Vitru(US:VTRU)2022-08-25 20:06Unaudited Interim Condensed Consolidated Financial Statements Consolidated Statements of Financial Position As of June 30, 2022, Vitru's total assets significantly increased to R$5.74 billion from R$1.53 billion at year-end 2021, primarily driven by a surge in intangible assets from R$670 million to R$4.54 billion due to the Unicesumar acquisition. Total liabilities also rose dramatically to R$4.04 billion from R$461 million, mainly due to new loans and financing of R$1.94 billion and a substantial increase in accounts payable from acquisitions. Consequently, total equity grew to R$1.70 billion from R$1.07 billion Consolidated Statement of Financial Position (in thousands of BRL) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | TOTAL ASSETS | 5,740,731 | 1,527,427 | | Total Current Assets | 606,008 | 514,784 | | Total Non-Current Assets | 5,134,723 | 1,012,643 | | Intangible assets | 4,539,245 | 670,152 | | TOTAL LIABILITIES | 4,040,246 | 461,299 | | Total Current Liabilities | 1,096,186 | 259,342 | | Accounts payable from acquisition | 841,253 | 149,765 | | Total Non-Current Liabilities | 2,944,060 | 201,957 | | Loans and financing | 1,939,222 | - | | TOTAL EQUITY | 1,700,485 | 1,066,128 | Consolidated Statements of Profit or Loss For the six months ended June 30, 2022, net revenue increased by 53.2% to R$485.8 million compared to the same period in 2021. Despite a significant rise in operating and financial expenses, net income for the period grew to R$44.8 million from R$37.2 million year-over-year. Basic earnings per share increased to R$1.84 from R$1.62 Statement of Profit or Loss Highlights (Six Months Ended June 30, in thousands of BRL) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenue | 485,806 | 317,146 | 53.2% | | Gross Profit | 302,756 | 204,583 | 48.0% | | Operating Profit | 64,890 | 46,761 | 38.8% | | Net Income for the Period | 44,797 | 37,249 | 20.3% | | Basic Earnings Per Share (R$) | 1.84 | 1.62 | 13.6% | | Diluted Earnings Per Share (R$) | 1.72 | 1.51 | 13.9% | Consolidated Statement of Changes in Equity Total equity increased from R$1.066 billion at the end of 2021 to R$1.700 billion as of June 30, 2022. This R$634 million increase was primarily driven by the issuance of R$560.5 million in shares for a business combination and the R$44.8 million in net profit for the period Changes in Equity (Six Months Ended June 30, 2022, in thousands of BRL) | Description | Amount | | :--- | :--- | | Equity at December 31, 2021 | 1,066,128 | | Profit for the period | 44,797 | | Issuance of shares for business combination | 560,546 | | Capital contributions | 13,285 | | Value of employee services (Share-based comp) | 15,729 | | Equity at June 30, 2022 | 1,700,485 | Consolidated Statement of Cash Flows For the first six months of 2022, net cash from operating activities was R$107.9 million. The company used a substantial R$2.0 billion in investing activities, almost entirely for the acquisition of a subsidiary. This was funded by R$1.93 billion in net cash from financing activities, primarily from new loans. Cash and cash equivalents increased by R$37.5 million during the period Cash Flow Summary (Six Months Ended June 30, in thousands of BRL) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | 107,901 | 61,240 | | Net cash used in investing activities | (1,999,957) | 1,152 | | Payments for acquisition of subsidiaries | (2,080,236) | (10,557) | | Net cash provided by (used in) financing activities | 1,929,546 | (5,093) | | Proceeds from loans and financing | 1,905,851 | - | | Net increase in cash and cash equivalents | 37,490 | 57,299 | | Cash and cash equivalents at end of period | 113,077 | 143,229 | Notes to the Financial Statements Note 1: Corporate Information and Significant Events Vitru Limited is a Cayman Islands holding company (NASDAQ: VTRU) providing educational services in Brazil. The company experienced significant growth, with learning centers increasing from 939 to 2,028. Key events in the first half of 2022 include the acquisition of Unicesumar, issuance of debentures to fund it, and typical revenue seasonality with higher enrollments in Q1 and Q3 leading to higher revenues in Q2 and Q4 - The company is engaged in providing educational services in Brazil, with a network that expanded to 2,028 learning centers by June 30, 2022, up from 939 at the end of 202112 - On May 20, 2022, the company closed the acquisition of Unicesumar, a major business combination18 - On May 19, 2022, the company issued two series of debentures totaling R$1.95 billion to finance the