Somos Educação — Abril Educação — BBI Conference 2013
43 slides from Somos Educação's conference presentation, November 2013
Slide 1: Institutional Presentation
Institutional Presentation November 2013 1
Slide 2: The Education Market
The Education Market
Slide 3: ABRE’s addressable market
ABRE’s addressable market Larger And More Diversified Than Post-Secondary… …With 8.2x More Students (R$ bn) More than 55 million students R$36 billion Technical schools 4,0 4.0 3.4 4.2 4,2 1.0 Languages 8.4 8,4 8,4 3.5 Own schools > 8.2x (elementary Preparatory and high Courses 51.0 51,0 55.0 school
Slide 4: ABRE’s addressable market
ABRE’s addressable market Students (MM) Schools (‘000)* Our market Public Private Public Private Kindergarten 3.6 1.2 80.9 28.1 Elementary School 13.6 2.5 109.1 22.7 Middle School 11.9 1.8 50.7 12.7 High School 7.3 1.1 19.3 7.9 Total 36.4 6.6 260.0 71.4 Source: MEC-INEP, 2012 *Considers schools from
Slide 5: Larger investments projected in basic education
Larger investments projected in basic education Largest Economies1 OECD’S Ranking of Quality3 Investments in Education Will Grow2… % of GDP GDP Country Country 10.0% 1st US 23rd Taiwan 5.8% 42nd 4.5% UAE 0.9% 2nd China 0.9% 4.9% 43rd Russia 3.7% 3rd Japan 2005 2010 2020 44th Chile K-12 Post-Secondar
Slide 6: Textbooks
Textbooks Government program still accounts for the majority of the volume Number of books sold - million PNLD total program – million of books 176 162 13 154 139 149 146 136 131 15 15 71 14 53 63 71 162 136 131 139 83 92 76 60 2010 2011 2012 2013 Middle High Elementary Middle Public Private Purchas
Slide 7: Learning Systems
Learning Systems Number of students & penetration: Private market (million and %) +5% a.a. 2.35 2.47 2.55 2.18 22% 0,54 0,56 0,54 0,50 EM High School 33% 0,78 0,84 EF2 Middle School 0,71 0,65 EF1 Elementary School 35% EIKindergarten 0,76 0,82 0,89 0,89 10% 0,27 0,28 0,26 0,26 2010 2011 2012 2013 37%
Slide 8: Schools
Schools Private segment number of students has been growing driven by Class C Number of schools* (´000) Number of students (million) Cresc. Cresc. -0,3% -1,4% 43.6 43.0 332 331 6.4 4% 6.6 69 3% 71 37.2 36.4 261 -0.8% 260 -2.3% 2011 2012 2011 2012 Private Public Source: MEC - Censo 2012 *Considers sc
Slide 9: Language
Language Brazilian English proficiency The language teaching franchise penetration is low market has grown between 3% * and Brazil population in the past 3 years. across all income classes. Source: Ipsos/Marplan and ABF. *Growth rate in revenue. 9
Slide 10: Our Business
Our Business i Abril EpucacAo
Slide 11: Milestones
Milestones Spin off 2009 2010 2011 July August April July October 2012 2013 February April June July November February July 11
Slide 12: Our businesses and brands
Our businesses and brands 1,811 associated schools 557,800 students Diversified products and Learning services to offer Systems 30 million books sold Complementary at PNLD 2014 (FNDE) Services Publishers Abril Educação 16 units* 20,100 students* Schools and 415 franchises and own Language Prep. Cour
Slide 13: Our new organizational structure
Our new organizational structure CEO Manoel Amorim VP PRODUCTS AND VP OPERATIONS, SERVICE SCHOOLS AND PREP. LANGUAGES DIRECTOR CFO AND IRO EDUCATIONAL SERVICES AND INTEGRATION COURSES DIRECTOR Julio De Angeli Guilherme A. Mélega Mario Ghio Vera Balhestero João Lacerda PUBLISHER PEDAGOGICAL LOGISTICS
Slide 14: Our ownership structure
Our ownership structure Pre-Offering Post-Offering 1 + Wise Up Civita Free Civita Flavio Free Constellation Family Float Family Augusto Float ON: 73.4% ON: 11.2% ON: 15.4% ON: 65.3% ON: 6.2% ON: 5.7% ON: 4.1% ON: 18.4% PN: 35.5% PN: 27.2% PN: 37.2% PN: 24.9% PN: 13.3% PN: 12.4% PN: 8.8% PN: 39.8% To
