.

 

The Company monitors capital on the basis of the gearing ratio. This ratio corresponds to the net debt expressed as a percentage of total capitalization. Net debt comprises financial liabilities less cash and cash equivalents. Total capitalization is calculated as equity as shown in the consolidated balance sheet plus net debt.

 

The Company’s main capital management objectives are to safeguard its ability to continue as a going concern, optimize returns, allow consistency of operations to other stakeholders and to maintain an optimal capital structure reducing financial costs and maximizing the returns. In addition, the Company monitors adequate financial leverage, and to mitigate risks that may affect the availability of capital in Company development. As a result of the IPO, see Note 1.2, the Company reduced its net debt improving its gearing ratio and adjusting its capital structure aiming to face new capital challenges from COVID-19 and investing in new ventures through acquisitions.

 

   June 30, 2021  December 31, 2020
       
Net debt (i)   639,447    1,138,988 
Total equity   4,729,824    4,785,317 
Total capitalization (ii)   4,090,377    3,646,329 
Gearing ratio - % - (iii)   16%   31%

 

(i)Net debt comprises financial liabilities (note 7) net of cash and equivalents.

(ii)Refers to the difference between Equity and Net debt.

(iii)The Gearing Ratio is calculated based on Net Debt/Total Capitalization.

 

15 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

Sensitivity analysis

 

The following table presents the sensitivity analysis of potential losses from financial instruments, according to the assessment of relevant market risks made by Management and presented above.

 

A probable scenario over a 12-month horizon was used, with a projected rate of 4,15% p.a. as per CDI reference rates disclosed by B3 S.A. (Brazilian stock exchange). Two further scenarios are presented, stressing, respectively, a 25% and 50% deterioration of the projected rates.

 

   Index - % per year  Balance as June  30, 2021  Base scenario 

Scenario I

(25%)

 

Scenario II

(50%)

Financial Assets  102,6% of CDI   327,896    13,968    17,418    22,643 
Marketable Securities  104% CDI   81,090    3,454    4,307    5,600 
       408,985    17,422    21,725    28,243 
                        
Accounts Payable for Business Combination  100% of CDI   (65.201)   (2,706)   (3,382)   (4,397)
Lease liabilities  CDI + 1.28%   (174,366)   (7,323)   (9,149)   (11,894)
Bonds and financing  CDI + 1.28%   (505,951)   (21,250)   (26,548)   (34,512)
       (745,518)   (31,279)   (39,079)   (50,803)
                        
Net exposure      (336,533)   (13,857)   (17,354)   (22,560)
                        
Interest Rate -% p.a  -   -    4.15%   5.19%   6.74%
   -   -    -    25%   50%

 

7Financial Instruments by Category

 

The Business holds the following financial instruments:

 

   Fair Value Hierarchy  June 30, 2021  December 31, 2020
Assets - Amortized cost             
 Cash and cash equivalents  1   335,098    311,156 
 Marketable Securities  1   81,090    491,102 
 Trade receivables  2   299,060    492,234 
 Other receivables  2   1,443    124 
 Related parties – other receivables  2   1,118    2,070 
       717,809    1,296,686 
              
Liabilities - Amortized cost             
 Bonds and financing  2   505,951    793,341 
 Lease liabilities  2   174,366    173,103 
 Reverse Factoring  2   105,759    110,513 
 Suppliers  2   89,406    168,941 
 Accounts payable for business combination  2   65,201    48,055 
 Other liabilities - related parties  2   33,862    135,307 
 Loans from related parties  2   -    20,884 
       974,545    1,450,144 

 

The Company’s financial instruments are recorded in the Condensed Consolidated Financial Position at amounts that are consistent with their fair values.

 

16 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

The fair value of financial assets and liabilities was determined based on available market information and appropriate valuation methodologies for each case. However, significant judgment is required to interpret market data and produce the most appropriate estimates of realizable values. Consequently, the estimates of fair value do not necessarily indicate the amounts that could be realized in the current market. The use of different market inputs and/or valuation methodologies could have a material impact on the estimated fair value.

 

8Cash and cash equivalents

 

a.Composition

 

The balance of this account comprises the following amounts:

 

   June 30, 2021  December 31, 2020
Cash   17    13 
Bank account   7,185    10,996 
Financial investments (i)   327,896    300,147 
    335,098    311,156 

 

(i)The Company invests in a short-term fixed income investment funds with daily liquidity and no material risk of change in value. Financial investments presented an average gross yield of 102,6% of the annual CDI rate on June 30, 2021 (101,7% on December 31, 2020). All investments are highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and correspond to the cash obligations for the period.

 

9Marketable securities

 

a.Composition

 

   Credit
Risk
  June 30, 2021  December 31, 2020
          
Financial bills (LF)  AAA   1,035    149,720 
Financial treasury bills (LFT)  AAA   80,055    341,382 
       81,090    491,102 
              

 

The average gross yield of securities is based on 102,6% CDI on June 30, 2021 (104% CDI on December 31, 2020).

 

10Trade receivables

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   June 30, 2021  December 31, 2020
Trade receivables   322,330    501,498 
Related Parties (Note 20)   14,628    22,791 
( - ) Impairment losses on trade receivables   (37,898)   (32,055)
    299,060    492,234 

17 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

b.Maturities of trade receivables

 

   June 30, 2021  December 31, 2020
Not yet due   244,603    425,327 
Past due          
Up to 30 days   15,996    8,456 
From 31 to 60 days   14,953    10,931 
From 61 to 90 days   7,310    8,764 
From 91 to 180 days   10,097    15,539 
From 181 to 360 days   16,121    18,038 
Over 360 days   13,250    12,279 
Total past due   77,727    74,007 
           
Customers in bankruptcy   -    2,164 
 Related parties (note 20)   14,628    22,791 
Provision for impairment of trade receivables   (37,898)   (32,055)
    299,060    492,234 

 

The gross carrying amount of trade receivables is written off when the Company has no reasonable expectations of recovering the financial asset in its entirety or a portion thereof. Collection efforts continue to be made, even for the receivables that have been written off, and amounts recoverable are recognized directly in the Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income upon collection.

