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 November 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 November 11, 2021 – Vasta Platform Limited announces today its financial and operating results for the third quarter of 2021
99.2 Vasta Platform Limited Unaudited Interim Condensed Consolidated Financial Statements as of September 30, 2021, and for the three- and nine-month periods ended September 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: November 12, 2021

 

 

 

  

Exhibit 99.1 

 

São Paulo, November 11, 2021 – Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or the “Company,” announces today its financial and operating results for the third quarter of 2021 (3Q21) ended September 30, 2021. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

HIGHLIGHTS

 

·Vasta concluded the 2021 cycle with a 7% subscription revenue growth over the same period of last year, or 11% excluding PAR (our hybrid subscription product based on textbooks). Total net revenue fell 12%, however, as the non-subscription revenue was severely impacted by the deterioration in the textbook business, on the back of Covid-19 (higher reuse of textbooks).

 

·In the third quarter, net revenue contracted 10% year on year, owing to the different seasonality of the ACV recognition observed in 2021, with the concentration of deliveries in some brands in the second quarter.

 

·Adjusted EBITDA totaled R$ 168 million in the 2021 cycle, a drop of 35% versus the 2020 cycle, driven by the reduction in net revenue, coupled with higher provision for doubtful accounts (PDA) and the enhancement in our corporate structure following the IPO in July 2020. Additionally, it was recorded in the 3Q21 a write-off of editorial costs amounting to R$ 20 million, referring to a rationalization of our portfolio considering the changes in the textbook business and our editorial strategy. Excluding this effect, adjusted EBITDA totaled R$ 188 million, 27% lower versus the 2020 cycle, yielding a margin of 21%. In the 3Q21, adjusted EBITDA was negative in R$ 29 million, or R$ 9 million excluding the write-off.

 

·The higher PDA reflects the company’s care with provisioning standards, amidst a difficult period for some of our partner schools and the textbook distribution channel. 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 profit of R$ 28 million in the 2021 cycle, 57% down year-on-year.

 

·On October 26, Vasta announced a distribution agreement with Instituto Presbiteriano Mackenzie, pursuant to which Vasta will be the sole and exclusive distributor of the Mackenzie Learning System across all of the basic education segments in Brazil.

 

·On October 29, Vasta concluded the acquisition of Eleva platform, its biggest acquisition since the IPO. This transaction adds not only a sizeable and complementary portfolio of schools to Vasta’s portfolio, but also a long-term contract through which Vasta will be the exclusive provider of learning systems to almost all K-12 schools held by Eleva.

 

·The B2B2C platform debuted in October, with Plurall MyTeacher (private classes platform) and Plurall Adapta (adaptive learning platform) recording their first sales.

 

·On October 31, and with two months to go in the commercial campaign, the 2022 preliminary ACV totaled R$ 888 million, an organic growth of 20% versus the subscription revenue collected in the 2021 cycle, or 29% excluding paper-based PAR. With Eleva, the 2022 preliminary ACV was R$ 974 million, 32% higher year-on-year. Nearly 100% of our new sales have come from tradition learning systems, complementary solutions, or the newly launched digital textbook platform (which is offered on a fee-per-student basis).

 

1 

  

 

MESSAGE FROM MANAGEMENT

 

In the third quarter, we concluded the 2021 cycle (4Q20 to 3Q21), one of the most challenging periods of our history. The adverse effects originated by the second wave of Covid-19 severely hit our business, leading to disappointing and below-potential operating results. The 2021 ACV of R$ 853 million (23% higher than the 2020 ACV) translated into R$ 741 million subscription revenue, a quite unusual gap in our industry, on the back of an unexpected dropout at our partner schools combined with a higher reuse of textbooks. At the same time, the non-subscription revenue declined 53%, due to the deterioration in the textbook business combined with our focus on bringing non-subscription clients to the subscription universe, our core business. Notwithstanding all the challenges, we delivered a 7% growth in subscription revenue, or 11% excluding PAR (highly dependent on textbooks).

 

We have reasons to say that the worst was left behind. With the social isolation measures almost fully lifted in the country (as most of Brazilian population is already immunized against Covid-19), we can expect the 2022 school year to be a regular one, without unexpected student dropouts that in the 2021 cycle led to subscription revenue substantially different from the ACV. While we don’t expect non-subscription revenue to recover strongly going forward, we don’t foresee reasons for another sharp reduction either. These two factors mean that Vasta is back to the growth territory in 2022, recovering the ground lost in 2021.

 

If 2021 was a lost year in terms of financial results, it has been a great year for the expansion of our Plurall platform, still the absolute leader in terms of K-12 web traffic. We particularly celebrate the debut of our B2B2C services: Plurall MyTeacher (private classes platform) and Plurall Adapta (adaptive learning platform) recorded their first sales in October. As it happens with products of this nature, first sales are quite small, but long-term potential is sound, and it could materialize exponentially once the product is better known by our Plurall community. Plurall Store, which offers a series of complementary solutions in partnership with education companies from all over the world, is also live in October, underscoring 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.

 

On October 26, we announced a distribution agreement with Instituto Presbiteriano Mackenzie (“Mackenzie”), pursuant to which Vasta will be the sole and exclusive distributor of the Mackenzie Learning System across all of the basic education segments in Brazil. Mackenzie, a meaningful participant in the educational sector in Brazil since its foundation, shall remain responsible for the development of the didactic and learning materials of the Mackenzie Learning System and the definition of the system’s pedagogy and methodology. Vasta shall be responsible for support services, technological products and all services relating to the commercialization and expansion of the Mackenzie Learning System brand. The Agreement will start in 2022, in a long-term basis, already contributing to the 2022 ACV.

 

Finally, on October 29 we closed the acquisition of Eleva platform, our biggest acquisition since the IPO. This transaction adds not only a sizeable and complementary portfolio of schools to our platform, but also a long-term contract through which Vasta will be the exclusive provider of learning systems to almost all K-12 schools held by Eleva, uniquely positioning Vasta to benefit from the consolidation of the fragmented K-12 market. The expected base purchase price (subject to adjustments based on 2021 and 2022 results) is R$ 580 million, to which an estimated net cash adjustment of approximately R$ 32 million will be added. This amount will be paid in installments over the next five years, all adjusted by the positive variation of Brazil’s interbank deposit rate (CDI). The first installment, in the amount of R$ 160 million, was paid on the closing date.

 

2 

  

 

On October 31, the 2022 preliminary ACV totaled R$ 888 million, an organic growth of 20% versus the subscription revenue collected in the 2021 cycle, with the commercial campaign still two months to go. Excluding paper-based PAR, the organic growth is 29%, as nearly 100% of our new sales have come from tradition learning systems, complementary solutions, or from the digital textbook platform offered on a fee-per-student basis, reflecting our focus on reducing exposure to the paper-based textbook channel. With Eleva, the preliminary 2022 ACV totaled R$ 974 million, a 32% growth versus our 2021 subscription revenue. We will update the 2022 ACV number when campaign ends. It is important to mention that in our projections we factor in neither the return of students who dropped out from our partners schools’ base in 2021 nor the normalization in the volume of textbooks typically acquired through PAR contracts in a regular year – this means that the 2021 ACV gap of R$112 million could be captured in the upcoming years.

 

Despite the macroeconomic deterioration, our premium brands Anglo and pH have had a strong performance during this sales campaign, reassuring our perception that quality and reputation remain the name of the game in this business. In this campaign, we have also counted with Fibonacci, our new premium learning system developed in partnership with Colegio Fibonacci, a top-10 school in the National High School Test (ENEM) for more than 10 years. Complementary solutions have continued to ramp-up its penetration over the client base, evidencing the potential of this segment – in the 2021 cycle, only 25% of partner schools adopted our complementary solutions, being 84% of these adopting only one solution.

 

3 

  

 

OPERATING PERFORMANCE

 

Student Base – Subscription Models

 

Values in R$ '000   2021   2020   % Y/Y   2019   % Y/Y
Partner Schools - Core Content   4,508   4,167   8.2%   3,400   22.6%
Partner Schools - Complementary Solutions   1,114   636   75.2%   417   52.5%
Students - Core Content   1,335,152   1,311,147   1.8%   1,185,799   10.6%
Students - Complementary Content   307,941   213,058   44.5%   133,583   59.5%

Note: Students enrolled in partner schools.

 

From 2019 to 2021, Vasta grew 33% its partner schools base, reflecting the success of the commercial strategy. Although the volume of enrolled students in the 2021 cycle was below its full potential, we retained our client base with long-term contracts, which represents additional growth potential without acquisition costs should our partner schools’ base is restored in the upcoming years. Additionally, only 25% of our clients adopt complementary solutions, which underscores the high growth potential of this segment. Finally, to this client base it will be added the schools currently served by Eleva and the new schools that joined Vasta’s platform during the 2022 sales campaign.

 

FINANCIAL PERFORMANCE

 

Net Revenue

 

    3Q21   3Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
Subscription   96,208   105,849   -9.1%   740,709   691,924   7.1%
   Subscription ex-PAR   86,648   108,335   -20.0%   609,083   551,014   10.5%
      Traditional Learning Systems   87,256   107,967   -19.2%   546,342   508,751   7.4%
   Complementary Solutions   (609)   368   n.m.   62,741   42,264   48.5%
PAR   9,560   (2,486)   n.m.   131,626   140,910   -6.6%
Non-subscription   30,985   35,566   -12.9%   152,013   324,990   -53.2%
Total Net Revenue   127,193   141,415   -10.1%   892,722   1,016,914   -12.2%

Note: n.m.: not meaningful

 

In the third quarter, net revenue contracted 10% versus the same quarter of 2020, owing to the different seasonality of the ACV recognition observed in 2021, with the concentration of deliveries in some brands in the second quarter, and to the 13% decrease in non-subscription revenue.

