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 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2022

 

Commission File Number: 001-39415 

 

Vasta Platform Limited

(Exact name of registrant as specified in its charter)

 

Av. Paulista, 901, 5th Floor

Bela Vista

São Paulo – SP, 01310-100

Brazil
+55 (11) 3047-2655

(Address of principal executive office)

 

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

X

  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

X

 

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

X

 

 

 

 

 
 

TABLE OF CONTENTS

 

ITEM  
99.1. Press release dated May 12, 2022 – Vasta Platform Limited announces today its financial and operating results for the first quarter of 2022.

 

 
 

SIGNATURE

 

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

 

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

 

Date: May 12, 2021

 

 

 

Exhibit 99.1

 

   

São Paulo, May 12, 2022 – Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or the “Company,” announces today its financial and operating results for the first quarter of 2022 (1Q22) ended March 31, 2022. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

HIGHLIGHTS

 

*Net revenue increased 36% year-on-year in the first quarter of 2022 (1Q22), to R$381 million, exceeding the R$370 million guidance.

 

*Subscription revenue grew 37% in 1Q22, driven by the recognition of 2022 ACV, or 48% excluding textbook subscription products (“PAR”). The 2022 ACV has had a superior quality in sources of revenue, as Vasta managed to increase growth in its premium brands and to initiate the migration from PAR to digital subscription products (Textbook as a Service Platform), aligned with the company’s strategy.

 

*In the 2022 cycle to date (4Q21 and 1Q22), subscription revenue grew 29%, or 41%, excluding PAR. The different seasonality of new brands (Eleva and Mackenzie) is leading to a less concentrated distribution of subscription revenue along the 2022 cycle when compared to previous cycles. In 2Q22, we expect ACV recognition to range between 16% to 18%, and our accumulated subscription revenue growth should gradually converge to the 2022 ACV growth of 35% by 3Q22.

 

*Adjusted EBITDA more than doubled in 1Q22, due to operating leverage gains, cost savings and better sales mix with the growth of subscription products and the contribution of Eleva. In the 2022 cycle to date, adjusted EBITDA grew 41%, with a margin increase of 450 bps.

 

*Adjusted net profit increased to R$51 million in 1Q22, from R$21 million in 1Q21, due to the growth in operating profit. In the 2022 cycle to date, adjusted net profit increased 4%, as the increased operating profit was partly offset by the higher financial leverage and interest rates.

 

*Operating cash flow (OCF) totaled R$13 million in 1Q22, impacted by the early payment of royalties to content providers. On a normalized basis, the OCF was a positive R$33 million, an improvement compared to 1Q21 figures, which remained close to zero.

 

*According to the results released in early 2022, Vasta’s brands maintained the leadership in the number of approvals in the admission tests of Brazil’s best universities (according to The Higher Education ranking).

 

*On April 28, 2022, Vasta issued its first Sustainability Report, elaborated according to GRI standards, SASB guidelines and aligned with IBC Stakeholder Capitalism Metrics and World Economic Forum (WEF) guidelines.

 

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MESSAGE FROM MANAGEMENT

 

This quarter has a special meaning for us. Vasta 1Q22 results confirm that the worst of the Covid-19 pandemic’s impact is behind us: net revenue increased 36% year-on-year (and 29% in the 2022 cycle to date), driven by (i) the 35% growth in 2022 ACV, which we expect to be fully captured within the 2022 cycle; and (ii) the stabilization in non-subscription revenue (up 1% in the cycle to date). After a long period of results being hit by the Covid-19 pandemic, numbers finally attest that the business is back to normal, with predictability and recurrence among its most important attributes. In addition, the quality of our sales improved in the 2022 cycle, with a greater share of sales from premium and digital products in the mix. Subscription revenue represented 87.4% of total net revenue in the 2022 sales cycle, compared to 84.4% in the same period of the previous cycle.

 

Another key aspect of the quarter is the repositioning of Vasta’s profitability. Our operating margins returned to levels that we believe to be more aligned with the company’s potential. In the 2022 cycle to date, the adjusted EBITDA margin grew 450 bps, to 38.7%, the highest margin for this period in recent periods. Although much of this result came from the normalization of the business and a sales mix of superior quality, it came with certain efforts: we conducted a workforce optimization in December 2021 and reinforced our budgetary discipline. These actions are also paramount to navigating the challenging macroeconomic scenario ahead of us.