 

c.Impairment losses on trade receivables

 

The Company measures impairment losses on trade receivables at an amount equal to lifetime expected credit losses (“ECL”) estimated using a provision matrix monthly. This matrix is prepared by analyzing the receivables established each month (in the 12-month period) and the related composition per default range and by calculating the recovery performance. In this methodology, for each default range an estimated loss likelihood percentage is established, which considers current and prospective information on macroeconomic factors that affect the customers’ ability to settle the receivables.

 

The Company also recognizes impairment losses on trade receivables at 100% over customers that filed for bankruptcy, based on historical experience, which has indicated that these receivables are generally not recoverable.

 

The credit risk and expected credit losses associated with amounts due from related parties is not significant.

 

The following table details the risk profile of trade receivables based on the Company’s provision matrix as of June 30, 2021 and as of June 30, 2020.

 

18 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

d.Expected credit losses for aging

 

   As of June 30, 2021  As of December 31, 2020
   Expected credit loss rate (%)  Lifetime ECL (R$)  Expected credit loss rate (%)  Lifetime ECL (R$)
Not yet due   0.12%   283    0.10%   432 
Past due                    
Up to 30 days   10.97%   1,755    6.19%   523 
From 31 to 60 days   19.66%   2,939    12.92%   1,413 
From 61 to 90 days   34.29%   2,507    20.64%   1,809 
From 91 to 180 days   48.83%   4,930    43.66%   6,785 
From 181 to 360 days   81.74%   13,177    51.67%   9,320 
Over 360 days   92.88%   12,307    78.26%   9,609 
         37,898         29,891 
Customers in bankruptcy (i)        -    100.00%   2,164 
Impairment losses on trade receivables        37,898         32,055 

 

(i)At December 31, 2020 the Company’s Management recorded 100% impairment losses from three of its customers that went on bankruptcy. All those corporate customers were national booksellers that were present in the main cities of Brazil and therefore were considered as strategic marketplaces for the sale of our published materials to final customers (students, teachers, and schools). The Company did not identify bankrupt customers with impairment losses in the six-month period ended June 30, 2021.

 

The following table shows the changes in impairment losses on trade receivables for the six months period ended:

 

e.Changes on provision

 

   June 30, 2021  June 30, 2020
Opening balance   32,055    22,524 
  Additions   18,966    11,720 
  Reversals   (758)   (137)
 Clients in bankruptcy   -    1,645 
Write offs (i)   (12,365)   (5,012)
Closing balance   37,898    30,715 

 

(i)The Company has assessed credits line alongside its customers, and some credit lines were renegotiated. Due to historical losses and lack of prospects of credit recovery alongside those customers, the Company recognized R$ 12,365 as write-off as of June 30, 2021.

 

11Inventories

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   June 30, 2021  December 31, 2020
Finished products (i)   161,943    168,328 
Work in process   54,467    52,322 
Raw materials   27,812    20,485 
Imports in progress   2,864    2,642 
Right to returned goods (ii)   2,365    5,855 
    249,451    249,632 

 

(i)That amounts are net of slow-moving items and net realizable value.

(ii)Represents the Company’s right to recover products from customers where customers exercise their right of return under the Company’s returns policies, where the Company estimates the volume of goods returned based on experience and foreseen expectations. The right to returned goods provision has been reducing due to changes in the commercial approach alongside with main distributors that allows the Company to be more assertive on sales, even in times of COVID-19.

 

19 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

 

Changes in provision for losses with slow-moving inventories, net realizable value and provision for goods returned are broken down as follows:

 

b.Changes in provision

  

   June 30, 2021  June 30, 2020
Opening balance   62,210    69,080 
Additions   10,353    5,693 
(Reversals)   (1,706)   (3,708)
   Inventory losses/destruction (i)   (13,221)   - 
Closing balance   57,636    71,065 

 

(i)Refers substantially to physical books destroyed, previously provisioned, due to indicative of demage or obsolescence caused by changes in the educational content during the schoolyear.

 

Covid 19 Impacts

 

The Company assessed its inventories and corresponding accounting estimates and as result of COVID-19 pandemy and did not identify any relevant impact due to obsolescence or depreciation of inventories.

 

12Property Plant and Equipment

 

The cost, depreciation weighted average rates and accumulated depreciation are as follows:

 

      June 30, 2021  December 31, 2020
   Weighted   average depreciation rate  Cost  Accumulated depreciation  Net Book value  Cost  Accumulated depreciation  Net Book value
                      
IT equipment   10% - 33%   29,667    (26,253)   3,414    27,036    (25,557)   1,479 
Furniture, equipment and fittings   10% - 33%   37,823    (28,052)   9,771    36,314    (26,406)   9,908 
Property, buildings and improvements   5%-20%   52,676    (33,991)   18,685    51,407    (31,429)   19,978 
In progress   -    1,785    -    1,785    315    -    315 
Right of use assets   12%   253,713    (95,661)   158,052    241,906    (82,033)   159,873 
Land   -    453    -    453    453    -    453 
Total        376,117    (183,957)   192,160    357,431    (165,425)   192,006 

 

Changes in property plant and equipment are as follows:

 

   IT equipment  Furniture, equipment and fittings  Property, buildings and improvements  In progress  Rights of use of assets  Land  Total
As of December 31, 2020   1,479    9,908    19,978    315    159,873    453    192,006 
Additions /Updates (i)   2,524    1,081    869    1,870    15,093    -    21,437 
Additions by business combination   107    504    -    -    -    -    611 
Disposals / Cancelled contracts   -    (76)   -    -    (3,286)   -    (3,362)
Depreciation   (696)   (1,646)   (2,562)   -    (13,628)   -    (18,532)
Transfers   -    -    400    (400)   -    -    - 
As of June 30, 2021   3,414    9,771    18,685    1,785    158,052    453    192,160 

 

(i)Refers substantially to IFRS 16, new lease agreements of R$ 15,093 which the Company considers it part of its digital learning solutions through computer tablets that have been part of current learning system solutions in a period of COVID 19 pandemy. See the corresponding lease liability in Note 16.