 

In the 2021 cycle (4Q20 to 3Q21), subscription ex-PAR revenue increased 11%, while PAR was down 7%, reflecting the challenging environment for textbook sales. Within subscription revenue, we highlight the strength of complementary solutions, up 49% in the cycle. Non-subscription revenue decreased 53%, 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, being a key driver for the 12% total net revenue decline in the cycle.

 

4 

  

 

Adjusted EBITDA

 

Values in R$ '000   3Q21   3Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
Net (loss) profit   (70,821)   (40,605)   74.4%   (116,286)   (27,591)   321.5%
(+) Income tax and social contribution   (32,963)   (18,593)   77.3%   (54,248)   (13,436)   303.7%
(+) Net financial result   18,154   18,912   -4.0%   58,987   128,586   -54.1%
(+) Depreciation and amortization   50,593   43,516   16.3%   194,446   162,701   19.5%
EBITDA   (35,037)   3,229   n.m.   82,899   250,259   -66.9%
EBITDA Margin   -27.5%   2.3%   (29.8)   9.3%   24.6%   (16.9)
(+) Non-recurring expenses   603   -   n.m.   6,324   922   585.9%
(+) IPO-related expenses   -   -   n.m.   50,580   -   n.m.
(+) Share-based compensation plan   5,832   3,824   52.5%   28,461   6,004   374.0%
Adjusted EBITDA   (28,602)   7,053   n.m.   168,264   257,185   -34.6%
Adjusted EBITDA Margin   -22.5%   5.0%   (27.5)   18.8%   25.3%   (8.0)

Note: n.m.: not meaningful

 

Adjusted EBITDA was negative in R$ 29 million in 3Q21, mostly driven by the unfavorable revenue seasonality of the third quarter (which hinders the dilution of fixed costs), by the higher provision for doubtful accounts (PDA) and by the enhancement in our corporate structure following the company’s IPO in July 2020, while the 3Q20 was favored by savings of R$ 2.7 million in personnel expenses, captured from reduced work journeys allowed by the provisional measure 936. Additionally, it was recorded in the 3Q21 a write-off of editorial costs amounting to R$ 20 million, referring to a rationalization of our portfolio considering the changes in the textbook business and our editorial strategy. Excluding this effect, our adjusted EBITDA was negative in R$ 9 million. In the cycle, our adjusted EBITDA totaled R$ 168 million, or R$ 188 million excluding the editorial cost write-off (-27% versus 2020 cycle).

 

Adjusted net income

 

Values in R$ '000   3Q21   3Q20   % Y/Y   2021 Cycle   2020 Cycle   % Y/Y
(Loss) Profit before taxes   (103,784)   (59,198)   75.3%   (170,534)   (41,027)   315.7%
(-) Taxes paid   -   -   n.m.   (1,167)   (4,611)   -74.7%
(+) Non-recurring expenses   603   -   n.m.   6,324   922   585.9%
(+) Share-based compensation plan   5,832   3,824   52.5%   28,461   6,004   374.0%
(+) IPO-related expenses   -   -   n.m.   50,580   -   n.m.
(+) Amortization of intangible assets(1)   28,987   29,043   -0.2%   114,794   104,760   9.6%
Adjusted net (loss) profit   (68,361)   (26,331)   159.6%   28,458   66,048   -56.9%

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

 

In the cycle, adjusted net profit totaled R$ 28 million, 57% down year-on-year.

 

5 

  

 

Accounts receivable and provision for doubtful accounts

 

Values in R$ '000   3Q21   3Q20   % Y/Y   2Q21   % Q/Q
Gross accounts receivable   249,628   274,264   -9.0%   336,958   -25.9%
Provision for doubtful accounts (PDA)   (39,103)   (26,929)   45.2%   (37,898)   3.2%
Coverage index   15.7%   9.8%   5.8   11.2%   4.4
Net accounts receivable   210,525   247,335   -14.9%   299,060   -29.6%
Average days of accounts receivable(1)   85   88   (3)   119   (34)

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

 

The increase in the provision for doubtful accounts (PDA) in the 3Q21 reflects our care with our provisioning standards. Consequently, the coverage index increased to 15.7% in 3Q21 from 9.8% in 3Q20, while the average days of receivable fell 3 days in the yearly comparison, at 85 days.

 

Since the beginning of the pandemic, our approach to credit issues faced by our school partners has been to extend payment terms instead of granting discounts. With the expected normalization of school activities in the upcoming school year, we expect an improvement in the receivable collection of this client segment in 2022. The textbook distribution channel has also been hit by the fast deterioration in sales, causing some of our clients to fall back in payments. As commented before, nearly 100% of our new sales contracted to the 2022 were composed of learning systems, complementary solutions, or digital textbooks; therefore, we are gradually reducing our exposure to the physical textbook distribution channel.

 

Financial leverage

 

Values in R$ '000   3Q21   2Q21   1Q21   4Q20  
Financial debt   812,016   505,951   687,203   793,341  
Accounts payable from business combinations   73,713   65,201   62,973   48,055  
Total debt   885,729   571,152   750,176   841,396  
Cash and cash equivalents   377,862   335,098   415,093   311,156  
Marketable securities   317,178   81,090   259,581   491,102  
Net debt   190,689   154,964   75,502   39,138  
Net debt/LTM adjusted EBITDA   1.13   0.76   0.36   0.15  

 

Vasta ended the 3Q21 with a net debt position of R$ 191 million, 1.1x the adjusted EBITDA of last twelve months.

 

6 

  

 

CONFERENCE CALL INFORMATION

 

Vasta will discuss its third quarter 2021 results on November 11, 2021, via a conference call at 5:00 p.m. Eastern Time. To access the call (ID: 1557069), please dial: +1 (833) 519-1336 or +1 (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, which are information for the convenience of investors. EBITDA, Adjusted EBITDA, Free Cash Flow, Adjusted Cash Conversion Ratio and Adjusted Net (Loss) Profit 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 EBITDA items, however, added by (a) Amortization of intangible assets from M&A, that includes 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.

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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  September 30, 2021  December 31, 2020
       
Current assets          
Cash and cash equivalents   377,862    311,156 
Marketable securities   317,178    491,102 
Trade receivables   210,525    492,234 
Inventories   240,636    249,632 
Taxes recoverable   23,851    18,871 
Income tax and social contribution recoverable   5,672    7,594 
Prepayments   37,632    27,461 
Other receivables   1,489    124 
Related parties – other receivables   2,481    2,070 
Total current assets   1,217,326    1,600,244 
           
Non-current assets          
Judicial deposits and escrow accounts   175,677    172,748 
Deferred income tax and social contribution   143,477    88,546 
Property, plant and equipment   164,989    192,006 
Intangible assets and goodwill   4,939,155    4,924,726 
Total non-current assets   5,423,298    5,378,026 
           
Total Assets   6,640,624    6,978,270 

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Consolidated Statements of Financial Position (continued)

 

Liabilities  September 30, 2021  December 31, 2020
       
Current liabilities          
Bonds and financing   262,445    502,882 
Lease liabilities   18,672    18,263 
Suppliers   186,272    279,454 
Income tax and social contribution payable   17    1,761 
Salaries and social contributions   70,910    69,123 
Contract liabilities and deferred income   8,432    47,169 
Accounts payable for business combination   20,055    17,132 
Other liabilities   3,106    4,285 
Other liabilities - related parties   39,677    135,307 
Loans from related parties   -    20,884 
Total current liabilities   609,586    1,096,260 
           
Non-current liabilities          
Bonds and financing   549,571    290,459 
Lease liabilities   129,375    154,840 
Accounts payable for business combination   53,658    30,923 
Provision for tax, civil and labor losses   641,307    613,933 
Contract liabilities and deferred income   4,607    6,538 
Total non-current liabilities   1,378,518    1,096,693 
           
Shareholder’s Equity          
Share capital   4,820,815    4,820,815 
Capital reserve   56,465    38,962 
Shares in treasury   (11,765)   - 
Accumulated losses   (212,995)   (74,460)
Total Shareholder's Equity   4,652,520    4,785,317 
           
 Total Liabilities and Shareholder's Equity   6,640,624    6,978,270 

12 

  

 

Consolidated Income Statement

 

   Jul 01, to Sep 30, 2021  Jan 01, to Sep 30, 2021  Jul 01, to Sep 30, 2020  Jan 01, to Sep 30, 2020
             
Net revenue from sales and services   127,192    549,159    141,415    654,066 
Sales   124,125    526,697    134,182    634,895 
Services   3,067    22,462    7,233    19,171 
                     
Cost of goods sold and services   (79,381)   (260,910)   (62,230)   (277,985)
                     
Gross profit   47,811    288,249    79,185    376,081 
         -48%   -44%   -43%
Operating income (expenses)                    
General and administrative expenses   (96,402)   (304,208)   (83,458)   (265,752)
Commercial expenses   (33,947)   (119,040)   (35,841)   (116,437)
Other operating income (expenses)   698    2,202    948    2,936 
Impairment losses on trade receivables   (3,790)   (21,998)   (1,121)   (12,704)
                     
(Loss) Profit before finance result and taxes   (85,630)   (154,795)   (40,287)   (15,876)
                     
Finance income   10,532    21,793    5,942    14,579 
Finance costs   (28,686)   (69,174)   (24,854)   (101,399)
Finance result   (18,154)   (47,381)   (18,912)   (86,820)
                     
(Loss) Before income tax and social contribution   (103,784)   (202,176)   (59,199)   (102,696)
                     