Slide 15: Growth Strategy
Growth Strategy i Abril EpucacAo
Slide 16: Our strategy
Our strategy • Commercial synergies Learning System • Brand positioning/segmentation • Adaptive learning • Open new schools (2015) Schools • Organic growth Integration • Zero based budget • IT Plan • Strengthen leadership Language • Organic growth • Expansion 16
Slide 17: Learning Systems
Learning Systems Graduation Flexible • Classrooms are defined by teacher/pedagogical counselor • Teachers are free to change the teaching Emerging • material Focus on the student graduation/citizenship • Accessible price • Commercial return • Commercial and marketing Content support • Teaching mater
Slide 18: Schools
Schools Concentration in the SE and NE regions, which account for 70% of the population Number of schools* (´000) Number of students 71.4 6.6 million North North South 5% 4% South 11% 15% Southeast Southeast 45% 45% Midwest Midwest 8% 6% Northeast Northeast 30% 31% 2012 2012 Source: MEC - Censo 2012
Slide 19: Language
Language N:7 NE:5 MW:19 POTENTIAL: 195 NEW FRANCHISED UNITS SE:91 Significant addressable market Geomarketing study (units) S:73 Source: GEOMARKETING STUDY ABRIL I ALPHABASE 19
Slide 20: Language
Language N: 29 NE:46 TOTAL: 757 NEW MW:69 FRANCHISED UNITS SE:395 Significant addressable market Possibility to triple its presence S:218 Geomarketing study (units) Source: GEOMARKETING STUDY ABRIL I ALPHABASE 20
Slide 21: Our Numbers 3Q13 & 9M13
Our Numbers 3Q13 & 9M13
Slide 22: Highlights
Highlights Net Revenue – R$ million EBITDA (adjusted) – R$ million Op. Cash Flow Generation - R$ mm • 3Q13 net revenue does not include any PNLD 2014 volume, differently from other years. 1 • 3Q13 EBITDA of R$24.9 million was affected by R$8.6 million of non-recurring expenses. Excluding this effect
Slide 23: Operating Performance
Operating Performance
Slide 24: Operating Performance – Learning Systems
Operating Performance – Educational Products & Services Learning Systems Private sector is the main growth driver in Learning Systems Number of Students 3Q13 3Q12 Change (%) Learning Systems 557.8 529.0 5% Technical Learning System (ETB) 7.0 - 0% The Leader in Me (OLEM) 5.8 - 0% Total Students 570.6
Slide 25: Operating Performance – Publishers
Operating Performance – Educational Products & Services Publishers Lack of PNLD volume in 2013 makes the comparison with 2012 difficult (3.8 million in volume). Private Sector was up 14% y-o-y (*) Includes 3.8 million books of PNLD 2013. 25
Slide 26: Operating Performance – Publishers – PNLD 2014
Operating Performance – Educational Products & Services Publishers – PNLD 2014 Our publishing business maintains its total market share leadership position (purchase + repurchase) Historical Market Share: Ática & Scipione Market Share PNLD 2014 (purchase + repurchase) (purchase + repurchase) Others
Slide 27: Operating Performance – Publishers – PNLD 2014
Operating Performance – Educational Products & Services Publishers – PNLD 2014 Similarly to 2007, Publishers had a lower-than-expected market share (purchase) PNLD Historical Market Share (Purchase) 37% 38% 34% 28% 27% 26% 25% 21% 16% 13% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Abr
Slide 28: Operating Performance – Schools and Prep. Courses
Operating Performance – Schools and Prep. Courses Strong organic and inorganic growth in student base Number of Students'000' +26% 20.1 2.7 Motivo 16.0 +9% 17.4 16.0 3Q12 3Q13 28
Slide 29: Operating Performance – Language