 

But more important than the improvement in our operating results is the success of our students, which is our real purpose. According to the results released in early 2022, Vasta’s brands maintained the leadership in the number of approvals in the admission tests of Brazil’s best universities (according to The Higher Education ranking). The performance of our premium brands was particularly noticeable in Medicine, the most competitive career in the country. Our top-of-mind brand Anglo expanded its leadership in admissions for Medicine at the University of São Paulo (USP), with an increase of 64% in admitted students compared to 2021. The top performance at Brazil’s best universities is among the key attributes considered by K-12 schools when choosing a content partner.

 

Reinforcing our commitment with the highest ESG standards, Vasta released its first Sustainability Report on April 28, 2022. The publication increases awareness around the work we do, reinforcing the bonds of trust forged with our partners, employees, customers, investors and other stakeholders. Our Sustainability Report is aligned with the guidelines of the Global Reporting Initiative (GRI), and incorporates indicators from the Sustainability Accounting Standards Board (SASB) and recommendations from the World Economic Forum (WEF) publication Stakeholder Capitalism Metrics. The report is available in Vasta’s website and can be accessed here.

 

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OPERATING PERFORMANCE

 

Student base – subscription models

 

   2022   2021   % Y/Y 
Partner schools - Core content   5,274    4,508    18.7%
Partner schools - Complementary solutions   1,304    1,114    16.8%
Students - Core content   1,589,224    1,335,152    15.4%
Students - Complementary content   372,559    307,941    30.0%

Note: Students enrolled in partner schools.

 

As we conclude the period of return of collections, we update the number of partner schools and enrolled students for the 2022 cycle. The company added 766 new partners schools compared to the 2021 cycle, serving nearly 1.6 million students with core content solutions. The partners school base of complementary solutions increased by 187 new schools, growing 30% in the number of students served compared to the previous cycle.

 

FINANCIAL PERFORMANCE

 

Net revenue

 

Values in R$ '000   1Q22   1Q21   % Y/Y    2022 Cycle    2021 Cycle    % Y/Y 
Subscription   333,781    243,371    37.1%   680,624    527,221    29.1%
   Subscription ex-PAR   296,713    201,120    47.5%   577,597    410,528    40.7%
      Traditional learning systems   251,148    169,138    48.5%   474,299    350,463    35.3%
   Complementary solutions   45,565    31,982    42.5%   103,298    60,065    72.0%
PAR   37,067    42,251    -12.3%   103,027    116,693    -11.7%
Non-subscription   46,801    37,461    24.9%   98,217    97,173    1.1%
Total net revenue   380,581    280,832    35.5%   778,840    624,394    24.7%
                               
% ACV   33.4%   32.8%   0.5    68.1%   71.1%   -3.1 
% Subscription   87.7%   86.7%   1.0    87.4%   84.4%   3.0 

 

In 1Q22, net revenue increased 36% year-on-year, to R$ 381 million, which exceeded the $370 million guidance. Excluding Eleva, net revenue grew 28% year-on-year.

 

Subscription revenue grew 37% in 1Q22, driven by the recognition of 2022 ACV (33.4% of total), or 48% excluding PAR. The 2022 ACV has showed a superior quality in sources of revenue, as Vasta managed to increase growth in our premium brands and to initiate the migration from PAR to digital subscription products (Textbook as a Service Platform), aligned with the company’s strategy. In 1Q22, Vasta recognized 33.4% of the ACV, compared to 32.8% in the same period of last year.

 

In the cycle to date (4Q21 and 1Q22), subscription revenue grew 29%, or 41% excluding PAR. In the period, it represented 68.1% of 2022 ACV, versus 71.1% in the same period of the 2021 cycle. The different seasonality of new

 

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brands (Eleva and Mackenzie) is leading to a less concentrated distribution of subscription revenue along the 2022 cycle when compared to previous cycles. In 2Q22, we expect ACV recognition to range between 16% to 18%, and our accumulated subscription revenue growth should gradually converge to the ACV growth of 35% by 3Q22.