Income tax and social contribution   32,963    63,641    18,593    34,797 
                     
(Loss) for the period   (70,821)   (138,535)   (40,606)   (67,899)
                     
Total comprehensive (loss) income for the period   (70,821)   (138,535)   (40,606)   (67,899)
(Loss) per share                    
Basic   (0.85)   (1.67)   (0.49)   (0.82)
Diluted   (0.84)   (1.65)   (0.49)   (0.82)

13 

  

 

Consolidated Statement of Cash Flows

 

   For the nine months ended September 30
   2021  2020
       
CASH FLOWS FROM OPERATING ACTIVITIES          
Loss before income tax and social contribution   (202,176)   (102,696)
Adjustments for:          
Depreciation and amortization   149,492    129,059 
Impairment losses on trade receivables   21,998    12,704 
Provision for tax, civil and labor losses   (775)   (4,966)
Interest on provision for tax, civil and labor losses   17,681    13,406 
Provision for obsolete inventories   13,936    11,941 
Interest on bonds and financing   24,272    46,725 
Refund liability and right to returned goods   2,115    (25,118)
Imputed interest on suppliers   3,213    2,945 
Interest on accounts payable for business combination   811    1,394 
Share-based payment expense   17,503    - 
Interest on lease liabilities   11,602    11,337 
Interest on marketable securities incurred and not withdrawed   (15,937)   (2,018)
Disposals of right of use assets and lease liabilities   (3,481)   (1,023)
Residual value of disposals of property and equipment and intangible assets   3,411    1,931 
           
Changes in          
Trade receivables   262,120    133,798 
Inventories   (5,618)   (37,741)
Prepayments   (10,157)   (4,629)
Taxes recoverable   (3,049)   22,090 
Judicial deposits and escrow accounts   (2,929)   1,029 
Other receivables   (1,185)   2,828 
Suppliers   (92,912)   (79,323)
Salaries and social charges   1,062    9,484 
Tax payable/Income taxes and social contribution   7,775    6,267 
Contract liabilities and deferred income   (42,105)   3,510 
Other receivables and liabilities from related parties   (96,041)   219,010 
Other liabilities   (1,880)   7,157 
Cash from operating activities   58,745    379,101 
           
Income tax and social contribution paid   (1,167)   (5,234)
Interest lease liabilities paid   (11,564)   (10,900)
Payment of interest on bonds and financing   (24,946)   (49,403)
Payment of provision for tax, civil and labor losses   (515)   (6,812)
Net cash from operating activities   20,553    306,752 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Acquisition of property and equipment   (9,452)   (3,730)
Additions to intangible assets   (36,763)   (32,226)
Acquisition of subsidiaries net of cash acquired and payments of business combinations   (33,591)   (8,703)
Realization of investment in marketable securities   189,861    (705,097)
Net cash applied in investing activities   110,055    (749,756)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Suppliers - related parties   (3,676)   (75,846)
Loans from related parties   -    65,600 
Payments of loans from related parties   (20,884)   - 
Lease liabilities paid   (15,308)   (9,207)
Parent company's net investment   -    4,197 
Issuance of common shares in initial public offering   -    1,836,317 
Transaction costs in initial public offering   -    (174,683)
Acquisition of treasury shares   (11,765)   - 
Payments of bonds and financing   (477,651)   (852,136)
Issuance of public bonds net off issuance costs   497,000    - 
Payments of accounts payable for business combination   (31,617)   - 
Others   -    (76,642)
Net cash applied in financing activities   (63,901)   717,600 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   66,706    274,596 
           
Cash and cash equivalents at beginning of period   311,156    43,287 
Cash and cash equivalents at end of period   377,862    317,883 
           

 

14 

 

 

Exhibit 99.2

 

  VASTA Platform Limited  
  Unaudited Interim Condensed Consolidated Financial Statements Nine-months period ended September 30, 2021  
     
         

 

 

VASTA Platform Limited

Unaudited Interim Condensed

Consolidated Financial Statements

Nine-months period ended September 30, 2021

 

Consolidated statement of financial position 3
   
Consolidated interim statement of profit or loss and other comprehensive income 5
   
Consolidated interim statement of changes in equity 6
   
Consolidated interim statement of cash flows 7
   
Notes to the interim condensed consolidated financial statements    9

2 

 

Consolidated Statement of Financial Position

 

In thousands of R$, unless otherwise stated

 

Assets  Note  September 30, 2021  December 31, 2020
          
Current assets         
Cash and cash equivalents  8   377,862    311,156 
Marketable securities  9   317,178    491,102 
Trade receivables  10   210,525    492,234 
Inventories  11   240,636    249,632 
Taxes recoverable      23,851    18,871 
Income tax and social contribution recoverable      5,672    7,594 
Prepayments      37,632    27,461 
Other receivables      1,489    124 
Related parties – other receivables  20   2,481    2,070 
Total current assets      1,217,326    1,600,244 
              
Non-current assets             
Judicial deposits and escrow accounts  21   175,677    172,748 
Deferred income tax and social contribution  22   143,477    88,546 
Property, plantand equipment  12   164,989    192,006 
Intangible assets and goodwill  13   4,939,155    4,924,726 
              
Total non-current assets      5,423,298    5,378,026 
              
Total Assets      6,640,624    6,978,270 

 

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

 

3 

 

Consolidated Statement of Financial Position

 

In thousands of R$, unless otherwise stated

 

Liabilities  Note  September 30, 2021  December 31, 2020
          
Current liabilities         
Bonds and financing  14   262,445    502,882 
Lease liabilities  16   18,672    18,263 
Suppliers  15   186,272    279,454 
Income tax and social contribution payable      17    1,761 
Salaries and social contributions  19   70,910    69,123 
Contract liabilities and deferred income  17   8,432    47,169 
Accounts payable for business combination  18   20,055    17,132 
Other liabilities      3,106    4,285 
Other liabilities - related parties  20   39,677    135,307 
Loans from related parties  20   -    20,884 
Total current liabilities      609,586    1,096,260 
              
Non-current liabilities             
Bonds and financing  14   549,571    290,459 
Lease liabilities  16   129,375    154,840 
Accounts payable for business combination  18   53,658    30,923 
Provision for tax, civil and labor losses  21   641,307    613,933 
Contract liabilities and deferred income  17   4,607    6,538 
Total non-current liabilities      1,378,518    1,096,693 
              
Shareholder's Equity             
Share Capital  23   4,820,815    4,820,815 
Capital reserve  23   56,465    38,962 
Treasury shares (Note 23d)  23   (11,765)   - 
Accumulated losses      (212,995)   (74,460)
Total Shareholder's Equity      4,652,520    4,785,317 
              
 Total Liabilities and Shareholder's Equity      6,640,624    6,978,270 

 

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

 

4 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

For the three-and-nine-month periods ended on September 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  July 1, to September 30, 2021  September 30, 2021  July 1, to September 30, 2020  September 30, 2020
                
Net revenue from sales and services  24   127,192    549,159    141,415    654,066 
Sales      124,125    526,697    134,182    634,895 
Services      3,067    22,462    7,233    19,171 
                        
Cost of goods sold and services  25   (79,381)   (260,910)   (62,230)   (277,985)
                        
Gross profit      47,811    288,249    79,185    376,081 
            -48%   -44%   -43%
Operating income (expenses)                       
General and administrative expenses  25   (96,402)   (304,208)   (83,458)   (265,752)
Commercial expenses  25   (33,947)   (119,040)   (35,841)   (116,437)
Other operating income (expenses)  25   698    2,202    948    2,936 
Impairment losses on trade receivables  10 and 25   (3,790)   (21,998)   (1,121)   (12,704)
                        
(Loss) Before finance result and taxes      (85,630)   (154,795)   (40,287)   (15,876)
                        
Finance result                       
Finance income  26   10,532    21,793    5,942    14,579 
Finance costs  26   (28,686)   (69,174)   (24,854)   (101,399)
       (18,154)   (47,381)   (18,912)   (86,820)
                        
(Loss) Before income tax and social contribution      (103,784)   (202,176)   (59,199)   (102,696)
                        
Income tax and social contribution  22   32,963    63,641    18,593    34,797 
                        
(Loss) for the period      (70,821)   (138,535)   (40,606)   (67,899)
                        
Other comprehensive income for the period      -    -    -    - 
                        
Total comprehensive loss for the period      (70,821)   (138,535)   (40,606)   (67,899)
Attributable to Controlling Shareholders'                       
                        
Loss per share                       
                        
Basic      (0,85)   (1,67)   (0,49)   (0,82)
Diluted      (0,84)   (1,65)   (0,49)   (0,82)

 

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

 

5 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Interim Financial Statements

For the nine-month periods ended on September 30, 2021 and 2020

 

 

Consolidated Interim Statement of Changes in Equity

 

In thousands of R$, unless otherwise stated

 

   Parent Company's Net Investment  Share Capital  Share issuance costs  Share-based
compensation
reserve (granted)
  Share-based
compensation
reserve (vested)
  Treasury shares (Note 23d)  Accumulated
losses
  Total Shareholders'
Equity/ Net Investment
                         
Balance at December 31,2019   3,100,083    -    -    -    -    -    -    3,100,083 
                                         
Movement in Parent’s investment, net   (3,100,083)   3,104,280    -    -    -    -    -    4,197 
Comprehensive loss for the period                                        
Net loss for the period   -    -    -    -    -    -    (67,899)   (67,899)
Total comprehensive loss for the period   -    -    -    -    -    -    (67,899)   (67,899)
                                         