 

20 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

   IT equipment  Furniture, equipment and fittings  Property, buildings and improvements  In progress  Rights of use assets  Land  Total
As of December 31, 2019   2,486    12,366    19,682    4,538    145,436    453    184,961 
Additions (i)   84    362    581    1,139    16,539    -    18,705 
Additions by business combination   178    33    -    -    -    -    211 
Disposals / Cancelled contracts   (182)   (1,228)   (5)   -    (3,249)   -    (4,664)
Depreciation   (707)   (854)   (2,217)   -    (9,030)   -    (12,808)
Transfers   -    -    -    -    -    -    - 
As of June 30, 2020   1,859    10,679    18,041    5,677    149,696    453    186,405 

 

(i)Refers substantially to IFRS 16, of R$ 16,539 refers to lease contracts previously signed and renewed based on contractual terms. See the corresponding lease liability in Note 16.

 

Covid 19 Impacts

 

The Company assesses, at each reporting date, even more with COVID 19 advent, whether there is an indication that a property plant and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. There aren’t indications of impairment of property plant and equipment as of June 30, 2021.

 

13Intangible Assets and Goodwill

 

The cost, weighted average amortization rates and accumulated amortization of intangible assets and goodwill comprise the following amounts:

 

      June 30, 2021  December 31, 2020
   Weighted   average amortization rate  Cost  Accumulated amortization  Net Book value  Cost  Accumulated amortization  Net Book value
Software  15%   218,343    (134,410)   83,933    204,213    (120,798)   83,414 
Trademarks  5%   631,935    (72,003)   559,932    631,935    (58,349)   573,586 
Customer Portfolio  8%   1,132,575    (228,796)   903,779    1,113,792    (184,934)   928,858 
Goodwill  -   3,356,361    -    3,356,361    3,307,805    -    3,307,805 
Platform content production  33%   64,209    (38,487)   25,722    53,069    (29,248)   23,821 
In progress  -   2,185    -    2,185    999    -    999 
Other Intangible assets  33%   39,382    (32,041)   7,341    38,283    (32,040)   6,243 
       5,444,990    (505,737)   4,939,253    5,350,096    (425,369)   4,924,726 

21 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

Changes in intangible assets and goodwill were as follows:

 

   Software  Customer Portfolio  Trademarks  Platform content production (i)  Other Intangible assets  In progress (i)  Goodwill (ii)  Total
As of December 31, 2020   83,414    928,858    573,586    23,821    6,243    999    3,307,805    4,924,726 
Additions   4,146         -    11,140    -    4,182    -    19,468 
Additions by business combination   6,988    18,783    -    -    1,099    -    48,556    75,426 
Disposals   -    -    -    -    -    -    -    - 
Amorization   (13,611)   (43,862)   (13,654)   (9,239)   (1)   -    -    (80,367)
Transfers   2,996    -    -    -    -    (2,996)   -    - 
As of June 30, 2021   83,933    903,779    559,932    25,722    7,341    2,185    3,356,361    4,939,253 

 

(i)Substantially refers to development of the projects related to Plurall Platform. The Company has invested in changes in its digital platform that include substantially “Plurall Digital Transformation” in the amount of approximately R$ 11,140 million, and project related to learning systems, in the amount of R$ 4,182 million which had its investments accelerated due to education demands created by COVID-19 pandemic.

(ii)The Company recognized R$ 48,556 as goodwill on SEL and Redação Nota 1000 acquisition, see Note 5.

 

Covid 19 Impacts

 

The Company opted to maintain investments in strategic projects and those related to improving the provision of services, given that they are considered essential for long-term growth, and partially reduced investments related to non-strategic projects or administrative area, such as IT projects or improvement in performance indicator reports. The Company will continue to evaluate COVID impacts on its business and cash flow and may postpone its plans to expand through significant acquisitions or investments.

 

   Software  Customer Portfolio  Trademarks  Platform content production  Other Intangible assets  In progress  Goodwill  Total
As of December 31, 2019   76,325    1,010,722    584,035    9,426    4,563    14,051    3,286,263    4,985,385 
Additions   9,025    -    -    15,241    906    529         25,701 
Additions by business combination   18    4,625    16,060         159    -    16,300    37,162 
Amorization   (13,594)   (42,435)   (13,254)   (3,175)   (352)   -    -    (72,810)
As of June 30, 2020   71,774    972,912    586,841    21,492    5,276    14,580    3,302,563    4,975,438 

 

Goodwill impairment test

 

During the year, the Company evaluated circumstances that could indicate impairment of its goodwill caused by impacts of Covid-19 and carried out a sensitivity analysis in the long-term model and cash flows, including any impacts / risks that could be estimated based on our best estimate of future cash flows. The conclusion of these tests conducted by the Company for the year ended December 31, 2020, showed that no adjustments were required to these assets. Further, the Company assessed the circumstances that could indicate impairment for the six months period ended June 30, 2021 and no impairment indicator was identified.

 

The Company is comprised of two separate CGUs (each one of its reportable operating segments, as per Note 27), for which the recoverable amount has been determined based on value-in-use calculations, Goodwill is allocated to each CGU as per below:

 

Content & EdTech Platform   3,345,633 
Digital Platform   10,728 
    3,356,361 

22 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

14       Bonds and financing

 

The balance of bonds and financing comprises the following amounts:

 

   December 31, 2020  Payment of interest (i)  Payment (i)  Interest accrued  Transfers  June 30, 2021
Bonds with Related Parties   502,743    (12,215)   (288,000)   12,845    (16,170)   199,203 
Finance   139    (28)   (87)   95    83    202 
Current liabilities   502,882    (12,243)   (288,087)   12,940    (16,087)   199,405 
                               
Bonds with Related Parties   289,600                   16,170    305,770 
Finance   859                   (83)   776 
Non-current liabilities   290,459    -    -    -    16,087    306,546 
                               
Total   793,341    (12,243)   (288,087)   12,940    -    505,951 

 

(i)On March 15, 2021, the Company, substantially settled bonds with related parties amounting to R$ 100,000 and R$ 1,488, respectively principal and interest, as follow: 5th Issuance, 1st series – R$ 101,488. In addition, the Company settled only interest on the following bonds: 5th Issuance, 2nd series – R$ 1,451, 6th Issuance, 2nd series – R$ 3,613 and 7th Issuance, single – R$ 5,663. This measure is part of a commitment with shareholders through the IPO. On May 31, 2021, the Company settled partially bonds with related parties amounting to R$ 188,000, principal as follow: 7th issuance single, being the remaining amount to be paid on August 16, 2021. On the financing with Banco de Desenvolvimento de Minas Gerais S.A - BDMG, the Company paid the amount of R$87 and 28, respectively principal and interest.