acquisition19 - Business seasonality leads to higher student enrollments in Q1 and Q3, resulting in higher revenues in Q2 and Q413 Note 3: Business Combinations On May 20, 2022, Vitru acquired 100% of Unicesumar, a leading Brazilian distance learning institution. The total purchase consideration was R$3.28 billion, paid through cash, shares, and a contingent consideration. The acquisition resulted in R$3.14 billion of goodwill and identifiable intangible assets, including brand, customer relationships, and operating licenses. From the acquisition date to June 30, 2022, Unicesumar contributed R$98.2 million in revenue and R$40.6 million in net profit - The acquisition of Unicesumar closed on May 20, 2022. Unicesumar has 999 centers and approximately 331,000 students2627 Purchase Consideration (in thousands of BRL) | Component | Amount | | :--- | :--- | | Cash payable at acquisition date | 2,162,500 | | Payable after 12 months | 525,681 | | Contingent consideration | 30,608 | | Payable through issuance of new Vitru shares | 560,544 | | Total Consideration | 3,279,333 | Goodwill Calculation (in thousands of BRL) | Item | Amount | | :--- | :--- | | Total acquired net assets at fair value | 137,050 | | Purchase consideration | 3,279,333 | | Goodwill arising on acquisition | 3,142,283 | - If the acquisition had occurred on January 1, 2022, the combined net revenue for the six-month period would have been R$831.7 million with a net income of R$57.3 million33 Note 4: Segment Reporting The company's operations are divided into three segments: Digital education undergraduate courses, Continuing education courses, and On-campus undergraduate courses. For the first six months of 2022, the Digital education segment was the largest contributor, generating R$399.9 million in net revenue and R$163.5 million in Adjusted EBITDA. The total Adjusted EBITDA for all segments was R$201.0 million, a significant increase from R$123.3 million in the same period of 2021 Segment Performance (Six Months Ended June 30, 2022, in thousands of BRL) | Segment | Net Revenue | Adjusted EBITDA | % Adjusted EBITDA Margin | | :--- | :--- | :--- | :--- | | Digital education undergraduate | 399,897 | 163,462 | 40.88% | | Continuing education | 28,177 | 17,532 | 62.22% | | On-campus undergraduate | 57,732 | 20,055 | 34.74% | | Total Allocated | 485,806 | 201,049 | 41.38% | Reconciliation of Adjusted EBITDA to Income Before Taxes (Six Months Ended June 30, 2022, in thousands of BRL) | Description | Amount | | :--- | :--- | | Adjusted EBITDA allocated to segments | 201,049 | | (-) Other operational expenses unallocated | (36,695) | | (-) M&A and Offering Expenses | (24,352) | | (-) Restructuring expenses | (11,504) | | (-) Share-based compensation plan | (7,833) | | (-) Depreciation and amortization | (46,107) | | (-) Financial result | (47,262) | | Other adjustments | (9,668) | | Income before taxes | 17,628 | Note 7: Trade Receivables Total gross trade receivables increased to R$473.4 million as of June 30, 2022, from R$264.6 million at the end of 2021. After accounting for a significantly higher allowance for expected credit losses (ECL) of R$197.6 million (up from R$113.9 million), net trade receivables stood at R$271.3 million. The increase in receivables and ECL is partly due to the Unicesumar acquisition Trade Receivables Breakdown (in thousands of BRL) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Tuition fees | 421,294 | 247,419 | | Allowance for expected credit losses | (197,608) | (113,934) | | Total trade receivables | 271,263 | 146,493 | Changes in Allowance for Expected Credit Losses (in thousands of BRL) | Description | 2022 | 2021 | | :--- | :--- | :--- | | At the beginning of the year | (113,934) | (102,128) | | Business combinations | (74,616) | - | | Allowance for expected credit losses | (78,304) | (61,723) | | Write-off & Reversal | 69,246 | 56,791 | | As of June 30 | (197,608) | (107,060) | Note 13: Intangible Assets The net book value of intangible assets surged to R$4.54 billion as of June 30, 2022, from R$670.2 million at the end of 2021. This increase is almost entirely due to the R$3.88 billion in assets recognized from the Unicesumar business combination, which includes goodwill (R$1.63 billion), distance learning operation licenses (R$1.21 billion), and trademarks (R$352.2 million) Changes in Intangible Assets (in thousands of BRL) | Description | Amount | | :--- | :--- | | Net book value at Dec 31, 2021 | 670,152 | | Purchase and capitalization | 15,836 | | Business combinations | 3,878,417 | | Amortization | (25,160) | | Net book