Title

Presentation

Vasta Platform Limited misses on earnings expectations. Reported EPS is $0.05 EPS, expectations were $0.06.

Operator: My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vasta Platform Limited first quarter 2025 financial results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, before we begin, I would like to read a forward-looking statement. During today’s presentation, our executives will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown uncertainties, and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements.

Forward-looking statements in this presentation include but are not limited to, statements related to our business and financial performance, expectations for future periods, our expectations regarding our strategic product initiatives and the related benefit, and our expectations regarding the market. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These risks include those set forth in the press release we are issuing today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of today. You should not rely on them as predictions of future events.

And we disclaim any obligation to update any forward-looking statements except as required by law. In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. Thank you. And now I would like to turn the call over to Cesar Silva, CFO. Please go ahead.

Cesar Silva: Good evening, everyone, and thank you for joining us in this conference call to discuss Vasta Platform Limited’s first quarter of 2025 results. I’m Cesar Silva, Vasta CFO. And today, we have the presence of Guilherme Melega, Vasta’s CEO, who will be joining on the call. Let me now hand over the floor to Guilherme Melega, our CEO, to make his opening statements.

Guilherme Melega: Thank you, Cesar. Thank you all for participating in our earnings release call. I’d like to cover Slide number three with some highlights of our 2025 sales cycle. I’m pleased to share our progress and achievements made so far. This first quarter also represents halfway through the 02/2025 commercial cycle, which runs from October 2024 to September 2025. In this quarter, we have continued delivering strong economic and financial results, with a particular highlight in our free cash flow. In the 02/2025 cycle today, our net revenue increased by 11% to reach BRL 1,129,000,000. This growth was primarily driven by the successful conversion of our annual contract value (ACV) into revenue and achieved BRL 10,000,000,000, a 17% increase compared to the 2024 cycle to date.

Complimentary solutions continue to present the highest growth rate among our business segments, with a 24% expansion in the cycle to date compared to the same period last year. Moving to the company’s profitability, our focus on operational efficiency and cost-saving continued to bring results. Adjusted EBITDA for the 2025 cycle to date was BRL 420,000,000, with a margin of 37.2%. It has been an increase of 5% from BRL 402,000,000 performed in the last cycle. These gains were driven by a favorable sales mix benefiting from the growth of our subscription products. Finally, our cash flow generation was the main highlight of the quarter, totaling BRL 144 million in the 02/2025 sales cycle, which represents 176% higher than the same period in 02/2024.

Last twelve months’ free cash flow to adjusted EBITDA conversion rate improved from 42.5% to 50.8%, reflecting our sustainable efficiency measures. These measures include improvements in the collection process, such as process automation, reminders and past due notifications, customer segmentation, and faster renegotiation of delayed receivables. Additionally, we implemented several initiatives to achieve better discipline on the payment side, including rigorous financial planning, centralization of payments on a single monthly date, and negotiating longer payment terms with suppliers. In addition to the financial highlights, I would like to emphasize our continuous development of our technological platform, Plural, which enables us to provide better service to our customers.

Starting in 02/2026, our schools will use Plural AI with many new tools focusing on the concepts of inclusion, diversity, and equity in continuous education. Plural AI advances towards creating a welcoming educational environment for our students with the creation of an individualized education plan. The AI generates personalized pedagogical recommendations and assists teachers in schools in inclusive practice, providing an innovative solution to help educators transform challenges into opportunities for growth. I will now turn back to Cesar Silva to talk about the financial results of the quarter and the sales cycle to date.

Cesar Silva: Thank you, Guilherme. In this Slide number four, we present the composition of Vasta’s net revenue. On the left side, you can observe the organic year-on-year growth in the total net revenue for the first quarter, which decreased by 6.6%, reaching BRL 1,129,000,000. Cost of subscription revenue achieved BRL 400,000,000, a 12% increase compared to the same quarter of 2024. Non-subscription decreased by 27% to BRL 25,000,000, as expected. And in the government segment, in this quarter, we generated BRL 5,000,000 revenues, coming from five new contracts, compared to BRL 69,000,000 in the first quarter of 2024 when the totality of the Para contract for the first and second semester was booked all at once. In the 02/2025 cycle, the first semester of the Para contract was booked in February, and the second semester is expected to be performed throughout the year.