 

   December 31, 2019  Additions by business combination  Payment of interest  Interest accrued  Transfers  June 30, 2020
Bonds with Related Parties   440,947    -    (17,576)   23,244    100,097    546,712 
Current liabilities   440,947    -    (17,576)   23,244    100,097    546,712 
                               
Bonds(i)   1,200,000    -    -    16,170    (100,097)   1,116,073 
Finance leases (ii)   -    998    -    -    -    998 
Non-current liabilities   1,200,000    998    -    16,170    (100,097)   1,117,071 
                               
Total   1,640,947    998    (17,576)   39,414    -    1,663,783 

 

(i)On November 21, 2018, Mind Makers, which became a subsidiary of the Company in February 2020, entered into a bank credit note in favor of Banco de Desenvolvimento de Minas Gerais S.A – BDMG, for an aggregate amount of R$ 1,676 with a maturity date of November 15, 2026. Tha payment of principal will be made in 72 installments, beginning on December 15, 2020, and ending on November 15, 2026. Interest will accrue at the long-term interest rate, plus 5% per annum, and will be paid on a monthly basis along with payments of principal.

 

23 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

a.Bonds’ description

 

See below the bonds outstanding on June 30, 2021:

 

Subscriber   Related Parties   Related Parties   Related Parties
Issuance   5th   6th   7th
Serie   Serie 2   Serie 2   Single
Date of issuance   08/15/2018   08/15/2017   08/15/2018
Maturity Date   08/15/2023   08/15/2022   08/16/2021
First payment after   60 months   60 months   36 months
Remuneration payment   Semi-annual interest   Semi-annual interest   Semi-annual interest
Financiais charges   CDI + 1,00% p,a,   CDI + 1,70% p,a,   CDI + 1,15% p,a,
             
Principal amount (in million R$)   100   200   190

 

b.Bond’s maturities

 

The maturities range of these accounts are as follow:

 

   June 30, 2021
Maturity of installments  Total  %
2021   199,405    39,4%
2022   254,941    50,4%
2023   51,057    10,1%
2024 onwards   548    0,1%
Total non-current liabilities   306,546    60,6%
           
    505,951    100,0%

 

c.Debit commitment

 

On November 19, 2019, all rights and obligations related to bonds issued by Saber with third parties were transferred to Cogna, under the condition that R$ 1,535,800 of the amounts should be transferred to the Company through the Corporate Restructuring. Through this process, the Company is subject to the following clauses: (i) the acceleration of the other debentures originally issued by Saber; (ii) the grant by the Company of any liens on Company assets or its capital stock; (iii) a change in control by Cogna of Saber’s subsidiaries, subject to certain exceptions. Additionally, the Company has agreed until the maturity of the private debentures that: (i) it will allocate at least 50% of the use of proceeds from any liquidity event to repay such debentures; (ii) it will not obtain any new loans unless the proceeds of such loans are directed to repay its debentures with Cogna; and (iii) the Company will not pledge shares and/or dividends.

 

The Company complied with all debit commitment in the period applicable on June 30, 2021 and December 31, 2020.

 

24 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

15Suppliers

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   June 30, 2021  December 31, 2020
Local suppliers (ii)   68,342    128,639 
Related parties (note 20)   14,617    20,985 
Copyright   6,447    19,317 
Reverse Factoring (i)   105,759    110,513 
    195,165    279,454 

 

(i)Some of the Company’s domestic suppliers sell their products with extended payment terms and may subsequently transfer their receivables due by the Company to financial institutions without right of recourse, in a transaction characterized as “Reverse Factoring”. The Company charged interest over the payment term at a rate that is commensurate with its own credit risk. The reverse factoring presents maturity dates from one year.

(ii)The decrease in outstanding balances of suppliers amounts is due to schoolyear seasonality being all editorial costs and correlated obligations usually initiated in July/August and completed in December of the same year.

 

16Lease liabilities

 

The lease agreements have an average term of 7 years and weighted average rate of 14.32% p.a.

 

   June 30, 2021  June 30, 2020
Opening balance   173,103    153,714 
Additions for new lease agreements (i)   15,093    16,539 
Cancelled contracts   (3,481)   (3,359)
Renegotiation - COVID-19 impact   (28)   (595)
Interest   8,060    7,592 
Payment of interest   (8,022)   (7,616)
Payment of principal   (10,359)   (5,797)
Closing balance   174,366    160,478 
           
Current liabilities   21,732    13,035 
Non-current liabilities   152,634    147,443 
    174,366    160,478 

 

(i)Refers to new lease agreements which the Company has embed part of its digital learning solutions in the computer tablets being part of them which the Company has embed part of its digital learning solutions in the computer tablets. Those lease agreements (digital learning) refer to lease terms of 36 months, with rates negotiated in the range from 10,3% p.a to 10,88% p.a.

 

Short-term leases (lease period of 12 months or less) and leases of low-value assets (such as personal computers and office furniture) are recognized on a straight-line basis in rent expenses for the period and are not included in lease liabilities. Fixed and variable lease payments, including those related to short-term contracts and to low-value assets, were the following for the six months periods ended June 30, 2021 and 2020:

 

   For the period ended June 30
   2021  2020
Fixed Payments   18,381    5,797 
Payments related to short-term contracts and low value assets, variable price contracts (note 25)   11,404    5,334 
    29,785    11,131 

25 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

17Contract liabilities and deferred income

 

   June 30, 2021  December 31, 2020
Refund liability (i)   27,585    42,005 
Sales of 'employees' payroll (iii)   1,565    2,348 
Deferred income in leaseback agreement (ii)   6,137    6,665 
Other contract liabilities   618    2,689 
    35,905    53,707 
           
Current   30,678    47,169 
Non-current   5,227    6,538 
    35,905    53,707 

(i) Refers to the customers right to return products.

 

(ii) In March 2018, the predecessor Somos-Anglo entered into a sales and leaseback agreement of a property located at Avenida João Dias in the city of São Paulo in the amount of R$ 25,500. This transaction included deferred income of R$ 9,104, which has been appropriated according to the lease term of the property (120 months).