Shareholder contributions and distributions to shareholders                                        
Issuance of common shares in initial public offering   -    1,836,317    -    -    -    -    -    1,836,317 
Share based compensations granted and issued   -    -    -    33,043    -    -    -    33,043 
Share issuance costs, net of taxes   -    -    (174,683)   -    -    -    -    (174,683)
Total shareholder contributions and distributions to shareholders   -    1,836,317    (174,683)   33,043    -    -    -    1,694,677 
                                         
Balance as of September 30, 2020   -    4,940,597    (174,683)   33,043    -    -    (67,899)   4,731,058 
                                         
Balance as of December 31, 2020   -    4,961,988    (141,173)   38,962    -    -    (74,460)   4,785,317 
                                         
Comprehensive loss for the period                                        
Net loss for the period   -    -    -    -    -    -    (138,535)   (138,535)
Total comprehensive loss for the period   -    -    -    -    -    -    (138,535)   (138,535)
                                         
Share based compensation granted and issued (Note 23c itens b and c)   -    -    -    17,503    -    -    -    17,503 
Share based compensation vested (Note 23a itens i,ii and iii)   -    -    -    (31,043)   31,043    -    -    - 
Acquisition of shares (Note 23d)   -    -    -              (11,765)   -    (11,765)
Net loss for the period   -    -    -    -    -    -         - 
Balance as of September 30, 2021   -    4,961,988    (141,173)   25,422    31,043    (11,765)   (212,995)   4,652,520 

 

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

 

6 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

For the nine-month periods ended on September 30, 2021 and 2020

 

 

Consolidated Interim Statement of Cash Flows

 

In thousands of R$ unless otherwise stated

 

      Nine months period September 30,
   Notes  2021  2020
          
CASH FLOWS FROM OPERATING ACTIVITIES         
 Loss before income tax and social contribution      (202,176)   (102,696)
 Adjustments for:             
Depreciation and amortization  12 and 13   149,492    129,059 
Impairment losses on trade receivables  10   21,998    12,704 
Provision for tax, civil and labor losses  21   (775)   (4,966)
Interest on provision for tax, civil and labor losses  21   17,681    13,406 
Provision for obsolete inventories  11   13,936    11,941 
Interest on bonds and financing  26   24,272    46,725 
Refund liability and right to returned goods      2,115    (25,118)
Imputed interest on suppliers  26   3,213    2,945 
Interest on accounts payable for business combination  18   811    1,394 
Share-based payment expense      17,503    - 
Interest on lease liabilities  16   11,602    11,337 
Interest on marketable securities incurred and not collected  26   (15,937)   (2,018)
Disposals of right of use assets and lease liabilities      (3,481)   (1,023)
Residual value of disposals of property, plant and equipment and intangible assets  12 and 13   3,411    1,931 
              
Changes in      43,665    95,621 
 Trade receivables  10   262,120    133,798 
 Inventories  11   (5,618)   (37,741)
 Prepayments      (10,157)   (4,629)
 Taxes recoverable      (3,049)   22,090 
 Judicial deposits and escrow accounts  21   (2,929)   1,029 
 Other receivables      (1,185)   2,828 
 Suppliers  15   (92,912)   (79,323)
 Salaries and social charges  19   1,062    9,484 
 Tax payable / Income taxes and social contribution      7,775    6,267 
 Contract liabilities and deferred income  17   (42,105)   3,510 
 Other receivables and liabilities from related parties      (96,041)   219,010 
 Other liabilities      (1,880)   7,157 
 Cash from operating activities      58,745    379,101 
Income tax and social contribution paid      (1,167)   (5,234)
Interest on liabilities paid  16   (11,564)   (10,900)
Payment of interest on bonds and financing  14   (24,946)   (49,403)
Payment of provision for tax, civil and labor losses  21   (515)   (6,812)
Net cash from operating activities      20,553    306,752 
CASH FLOWS FROM INVESTING ACTIVITIES             
Acquisition of property, plant and equipment  12   (9,452)   (3,730)
Additions to intangible assets  13   (36,763)   (32,226)
Acquisition of subsidiaries net of cash acquired and payments of business combinations  5   (33,591)   (8,703)
Realization of investment in marketable securities      189,861    (705,097)
 Net cash from (applied in) investing activities      110,055    (749,756)

7 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

For the nine-month periods ended on September 30, 2021 and 2020

 

 

Consolidated Interim Statement of Cash Flows

 

In thousands of R$ unless otherwise stated

 

CASH FLOWS FROM FINANCING ACTIVITIES         
          
Suppliers - related parties  20   (3,676)   (75,846)
Loans from related parties      -    65,600 
Payments of loans from related parties      (20,884)   - 
Lease liabilities paid  16   (15,308)   (9,207)
Parent Company's Net Investment      -    4,197 
Issuance of common shares in initial public offering      -    1,836,317 
Transaction costs in initial public offering      -    (174,683)
Acquisition of treasury shares  23d   (11,765)   - 
Payments of bonds and financing  14   (477,651)   (852,136)
Issuance of public bonds net off issuance costs      497,000    - 
Payments of accounts payable for business combination      (31,617)   - 
Others      -    (76,642)
 Net cash (applied in) from financing activities      (63,901)   717,600 
              
 NET INCREASE IN CASH AND CASH EQUIVALENTS      66,706    274,596 
              
 Cash and cash equivalents at beginning of period  8   311,156    43,287 
 Cash and cash equivalents at end of period  8   377,862    317,883 
              
NET INCREASE IN CASH AND CASH EQUIVALENTS      66,706    274,596 

 

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

 

8 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

Notes to the Condensed Interim Consolidated Financial Statements

 

(Amounts in thousands of R$, unless otherwise stated)

 

1.The Company and Basis of Presentation

 

1.1 The 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. has been 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”.

 

1.2 Corporate restructuring and business acquisitions

 

VASTA Platform, from October 11, 2018 until July 23, 2020, was not a separate legal entity. The Business (referred to herein 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”) “Somos Group” for a consideration of R$6.3 billion (the “Acquisition”) comprising 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 R$ 6.3 billion was allocated to the K-12 Business of 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 restructuring 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 1, 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 completion of the Initial Public Offering – IPO, the Board of Directors’ Meeting approved the Contribution Agreement which Cogna (Vasta’s Parent Company) contributed with 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 shareholders capital in the amount R$ 2.426 in cash on July 23, 2020.

 

9 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

On July 31, 2020 the Company held its public offering in the 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.

 

On August 1, the Company acquired an ownership interest in EMME – Produções de Materiais em Multimídia (“EMME”) through its wholy owned subsidiary Somos Sistemas de Ensino S.A. See Note 5.

 

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

 

Company   September 30, 2021   December 31, 2020
    Interest %   Interest %
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%   -
EMME – Produções de Materiais em Multimídia Ltda (“EMME”). 100%   -

 

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

 

It is widely accepted now that the global Coronavirus (“COVID-19”) pandemic changed the world’s growth prospects and added risks to Companies in an unprecedent scenario. In Brazil, as elsewhere, govermments 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 the COVID-19 pandemic in 2020 up to September 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 salaries and working hours, seeking to preserve jobs and payroll continuity.

 

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

 

10 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

6) Strategic Plan for opportunities generated by the crisis.

 

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

 

8) On-line campaigns to promote our products to potential new customers; and

 

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

 

10) Financial leverage reorganization by obtaining R$ 500,000 (corresponding to 500,000 bonds) to maintain the strategic acquisition goals to comply with medium and long-term obligations and consequently, to mitigate risks over operating cash flows caused by COVID-19. See Note 14.

 

11) Issued new technological solutions embedeed with current learning systems and added of complementary solutions for the next school-year through digital transformation caused by social distancing restriction brought by COVID 19.

 

As a result of our actions, despite school closures and social distancing restrictions, the majority of our customers have been able to continue providing their educational services through our virtual platforms.

 

As of September 30, 2021, some municipalities and states determined classes reopening in private schools through certain sanitary restrictions as result of reduction of COVID-19 contamination due to elevated indexes of vaccination. Untill December 31, 2021 we are estimating that all classroom lessons will reopen in definitive, therefore, differently from June 30, 2021 the risk of uncertainty in our operations will not be relevant.

 

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

 

The 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 Basis of Preparation

 

The Company’s Condensed Interim Consolidated Financial Statements included in the SEC - 6K Form for the quarter ended September 30, 2021, encompasses the interim consolidated accounting information prepared pursuant to “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 accounting information was prepared based on the historical costs, except for certain financial instruments measured at their fair value, as described in the accounting policies.

 

The main accounting policies used in preparing this interim consolidated accounting information are disclosed in note No. 4.2 to of the Company’s financial statements, the fiscal year ended December 31, 2020, issued on April 30, 2021. The same policies apply for comparison with the nine-month period ended September 30, 2020, and a practical expedient was applied to rent concessions in lease contracts as a direct consequence of the Covid-19 pandemic.

 

The information on the notes did not undergo significant changes in comparison with December 2020, which is why it is not fully presented in this interim accounting information and must, therefore, be read jointly with the past 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 June 30, 2020 the Combined Financial Statements guidance. After July 23, 2020, the Company applied the guidance presented in item c.

 

11 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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.

 

The combined assets, liabilities and results of operations of the Business are based on the historical accounting records of the Parent Entities. The balances of 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 been preparing the Consolidated Financial Statements which include the accounts of the Company and its subsidiaries. Since all entities were under common control as of the date of the initial public offering, the results for the three and nine-months period ended September 30, 2020 are presented on a consolidated basis for the entire period.

 

d.Functional and Presentation Currency

 

The Interim Condensed Consolidated are presented in thousands of Brazilian Reals (“R$”), which is the Company’s functional currency. All financial information presented in R$ 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 Note 2. a, the Unaudited Interim Condensed Consolidated Financial Statements as of September 30, 2021 should be read in conjunction with the 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, the 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 Unaudited Interim Consolidated Financial Statements.

