Ser Educacional SA (BSP:SEER3) Q2 2024 Earnings Call Highlights: Strong Cash Generation and ...
Net Operating Cash Generation: Significant increase, aiding in financial debt reduction.
Gross Cash Margin: Expanded by more than 3% compared to the first two quarters of 2022.
Adjusted EBITDA Margin: Increased by almost 3 percentage points compared to the first two quarters of 2022.
Medical Course Offerings: Increased from 521 to 881 annual places, a 6% to 9% increase.
Average Ticket for Hybrid Education: Fell 1.2% compared to Q2 2023.
Net Cash Generation: Increased by 35% compared to the previous period.
Net Debt to EBITDA Ratio: Reduced from 2.68 in 2022 to 1.93x.
CapEx: Increased in the first half of the year, mainly for real estate and digital content investments.
Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ser Educacional SA (BSP:SEER3) successfully attracted summer students, particularly in on-site courses, leading to significant growth in the student base.
The company reported a significant increase in net operating cash generation, which allowed for a reduction in financial debt indicators.
Operational optimization plans have led to an expansion of the gross cash margin by more than 3% and an adjusted EBITDA margin increase of almost 3 percentage points.
The company received a favorable regulatory decision, increasing its offer of medical course places from 521 to 881 annual spots.
Hybrid courses have become more relevant, contributing to the organic growth of the total student base and improving the company's competitive position.
Negative Points
There was a slight reduction in the average ticket for hybrid education graduation, primarily due to discounts offered in previous campaigns.
Digital courses experienced a drop in average ticket prices due to increased market competitiveness.
The company faced challenges with the delayed FIES education financing program, impacting digital course funding.
Despite improvements, the PDD (Provision for Doubtful Debts) remains high, indicating ongoing challenges with student payment punctuality.
CapEx was higher than usual in the first half of the year due to investments in new administrative centers and digital content, which may impact financial flexibility.
Q & A Highlights
Q: In the medical courses, what should we expect regarding ramping up these courses? What are the main levers for better margins in the third stage of the plan? A: As for medical courses, we have three units approved by the Ministry of Education. We plan to offer 60 spots annually per course, totaling 180 spots. The main levers for better margins include positive commercial processes, additional medical course spots, and cost reductions from real estate deliveries.
Q: Can we expect similar results in student intake as in the first two quarters? A: The dynamics differ slightly. Digital courses are growing better, and in-person courses are also positive. We anticipate continued growth in student intake, with digital courses performing better than in-person ones.
Q: What do you see in terms of competitiveness for digital and in-person courses? How are you handling the ticket pricing for medical courses? A: The ticket for medical courses is around BRL10,000, slightly higher than expected but not affecting student intake. The average ticket is improving due to better student payment behavior, although it appears masked by discounts and payment timing.
Q: Is there a risk of losing medical course spots due to the Supreme Court ruling? When do you expect to reduce PDD levels? A: We are following both administrative and judicial paths to secure medical course spots. Regarding PDD, we expect it to stabilize around 8% of net revenue, with improvements anticipated from the second semester onward.
Q: How are you addressing marketing strategies and student evasion? A: We have reorganized our brand portfolio and adjusted marketing expenses. Evasion has slightly reduced due to stricter negotiation policies and improved student payment behavior, which we expect to continue stabilizing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.