Institutional Presentation February 2011 KROT11

Transcription

1 Institutional Presentation February 2011 KROT11

2 Disclaimer The following presentation provides general information about Kroton Educacional S.A. ( Kroton ). It consists of summary information not intended to be complete, and should not be considered a potential investors as investment advice. This presentation is strictly confidential and may not be published or distributed to any other party. Kroton makes no claims and provides no guarantees as to the accurateness, relevance or scope of the information presented here, which should not be used as a basis for making investment decisions. This presentation contains forward-looking statements and information as defined under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Such forward-looking statements and information are projections only, not guarantees of future performance. We advise investors that said forward-looking statements and information are, or may in the future be, subject to risks, uncertainty and other factors related to the operations and business environment of Kroton and its subsidiaries, and the actual results of these companies may differ significantly from estimates of future results that are expressly stated or implied by these forward-looking statements and information. Although Kroton believes that the outlook and the assumptions contained in these forward-looking statements and information are reasonable and based on data currently available to its management, Kroton cannot guarantee future results or events. Kroton expressly exempts itself from the duty of updating any of the following forward-looking statements or information. This presentation does not constitute an offer, invitation or solicitation of an offer to subscribe to or purchase any securities. This presentation and its contents do not constitute the basis of any contractual agreement or legal obligation of any kind. 2

3 Kroton Overview KROT11

4 An educational group with national presence One of the major educational groups in the country with more than 40 years of history and: Primary and secondary 265,000 students in 720 associated schools Post secondary 85,600 students in postsecondary education, in 37 campuses, in 27 cities and 10 states in Brazil Primary and secondary Associated schools in Brazil (+6 in Japan and 1 in Canada) 8 7 Post secondary units

5 Contribution Margin per Business As % of Net Revenues Operation Performance Running Rate K-12 Post Secondary Kroton Revenues 20.0% 80.0% - Contribution Margin per Business 27.5% 20.6% 22.0% Corporate % EBITDA 15.0% Centralized Corporate Structure with Shared Services Primary and Secondary Education Post Secondary Education 5

6 Kroton is well positioned in both business Main players on the Brazilian learning system market (K12) Associated school s students ( 000) 790 Source: Santander Research Positivo Pearson Objetivo Abril Educação KROTON Santillana Saraiva Etapa Universitário Main players on the Brazilian post secondary market in Brazil Number of students (includes distance learning) 9M10 - ( 000) Source: Hoper Anhanguera Estácio Unip Uninove Laureate KROTON SEB Uniban Universo Ânima M.Nassau Unit Unicsul UB Part.Fanor / Devry Ibmec 6

7 More than 40 years of experience in the Brazilian educational market IUNI Educacional acquisition Company is ready for revenues and margin growth Growth speeding Acquisitions Conclusion of integration Kroton IUNI Capital raise from Advent International and entrance on the controlling group Turn around on Kroton s post secondary Company foundation and beginning of K-12 activities High scale learning system creation Operation expansion for other states and countries through partnerships with big Companies Start up of Post Secondary Operation 98,300 IPO July ,000 17, ,600 43, ,000 85, & & / Q *For-profit private companies begin offering post-secondary courses # of Students K-12 Post-Graduation 7

8 Kroton timeline October, 2009 March, 2010 August, Integration process / turn around Event ADVENT Entrance in the controlling shareholder s base ACQUISITION OF IUNI CONCLUSION OF INTEGRATION/ TURN AROUND PREPARED FOR GROWTH Impact o Capital increase New management culture Beginning of management restructuring Growth of 100% in the post secondary education IUNI management remains in Kroton s operation Beginning of the integration process and turn around of Pitagoras post secondary units New Academic Model Budget strict control Corporative restructure Financial and academic ERP integrated Annual Savings of R$ 40 million captured Change in the performance level New CEO and organizational structure EBITDA Margin of 15% (running rate) Focus on areas related to the target of 23% EBITDA margin in 2013 Beginning of acquisitions and distance learning operation 8

9 Corporate governance Founding Advent 50 % Partners 50 % International PAP + Direct 53.2 % Treasury Stocks Participation 1.5 % 45.3 % Free-Float 9 members Board of Directors (2 independents) 4 Consulting Committees Academic Auditing Financial HR 100% Tag along Code of Conduct Market Maker Dividends and Share Trade Policies 9

10 Our Businesses Primary and Secondary Education KROT11

11 Kroton offers a K-12 learning system through a national network of associated schools REDE 720 Primary and secondary associated schools in Brazil (+6 in Japan and 1 in Canada)