 

EBITDA

 

Values in R$ '000   1Q22   1Q21   % Y/Y    2022 Cycle    2021 Cycle    % Y/Y 
Net revenue   380,581    280,832    35.5%   778,841    624,394    24.7%
Cost of goods sold and services   (129,237)   (113,982)   13.4%   (265,156)   (214,000)   23.9%
General and administrative expenses   (126,088)   (109,876)   14.8%   (252,159)   (250,475)   0.7%
Commercial expenses   (47,933)   (49,509)   -3.2%   (93,332)   (98,241)   -5.0%
Other operating income, net   933    2,467    -62.2%   4,286    3,813    12.4%
Impairment on trade receivables   (8,896)   (2,609)   241.0%   (19,624)   (14,920)   31.5%
Profit before financial income and taxes   69,360    7,323    847.2%   152,856    50,571    202.3%
(+) Depreciation and amortization   64,287    48,585    32.3%   125,951    93,539    34.7%
EBITDA   133,647    55,908    139.0%   278,807    144,110    93.5%
EBITDA margin   35.1%   19.9%   15.2    35.8%   23.1%   12.7 
(+) Layoffs related to internal restructuring   1,459    4,936    -70.4%   10,871    4,936    120.2%
(+) IPO-related expenses   -    -    0.0%   -    50,580    -100.0%
(+) Share-based compensation plan   5,904    6,544    -9.8%   12,023    14,447    -16.8%
Adjusted EBITDA   141,011    67,388    109.3%   301,700    214,073    40.9%
Adjusted EBITDA margin   37.1%   24.0%   13.1    38.7%   34.3%   4.5 

Note: n.m.: not meaningful

 

Adjusted EBITDA more than doubled in the quarter compared to 1Q21, reaching R$141 million, due to operating leverage gains, cost savings and better sales mix with the growth of subscription products and the contribution of Eleva. In the 2022 cycle to date, Adjusted EBITDA grew 41%, with a margin increase of 450 bps.

 

In proportion to net revenue, gross margin grew 660 bps in the quarter (from 59.4% to 66.0%), while commercial expenses and adjusted cash G&A expenses were down 500 bps and 280 bps, respectively. The impairment on trade receivables increased 140 bps in the quarter, reflecting increased provisions adopted in the second half of 2021. As a result, adjusted EBITDA margin grew from 24.0% in 1Q21 to 37.1% in 1Q22.

 

(%) Net Revenue   1Q22   1Q21    Y/Y (p.p.)    2022 Cycle    2021 Cycle    Y/Y (p.p.) 
Gross margin   66.0%   59.4%   6.6    66.0%   65.7%   0.2 
Adjusted cash G&A expenses(1)   -14.1%   -16.9%   2.8    -12.7%   -13.3%   0.6 
Commercial expenses   -12.6%   -17.6%   5.0    -12.0%   -15.7%   3.8 
Impairment on trade receivables   -2.3%   -0.9%   (1.4)   -2.5%   -2.4%   (0.1)
Adjusted EBITDA margin   37.1%   24.0%   13.1    38.7%   34.3%   4.5 

(1) Sum of general and administrative expenses and other operating income, less: depreciation and amortization, non-recurring expenses, IPO-related expenses, and share-based compensation plan.

 

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Net profit (loss)

 

Values in R$ '000   1Q22   1Q21   % Y/Y    2022 Cycle    2021 Cycle    % Y/Y 
Net profit (loss)   20,190    (5,517)   n.m.    39,970    16,732    138.9%
(+) Layoffs related to internal restructuring   1,459    4,936    -70.4%   10,871    4,936    120.2%
(+) Share-based compensation plan   5,904    6,544    -9.8%   12,023    14,447    -16.8%
(+) IPO-related expenses   -    -    n.m.    -    50,580    n.m. 
(+) Amortization of intangible assets(1)   38,693    28,300    36.7%   74,649    56,590    31.9%
(-) Tax shield(2)   (15,659)   (13,525)   15.8%   (33,165)   (43,028)   -22.9%
Adjusted net profit (loss)   50,587    20,738    143.9%   104,349    100,257    4.1%
Adjusted net margin   13.3%   7.4%   5.9    13.4%   16.1%   (2.7)

(1) From business combinations. (2) Tax shield (34%) generated by the expenses that are being deducted as net (loss) profit adjustments. Note: n.m.: not meaningful

 

In the first quarter, adjusted net profit increased to R$51 million, from R$21 million in 1Q21, due to the growth in operating profit. In the 2022 cycle to date, adjusted net profit increased 4%, as the increased operating profit was partly offset by the higher financial leverage and interest rates.