Moving to the right side, we analyze the net revenue for the 02/2025 sales cycle to date. We achieved an organic net revenue growth of 11.3% in the 2025 sales cycle to date, amounting to BRL 1,129,000,000. The main factors for this performance were firstly, the subscription revenue has increased 17%, reaching BRL 1,019,000,000 and continues to be the major contributor to our total revenue, representing 90% of the revenue share. Non-subscription revenue dropped 6% to BRL 69,000,000. And the net revenue of B2G reached BRL 41 million, a decrease of 40% compared to the 2024 sales cycle. Moving to Slide number five, in this quarter, our adjusted EBITDA amounted to BRL 121,000,000, with a margin of 28.2%, a decrease of 25% from BRL 162,000,000 in the first quarter of 2024, mainly due to a lower revenue volume in this quarter and a different product mix.

On the right side, we see that adjusted EBITDA in the 2025 sales cycle increased by 5% to reach BRL 420,000,000, with a margin of 37.2%. Let’s now move on to the next slide, explaining the breakdown of the adjusted EBITDA margin. In this slide, number six, we can observe that the adjusted EBITDA margin achieved 37.2% in the 2025 sales cycle, 3.2 percentage points lower than the same period of 2024. Firstly, our gross margin achieved 63.7%, a decrease of 3.2 percentage points from 66.9% in the 02/2024 sales cycle, due to lower revenue in the sales cycle and a different product mix. Provisions for doubtful accounts (PDA) achieved 3% in relation to the net revenue and had an improvement of 1.2 percentage points when comparing to 2024. While showing improvement in this indicator, the year has been performing in a very challenging and extensive credit landscape for non-premium brand business, and we still foresee some challenges in the credit scenario for the next months.

As a percentage of net revenue, our commercial expenses increased by 1.2 percentage points, driven by higher expenses related to business expansion of the commercial cycle of 2025. And finally, adjusted G&A expenses improved by 0.8 percentage points, mainly driven by workforce optimization and budget discipline measures. Moving to slide number seven, which shows the adjusted net profit. In this first quarter of 2025, adjusted net profit totaled BRL 26,000,000, a 49% increase compared to adjusted net profit of BRL 50,000,000 in the same quarter of 2024. On the right side of the slide, in the 02/2025 sales cycle, adjusted net profit reached BRL 140,000,000, which has been a decrease of 44.4% from adjusted net profit of BRL 146,000,000 in 02/2024 as a result of the topics commented before.

Moving to slide number eight, we show the free cash flow evolution. We continue to observe the growth of the company’s cash flow generation. In the first quarter of 2025, the free cash flow totaled BRL 774,000,000, representing a relevant increase compared to BRL 52,000,000 in the same period of 02/2024. On the right side of the slide, in the 2025 sales cycle, our free cash flow reached BRL 144,000,000, an increase of 176% from the previous year. This quarter and the first semester of 2025 will benefit from early collections regarding the 2025 sales cycle, which will be normalized throughout the year, together with consistent efficiency measures implemented in the collection process and the payments balance.

Cesar Silva: I’ll read the text by Guilherme Melega in his initial remarks. On another metric, our last twelve months’ free cash flow to adjusted EBITDA conversion rate increased from 42.5% in the 02/2024 sales cycle to 50.8% in 02/2025. Despite having an expressive result in the sales cycle to date, we expect to keep this conversion rate in the following quarters. Moving to slide number nine, we show the provision for doubtful accounts. Total expense with PDA in the first quarter of 2025 totaled BRL 12,000,000, representing 2.9% of net revenue, the same level as the comparable quarter. Moving to the right side of the slide, the PDA for the 2025 sales cycle amounted to BRL 34,000,000 compared to BRL 42,000,000 in 2024. Provision for doubtful accounts represents 3% of net revenue in the 02/2025 sales cycle, an improvement of 1.2 percentage points in comparison to 2024.

As explained before, we still foresee some difficulty in the credit scenario, mainly for the school related to mainstream brands. Moving to the next slide, we observe that the average payment terms of Vasta’s account receivables portfolio was 188 days in the first quarter of 2025, which is eight days higher than the comparable quarter and in line with the business model seasonality. Moving to slide number 11, let’s take a closer look into net debt movement. In the first quarter of 2025, Vasta had a net debt position of BRL 9,103,000,000, a decrease from the previous quarter. This achievement is due to the positive cash flow generated during the period in the amount of BRL 74,000,000, which surpassed the impact of interest accrual of BRL 34,000,000.