 

(iii) Refers to deferred income related to the sale of a 5-year exclusivity to process our Company employees’ payroll to Banco Itaú for R$ 7,000 thousand, in August 2017. This income is recognized in the Income Statement through straight-line basis throughout the contract term as “Other Operating income” as the Company believes that the rights of exclusivity are transferred to Itaú over the 5-year period.

 

18Accounts payable for business combination

 

   June 30, 2021  December 31, 2020
Pluri   3,154    12,817 
Mind Makers   11,837    15,000 
Livro Fácil   13,658    15,907 
Meritt   3,121    4,331 
SEL (i)   26,128    - 
Redação Nota 1000 (ii)   7,303    - 
    65,201    48,055 
           
Current   18,348    17,132 
Non-current   46,853    30,923 
    65,201    48,055 
(i)Refers to the SEL acquisition (see note 5).

 

(ii)Refers to Redação Nota 1000 acquisition (see note 5).

 

The change in the balance is as follows:

 

   June 30, 2021  December 31, 2020
Opening balance   48,055    10,941 
Additions   76,387    58,857 
Payment   (58,974)   (26,389)
Interest adjustment   (623)   1,568 
Others   356    3,078 
Closing balance   65,201    48,055 

26 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

The maturity years of such balances as of June 30, 2021 are shown in the table below:

 

   As of June 30, 2021  As of December 31, 2020
Maturity of installments  Total  %  Total  %
2021   18,348    28.1    17,132    35.7 
                     
2022   6,832    10.5    13,811    28.7 
2023   22,623    34.7    17,112    35.6 
2024   13,761    21.1    -    - 
2025   595    0.9    -    - 
2026   3,042    4.7    -    - 
Total non-current liabilities   46,853    71.9    30,923    64.3 
                     
    65,201    100.0    48,055    100.0 

 

19Salaries and Social Contribution

 

   June 30, 2021  December 31, 2020
Salaries payable   26,090    15,891 
Social contribution payable (i)   23,460    30,511 
Provision for vacation pay and 13th salary   23,437    15,920 
Provision for profit sharing (ii)   18    5,880 
Others   3,661    921 
    76,666    69,123 

 

(i)Refers to the effect of social contribution over restricted share unit’s compensation plans issued on July 31 and November 10, 2020. The Company records the taxes over the shares on monthly basis according to the Company’s share price.

(ii)The provision for profit sharing is based on qualitative and quantitative metrics determined by Management. In 2020, some metrics were reviewed over COVID 19. The provision for profit sharing was settled in the second quarter from 2021.

 

20Related parties

 

As presented in note 1, the Company is part of Cogna Group and some of the Company’s transactions and arrangements involve entities that pertain to the Cogna Group. The effect of these transactions is reflected in this Consolidated Financial Statements, with these related parties segregated by nature of transaction measured on an arm’s length basis and determined by intercompany agreements and approved by the Company’s Management. Furthermore, all of them are settled in cash, except for certain intangibles described in item 20(d).

 

The balances and transactions between the Company and its affiliates have been eliminated in the Company’s Consolidated Financial Statements. The balances and transactions between related parties are shown below:

 

27 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

   June 30, 2021
   Other receivables (i)  Trade receivables (Note 10 and 20c)  Indemnification asset (note 20b)  Other payments (ii)  Suppliers (note 15) 

Bonds

(note 14) 

Acel Adminstração de Cursos Educacionais Ltda   -    930    -    -    29    - 
Anhanguera Educacional Participacoes SA.   -    413    -    -    -    - 
Centro Educacional Leonardo Da Vinci SS   -    42    -    -    4    - 
Cogna Educação S.A.   -    -    155,665    2,601    -    504,973 
Colégio Ambiental Ltda   -    436    -    -    40    - 
Colégio JAO Ltda.   -    887    -    -    -    - 
Colegio Manauara Lato Sensu Ltda.   -    1,709    -    -    24    - 
Colégio Motivo Ltda.   -    -    -    -    -    - 
Colegio Visao Eireli   -    229    -    -    7    - 
Conlégio Cidade Ltda   -    142    -    -    15    - 
Curso e Colégio Coqueiro Ltda   -    321    -    -    20    - 
ECSA  Escola A Chave do Saber Ltda   -    223    -    -    -    - 
Editora Atica S.A.   -    784    -    15,210    6,312    - 
Editora E Distribuidora Educacional S.A.   -    436    -    15,351    88    - 
Editora Scipione S.A.   -    303    -    630    749    - 
Educação Inovação e Tecnologia S.A.   13    -    -    -    -    - 
Escola Mater Christi Ltda.   -    74    -    -    112    - 
Escola Riacho Doce Ltda   -    129    -    -    53    - 
Maxiprint Editora Ltda.   -    -    -    -    28    - 
Nucleo Brasileiro de Estudos Avançados Ltda   -    246    -    -    -    - 
Papelaria Brasiliana Ltda   -    518    -    -    -    - 
Pitagoras Sistema De Educacao Superior Ltda.   -    76    -    -    -    - 
Saber Serviços Educacionais S.A.   5    1,671    -    -    744    - 
Saraiva Educacao S.A.   798    1,158    -    -    5,013    - 
SGE Comercio De Material Didatico Ltda.   -    0    -    -    660    - 
Sistema P H De Ensino Ltda.   -    1,730    -    -    121    - 
Sociedade Educacional Alphaville Ltda   -    147    -    -    -    - 
Sociedade Educacional Doze De Outubro Ltda.   -    165    -    -    38    - 
Sociedade Educacional NEODNA Cuiaba Ltda   -    74    -    -    -    - 
Sociedade Educacional Parana Ltda.   -    47              8      
Somos Educação S.A.   -    -    -    1    -    - 
Somos Idiomas SA   53    -    -    -    -    - 
Somos Operações Escolares S.A.   -    1,339    -    34    61    - 
SSE Serviços Educacionais Ltda.        399              488      
Others   249    -    -    35         - 
    1,118    14,628    155,665    33,862    14,617    504,973 

 

(i)Refers to other receivables related to cost sharing agreements where substantially Saber Serviços Educacionais (“Saber”), a Cogna Group entity. The Company provides services and learning systems to Cogna Group entities.