 

4.Use of estimates and judgements

 

The Company for nine months period ended as of September 30, 2021, updated provision for slow moving calculation based on its accounting policies according to its previous inventory turnovers and disaggregated by brands. As result of this analysis,the slow-moving provision based on current estimate is R$ 57,202 versus a provision of R$ 68,919 based on old estimative. Except for the slow-moving provision, there are not changes on such estimates calculation and methodologies applied in judgements even neither accounting policies that could be applicable since of January 1, 2021 or earlier adopted in the Unaudited Interim Condensed Consolidated Financial Statements.

 

12 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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

·August 1, 2021 - EMME

 

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 emotional soft skills including teamwork, leadership and perseverance. The total purchase price was R$ 18,200, of which R$ 10,000 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, directly or indirectly, 441 schools, 272 thousand K-12 students and approximately 503 thousand students in the post-secondary and continuing education segment.

 

13 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

The consideration paid was R$ 65,000, of which R$ 38,124 was paid in cash. The remaining balance, of 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 approaches 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.

 

The consideration was R$ 11,387, of which R$ 4,093 was paid in cash and the remaining balance of R$ 7,294 will be paid in installments with final due date on December 24, 2026 (each installment adjusted by the positive variation of 100% of CDI index). In addition, the Company recognized a contingent consideration of R$ 2,650 subjects to certain post-closing price adjustments.

 

EMME – Produções de Materiais em Multimídia (“EMME”)

 

On August 1, 2021 the Company acquired through its subsidiary, Somos Sistemas de Ensino S.A. (“Somos Sistemas”) the entity EMME, which provides educational marketing solutions for schools, through license of its “software as a service”. The consideration was R$ 15,316 of which R$ 3,063 was paid in cash and the remaining balance of R$ 12,253 will be paid in installments with final due date on August 16, 2026 (each installment adjusted by the positive variation of inflation- “IPCA” – Extended National Consumer Price Index).

 

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  EMME  Total of  Combination
Current assets            
Cash and cash equivalents   1,461    525    637    2,623 
Trade receivables   -    1,327    1,082    2,409 
Prepayments   -    -    14    14 
Taxes recoverable   -    -    9    9 
Other receivables   180    -    -    180 
Total current assets   1,641    1,852    1,742    5,235 
                     
Non-current assets                    
Property, plant and equipment   611    -    128    739 
Other intangible assets   -    1,099    1    1,100 
Intangible assets - Customer Portfolio (ii)   18,783    -    -    18,783 
Intangible assets - Software (iii)   1,296    5,692    4,048    11,036 
Total non-current assets   20,690    6,791    4,177    31,658 
                     
Total Assets   22,331    8,643    5,919    36,893 
                     
Current liabilities                    
Suppliers   -    180    13    193 
Salaries and social contributions   1    124    600    725 
Taxes payable   17    207    101    325 
Income tax and social contribution payable   33    -    -    33 
Other liabilities   -    1,673    2    1,675 
Total current liabilities   51    2,184    716    2,951 
                     

14 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   SEL  Redação Nota 1000  EMME  Total of  Combination
Non-current liabilities            
Provision for tax, civil and labor losses (iv)   -    908    10,075    10,983 
Total non-current liabilities   -    908    10,075    10,983 
                     
Total liabilities   51    3,092    10,791    13,934 
                     
Shareholder's Equity   2,201    (1,240)   (8,921)   (7,960)
                     
Total liabilities and Shareholders' Equity   2,252    1,852    1,870    5,974 
                     
Equity   (2,201)   1,240    8,921    7,960 
Acquisition Price   65,000    11,387    15,317    91,704 
Goodwill not allocated   62,799    12,627    24,238    99,664 
                     
Net assets (A)   22,280    5,551    (4,873)   22,958 
Total Consideration transferred (B)   65,000    11,387    15,317    91,704 
Goodwill after allocation (B – A) (i)   42,720    5,836    20,190    68,746 

 

(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 a result of purchase price allocation, the Company identified R$ 18,783, customer portfolio (“SESI”), based on customer portfolio receivables expectation around 8% per year. see Note 13.

 

(iii) As a result of purchase price allocation, the Company identified R$ 11,036, Educational Software applied in the “SESI” learning system, Writing Correction Software for Education System “Redação Nota 1000” and software that produces digital marketing material solutions for schools “EMME”, all of them based on relief from royalties criteria (RIR) and each acquisition with its corresponding rate of net revenue by investment see Note 13.

 

(iv) Refers to contingent liability identified as contingent consideration of R$ 10,075 being R$ 6,471 corresponding tax and R$ 3,604 labor contingencies all of them subject to certain post-closing price adjustments.  

 

From the date of acquisition to September 30, 2021, SEL , Redação Nota 1000 and EMME contributed to the Interim Condensed Consolidated Financial Statements net sales and services the amount of R$4,515, R$1,359 and R$213, respectively, and net profit (loss) in the amount of R$3,104, R$ (1,101) and R$(139), respectively. If the acquisitions had been concluded on January 1, 2021, the Company estimates its combined (include Company and the acquistions of SEL, Nota 1000 and EMME) net revenue from sales and services would have been R$ 554,388 and it would have recorded Net loss of R$ (142,730) for the period ended on September 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 reviewed periodically 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.

 

15 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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 the Group’s Board of Directors monitor 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 that the Company incur 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 CDI and IPCA (broad consumer price index) partially mitigate any interest rate exposures.

 

Interest rates contracted are as follows:

 

   September 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   103,880    102,868   CDI + 1.00% p.a.
  Private Bonds – 6th Issuance - serie 2   204,871    206,733   CDI + 1.70% p.a.
  Private Bonds – 7th Issuance - single   -    381,850   CDI + 1.15% p.a.
  Bonds – 1th Issuance - single   502,333    -   CDI + 2.30% p.a.
Financing and Lease Liabilities - Mind Makers   933    998   TJPLP + 5% p.a.
Financing and Lease Liabilities   148,047    173,103   IPCA
Accounts Payable for Business Combination   73,713    48,055   100% CDI
Loans from related parties   -    20,884   CDI + 3.57%
    1,033,776    1,035,383    

 

b.Credit risk

 

Credit risk arises from the potential default of a counterparty on 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 include 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 a sales policy and an 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 characteristics.

 

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.

 

16 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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 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 thus providing to the Company the appropriate committment with the going concern presumption.

 

Company on August 6th through its subsidiary Somos Sistemas de Ensino S.A issued R$ 500.000 in simple debentures, not convertible. The debentures are aimed to reinforce the Company capital structure and its impacts caused by COVID 19 as well as alonging the debt maturity profile, see Note 14.

 

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

 

Financial liabilities by maturity ranges

 

September 30, 2021  Less than one year  Between one and two years  Over two years  Total
Bonds and financing (Note 14)   262,445    549,571    -    812,016 
Lease Liabilities (Note 16)   18,672    25,875    103,500    148,047 
Accounts Payable for business combination (Note 18)   20,055    28,907    24,751    73,713 
Suppliers (Note 15)   91,676    -    -    91,676 
Reverse Factoring (Note 15)   94,596    -    -    94,596 
Other liabilities - related parties (Note 20)   39,677    -    -    39,677 
    527,121    604,353    128,251    1,259,725 

 

Financial liabilities by maturity ranges

 

The table below reflects the estimated interest rate based on CDI for 12 months (8.99% p.a) extracted from BACEN (Brazilian Central Bank) on September 30,2021. Amounts payable refer to principal and interest based on undiscounted contractual amounts and, therefore, do not reflect the financial position presented as of September 30,2021:

             
September 30, 2021  Less than one year  Between one and two years  Over two years  Total
Bonds and financing   286,038    598,977    -    885,016 
Lease Liabilities   20,351    28,201    112,805    161,356 
Accounts Payable for business combination   21,858    31,506    26,976    80,340 
Suppliers   91,676    -    -    91,676 
Reverse Factoring   100,830    -    -    100,830 
Other liabilities - related parties   39,677    -    -    39,677 
    560,430    658,685    139,781    1,358,895 

17 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

On September 30, 2021, the Company had positive working capital of R$ 607,740 (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 shareholders’ 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 others stakeholders, and maintain an optimal capital structure reducing financial costs and maximizing the returns. In addition, the Company monitors financial leverage adequacy, and mitigates risks that may affect the availability of capital for 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.

