Vasta Platform Q1 2025 Earnings Report

Vasta Platform EPS Results

• Actual EPS: $0.05
• Consensus EPS: $0.06
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Vasta Platform Revenue Results

• Actual Revenue: $75.32 million
• Expected Revenue: $414.00 million
• Beat/Miss: Missed by -$338.68 million
• YoY Revenue Growth: N/A

Vasta Platform Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Vasta Platform (NASDAQ:VSTA) provides educational printed and digital solutions to private schools operating in the K-12 education sector in Brazil. The company offers digital and printed textbooks, teacher handbooks, exercise books, multidisciplinary subject books, and student evaluations; and PAR platform that allows schools to select their preferred books and materials and follow their own specific teaching methods. It also provides traditional learning systems under the Anglo, Pitágoras, Rede Cristã de Educação, Maxi Ético, Fibonacci, Mackenzie, and Amplia brands; ongoing training for educators; and services to partner schools, including consulting services for school management and the organization of events, and a proprietary and differentiated evaluation system for partner schools and their students. In addition, the company offers Plurall that provides a digital learning experience and allows for tailor-made adjustments for each school; Plurall Maestro that develops digital solutions to help educators in planning and conducting classes; PROFS, a teacher training program; O Líder em Mim, a program with content, methodology, teaching material, and training to develop leadership; English Stars, an English educational platform; EduAll, a bilingual program to enhance its current solutions; Plurall Olímpico, a content for scientific competitions; MindMakers to develop leadership, collaboration, and persistence through multidisciplinary problem-solving exercises; Matific that provides interactive learning environments and adaptable worksheets; Plurall Store; Plurall Adapta for adaptive learning sessions; Plurall MeuProf to connect students with professors for private tutoring; Prepara to prepare students for external assessments; Leader in Me to develop socio-emotional competencies of K12 students; Education Systems, a structured teaching system for K12 students and teachers; and Prepara ENEM. Vasta Platform Limited was founded in 1966 and is based in São Paulo, Brazil.

Vasta Platform Q1 2025 Earnings Call Transcript

Key Takeaways

• Vasta Platform’s 2025 sales cycle net revenue rose 11% to BRL 1 billion, driven by successful ACV-to-revenue conversion and a 17% increase in subscription revenue, while complementary solutions grew 24%.
• Adjusted EBITDA for the 2025 cycle increased 5% to BRL 420 million with a margin of 37.2%, reflecting operational efficiency gains and a favorable subscription-heavy sales mix.
• Free cash flow surged 176% year-over-year to BRL 144 million in the cycle-to-date, lifting the free cash flow-to-EBITDA conversion rate to 50.8% thanks to enhanced collections and disciplined payment initiatives.
• The firm is expanding its Lural platform with Plural.ai tools launching in 2026, offering AI-driven personalized pedagogical recommendations to foster inclusion, diversity, and equity in education.
• Management expects stable margins above 30% for 2025 and anticipates continued high-double-digit growth in complementary products, double-digit core content growth, and further B2G expansion from a strong contract pipeline.

Presentation

[Operator]

Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will remain on music hold. Thank you for your patience. Thank you for standing by.

[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 First Quarter twenty twenty five 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. Before we begin, I would like to read a forward looking statement.

[Operator]

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 risks, 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 their 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 and we are issuing today as well as those more fully described in our filings with the Securities and Exchange Commission.

[Operator]

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 the 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.

[Operator]

And now I would like to turn the call over to Sever Silva, CFO. Please go ahead.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

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

[Guilherme Mélega, CEO at Vasta Platform]

Thank you, Cesar.

[Guilherme Mélega, CEO at Vasta Platform]

Thank you all for participating in our earnings release call. I would 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 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 particularly highlight in our free cash flow.

[Guilherme Mélega, CEO at Vasta Platform]

In the 2025 cycle to date, our net revenue increased by 11% to reach billion. This growth was primarily driven by the successful conversion of our annual contract value, ACV, into revenue and achieved BRL1.19 billion, a 17% increase compared to 2024 cycle to date. Complementary 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 BRL420 million with a margin of 37.2%.

[Guilherme Mélega, CEO at Vasta Platform]

It has been an increase of 5% from BRL402 million 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 BRL144 million in the 2025 sales cycle, which represents 176% higher than the same period in 2024. The 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 and delayed of delayed receivables.