12 Kroton s learning system includes a broad range of educational products and services Book collection Services & training Technology and multimedia tools Education assessment and partnerships Set of comprehensive and interlinked textbooks, workbooks and exercise books for students of all mandatory and complementary classes and additional publications High quality technical and pedagogical assistance through systematic training Set of different events for teachers, leadership and parents as well as student activities (e.g. Educational Congress, Management Courses, Parents Seminars, etc) Innovative support for additional activities TV Portal Robotics Project Mind lab Project Connected classroom Interactive network Exclusive yearly evaluation assessment program for all schools through INADE Partnerships with different institutions create additional advantages for associated schools Comprehensive set of materials and services strengthening schools and students results 12

13 High growth rates thanks to quality and close relationship with associated schools Students CAGR 07-10: 12.9% 183, % 207,800 +9% 226,600 10, % 265,000 24,000 Associated schools , , Private Network Public Network - Projecta High level of fidelization 2009 Enem s Results The renewal rate of associated school 68% of Rede Pitágoras schools are ranked contracts is 93% among the top schools in the cities where it is Over 90% of the associated schools are present satisfied with our learning system 90% of associated schools are above the national average 13

14 Our Businesses Post Secondary Education KROT11

15 Brazilian post secondary education market 5.9 million enrollments in 2009 (includes distance learning since 2001) 4,4 Public Segment (CAGR 97-09: 5.4%) 4,2 3,9 Private Segment (CAGR 97-09: 11.4%) 3,6 3,3 Source: INEP /MEC 3,0 2,8 2,4 2,1 1,8 1,5 1,5 1,5 1,2 1,3 1,1 1,1 1,2 1,2 1,2 1,3 0,8 0,8 0,8 0,9 0, According to UNESCO, Brazil`s post secondary education has lower penetration within BRICs countries (penetration among population between years old) 82% 75% 67% 59% 52% Source: UNESCO/ % 23% 20% 62% Wage increase for workers with a post secondary degree Source: Hoper 62% 124% 124% 150% 171% 200% USA Mexico Chile Brazil China 15

16 Kroton s goal is to provide quality education for many FEDERAL AND EXCELLENCE CENTERS Institutes idealized by the students High perceived value No costs (public) or price range of R$ 1,200 to R$ 1,900 QUALITY OPTION Institutes with high concept Good perceived value Price range from R$ 900 to R$1,500 QUALITY EDUCATION FOR MANY Institutes with good concept Good quality for employability Price range from R$ 400 to R$ 900 PRICE OPTION Institutes with dubious concept Price is the higher perceived value Less than R$

17 Strong national presence with 37 campuses 37 Campuses 10 States 27 Municipalities Macapá (AP) Marabá (PA) São Luis (MA) Lauro de Freitas (BA) Salvador (BA) Itabuna (BA) Sinop (MT) 2 units Tangará da Serra(MT) Várzea Grande (MT) Cuiabá (MT) 3 units Rondonópolis (MT) 2 units Primavera do Leste (MT) Londrina (PR) Uberlândia (MG) Divinópolis (MG) Feira de Santana (BA) Teixeira de Freitas (BA) Betim (MG) Ipatinga MG) Belo Horizonte(MG) 6 units Contagem (MG) Poços de Caldas (MG) Rio de Janeiro (RJ) Votorantim (SP) Jundiaí (SP) Linhares (ES) Guarapari (ES) 17

18 ...and over 85 thousand students Student enrolled in 3Q10 88,094 10,241 6,365 6,418 85,552 2Q10 New Students Drop Out Graduates 3Q10 Student enrolled in ,104 17,817 18,539 85,552 43,612 42,192 2Q10 IUNI Acquisition New Students Drop out Graduates 3Q10 18

19 Diversified mix of programs offered 43.2% % of total number of students 24.0% 15.3% 8.7% 5.4% 2.2% 1.2% Social Sciences Health Science Engineering Associate Degree Professorship Technological Sciences Other 19

20 Growth Strategy KROT11

21 Growth strategy 1 Organic growth and distance learning Organic growth Primary & secondary 2 Acquisitions Distance learning Graduate and Post secondary Organic growth Post secondary Acquisitions Post secondary 3 Bridge of EBITDA margin Target of 23% in

22 1 Organic growth and distance learning Organic growth Primary & secondary The primary and secondary education market offers interesting growth opportunities Significant growth potential to provide educational services to public schools, as a result of changes in Government policies to improve the quality of education Expertise to rapidly develop specific products to attend new markets: Pax Editora 2009 enrollments on primary and secondary education Public students Source: INEP /MEC Students 86% 14% Private students Revenues ( 000) CAGR Primary and secondary education % Sector Public Private Kroton 24, ,000 Market 45,270,710 7,309,742 22