Operating Performance – Language Wise Up – Enrollments in September were 12% above the previous year +12% in Sep/13 29
Slide 30: Financial Performance
Financial Performance
Slide 31: Net Revenue per Business Line
Financial Performance – ABRE Consolidated Net Revenue per Business Line Note: “As Is” data. Eliminations consider sales between business lines: SER sales to GEO, Anglo to PH and SER to ETB. 31
Slide 32: Consolidated Net Revenue
Financial Performance – ABRE Consolidated Net Revenue +29% +16% +18% +12% (*) Excludes PNLD effect (3Q12: R$ 26.0 mm); (9M12: R$ 53 mm). (**) Excludes acquisitions: Grupo Ometz, Red Balloon and Motivo (3Q13: R$ 45.8 mm); (9M13: R$ 81.4 mm). 32
Slide 33: COGS - Cost of Goods Sold
Financial Performance – ABRE Consolidated COGS - Cost of Goods Sold -3% -9% +6% +9% (*) Excludes PNLD effect (3Q12: R$9.0 mm); YTD excludes PNLD and inventory write off (9M12: R$40.3 mm). (**) Exclude acquisitions: Grupo Ometz, Red Balloon and Motivo (3Q13: R$5.7 mm); (9M13: R$14.5 mm). 33
Slide 34: SG&A - Selling, General and Administrative Expenses
Financial Performance – ABRE Consolidated SG&A - Selling, General and Administrative Expenses (In R$) (In R$) Note: “As Is” data. GEO accumulated 2013 considers only 6 months for better comparison with 2012. 3Q13 vs. 3Q12 change primarily explained by: • R$27.2 million: incremental expenses related
Slide 35: EBITDA
Financial Performance – ABRE Consolidated EBITDA +20% +27% +193% +20% (*) Excludes PNLD effect (3Q12: R$14.0 mm); YTD excludes PNLD and inventory write off (9M12: R$7.7 mm). (**) Excludes acquisitions: Grupo Ometz, Red Balloon and Motivo (3Q13: R$13.6 mm); (9M13: R$25.5 mm). Excludes non-recurring e
Slide 36: Net Income (Loss)
Financial Performance – ABRE Consolidated Net Income (Loss) 3Q13 9M13 (*) Excludes the accounting amortization of surplus value and includes the tax benefit of the use of goodwill. 36
Slide 37: Capital Structure
Financial Performance – ABRE Consolidated Capital Structure Net Debt Net Debt / EBITDA * 900 2,7 800 700 1,9 600 500 400 780 300 591 0,6 200 100 161 - 1Q13 2Q13 3Q13 *EBITDA "As Is" inlast 12 months + Wise Up pro forma , as described in the Covenants of the debênturas. (R$mm) 1Q13 2Q13 3Q13 Banking
Slide 38: Financial Performance – Learning Systems
Financial Performance – Educational Products & Services Learning Systems Note: “As Is” data. 38
Slide 39: Financial Performance – Publishers
Financial Performance – Educational Products & Services Publishers Note: “As Is” data. 39
Slide 40: Financial Performance – Complementary Services
Financial Performance – Educational Products & Services Complementary Services Highlight: Alfacon: • Sale of 27,000 courses online for 20 000 students • 348 students accepted by the Federal Police, approval rate of 33% • 155 accepted by the National Corrections Department out of 650 openings • 1,257
Slide 41: Financial Performance – Schools and Prep. Courses
Financial Performance – Schools and Prep. Courses Note: “As Is” data. 41
Slide 42: Financial Performance – Language
Financial Performance – Language Net Revenue - R$ mm 3Q13 9M13 39.9 33.7 75.5 55.1 20.4 6.2 Red Balloon Wise Up Language Red Balloon Wise Up Language EBITDA - R$ mm 32.3 3Q13 17.2 9M13 24.4 14.6 8.3 5.1 8.3 FIFA + NPV* FIFA + NPV* 5.1 12.1 24.0 9.5 16.1 7.9 2.6 Red Balloon Wise Up Language Red Ballo
Slide 43: Investor Relations
Investor Relations ri@abrileducacao.com.br www.abrileducacao.com.br/investidores Disclaimer: This document should not in any circumstances be considered a recommendation to invest in the Company. Before investing in the Company, prospective investors should conduct their own analysis and evaluation