 

28 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

(ii)Refers substantially to “Reverse Factoring” contracts. As mentioned in the note 1.2 – Corporate Restructuring and Business Acquisitions - the Company concluded the carve-out process on December 31, 2019, as consequence some contracts with certaing suppliers were kept in the entities carved-out (Editoria Atica; Editoria Scipione and Editora E.Distribuidora Educacional) as manner of avoid early contract termination as consequence of carve-out. Therefore, throughout 2020 all reverse factoring liabilities were settled by those entities alongside suppliers and subsequently those commintements were paid by the Company through related parties transacions. Since January 1st, 2021 all new commitments related to the reverse factoring have been done by the Company alongside its suppliers, see note 15, and the remaining supplier financing amount on June 30, 2021 are due to the reverse factoring transactions untill December 31, 2020.

 

   December 31, 2020
   Other receivables  Trade receivables (Notes 10 and 20.c)  Indemnification asset (Note 20b)  Other payments 

Loans

(i)

  Suppliers (Note 15)  Bonds (Note 14)
Acel Adminstração de Cursos Educacionais Ltda   -    2,899    -    -    -    36    - 
Anhanguera Educacional Participacoes SA.   -    413    -    -    -    -    - 
Centro Educacional Leonardo Da Vinci SS   -    63    -    -    -    -    - 
Cogna Educação S.A.   -    -    153,714    1,354    20,884    -    691,451 
Colégio Ambiental Ltda   -    315    -    -    -         - 
Colégio JAO Ltda.   -    772    -    -    -    -    - 
Colegio Manauara Lato Sensu Ltda.   -    2,838    -    -    -    173    - 
Colégio Motivo Ltda.   -    1,250    -    -    -    249    - 
Colegio Visao Eireli   -    115    -    -    -    -    - 
Conlégio Cidade Ltda   -    155    -    -    -         - 
Curso e Colégio Coqueiro Ltda   -    188    -    -    -         - 
ECSA  Escola A Chave do Saber Ltda   -    435    -    -    -         - 
Editora Atica S.A.   -    1,193    -    72,158    -    7,392    - 
Editora E Distribuidora Educacional S.A.   -    528    -    9,547    -    89    - 
Editora Scipione S.A.   -    414    -    13,408    -    1,386    - 
Educação Inovação e Tecnologia S.A.   -    -    -    229    -    0    - 
EDUFOR Serviços Educacionais Ltda   -    10    -    -    -         - 
Escola Mater Christi Ltda.   -    216    -    -    -    104    - 
Escola Riacho Doce Ltda   -    253    -    -    -         - 
Maxiprint Editora Ltda.   13    367    -    -    -    26    - 
Nucleo Brasileiro de Estudos Avançados Ltda   -    391    -    -    -         - 
Papelaria Brasiliana Ltda   -    1,478    -    -    -         - 
Pitagoras Sistema De Educacao Superior Ltda.   -    127    -    -    -    -    - 
Saber Serviços Educacionais S.A.   1,686    3,710    -    -    -    2,658    100,892 
Saraiva Educacao S.A.   -    804    -    36,454    -    8,010    - 
SGE Comercio De Material Didatico Ltda.   -    6    -    41    -    661    - 
Sistema P H De Ensino Ltda.   -    2,348    -    2,116    -    163    - 
Sociedade Educacional Alphaville Ltda   -    190    -    -    -         - 
Sociedade Educacional Doze De Outubro Ltda.   -    231    -    -    -    36    - 
Sociedade Educacional NEODNA Cuiaba Ltda   -    101    -    -    -         - 
Somos Idiomas SA   79    -    -    -    -    -    - 
Somos Operações Escolares S.A.   292    980    -    -    -    -    - 
    2,070    22,791    153,714    135,307    20,884    20,985    792,343 

 

(i)Unitll December 31, 2020 the Company held loan with Cogna Educação S.A. on amount of R$ 20,884 being paid on January 21, 2021.

 

29 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

   Six months ended June 30, 2021  Six months ended June 30, 2020
Transactions held:  Revenues  Finance costs (i)  Cost Sharing (note 20d)  Sublease (note 20f)  Revenues  Finance costs  Cost Sharing (note 20d)  Sublease (note 20f)
                         
 A & R Comercio e Serviços de Informática Ltda (“Pluri”)   -    -    -    -    6,167    -    -    - 
 Acel Administracao De Cursos Educacionais Ltda.   976    -    -    -    138    -    -    - 
 Centro Educacional Leonardo Da Vinci SS   41    -    -    -    -    -    -    - 
 Cogna Educação S.A.   -    12,845    -    -    -    576    -    - 
 Colégio Ambiental Ltda   353    -    -    -    -    -    -    - 
 Colégio Cidade Ltda   81    -    -    -    -    -    -    - 
 Colegio JAO Ltda.   469    -    -    -    -    -    -    - 
 Colégio Manauara Lato Sensu Ltda.   543    -    -    -    371    -    -    - 
 Colégio Motivo Ltda.   35    -         -    372    -    -    - 
 Colégio Visão Ltda   225    -    -    -    -    -    -    - 
 Cursos e Colégio Coqueiros Ltda   199    -    -    -    -    -    -    - 
 Ecsa  Escola A Chave Do Saber Ltda.   106    -    -    -    77    -    -    - 
 Editora Atica S.A.   1,496    -    3,016    2,862    5,394    198    11,989    5,436 
 Editora E Distribuidora Educacional SA.   -    -    15,443    -    1,834    -    18,594    1,554 
 Editora Scipione SA.   707    -    -    -    704    -    -    - 
 Escola Mater Christi   35    -    -    -    -    -    -    - 
 Escola Riacho Doce Ltda   39    -    -    -    -    -    -    - 
 Maxiprint Editora Ltda.   -    -    -    -    583    -    -    - 
 Nucleo Brasileiro de Estudos Avancados Ltda   63    -    -    -    -    -    -    - 
 Papelaria Brasiliana Ltda   46    -    -    -    -    -    -    - 
 Saber Serviços Educacionais S.A.   152    -    -    -    796    -    -    - 
 Saraiva Educacao SA.   1,727    -    -    1,549    1,776    -    -    1,686 
 Sistema P H De Ensino Ltda.   1,841    -    -    -    2,984    -    -    - 
 Sociedade Educacional Alphaville SA   140    -    -    -    -    -    -    - 
 Sociedade Educacional Doze De Outubro Ltda   173    -    -    -    89    -    -    - 
 Sociedade Educacional Neodna Cuiaba Ltda.   149    -    -    -    181    -    -    - 
 Sociedade Educacional Parana Ltda.   -    -    -    -    543    -    -    - 
 SOE Operações Escolares SA.   444    -    -    -    -    39,414    -    - 
 Somos Educação S.A.   -    -    -    -    -    984    -    - 
 Somos Idiomas Ltda   -    -    -    136    -    -    -    - 
 Somos Operações Escolares SA.   243    -    -    -    -    -    -    - 
 SSE Serviços Educacionais Ltda.   125    -    -    -    -    -    -    - 
 Others   -    -    -    -    238    -    -    186 
    10,408    12,845    18,459    4,547    22,247    41,172    30,583    8,862 