23 1 Organic growth and distance learning Distance learning Graduate and Post secondary Graduate distance learning programs implemented in December 2010 Synergies with primary and secondary education Distance graduate studies centers opportunity using: associated schools Launching of post secondary distance learning programs Post secondary distance learning accreditation project currently being analyzed by the Ministry of Education (beginning of activities expected in 2012) Possible acquisitions to accelerate growth post secondary units in different cities 23

24 1 Organic growth and distance learning Organic growth Post secondary Key points: Recurring review of programs portfolio in all units Priority focus on Engineering programs (12,000 students in 2010) 57 new programs to be approved and opened until 4Q11/1Q12 Consolidation of 5 start-up units Active sales force New FIES 24

25 1 Organic growth and distance learning Organic growth Post secondary New FIES: Significant potential to boost enrollment and reduce dropout and delinquency rates Certificate sale already tested Conditions and possible consequences Interest of 3.4% p.a. 18-month grace period after graduation Payment term over 3x program duration, starting after grace period Guarantor Fund of the Government may exempt the need of a co-signer Higher new student enrollment Lower delinquency and dropout rates Incentive for dropouts to return Reduce importance of pricing in student decision Greater competitive advantage for institutions with better quality and reputation 25

26 1 Organic growth and distance learning Organic growth Post secondary New FIES: Consistent growth since June/2010 Kroton s eligible base: ~61% of the students Number of Kroton students with contracts under the new FIES 10,000 New FIES contracts: ~71,831 Market share Other Source: MEC 92% 8% Kroton: 5,796 actual Post Secondary in-class students Market share 5,796 4,810 5,064 5,329 3,973 2,015 1, Jun Jul Aug Sep Oct Nov Dec Jan/11 1Q11e Other Source: INEP /MEC 98% 2% Kroton 26

27 1 Organic growth and distance learning Organic growth Post secondary New FIES timeline Example: payment flow for a 100% FIES financed of a 4-year program and R$ monthly tuition January 2011 Begining January 2015 Graduation July 2016 End of Grace Period August 2029 End 4 years (48 months) Program Length 1 ½ year (18 months) Grace Period 13 years (156 months) Pay back R$ per month R$ per month R$ per month New FIES workflow: education becomes economically viable for everyone Only for low income students no co-signer needed Guarantor Fund 7% of net revenues Quarterly payment needs a co-signer Monthly payment 27

28 2 Acquisition Acquisitions Post secondary Highly fragmented market, with a lot of room for consolidation Number of post secondary institutions Public Segment Private Segment Source: INEP /MEC 1,982 1,859 1,637 1,391 1,180 1,652 1,758 1,208 1,442 1,004 2,165 2,270 2,281 2,252 2,314 1,934 2,022 2,032 2,016 2, ,314 post secondary institutions in 2009 Source: INEP /MEC Institutions less than 1,000 students Institutions with 1,001 to 10,000 students Institutions with more than 10,001 students 139 7% % 1,379 67% 28

29 2 Acquisition Acquisitions Post secondary Key points of the investment thesis: Regions where Kroton s brands are already known Regions with high potential for growth: Central, Northeast and North Institutions with a minimum size: Preferable between 3,000 to 7,000 students Kroton s proved expertise: Track record of acquisition and turn around Aggressive integration process 29

30 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary Acquisition historical: 19 institutions in 12 months FIPAG Pitágoras Guarapari NABEC Pitágoras Guarapari Unilinhares Pitágoras Linhares SEUSC Pitágoras, Rio de Janeiro UMEP Pitágoras Londrina FATEC Pitágoras Londrina FADOM Pitágoras Divinópolis São Francisco Pitágoras Divinópolis JAPI Pitágoras Jundiaí UNIMINAS Pitágoras Uberlândia FACTEF Pitágoras Teixeira de Freitas Dec, 2007 Jan, 2008 Mar, 2008 Apr, 2008 May, 2008 Jun, 2008 Aug, 2008 Sep, 2008 Oct, 2008 Unicem Primavera IUNI Primavera Facdelta, Salvador IUNI Salvador Unicem IUNI Tangará Unicen Sinop Aeroporto IUNI Sinop Aeroporto Unitas IUNI Tangará Facsul Itabuna IUNI Itabuna UNIR IUNI Rondonópolis UESP IUNI Rondonópolis 30