Moving to the right side of this slide, the net debt position decreased by BRL 77,000,000 since last year. This decrease was driven also by the free cash flow generated in the 2025 sales cycle, which was partially offset by financial interest costs. I will conclude my part of this presentation with Slide 12, explaining some more detail about our net debt composition, which represents BRL 963,000,000 at the end of the quarter. This amount is composed of BRL 7,071,000,000 on debentures issued to the parent company in addition to BRL 4,140,000,000 on accounts payable for business combinations, mainly related to the acquisition of Offalive, offset by BRL 257,000,000 in cash and cash equivalents that the company owned. In the lower left of this slide, you can see that in the first quarter of 2025, the net debt to last twelve months adjusted EBITDA ratio has increased by 0.09x from the last quarter.

This slight increase was expected when compared to the fourth quarter of 2022 or the first quarter of 2024, the indicators are relevant downwards and now it stands at 2.06 times. We would like to reinforce our commitment to continuing to generate free cash flow and deleverage the company. Having said that, I finish our presentation and invite you all to the Q&A session.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star 1 to join the queue. And your first question comes from the line of Jessica Miller of JPMorgan. Please go ahead.

Jessica Miller: Hello. Good evening, everyone. Thank you for taking my question. Actually, I have two. So first, how do you see margins for 2025, comparing to 02/2024? This is my first question. And second, what is the strategy in terms of mix and what are the expectations for the B2G business? How much can this business expand going forward? Thank you.

Cesar Silva: Thank you, Jessica. I’ll take your questions. I will start with the margins. We expect stable margins for 02/2025. So we ended 02/2024 slightly above 30%. We forecast similar margins, although Q1 and Q2 will have lower margins due to some concentration in market spendings and mix. We expect the mix to catch up in Q2. And now I will jump to the second question about strategy mix and B2G because it also compounds with the margins. So last year, in 2024, we had a concentration in B2G because the Para contract was entirely recognized in Q1. This contract this year on the sales cycle of 02/2025 was partially recognized in Q4 2024, and we expect to perform the remaining of the contract in Q2 and Q3. Additionally, we already noticed new contracts in B2G, where we have five new contracts in Q1, and we definitely have more contracts to follow up in Q2.

So this will enhance the mix in terms of segment mix. In terms of 220% and core content in double digits, that’s what we expected, and we expect to have similar margins in 02/2025.

Operator: Very clear. Thank you. And your next question comes from the line of Lucas Magana of Morgan Stanley. Your line is now open.

Lucas Magana: Hi. Good evening, Guilherme, Cesar. Thanks for taking our questions. I have just one and it’s related to the B2G. You mentioned that part of the contract was booked last year. So do you expect a lower B2G revenue this year, or should the seasonality of the Para contract be kind of the same in which part of it is booked in the fourth quarter of the previous year? Just a question to assess the potential growth of B2G this year. Thank you.

Cesar Silva: Thank you very much, Lucas. Yeah. I really would like to have more data to have a confident seasonality in terms of B2G. But this year, I would say that in Para, we are having a more normal seasonality because when we start classes in January and February, you already have the material. The first semester should be recognized in late Q4. So it’s quite similar to the B2B distribution process. So we expect to have the same distribution in 02/2025. So we do not expect any difference in terms of fiscal year in 2025. Additionally, we have a very heated pipeline. We are prospecting several new contracts that will pile up in the contracts that we already signed. So we expect to grow in the B2G. We will not give guidance about that, but we are working to have a sound growth for 2025.

Lucas Magana: Very clear. Thank you.

Operator: And there are no further questions at this time. I will now turn the conference back over to Mr. Guilherme Melega, our CEO, for closing remarks.

Guilherme Melega: Thank you all very much for participating in the Vasta Platform Limited Q1 conference call. We are very happy with the beginning of the year with ACV recognition, with the start of the sales campaign of ACV for 02/2026. We just finalized the Bett Educar Fair last week, which generated a significant pipeline for us in B2B and B2G. So both segments have a heated pipeline. Additionally, we already see very positive signs in free cash flow that we will remain performing positively throughout the year. So thank you very much. Looking forward to seeing you on our Q2 earnings release call. Thank you.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.