 

   September 30, 2021  December 31, 2020
       
Net debt (i)   881,863    1,138,988 
Total shareholders' equity   4,652,520    4,785,317 
Total capitalization (ii)   3,770,658    3,646,329 
Gearing ratio - % - (iii)   23%   31%

 

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

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

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

 

Sensitivity analysis

 

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

 

A probable scenario over a 12-month horizon was used, with a projected rate of 8.99% 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 September  30, 2021  Base scenario  Scenario I  Scenario II
Financial Assets  103.8% of CDI   375,247    35,017    43,771    52,525 
Marketable Securities  105.2% CDI   317,178    29,997    37,496    44,996 
       692,425    65,014    81,267    97,521 
                        
 Accounts Payable for Business Combination  100% of CDI   (73.713)   (6,627)   (8,283)   (9,940)
 Lease liabilities  % of CDI   (148,047)   (13,309)   (16,637)   (19,964)
 Bonds and financing  CDI + 1.99%   (812,016)   (83,394)   (104,243)   (125,091)
       (1,033,776)   (103,330)   (129,163)   (154,995)
                        
Net exposure      (341,351)   (38,316)   (47,896)   (57,474)
                        
Interest Rate -% p.a  -   -    8.99%   11.24%   13.49%
   -   -    -    25%   50%

18 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

7Financial Instruments by Category

 

The Company holds the following financial instruments:

 

          
   Fair Value Hierarchy  September 30, 2021  December 31, 2020
Assets - Amortized cost         
 Cash and cash equivalents  1   377,862    311,156 
 Marketable Securities  1   317,178    491,102 
 Trade receivables  2   210,525    492,234 
 Other receivables  2   1,489    124 
 Related parties – other receivables  2   2,481    2,070 
       909,535    1,296,686 
              
Liabilities - Amortized cost             
 Bonds and financing  2   812,016    793,341 
 Lease liabilities  2   148,047    173,103 
 Reverse Factoring  2   94,596    110,513 
 Suppliers  2   91,676    168,941 
 Accounts payable for business combination  2   73,713    48,055 
 Other liabilities - related parties  2   39,677    135,307 
 Loans from related parties  2   -    20,884 
       1,259,725    1,450,144 

 

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

 

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:

 

   September 30, 2021  December 31, 2020
Cash   77    13 
Bank account   2,538    10,996 
Financial investments (i)   375,247    300,147 
    377,862    311,156 

 

(i)The Company invests in 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 105,2% of the annual CDI rate on September 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.

 

19 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

9Marketable securities

 

a.Composition

 

   Credit
Risk
  September 30, 2021  December 31, 2020
          
Financial bills (LF)  AAA   1,350    149,720 
Financial treasury bills (LFT)  AAA   315,828    341,382 
       317,178    491,102 

 

The average gross yield of securities is based on 105,2% CDI on September 30, 2021 (104% CDI on December 31, 2020).

 

10Trade receivables

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   September 30, 2021  December 31, 2020
Trade receivables   235,934    501,498 
Related Parties (Note 20)   13,694    22,791 
( - ) Impairment losses on trade receivables   (39,103)   (32,055)
    210,525    492,234 

 

b.Maturities of trade receivables

 

   September 30, 2021  December 31, 2020
Not yet due   157,287    425,327 
Past due          
Up to 30 days   17,085    8,456 
From 31 to 60 days   8,998    10,931 
From 61 to 90 days   8,278    8,764 
From 91 to 180 days   17,218    15,539 
From 181 to 360 days   15,873    18,038 
Over 360 days   11,195    12,279 
Total past due   78,647    74,007 
           
Customers in bankruptcy   -    2,164 
 Related partiess (note 20)   13,694    22,791 
Provision for impairment of trade receivables   (39,103)   (32,055)
           
    210,525    492,234 

 

The gross book value 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.

 

20 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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% for customers that filed for bankruptcy, based on historical experience, which indicates 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 September 30, 2021 and as of December 31, 2020.

 

d.Expected credit losses aging

 

   As of September 30, 2021  As of December 31, 2020
   Expected credit loss rate (%) (i)  Lifetime ECL (R$)  Expected credit loss rate (%)(i)  Lifetime ECL (R$)
Not yet due  0.18%   315    0,10%   432 
Past due                  
Up to 30 days  10.80%   1,845    6.19%   523 
From 31 to 60 days  19.40%   1,746    12.92%   1,413 
From 61 to 90 days  28.20%   2,334    20.64%   1,809 
From 91 to 180 days  48.50%   8,351    43.66%   6,785 
From 181 to 360 days  84.60%   13,429    51.67%   9,320 
Over 360 days  99.00%   11,083    78.26%   9,609 
       39,103         29,891 
Customers in bankruptcy (ii)  100,00%   -    100,00%   2,164 
Impairment losses on trade receivables      39,103         32,055 

 

(i)The expected credit loss rates as of September 30, 2021 increased when compared to December 31, 2020 due the change of effective credit losses observed in period ended substantially caused by COVID 19 pandemic.

 

(ii)At December 31, 2020 the Company’s Management recorded 100% impairment losses for 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 nine-month period ended September 30, 2021.

 

e.Changes on provision

 

   September 30, 2021  September 30, 2020
Opening balance   32,055    22,524 
  Additions (i)   23,159    16,015 
  Reversals   (1,161)   (3,311)
Write offs (ii)   (14,950)   (8,299)
Closing balance   39,103    26,929 

 

(i)See note d. expected credit losses; .

 

(ii)The Company assessed its customers credit lines, and some of them were renegotiated. Due to historical losses and lack of prospects of credit recovery alongside these customers, the Company recognized R$ 14,950 as write-off as of September 30, 2021.

 

21 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

11       Inventories

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   September 30, 2021  December 31, 2020
Finished products (i)   160,177    168,328 
Work in process   51,742    52,322 
Raw materials   22,114    20,485 
Imports in progress   5,925    2,642 
Right to returned goods (ii)   678    5,855 
    240,636    249,632 

 

(i)Amounts 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 provision for right to returned goods reduced as of September 30, 2021 compared with December 31, 2020 due to its commercial cycle seasonality .

 

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

  

   September 30, 2021  September 30, 2020
Opening balance   62,210    69,080 
Additions   15,997    16,492 
(Reversals)   (2,061)   (4,551)
   Inventory losses (i)   (14,429)   (7,390)
Closing balance   61,717    73,631 

 

(i)Refers substantially to physical books destroyed, previously provisioned, due to indication of damage or obsolescence caused by changes in the educational content during the schoolyear. Differently from previous years, the Company anticipated the physical books discharges previously expected to December 31, 2021 once its commercial cycle finishes as of September 30, 2021.

 

Covid 19 Impacts

 

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

 

22 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

12Property, plant and Equipment

 

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

 

      September 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%   32,505    (26,783)   5,722    27,036    (25,557)   1,479 
Furniture, equipment and fittings  10% - 33%   38,007    (28,890)   9,117    36,314    (26,406)   9,908 
Property, buildings and improvements  5%-20%   52,684    (35,317)   17,367    51,407    (31,429)   19,978 
In progress  -   1,977    -    1,977    315    -    315 
Right of use assets  12%   232,342    (101,927)   130,415    241,906    (82,033)   159,873 
Land  -   391    -    391    453    -    453 
Total      357,906    (192,917)   164,989    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 assets  Land  Total
As of December 31, 2020   1,479    9,908    19,978    315    159,873    453    192,006 
Additions /Updates (i)   5,317    1,168    877    2,062    15,361    -    24,785 
Additions by business combination   152    587    -    -    -    -    739 
Renegotiation (ii)   -    -    -    -    (21,638)   -    (21,638)
Disposals / Cancelled contracts   -    (124)   -    -    (3,287)   -    (3,411)
Depreciation   (1,226)   (2,484)   (3,888)   -    (19,894)   -    (27,492)
Transfers   -    62    400    (400)   -    (62)   - 
As of September 30, 2021   5,722    9,117    17,367    1,977    130,415    391    164,989 

 

(i)Refers substantially to IFRS 16, new lease agreements of R$ 15,361 which the Company considers as part of its digital learning solutions through computer tablets that have been part of current learning system solutions in a period of COVID 19 pandemic. See the corresponding lease liability in Note 16.

 

(ii)The Company returned part of São Jose dos Campos’warehouse to lessor in September 2021. The Company kept the contract interest, lease period changing lease installments. The Company de-recognized the right of use and corresponding lease liabilities, see Note 16.

 

   IT equipment  Furniture, equipment and fittings  Property, buildings and improvements  In progress  Right of use assets  Land  Total
As of December 31, 2019   2,486    12,366    19,682    4,538    145,436    453    184,961 
Additions /Updates (i)   424    41    628    1,427    16,853    -    19,373 
Additions by business combination   59    153    -    -    -    -    212 
Disposals / Cancelled contracts   (25)   (202)   (4)   -    (3,249)   -    (3,480)
Depreciation   (1,477)   (1,611)   (3,385)   -    (13,566)   -    (20,039)
Transfers   -    -    4,207    (4,207)   -    -    - 
As of September 30, 2020   1,467    10,747    21,128    1,758    145,474    453    181,027 

 

(i)Refers substantially to IFRS 16, R$ 16,853 refers to lease contracts previously signed and renewed based on contractual terms. See the corresponding lease liability in Note 16.

 

23 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

Covid 19 Impacts

 

The Company assesses, at each reporting date, much more so with the COVID 19 advent, whether there is an indication that a property, plnat 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 September 30, 2021.

 

13Intangible Assets and Goodwill

 

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

 

      September 30, 2021  December 31, 2020
   Weighted   average amortization rate  Cost  Accumulated amortization  Net Book value  Cost  Accumulated amortization  Net Book value
Software  15%   234,263    (141,531)   92,732    204,213    (120,798)   83,414 
Customer Portfolio  8%   1,132,575    (250,956)   881,619    1,113,792    (184,934)   928,858 
Trademarks  5%   631,935    (78,831)   553,104    631,935    (58,349)   573,586 
Platform content production  33%   68,321    (43,960)   24,361    53,069    (29,248)   23,821 
Other Intangible assets  33%   39,383    (32,091)   7,293    38,283    (32,040)   6,243 
In progress  -   3,495    -    3,495    999    -    999 
Goodwill  -   3,376,551    -    3,376,551    3,307,805    -    3,307,805 
       5,486,523    (547,369)   4,939,155    5,350,096    (425,369)   4,924,726 

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   16,019    -    -    15,252    -    5,492    -    36,763 
Additions by business combination   11,036    18,783    -    -    1,100    -    68,746    99,665 
Amoritization   (20,733)   (66,022)   (20,482)   (14,712)   (51)   -    -    (122,000)
Transfers   2,996    -    -    -    -    (2,996)   -    - 
As of September 30, 2021   92,732    881,619    553,104    24,361    7,293    3,495    3,376,551    4,939,155 

 

(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$ 15,252 million, and project related to learning systems, in the amount of R$ 5,492 million which had its investments accelerated due to education demands created by the COVID-19 pandemic.