 

(i)Refers to debentures interest; see Note 14. Until June 30, 2020 there were not debentures .

 

30 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

a.Suppliers and other arrangements with related parties

 

The Company, as consequence of carve-out process on December 31, 2019 kept reverse factoring operations (specifically raw material purchases with Group Cogna’s affiliates) until then owner of assets and liabilities. After the carve-out process on January 1, 2020, the Company assumed those commitments. However, the Company took into account the fact that those contracts would last one year or least after the carve-out data basis, and the cost and benefit of transferring the contracts from the Group Cogna’s affiliates to the Company would be higher than keep them with Group Cogna. As consequence, the Management decided to reimburse the Cogna Group for those expenses inasmuch as the contracts expirated. On June 30, 2021 part of those commitments added up R$ 33,862 (R$ 135,307 as of December 31, 2020). As of December 31, 2020, the Company has settled remaining contracts committed with Related Parties orderly and the Cogna Group has been transferring the remaining services and current contracts to the Company.

 

b.Guarantees related to contingencies acquired through past business combination

 

In December 2019, the Company and Cogna Group signed the agreement to legally bind the indemnification from the seller in connection with the acquisition of Somos by Cogna Group, in order to indemnify the Company for any and all losses that may be incurred related to all contingencies or lawsuits events related to the Predecessor up to the maximum amount of R$ 155,7 million as of June 30, 2021 (R$ 153,7 million as of December 31, 2020). See Provision for risks of tax, civil and labor losses and judicial deposits and escrow account footnote (note 20).

 

c.Trade receivables

 

The Company and its subsidiaries provide learning systems, textbooks, and complementary educational solutions to the Cogna Group substantially composed by schools, publisher, language schools and stationary shops. All sales and services provided are based on intercompany contracts and its commercial conditions, which include price, margin and payment terms, and were determined in arms-length condition.

 

d.Cost sharing agreements with related parties

 

The Company expensed certain amounts based on an apportionment from Cogna Group related to shared services, including the shared service center, IT expenses, propriety IT systems and legal and accounting activities, and shared warehouses and other logistic activites based on agreement. Those expenses, R$ 18,459 for the six months period ended June 30, 2021 (R$ 30,583 for the six months period ended June 30, 2020) are related to these apportionments.

 

e.Brand and Copyrights sharing agreements with related parties

 

In November and December 2019, the Company and its related parties entered into brand and copyrights sharing agreements with related parties, as follows:

 

(i)On November 6, 2019, the Company entered into a trademark license agreement (as amended in 2020) with EDE whereby Company was granted at no cost rights to use related to the trademark “Pitágoras.” This agreement is valid for a period of 20 years, automatically and successively renewable for the same period.

 

(ii)On November 11, 2019, the Company and EDE (Cogna Group’s Parent Company) entered into a copyright license agreement whereby EDE agreed to grant a license, at no cost, to Company, for commercial exploitation and use of copyrights related to the educational platform materials. This agreement is valid for three years.

 

31 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

(iii)On December 6, 2019, the Company also entered into two trademark license agreements (as amended in 2020) whereby the rights to use related to certain trademarks, such as “Somos Educação”, “Editora Atica”, “Editora Scipione,” “Atual Editora,” “Par Plataforma Educacional,” “Sistema Maxi de Ensino,” “Bilingual Experience,” “English Stars” and “Rede Cristã de Educação,” were granted at no cost to certain related parties. This agreement is valid for a period of 20 years, automatically and successively renewable for the same period. On June 30, 2021 all those commitments have been renewed with related parties at no cost.

 

f.Lease and sublease agreements with related parties

 

The Company and its related parties also shared the infrastructure of leased warehouses and other properties, which are direct expenses of the Cogna Group. The expenses related to these lease payments were recognized in the consolidated financial statements according to assumptions defined by Management based on utilization of these properties by the Company.

 

However, as part of its corporate restructuring (Note 1), the Company entered into lease and sublease agreements with its related parties on December 5, 2019, to continue to share these leased warehouses and other properties, as follows:

 

f.1Commercial lease agreement

 

Lessee Entity Counterpart lease agreement (Lessor) Monthly payments Maturity Rate State of the property in use
Somos Sistemas de Ensino S.A. Editora Scipione S.A. R$35 60 months from the agreement date Inflation index Pernambuco (Recife)
Somos Sistemas de Ensino S.A. Editora Ática S.A. R$30 60 months from the agreement date Inflation index Bahia (Salvador)

 

f.2Commercial sublease agreement

 

Entity

 

(Sublessor)

 

Counterpart sublease agreement (Sublessee) Monthly payments Maturity Rate State of the property in use
Editora e Distribuidora Educacional S,A (“EDE”) Somos Sistemas de Ensino S.A. R$ 390 September 30, 2025 Inflation index São Paulo (São Paulo)
Somos Sistemas de Ensino S.A. Editora Ática S.A. R$439 September 30, 2025 Inflation index São Paulo (São José dos Campos)
Somos Sistemas de Ensino S.A. SGE Comércio de Material Didático Ltda, (“SGE”), R$15 September 30, 2025 Inflation index São Paulo (São José dos Campos)
Somos Sistemas de Ensino S.A. Somos Idiomas S.A. R$ 3 September 30, 2025 Inflation index São Paulo (São José dos Campos)
Somos Sistemas de Ensino S.A. Saraiva Educação S,A, (“Sariva”) R$ 113 September 30, 2025 Inflation index São Paulo (São José dos Campos)
Somos Sistemas de Ensino S.A. Livraria Livro Fácil Ltda,(“Livro Fácil”) R$ 82 September 30, 2025 Inflation index São Paulo (São José dos Campos)
Somos Sistemas de Ensino S.A. Editora e Distribuidora Educacional S,A (“EDE”) R$ 43 September 30, 2025 Inflation index São Paulo (São José dos Campos)

 

The income from these lease and sublease agreements with related parties were recognized in the Interim Condensed Consolidated Financial Statements as of June 30, 2021 in the amount of R$ 4,547 (R$ 8,862 for the six months period ended June 30, 2020).