[Guilherme Mélega, CEO at Vasta Platform]

Additionally, we implemented several initiatives to achieve better discipline on the payment side, including vigorous financial planning, centralization of payments on a single monthly basis 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, Lural, which enables us to provide better service to our customers. Starting in 2026, our schools will use Plural.ai with many new tools, focusing on the concepts of inclusion, diversity and equity in continuous education. Rural AI advances towards creating a welcoming educational environment for all students with the creation of an individualized education plan. The AI generates personalized pedagogical recommendations and assist teachers and schools in inclusive practice, providing an innovative solution to help educators transform challenges into opportunities for growth.

[Guilherme Mélega, CEO at Vasta Platform]

I will now turn back to Severo Silva to talk about the financial results of the quarter and the sales cycle to date.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

Thank you, Meligan. In this slide number four, we present the composition of Vazquez 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 million dollars Cost of subscription revenue achieved in the first quarter of twenty twenty five, R400 million dollars a 12% increase compared to the same quarter of 2024. Non subscription decreased by 27% to $25,000,000 as expected.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

And in the government segment, in this quarter, we generated $5,000,000 revenues coming from five new contracts compared to $69,000,000 first quarter of 20 20 4 when the totality of Para contract first and second semester was booked all at once. In 2025 cycle, the first semester of Para contract was booked in the fourth quarter of twenty twenty four and second semester is expected to be performed throughout the year. Moving to the right side, we analyze the net revenue for the 2025 sales cycle date. We achieved an organic net revenue growth of 11.3% in the 2025 sales site to date amounting to million dollars The main factors for this performance were firstly, the subscription revenue has increased 17% reaching R1,019 million dollars and continues to be the major contributor to our total revenue representing 90% of the revenue share. Non subscription revenue dropped 6% to million dollars and the net revenue of B2G reached BRL41 million, a decrease of 40% comparing to 2024 sales cycle.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

Moving to Slide number five. In this quarter, our adjusted EBITDA amounted to $121,000,000 with a margin of 28.2%, a decrease of 25% from $162,000,000 in the first quarter of twenty twenty four, 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 2025 sales cycle increased by 5% to reach million with a margin of 37.2%. Let's now move on to the next slide and explain 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.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

Firstly, our gross margin achieved 63.7%, a decrease of 3.2 percentage points from 66.9% in 2024 sales cycle due to a lower revenue in the sales cycle and a different product mix. Provisions for downfall accounts PDA achieved 3% in relation to the net revenue and have an improvement of 1.2 percentage points when comparing to 2024. Quite showing improvement in this indicator, the year has been performing a very challenging and it's to achieve the credit landscape for non premium brands business and we still foresee some challenging the credit scenario for the next month. 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 and A expenses improved by 0.8 percentage points, mainly driven by workforce optimization and budgetary discipline measures.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

Moving to slide number seven, which shows the adjusted net profit. In this first quarter of twenty twenty five, net profit totaled $26,000,000 a 49% increase compared to adjusted net profit of $50,000,000 in the same quarter of 2024. On the right side of the slide in 2025 sales cycle, adjusted net profit reached R140 million that has been a decrease of 4.4% from adjusted net profit of BRL146 million in 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.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

In the first quarter of twenty twenty five, the free cash flow totaled $4,000,000 representing a relevant increase comparing to $52,000,000 in the same period of 2024. On the right side of the slide, in the 2025 sales cycle, our free cash flow reached $144,000,000 an increase of 176% from '24. This quarter and the first semester of twenty twenty five will benefit from early collections regarding 2025 sales cycle, which will be normalized throughout the year together with consistent efficient measures implemented in the collection process in the payments balance. I'll read the details by Guilherme in his initial remarks. On another metric, our last twelve months free cash flow to adjusted EBITDA conversion rate increased from 42.5% in 2024 sales cycle to 50.8% in 2025 despite having an expressive results in the sales.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

But to date, we expect to keep this conversion rate in the following quarters. Moving to Slide nine, we show the provision for doubtful accounts. Total expense with PDA in the first quarter of twenty twenty five totaled $12,000,000 representing 2.9% of net revenue, the same level as comparable quarter. Moving to the right side of the slide, the PDA for 2025 sales cycle amounted to R34 million dollars compared to the R42 million in 2024. Provision for doubtful accounts represent 3% of net revenue in 2025 sales cycle, an improvement of 1.2 percentage points in comparison to 2024.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

As explained before, we still foresee some difficulties in the credit scenario, mainly for the school related to mainstream brands. Moving to the next slide, we observed that the average payment terms of FASTA's account receivables portfolio was 180 days in the first quarter of twenty twenty five, 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 twenty twenty five, Vazda had a net debt position of MXN963 million, MXN40 million decrease from the previous quarter. This achievement is due to the positive cash flow generated during the period in the amount of $74,000,000 which surpassed the impact of interest accrual of $34,000,000 Moving to the right side of the slide, the net debt position decreased by $77,000,000 since last year.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