 

(ii)The Company recognized R$ 68,746 as goodwill on SEL, Redação Nota 1000 and EMME 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.

 

24 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   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   7,374    -    -    23,417    906    529         32,226 
Additions by business combination   -    4,625    16,060    -    177    -    16,300    37,162 
Disposals   (77)   -    -    -    (89)   -    (326)   (492)
Amoritization   (17,442)   (64,374)   (20,346)   (6,506)   (352)   -    -    (109,020)
Transfers   17,065    28    (3)   (3,231)   -    (14,051)   192    - 
As of September 30, 2020   83,245    951,001    579,746    23,106    5,205    529    3,302,429    4,945,261 

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 its 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 nine months period ended September 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 shown below:

 

Content & EdTech Platform   3,345,633 
Digital Platform   30,918 
    3,376,551 

25 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

14Bonds and financing

 

The balance of bonds and financing comprises the following amounts:

 

   December 31, 2020  Additions (ii)  Payment of interest (i)  Payment (i)  Interest accrued  Transaction cost of bonds  Transfers  September 30, 2021
Bonds with Related Parties   502,743    -    (24,873)   (477,564)   18,844    -    238,715    257,865 
Bonds   -    -    -    -    5,333    (993)   -    4,340 
Finance   139    -    (73)   (87)   95    -    166    240 
Current liabilities   502,882    -    (24,946)   (477,651)   24,272    (993)   238,881    262,445 
                                         
Bonds with Related Parties   289,600    -    -    -    -    -    (238,715)   50,885 
Bonds   -    500,000    -    -    -    (2,007)   -    497,993 
Finance   859                        -    (166)   693 
Non-current liabilities   290,459    500,000    -    -    -    (2,007)   (238,881)   549,571 
                                         
Total   793,341    500,000    (24,946)   (477,651)   24,272    (3,000)   -    812,016 

 

(i)On March 15, 2021, the Company, substantially settled bonds with related parties amounting to R$ 100,000 and R$ 1,488, in principal and interest, respectively as follows: 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 series – R$ 5,663. This measure is part of a commitment with shareholders as a result of the IPO.

 

On May 31, 2021, the Company partially settled bonds with related parties amounting to R$ 188,000, in principal as follows: 7th issuance single series, being the remaining amount to be paid on August 16, 2021. Regarding the financing with Banco de Desenvolvimento de Minas Gerais S.A - BDMG, the Company paid the amount of R$87 and 73, respectively for principal and interest.

 

On August 6, 2021, the Company settled the remaining 7th issuance with related parties in the amounts of R$189,564 and R$5,871, as principal and interest. In addition, the Company settled only interest on the following bonds: 5th Issuance, 2nd series – R$ 2,029 and 6th Issuance, 2nd series – R$ 4,758.

 

(ii)On August 6, 2021, 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 DI Interest Deposit rate (CDI), plus 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 35 months.

 

26 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   December 31, 2019  Additions by Business Combination  Payment of interest  Payment (i)  Interest accrued  Transfers  September 30, 2020
Bonds with Related Parties   440,947    -    (49,368)   (852,136)   30,520    910,400    480,363 
Finance   -    -    (35)   -    35    139    139 
Current liabilities   440,947    -    (49,403)   (852,136)   30,555    910,539    480,502 
                                    
Bonds   1,200,000    -    -    -    16,170    (910,400)   305,770 
Finance leases   -    998    -    -    -    (139)   859 
Non-current liabilities   1,200,000    998    -    -    16,170    (910,539)   306,629 
                                    
Total   1,640,947    998    (49,403)   (852,136)   46,725    -    787,131 

 

(i)On August 4, 2020, the Company, substantially settled bonds with related parties amounting by R$ 852,136 and R$ 29,864, respectively principal and interest, as follow: 7th Issuance, 1st serie – R$ 310,918; 8th Issuance R$ 448,826 and 9th Issuance 115,591. In addition, the Company settled only interest on the following bonds: 7th Issuance, 2nd serie – R$4,671 and 6th Issuance, 2nd serie – R$ 1,994. This measure is part of committed take with shareholders thorugh IPO.

 

27 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

a.Bonds’ description

 

See below the bonds outstanding on September 30, 2021:

 

Subscriber   Related Parties   Related Parties   Third parties
Issuance   5th   6th   1th GAGL11
Series   2nd Series   2nd Series   Single Series
Date of issuance   08/15/2018   08/15/2017   08/06/2021
Maturity Date   08/15/2023   08/15/2022   08/05/2024
First payment after   60 months   60 months   35 months
Remuneration payment   Semi-annual interest   Semi-annual interest   Semi-annual interest
Financials charges   CDI + 1,00% p,a,   CDI + 1,70% p,a,   CDI + 2,30% p,a,
             
Principal amount (in millions of R$)   100   200   500

 

b.Bonds’ maturities

 

The maturities range of these accounts, considering related and third parties are as follow:

 

   September 30, 2021
Maturity of installments  Total  %
2021   -    0.0%
2022   262,445    32.3%
2023   51,578    6.4%
2024 onwards   497,993    61.3%
Total non-current liabilities   812,016    100.0%
           
    812,016    100.0%

 

c.Debit commitments

 

The maintenance of the contractual maturity of debentures at their original maturities is subject to covenants, which are being regularly complied with. The key covenant compliance indicators are the following:

 

Bonds with related parties

 

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 upon 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 repayment of its debentures with Cogna; and (iii) the Company will not pledge shares and/or dividends.

 

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

 

28 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

Bonds with third parties

 

The bond issued by Somos Sistemas requires the maintance of certain financial indicators “covenants” which are annually calculated based on Somos Sistemas Consolidated financial statements. The period of covenants compliance comprises 12 months immediately prior to the end of each year, being the first year of analysis December 31, 2021 and based on ration between adjusted net debt by adjusted consolidated EBTIDA. The net debt adjusted EBTIDA ratio should be less or equal:

 

·4.25 in 2021

·4.00% in 2022

·3.75% in 2023

·3.50 in 2024

 

This ratio cannot be breched for two consecutive periods or three alternate periods.

 

Consolidated net debt: Company’s total debt (short- and long-term loans and financing, including capital markets operations, less cash equivalents cash which could be withdrawned untill five business days added by accounts payable for business combinations)

 

Adjusted consolidated EBITDA: Earnings before income taxes, depreciation and amortization, financial results, added by financial income and considering non-recurring income.

 

15Suppliers

 

The balance of this account comprises the following amounts:

 

a.Composition

 

   September 30, 2021  December 31, 2020
Local suppliers (ii)   67,892    128,639 
Related parties (note 20)   17,309    20,985 
Copyright   6,475    19,317 
Reverse Factoring (i)   94,596    110,513 
    186,272    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 supplier’s amounts is due to schoolyear seasonality and all editorial costs and correlated obligations usually initiated in July/August for each year and completed in December.

 

16Lease liabilities

 

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

 

   September 30, 2021  September 30, 2020
Opening balance   173,103    153,714 
Additions for new lease agreements (i)   15,361    16,865 
Renegotiation   (21,638)   - 
Cancelled contracts   (3,481)   (3,429)
Renegotiation - COVID-19 impact   (28)   (844)
Interest   11,602    11,337 
Payment of interest   (11,564)   (10,900)
Payment of principal   (15,308)   (9,207)
Closing balance   148,047    157,536 
           
Current liabilities   18,672    13,112 
Non-current liabilities   129,375    144,424 
    148,047    157,536 

 

(i)Refers to new lease agreements which the Company has embeded part of its digital learning solutions. 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.

 

29 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

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 nine months periods ended September 30, 2021 and 2020:

 

   Period ended September 30
   2021  2020
Fixed Payments   26,872    20,107 
Payments related to short-term contracts and low value assets, variable price contracts (note 25)   14,459    15,003 
    41,331    35,110 

 

17Contract liabilities and deferred income

 

   September 30, 2021  December 31, 2020
Refund liability (i)   4,413    42,005 
Sales of 'employees' payroll (iii)   1,174    2,348 
Deferred income in leaseback agreement (ii)   5,908    6,665 
Other contract liabilities   1,544    2,689 
    13,039    53,707 
           
Current   8,432    47,169 
Non-current   4,607    6,538 
    13,039    53,707 

 

(i) Refers to the customers’ right to return products, as mentioned in the Note 11, the Company business cycle is comprehended from September to September for each year, being the provision reduced in the end of business cycle and estimated in the fourth quarter.

 

(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 on a 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.

 

18       Accounts payable for business combination

 

   September 30, 2021  December 31, 2020
Pluri   3,192    12,817 
Mind Makers   6,916    15,000 
Livro Fácil   13,854    15,907 
Meritt   3,953    4,331 
SEL (i)   26,448    - 
Redação Nota 1000 (ii)   6,990    - 
EMME (iii)   12,360    - 
    73,713    48,055 
           
Current   20,055    17,132 
Non-current   53,658    30,923 
    73,713    48,055 

 

(i)Refers to the SEL acquisition (see note 5).

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

(iii)Refers to EMME acquisition (see note 5).

 

30 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

The change in the balance is as follows:

 

   September 30, 2021  December 31, 2020
Opening balance   48,055    10,941 
Additions   96,907    58,857 
Price adjustment (i)   (5,203)   - 
Payment   (66,019)   (26,389)
Interest adjustment   811    1,568 
Others   (838)   3,078 
Closing balance   73,713    48,055 

 

(i)Refers to Mind Makers price adjustment based on December 31, 2020’s revenue targets calculated and approved on September 3, 2021.

