Vasta Platform Ltd. Q4 FY2023 earnings call

Key Highlights of 2023 Fiscal Year

• 18% net revenue growth due to ACV conversion and B2G business units performance. Subscription revenue reached R$1,278 million.
• Complementary solution segment grew by 34%, with accelerated student base and market penetration.
• 2023 saw Vasta enter the Brazilian public sector, generating R$81 million from B2G.
• Adjusted EBITDA grew by 20% in 2023 to R$451 million, with an adjusted EBITDA margin of 30.3%.
• Free cash flow in 2023 totaled R$189 million, a R$100 million increase from 2022.

2024 Sales Cycle and Initiatives

• 2024 contract finance ended at R$1.4 billion. Traditional learning system represents 77% of subscription revenue and is expected to increase by 14% compared to 2023 cycle.
• Complementary solutions are the fastest-growing segment with a 24% increase, with over 300 new partner schools using complementary solutions, surpassing 1,700 schools.
• Launched Start Anglo franchise with two operational units in 2024 and plan to open a new flagship in Sao Paulo in 2025.
• B2G business renewed its contract in 2024, with R$81 million revenue in 2023 and expectations of new contracts in Q2 2024.

In the fourth quarter, total net revenue increased by 10% to R$554 million. Total subscription revenue saw a 16% increase, reaching R$515 million, which accounts for 93% of the quarter's total revenue. For the 2023 fiscal year, organic net revenue grew by 18% to R$1,486 million. Total subscription revenue increased by 14% to R$1,278 million, representing 86% of the revenue share. B2G contributed 5% of the overall revenue in 2023, generating R$81 million, and non-subscription revenue comprised 9% of total revenue, dropping 11% to R$127 million.

• 2024 contract finance ended at R$1.4 billion. Traditional learning system is expected to grow by 14% compared to 2023 cycle. Complementary solutions are projected to have a 24% increase.
• Margin is expected to remain around 30% as cost pressures are behind and they intend to spend commercially on acquiring new contracts.
• B2G contract with [Para] was renewed on similar terms as last year, with expectations of new contracts in Q2 2024.

Forward-looking statements involve known and unknown risks, uncertainties, and other facts that may cause actual results to differ materially from those contemplated. These risks include those set forth in the press release and filings with the Securities and Exchange Commission.

Q: Could you discuss the evolution of ACV that you have up to like the 2024 cycle, in terms of volume, price churn, and the margin outlook for 2024?

A: We are pretty much breakeven in terms of volume and our ACV growth relies on pricing and better mix. We already reached the 30% margin we aimed for. Cost pressures are behind us, but we don't forecast major improvements in the margin, so they should be around the 30% level.

Q: The ACV for the next year implies a slight deceleration from the past years. Could you comment a little bit on if this deceleration is driven more the traditional learning system or if it's lower growth on the complementary solutions, and provide more details on the B2G contract that you just renewed?

A: Complementary solutions keep boosting growth as the most fast-growing product, growing more than 30% less cycle and is the main lever for growth. Regarding B2G, we renewed our contract with [Para] pretty much in the same terms that we had last year. We expect to have new contracts in Q2, but for now, none are signed yet.