value at June 30, 2022 | 4,539,245 | - Key intangible assets from the business combination include Goodwill (R$1.63 billion), Operation licenses for distance learning (R$1.21 billion), Trademarks (R$352 million), Customer relationships (R$295 million), and Non-compete agreements (R$272 million)59 Note 14: Loans and Financing To finance its recent acquisition, the company issued two series of debentures on May 19, 2022, totaling R$1.95 billion. After accounting for transaction costs and accrued interest, the outstanding balance of loans and financing was R$1.94 billion as of June 30, 2022. These debentures have maturities extending from November 2023 to May 2027 - On May 19, 2022, the company issued two series of debentures with a nominal value of R$1,000 each, totaling R$1.95 billion60 Loans and Financing Balance (in thousands of BRL) | Description | Amount | | :--- | :--- | | Proceeds from issuance of debentures | 1,950,000 | | Costs related to issuance of debentures | (44,149) | | Accrued interest | 33,371 | | As of June 30, 2022 | 1,939,222 | Note 16: Accounts Payable from Acquisition of Subsidiaries Accounts payable from acquisitions increased from R$149.8 million at the start of the year to R$841.3 million by June 30, 2022. This increase is primarily due to the R$677.4 million in new payables arising from the Unicesumar acquisition, with a significant portion (R$492.1 million) due in May 2023 - The acquisition of Unicesumar on May 20, 2022, added significant payables, with R$492.1 million due on May 20, 2023, adjusted by the IPCA inflation rate66 Changes in Accounts Payable from Acquisitions (in thousands of BRL) | Description | 2022 | | :--- | :--- | | At the beginning of the year | 149,765 | | Proceeds from acquisition of subsidiaries | 677,428 | | Accrued Interest | 19,266 | | Payment of principal | (5,206) | | As of June 30 | 841,253 | Note 18: Equity As of June 30, 2022, the company's share capital was represented by 28,573,902 common shares. The company has an authorized capital of up to 1 billion shares. The additional paid-in capital reserve can be used for distributions, subject to a solvency test. The company did not pay any cash dividends in the first half of 2022 and does not anticipate doing so in the near future - As of June 30, 2022, the Company's share capital is represented by 28,573,902 common shares73 - The company does not anticipate paying cash dividends in the foreseeable future, intending to retain funds for business development and expansion76 Note 19: Earnings Per Share For the six months ended June 30, 2022, basic earnings per share (EPS) was R$1.84, calculated on a net income of R$44.8 million and a weighted average of 24.3 million shares. Diluted EPS was R$1.72, considering the potential dilution from 1.725 million outstanding stock options Earnings Per Share (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (thousands BRL) | 44,797 | 37,249 | | Weighted average shares - Basic (thousands) | 24,323 | 23,058 | | Basic EPS (R$) | 1.84 | 1.62 | | Weighted average shares - Diluted (thousands) | 26,048 | 24,648 | | Diluted EPS (R$) | 1.72 | 1.51 | Note 22: Revenue For the six months ended June 30, 2022, gross revenue from services was R$625.8 million. After deductions for cancellations, discounts, ProUni scholarships, and taxes, net revenue was R$485.8 million. The vast majority of revenue (R$475.3 million) is recognized over time, consistent with the delivery of educational services Revenue Breakdown (Six Months Ended June 30, in thousands of BRL) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Gross amount from services provided | 625,846 | 397,997 | | (-) Deductions (Discounts, ProUni, etc.) | (124,357) | (75,877) | | (-) Taxes and contributions on revenue | (15,679) | (10,321) | | Net revenue | 485,806 | 317,146 | Note 23: Costs and Expenses by Nature For the six months ended June 30, 2022, total costs and expenses amounted to R$357.6 million, up from R$217.9 million in the prior year period. The largest components were payroll (R$157.7 million), sales and marketing (R$74.3 million), and depreciation and amortization (R$46.1 million). Consulting and advisory services also saw a significant increase, rising to R$37.1 million from R$9.3 million Costs and Expenses by Nature (Six Months Ended June 30, in thousands of BRL) | Expense Category | 2022 | 2021 | | :--- | :--- | :--- | | Payroll | 157,686 | 108,626 | | Sales and marketing | 74,255 | 53,655 | | Depreciation and amortization | 46,107 | 25,524 | | Consulting and advisory services | 37,118 | 9,284 | | Total | 357,561 | 217,903 |