 

Accounts receivable and PDA

 

Values in R$ '000   1Q22   1Q21   % Y/Y    4Q21   % Q/Q 
Gross accounts receivable   628,771    517,478    21.5%   552,014    13.9%
Provision for doubtful accounts (PDA)   (52,383)   (30,986)   69.1%   (46,500)   12.7%
Coverage index   8.3%   6.0%   2.3    8.4%   (0.1)
Net accounts receivable   576,388    486,492    18.5%   505,514    14.0%
Average days of accounts receivable(1)   198    198    0    190    8 

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

 

The increase in the net accounts receivable in 1Q22 arose from the growth in collected revenue, which was partly offset by the higher coverage of PDA. 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, pressuring the PDA level due to aging of the accounts receivable portfolio. With the return of school activities in 2022, we expect a gradual normalization in payment cycles for the years to come. The average payment time of our accounts receivable portfolio was 198 days in the 1Q22, the same level as of 1Q21. By adding Eleva’s last-twelve-month (“LTM”) net revenue, the average time decreases to 188 days.

 

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Operating cash flow

 

Values in R$ '000   1Q22   1Q21   % Y/Y    2022 Cycle    2021 Cycle    % Y/Y 
Cash from operating activities(1)   76,855    71,853    7.0%   39,484    (15,662)   n.m. 
(-) Income tax and social contribution paid   (523)   -    0.0%   (523)   -    0.0%
(-) Payment of provision for tax, civil and labor losses   (180)   (9)   1900.7%   (293)   (9)   3151.8%
(-) Interest lease liabilities paid   (3,750)   (4,021)   -6.7%   (6,878)   (7,796)   -11.8%
(-) Acquisition of property, plant, and equipment   (34,435)   (2,481)   1287.9%   (45,893)   (393)   11577.6%
(-) Additions of intangible assets   (19,716)   (9,107)   116.5%   (38,831)   (19,674)   97.4%
(-) Lease liabilities paid   (5,654)   (4,977)   13.6%   (12,344)   (8,605)   43.4%
Operating cash flow (OCF)   12,597    51,258    -75.4%   (65,277)   (52,139)   25.2%
OCF/Adjusted EBITDA   8.9%   76.1%   (67.1)   -21.6%   -24.4%   2.7 

(1) Net (loss) profit less non-cash items less and changes in working capital. Note: n.m.: not meaningful

 

In 1Q22, operating cash flow totaled R$13 million in 1Q22, impacted by the early payment of royalties (R$20 million) to content providers. This compares with the R$51 million OCF registered in 1Q21, which was benefitted by the early receipt of accounts receivable amounting to R$52 million. Therefore, on a normalized basis, the OCF increased from nearly zero in 1Q21 to R$33 million in 1Q22. Likewise, the normalized OCF was a negative R$45 million in the 2022 cycle to date, up from a negative R$104 million in the same period of 2021. We observe that the operating cash flow generation is usually negative in the first half of the cycle, as we invest in the production of materials in preparation for the school year and we receive payment from costumers in arrears.

 

Financial leverage

 

Values in R$ '000   1Q22   4Q21   3Q21   2Q21   1Q21
Financial debt   817,516    831,226    812,016    505,951    687,203 
Accounts payable from business combinations   570,660    532,313    73,713    65,201    62,973 
Total debt   1,388,176    1,363,539    885,729    571,152    750,176 
Cash and cash equivalents   449,673    309,893    377,862    335,098    415,093 
Marketable securities   -    166,349    317,178    81,090    259,581 
Net debt   938,503    887,297    190,689    154,964    75,502 
Net debt/LTM adjusted EBITDA   3.67    4.87    1.13    0.76    0.30 

(1) LTM adjusted EBITDA includes Eleva. Eleva’s LTM adjusted EBITDA prior to November 2021 may not reflect Vasta’s accounting standards.