 

32 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

g.Compensation of key management personnel

 

Key management personnel include the members of the Board of Directors, Audit Committee, the CEO and the vice-presidents, for which the nature of the tasks performed were related to the activities of the Company.

 

For the six months period ended June 30, 2021, key management compensation, including charges and variable compensation added up R$ 4,517 (R$ 3,292 for the six months period ended June 30, 2020). The Audit Committee and Board of Directors were stablished in July 2020 as IPO outcome.

 

For the Company management members, the following benefits are granted: healthcare plan, share-based compensation plan, discounts on monthly tuition of K-12 in the Cogna Group’s schools, besides discounts over the Company’ own products.

 

See below the key management’s person remuneration by nature:

 

a)Short term benefits - Short-term benefits include fixed compensation (salaries and fees, vacation, mandatory bonus, and “13th salary” bonus), payroll charges (Company share of contributions to social security – INSS) and variable compensation such as profit sharing, The short-term benefits for the six-month period ended June 30, 2021 amounted to R$ 1,508 (R$ 1,663 for the six months period ended June 30, 2020), including payroll charges.

 

b)Long-term benefits - The Company offered also to certain key management personnel payment based in its restricted shares units - ILP, amount that added up R$ 3,009 for the six-month period ended June 30, 2021 (R$ 1,629 for the six-month period ended June 30, 2020) including payroll charges.

 

The Key management personnel compensation expenses comprised the following:

 

   June, 30 2021  June, 30 2020
Short-term employee benefits (i)   1,508    1,663 
Share-based compensation plan (ii)   3,009    1,629 
    4,517    3,292 

  

(i)The Company, as a result of COVID-19, has been reviewed some short-term benefits not based on legal obligation, for example bonus based on performance to key management personnel. Therefore, the expense over those short-term benefit has been reversed.

(ii)Refers substantially to share-based compensation plan, considered as ILP which included payroll charges.

 

h.Guarantees related to finance

 

According to Note 14, on November 21, 2018, Mind Makers entered into a bank credit note in favor of Banco de Desenvolvimento de Minas Gerais S.A. – BDMG, for an aggregate amount of R$1,676 with maturity on November 15, 2026. A personal lien to secure this bank credit note was granted by certain individuals, including, our Chief Executive Officer.

 

21Provision for tax, civil and labor losses and Judicial deposits and escrow accounts

 

The Company classifies the likelihood of loss in judicial/administrative proceedings in which it is a defendant. Provisions are recorded for contingencies classified as probable loss and in an amount that Management, in conjunction with its legal advisors, believes is enough to cover probable losses or when related to contingences resulting from business combinations.

 

33 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

In connection with the acquisition of Somos Group (Vasta’s predecessor) by Cogna Group, provisions for contingent liabilities assumed by Cogna were recognized when potential non-compliance with labor and civil legislation arising from past practices of subsidiaries acquired were identified. Thus, at the acquisition date, Cogna reviewed all proceedings whose responsibility were transferred to assess whether there was a present obligation and if the fair value could be measured reliably. The contingent liabilities are composed as follows:

 

a.Composition

 

   June 30, 2021  December 31, 2020
Proceedings whose likelihood of loss is probable      
Tax proceedings (i)   585,000    575,724 
Labor proceedings (ii)   6,591    6,591 
    591,591    582,315 
           
Liabilities assumed in Business Combination          
Labor proceedings (ii)   31,385    31,305 
Civil proceedings   307    313 
    31,692    31,618 
           
Total of provision for tax, civil and labor losses   623,283    613,933 

 

(i) Primarily refers to income tax positions taken by Somos (Vasta Predecessor) and the Company (Sucessor) in connection with a corporate restructuring held by the predecessor in 2010. In 2018, given a tax assessment via an Infraction Notice received by the predecessor for certain periods opened for tax audit coupled with unfavorable jurisprudence on a similar tax case also reached in 2018, the Company reassessed this income tax position and recorded a liability, including interest and penalties.

 

(ii) The Company is a party to labor demands, which mostly refer to proportional vacation, salary differential, night shift premium, overtime, social charges, among others. There are no individual labor demands with material values that require specific disclosure.

 

The changes in provision for the six-months period ended June 30, 2021 and 2020 were as follows:

 

   December 31, 2020  Additions  Reversals  Interest  Total effect on the result  Payments  June 30, 2021
                      
Tax proceedings   575,724    405    -    8,871    9,276    -    585,000 
Labor proceedings   37,896    1,114    (2,357)   1,394    151    (72)   37,976 
Civil proceedings   313    7    (18)   10    (1)   (4)   307 
Total   613,933    1,526    (2,375)   10,275    9,426    (76)   623,283 

             
Reconciliation with profit or loss for the period            
  Finance expense   -    -    (10,275)     
General and administrative expenses   (1,121)   2,375    -      
  Income tax and social contribution   (405)   -    -      
Total   (1,526)   2,375    (10,275)     

 

34 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of June 30, 2021

 

   December 31, 2019  Additions  Reversals  Interest  Total effect on the result  Payments  June 30, 2020
Tax proceedings   557,783    -    (773)   10,329    9,556    -    567,339 
Labor proceedings   51,193    1,226    (5,095)   233    (3,636)   (6,762)   40,795 
Civil proceedings   31    375    (64)   2    313    (17)   327 
Total   609,007    1,601    (5,932)   10,564    6,233    (6,779)   608,461