This decrease was driven also by the free cash flow generated in 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 million dollars at the end of the quarter. This amount is composed of 77,100,000.0 on debentures issued to the parent company in addition to BRL 49,000,000 on accounts payable for business combinations, mainly related to OfferLab acquisition offset by $257,000,000 on cash and cash equivalents that the company owned. In the lower left of this slide, we can see that in the first quarter of twenty twenty five, the net debt to last twelve months adjusted EBITDA ratio has increased at 0.09 times from the last quarter. This slight increase was expected when compared to the fourth quarter of twenty twenty two or the first quarter of twenty twenty four, the increase was elevated downwards and now stands at 2.06 times.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

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 invited you all to the Q and A session.

[Operator]

Thank you. We will now begin the question and answer session. And if you would like to withdraw your question, simply press the star one again. If you are called upon to ask your question and listening via loudspeaker on your device, And your first question comes from the line of Jessica Mueller of JPMorgan. Please go ahead.

[Jessica Mehler, Equity Research Associate at J.P. Morgan]

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 2024? This is my first question.

[Jessica Mehler, Equity Research Associate at J.P. Morgan]

And second, what is the strategy in terms of mix? What is the expectations for the BTG business? How much this business can expand going forward? Thank you.

[Guilherme Mélega, CEO at Vasta Platform]

Thank you, Jessica. I will take your questions. I will start with the margins. We expect stable margins for 2025. So when we ended 2024, it's likely above 30%.

[Guilherme Mélega, CEO at Vasta Platform]

We forecast similar margins. Although Q1 and Q2 will have lower margin due to some concentration in marketing spending and mix, We expect mix to catch up in Q2. And now I will jump to the second question about strategy mix in B2G because it also compounds with the margins. So we have 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 2025 was partially recognized in Q4 twenty twenty four and we expect to perform the remaining of the contract in Q2 and Q3.

[Guilherme Mélega, CEO at Vasta Platform]

Additionally, we already noticed new contracts in B2G, where we have five new contracts in And we have definitely more contracts to pile up in Q2. So this will enhance mix in terms of segment mix. In terms of B2B product mix, we expect to be very similar to last year with complementary products growing high double digits actually above 20% and core content in double digits. That's what we expected and we expected to have similar margins in 2025.

[Operator]

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

[Lucas Dai Nagano, Equity Research Associate at Morgan Stanley]

Hi, good evening, Malaga, Cesar. Thanks for taking our questions. I have just one and it's related to the BTG. You mentioned that part of the contract was booked last year. So do you expect a lower BTG revenue this year or should there be a seasonality?

[Lucas Dai Nagano, Equity Research Associate at Morgan Stanley]

Seasonality of the product contract should be kind of the same in which part of it is booked on the fourth quarter of the previous year. Just a question to assess the potential growth of BTG this year. Thank you.

[Guilherme Mélega, CEO at Vasta Platform]

Thank you very much, Lucas. Yes, it's I really would like to have more data to have a confident seasonality in terms of B2G. But this year, I would say that, for instance, in Para, we are having a more normal seasonality because first semester should be recognized in late Q4. So when we start classes in January and February, you already have the material. So it's quite similar to the B2B distribution process.

[Guilherme Mélega, CEO at Vasta Platform]

So we expect to have the same distribution in 2025. So we do not expect any difference in terms of fiscal year on 2025. Additionally, we have a very heated pipeline. We have 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.

[Guilherme Mélega, CEO at Vasta Platform]

We will not give a guidance about that, but we are working to have it a sound growth for 2025.

[Lucas Dai Nagano, Equity Research Associate at Morgan Stanley]

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 Malaga, our CEO for closing remarks.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

Thank you all very much for participating in the Vasta platform Q1 conference call. We are very happy with the beginning of the year with ACV recognition, with a start of sales campaign of ACV for 2026. We just finalized the Bechha Ducar fair last week that generated a significant pipeline for us in B2B and B2G. So both segments, we have hit the pipeline. And additionally to that, we already see very positive signs in free cash flow that we will remain perform positively throughout the year.

[Cesar Silva, Chief Financial Officer at Vasta Platform]

So thank you very much. Looking forward to see 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.

Participants

Executives

• Cesar Silva, Chief Financial Officer
• Guilherme Mélega, CEO

Analysts

• Jessica Mehler, Equity Research Associate at J.P. Morgan
• Lucas Dai Nagano, Equity Research Associate at Morgan Stanley