 

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

 

   September 30, 2021  December 31, 2020
Maturity of installments  Total  %  Total  %
 2021    20,055    27.2    17,132    35.7 
                       
 2022    28,907    39.2    13,811    28.7 
 2023    16,212    22.0    17,112    35.6 
 2024    2,746    3.7    -    - 
 2025    5,793    7.9    -    - 
                       
      73,713    100.0    48,055    100.0 

 

19Salaries and Social Contribution

 

   September 30, 2021  December 31, 2020
Salaries payable   17,456    15,891 
Social contribution payable (i)   24,372    30,511 
Provision for vacation pay and 13th salary   25,559    15,920 
Provision for profit sharing (ii)   63    5,880 
Others   3,460    921 
    70,910    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 a 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 on account of COVID 19. The provision for profit sharing was settled in the second quarter of 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 belong to the Cogna Group. The effect of these transactions is reflected in these 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:

 

31 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   September 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   -    1,208    -    -    455    - 
Anhanguera Educacional Participacoes SA.   -    413    -    -    -    - 
Centro Educacional Leonardo Da Vinci SS   -    -    -    -    6    - 
Cogna Educação S.A.   -    -    157,568    3,021    -    308,750 
Colégio Ambiental Ltda   -    443    -    -    40    - 
Colégio JAO Ltda.   -    681    -    -    33    - 
Colegio Manauara Lato Sensu Ltda.   -    1,750    -    -    1,981    - 
Colegio Visao Eireli   -    270    -    -    13    - 
Conlégio Cidade Ltda   -    137    -    -    15    - 
Curso e Colégio Coqueiro Ltda   -    298    -    -    20    - 
ECSA  Escola A Chave do Saber Ltda   -    71    -    -    16    - 
Editora Atica S.A.   -    1,764    -    20,423    6,192    - 
Editora E Distribuidora Educacional S.A.   -    436    -    15,339    88    - 
Editora Scipione S.A.   -    475    -    736    503    - 
Educação Inovação e Tecnologia S.A.   13    -    -    -    -    - 
Escola Mater Christi Ltda.   -    78    -    -    139    - 
Escola Riacho Doce Ltda   -    21    -    -    62    - 
Maxiprint Editora Ltda.   -    98    -    117    27    - 
Nucleo Brasileiro de Estudos Avançados Ltda   -    19    -    -    -    - 
Papelaria Brasiliana Ltda   -    554    -    -    -    - 
Pitagoras Sistema De Educacao Superior Ltda.   -    76    -    -    -    - 
Saber Serviços Educacionais S.A.   5    580    -    -    590    - 
Saraiva Educacao S.A.   2,141    1,231    -    -    5,539    - 
SGE Comercio De Material Didatico Ltda.   -    0    -    -    660    - 
Sistema P H De Ensino Ltda.   -    1,751    -    -    177    - 
Sociedade Educacional Alphaville Ltda   -    100    -    -    1    - 
Sociedade Educacional Doze De Outubro Ltda.   -    170    -    -    47    - 
Sociedade Educacional NEODNA Cuiaba Ltda   -    37    -    -    -    - 
Sociedade Educacional Parana Ltda.   -    46         -    11      
Somos Idiomas SA   112    -    -    -    -    - 
Somos Operações Escolares S.A.   -    606    -    31    29    - 
SSE Serviços Educacionais Ltda.   -    381    -    -    665    - 
Stoodi Ensino a Distancia Ltda   124    -    -    -    -    - 
Others   86    -    -    10    -    - 
    2,481    13,694    157,568    39,677    17,309    308,750 

 

(i)Refers substantially to accounts receivable generated from sharing costs e.g IT services shared by the Company to Cogna Group

(ii)Refers substantially to accounts payable by sharing expenses e.g property leasing, personnel and IT licences shared with Cogna Group.

 

32 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   December 31, 2020
   Other receivables (i)  Trade receivables (Note 9)  Indemnification asset (note 20b)  Other payments (ii)  Loans (iii)  Suppliers (note 14) 

Bonds

(note 13)  

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   -    102    -    -    -         - 
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)Refers to other receivables related to cost sharing agreements where substantially Saber Serviços Educacionais (“Saber”), a Cogna Group entity, takes services from the Company;

(ii)Refers substantially to “Reverse Factoring” contracts for raw material purchases, specifically graphics and paper, which the Company reimburses Atica and Scipione. See item a, below;

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

 

33 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

   Nine months ended September 30, 2021  Nine months ended September 30, 2020
Transactions held:  Revenues  Finance costs (i)  Cost Sharing (note 20c)  Sublease (note 20e)  Revenues  Finance costs(i)  Cost Sharing (note 20c)  Sublease (note 20e)
                         
 Acel Administracao De Cursos Educacionais Ltda.   1,204    -    -    -    138    -    -    - 
 Centro Educacional Leonardo Da Vinci SS   41    -    -    -    -    -    -    - 
 Cogna Educação S.A.   -    18,844    -    -    -    47,726    -    - 
 Colégio Ambiental Ltda   443    -    -    -    -    -    -    - 
 Colégio Cidade Ltda   108    -    -    -    -    -    -    - 
 Colegio JAO Ltda.   546    -    -    -    -    -    -    - 
 Colégio Manauara Lato Sensu Ltda.   641    -    -    -    371    -    -    - 
 Colégio Motivo Ltda.   35    -         -    372    -    -    - 
 Colégio Visão Ltda   287    -    -    -    -    -    -    - 
 Cursos e Colégio Coqueiros Ltda   242    -    -    -    -    -    -    - 
 Ecsa  Escola A Chave Do Saber Ltda.   148    -    -    -    162    -    -    - 
 Editora Atica S.A.   2,852    -    4,602    8,901    5,725    272    11,989    1,727 
 Editora E Distribuidora Educacional SA.   -    -    23,561    -    1,841    -    26,873    772 
 Editora Scipione SA.   1,076    -    -    -    883    -    -    - 
 Escola Mater Christi   35    -    -    -    -    -    -    - 
 Escola Riacho Doce Ltda   39    -    -    -    -    -    -    - 
 Maxiprint Editora Ltda.   -    -    -    -    608    -    -    - 
 Nucleo Brasileiro de Estudos Avancados Ltda   63    -    -    -    -    -    -    - 
 Papelaria Brasiliana Ltda   46    -    -    -    -    -    -    - 
 Saber Serviços Educacionais S.A.   189    -    -    -    854    -    -    - 
 Saraiva Educacao SA.   2,077    -    -    2,271    1,785    -    -    5,023 
 Sistema P H De Ensino Ltda.   2,628    -    -    -    3,991    -    -    - 
 Sociedade Educacional Alphaville SA   196    -    -    -    -    -    -    - 
 Sociedade Educacional Doze De Outubro Ltda   237    -    -    -    127    -    -    - 
 Sociedade Educacional Neodna Cuiaba Ltda.   224    -    -    -    257    -    -    - 
 Sociedade Educacional Parana Ltda.   -    -    -    -    795    -    -    - 
 SOE Operações Escolares SA.   543    -    -    -    -    -    -    - 
 Somos Educação S.A.   -    -    -    -    -    1,235    -    - 
 Somos Idiomas Ltda   -    -    -    195    -    -    -    - 
 Somos Operações Escolares SA.   243    -    -    -    -    -    -    - 
 SSE Serviços Educacionais Ltda.   164    -    -    -    -    -    -    - 
 Others   -    -    -    -    393    -    -    1,686 
    14,307    18,844    28,163    11,367    18,302    49,233    38,862    9,208 

 

(i)Refers to debentures interest; see Note 14. Until September 30, 2020 there were no debentures.

 

34 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021

 

a.Suppliers and other arrangements with related parties

 

The Company, as a result of the carve-out process on December 31, 2019, maintained the reverse factoring operations (specifically purchases of raw materials with affiliates of the Cogna Group) and until then owned the assets and liabilities. After the carve-out process on January 1, 2020, the Company assumed these commitments. However, the Company took into account the fact that these contracts would last a year or less after the base carve-out date, and the cost and benefit of transferring the contracts from Cogna Group affiliates to the Company would be greater than keep them with Cogna Group. As a result, Management decided to reimburse Grupo Cogna for these expenses as the contracts expired and settled the entire remaining balance of this transaction in May 2021. Since January 1, 2021 the Company does not arrange reverse factoring transactions with related parties, being the residual amount opened as of December 31, 2021 settled on May, 2021 on amount R$ 83,922

 

In addition to this process, the affiliates also had some shared expenses such as property lease, expenses with personnel and software license, which continued even after the carve-out operation was completed and still remain today. As of September 30, 2021, only shared expense transactions are part of these commitments, which amounted to R$39,677 (R$135,307 as of December 31, 2020).

 

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 of 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 in connection with all contingencies or lawsuits related to the Predecessor up to the maximum amount of R$ 157,6 million as of September 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 which substantially comprises schools, publishers, language schools and stationery shops. All sales and services provided are based on intercompany contracts and its commercial conditions, which include price, margin and payment terms, were determined on an arm’s length basis.

 

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, proprietary IT systems and legal and accounting activities, and shared warehouses and other logistic activities based on agreements. Those expenses, in the amount of R$ 28,163 for the nine months period ended September 30, 2021 (R$ 38,862 for the nine months period ended September 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 the 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 the Company, for commercial exploitation and use of copyrights related to the educational platform materials. This agreement is valid for three years.

 

35 

 

Vasta Platform Limited

Unaudited Interim Condensed Consolidated Financial Statements

as of September 30, 2021<