 

Vasta ended the 1Q22 with a net debt position of R$939 million, mainly due to the incorporation of Eleva in late October, leading to a net debt/LTM adjusted EBITDA of 3.67x. By adding Eleva’s last-twelve-month EBITDA, this indicator stood at 3.28x.

 

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CONFERENCE CALL INFORMATION

 

Vasta will discuss its first quarter 2022 results on May 12, 2022, via a conference call at 5:00 p.m. Eastern Time. To access the call (ID: 5859784), 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

 

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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.

 

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NON-GAAP FINANCIAL MEASURES

 

This press release presents our EBITDA, Adjusted EBITDA and Adjusted net (loss) profit and Operating cash flow (OCF), which is information provided for the convenience of investors. EBITDA and Adjusted EBITDA are among 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 (loss) profit 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) income tax and social contribution; (b) net finance result; (c) depreciation and amortization; (d) 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 to the audited consolidated financial statements); (e) provision for risks of tax, civil and labor losses regarding penalties, related to income tax positions taken by the Predecessor Somos – Anglo and Vasta in connection with a corporate reorganization carried out by the Predecessor Somos – Anglo; (f) Bonus IPO, which refers to bonus paid to certain executives and employees based on restricted share units; and (g) expenses with contractual termination of employees due to organizational restructuring. 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 Adjusted net (loss) profit as the (loss) profit for the period/year 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 Business Combination and (b) Tax shield of 34% generated by the aforementioned adjustments.

 

We calculate Operating cash flow (OCF) as the cash from operating activities as presented in the Statement of Cash Flows less (a) income tax and social contribution paid; (b) tax, civil and labor proceedings paid; (c) interest lease liabilities paid; (d) acquisition of property, plant and equipment; (e) additions to intangible assets; and (f) lease liabilities paid.

 

We understand that, although Adjusted net (loss) profit, EBITDA, Adjusted EBITDA and Operating cash flow (OCF) 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 and Operating cash flow (OCF) 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).

 

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FINANCIAL STATEMENTS

 

Consolidated Statements of Financial Position

 

Assets  March 31, 2022  December 31, 2021
       
Current assets          
Cash and cash equivalents   145,998    309,893 
Marketable securities   303,675    166,349 
Trade receivables   576,388    505,514 
Inventories   208,744    242,363 
Taxes recoverable   27,040    24,564 
Income tax and social contribution recoverable   9,689    8,771 
Prepayments   57,335    40,069 
Other receivables   982    2,105 
Related parties – other receivables   1,126    501 
Total current assets   1,330,977    1,300,129 
           
Non-current assets          
Judicial deposits and escrow accounts   177,579    178,824 
Deferred income tax and social contribution   129,453    130,405 
Property, plant and equipment   222,265    185,682 
Intangible assets and goodwill   5,542,991    5,538,367 
Total non-current assets   6,072,288    6,033,278 
           
Total Assets   7,403,265    7,333,407 

 

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Consolidated Statements of Financial Position (continued)

 

Liabilities  March 31, 2022  December 31, 2021
       
Current liabilities          
Bonds and financing   267,568    281,491 
Lease liabilities   27,915    26,636 
Suppliers   261,219    264,787 
Income tax and social contribution payable   16,644    16,666 
Salaries and social contributions   75,952    62,829 
Contractual obligations and deferred income   44,812    42,179 
Accounts payable for business combination   59,296    20,502 
Other liabilities   25,350    20,033 
Other liabilities - related parties   30,393    39,271 
Total current liabilities   809,149    774,394 
           
Non-current liabilities          
Bonds and financing   549,948    549,735 
Lease liabilities   139,640    133,906 
Accounts payable for business combination   511,364    511,811 
Provision for tax, civil and labor losses   652,015    646,850 
Contract liabilities and deferred income   4,544    3,986 
Other liabilities   47,080    47,516 
Total non-current liabilities   1,904,591    1,893,804 
           
Shareholder’s Equity          
Share capital   4,820,815    4,820,815 
Capital reserve   65,614    61,488 
Treasury shares   (23,880)   (23,880)
Accumulated losses   (173,024)   (193,214)
Total Shareholder's Equity   4,689,525    4,665,209 
           
 Total Liabilities and Shareholder's Equity   7,403,265    7,333,407 

 

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Consolidated Income Statement

 

   Jan 01, to Mar 31, 2022  Jan 01, to Mar 31, 2021
       
Net revenue from sales and services   380,581    280,832 
Sales   374,734    274,884 
Services   5,847    5,948 
           
Cost of goods sold and services   (129,237)   (113,982)
           
Gross profit   251,344    166,850 
    -34%   -41%
Operating income (expenses)          
General and administrative expenses   (126,088)   (109,876)
Commercial expenses   (47,933)   (49,509)
Other operating income, net   933    2,467 
Impairment losses on trade receivables   (8,896)   (2,609)
           
Profit (Loss) before finance result and taxes   69,360    7,323 
           
Finance result          
Finance income   15,269    5,463 
Finance costs   (57,963)   (19,715)
           
Profit (Loss) before income tax and social contribution   26,666    (6,929)
           
Income tax and social contribution   (6,476)   1,412 
           
Profit (Loss) for the period   20,190    (5,517)
           
Profit (Loss) per share          
Basic   0.242    (0.066)
Diluted   0.239    (0.065)

 

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Consolidated Statement of Cash Flows

 

   For the three months ended March 31
   2022  2021
       
CASH FLOWS FROM OPERATING ACTIVITIES          
Profit (Loss) before income tax and social contribution   26,666    (6,929)
Adjustments for:          
Depreciation and amortization   64,287    48,585 
Impairment losses on trade receivables   8,896    2,609 
Reversal of provision for tax, civil and labor losses   (6,109)   (740)
Interest on provision for tax, civil and labor losses   11,454    5,630 
Provision for obsolete inventories   6,780    4,838 
Interest on bonds and financing   23,974    6,077 
Contractual obligations and right to returned goods   (10,732)   (6,220)
Imputed interest on suppliers   -    1,452 
Interest on accounts payable for business combination   13,694    167 
Share-based payment expense   4,126    5,271 
Interest on lease liabilities   3,596    4,022 
Interest on marketable securities incurred   (11,459)   (3,298)
Disposal of right of use assets and lease liabilities   (1,284)   14 
           
Changes in          
Trade receivables   (79,574)   3,133 
Inventories   26,787    4,564 
Prepayments   (17,266)   1,588 
Taxes recoverable   (2,434)   (184)
Judicial deposits and escrow accounts   1,245    644 
Other receivables   1,123    - 
Suppliers   (3,568)   (16,804)
Salaries and social charges   13,153    (6)
Tax payable   (5,852)   (2,000)
Contract liabilities and deferred income   13,976    (3,128)
Other receivables and liabilities from related parties   (9,504)   20,281 
Other liabilities   4,880    2,287 
Cash from operating activities   76,855    71,853 
           
Income tax and social contribution paid   (523)   - 
Interest lease liabilities paid   (3,750)   (4,021)
Payment of interest on bonds and financing   (37,640)   (12,215)
Payment of provision for tax, civil and labor losses   (180)   (9)
Net cash generated by operating activities   34,762    55,608 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Acquisition of property, plant, and equipment   (34,435)   (2,481)
Additions of intangible assets   (19,716)   (9,107)
Acquisition of subsidiaries net of cash acquired   (8,475)   (36,663)
Proceeds from (purchase of) investment in marketable securities   (125,866)   234,819 
Net cash (applied in) from investing activities   (188,492)   186,568 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Payments of loans from related parties   -    (20,884)
Lease liabilities paid   (5,654)   (4,977)
Payments of bonds and financing   -    (100,000)
Payments of accounts payable for business combination   (4,511)   (12,378)
Net cash applied in financing activities   (10,165)   (138,239)
           
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (163,895)   103,937 
Cash and cash equivalents at beginning of period   309,893    311,156 
Cash and cash equivalents at end of period   145,998    415,093 

 

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