31 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary IUNI acquisitions: Total of 8 institutions States of Mato Grosso and Bahia Before acquisition ( prior months annualized) Full year 2009 Full year 2009 vs. before acquisition Number of students 11,226 13, % Annualized net revenues (R$ 000) 52,611 66, % Annualized EBITDA (R$ 000) ,011 1,561.0% EBITDA margin 1.6% 21.0% p.p. EV (R$ MM) 60.5 EV/EBITDA after turn around 4.3X 31

32 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary Pitágoras acquisitions: Total of 11 institutions (excludes 2 that were sold in 2010) States of Minas Gerais, São Paulo, Espírito Santo, Paraná and Rio de Janeiro Matured campus 2009 Contribution margin as a % of net revenues Actual (Aug- Dec annualized) Running Rate Pitágoras Linhares 4.0% 7.2% 7.0% 30.5% Pitágoras Teixeira de Freitas 18.4% 19.6% 29.3% 30.0% Pitágoras Divinópolis (2 units) 12.5% 17.8% 17.0% 29.9% Pitágoras Guarapari (2 units) -7.4% -8.9% 5.9% 28.7% Pitágoras Jundiaí -22.7% -21.8% 32.2% 20.8% Pitágoras Uberlândia -33.6% -10.6% 9.9% 15.9% Pitágoras Londrina (2 units) -21.9% 7.6% 22.2% 14.8% Pitágoras Rio de Janeiro -0.2% 9.7% 44.6% -43.5% Total -6.4% 4.8% 19.0% 21.1% 32

33 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary Turn around of 6 matured units: More improvements expected, especially in Pitágoras Belo Horizonte, in Matured campus 2009 Contribution margin as a % of Net Revenues Actual (Aug- Dec annualized) Running rate Pitágoras Belo Horizonte -6.8% -2.2% -10.1% -10.3% Pitágoras São Luis 30.4% 43.6% 58.2% 49.0% Pitágoras Poços de Caldas -71.6% -21.2% -0.8% 38.6% Pitágoras Betim 17.2% 32.5% 28.3% 36.4% Pitágoras Ipatinga 25.8% 41.8% 46.7% 33.6% Pitágoras Contagem -7.6% -75.6% -19.7% 10.8% Total 7.0% 16.3% 19.2% 20.0% 33

34 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary Revenues evolution: Units continue to grown during turn around phase Revenues in R$ ( 000) Pre turn around* Running Rate Chg % Acquisitions IUNI 52,611 83, % Acquisitions Pitágoras 98, , % Pitágoras matured units 114, , % Total 279, , % * Pre-turn around for IUNI acquisitions is 2008 figures and for Pitágoras is 2009 figures. 34

35 2 Acquisition Track record of acquisition and turn around Acquisitions Post secondary Shared services: Significant scale gains after integration of acquired institutions Shared Services in R$ (MM) Jan-Jul 10 (annualized) Running rate Chg % Shared Services Cost % Net Revenues % % Net Revenues -11.8% -7.7% -34.8% 35

36 2 Acquisition Aggressive integration process Acquisitions Post secondary Time is EBITDA Concept: 90-day integration Project management methodology One manager for each integration project Ability to lead simultaneous projects Focusing on what matters in 90 days: Integrated financial ERP Integrated academic ERP Integrated payroll Shared services in operation Budget in operation Academic model implemented for freshmen and seniors in the first semester following the one in which the acquisition took place 36

37 Integration process timeline Negotiation 1 st month 2 nd month 3 rd month Preparing for integration Announcement of acquisition Cash and budget integration (financial ERP) Academic integration, with the implementation of the new academic model Payroll integration (ERP) Student management integration (Academic ERP) Implementation of Shared Services (ERP) AGILITY STANDARDIZATION CENTRALIZATION TECHNOLOGY 37

38 2 Acquisition Aggressive integration process Acquisitions Post secondary Essential pillars for performance improvement: I. End of operational inefficiencies II. III. IV. Gains of scale Transfer of services to the shared service center (SSC) Strict management of costs and expenses (low-cost culture, supported by a restrictive budged) Low-cost academic model 38

39 2 Acquisition Aggressive integration process Acquisitions Post secondary Changing the core business: Impacts of the low-cost / high performance academic model CONVENTIONAL ACADEMIC MODEL 3,200 hours in-class 8 semesters 400 h/c per semester 20 weeks 20 h/c per week KROTON S ACADEMIC MODEL 3,000 hours 600 hours supplementary activities via distance learning 2,400 hours in-class 8 semesters 300 h/c per semester 20 weeks 15 h/c per week FACULTY COSTS: 20 H/C/WEEK FACULTY COSTS: 15 H/C/WEEK 25% reduction in the cost of teachers in the classroom 39

40 2 Acquisition The academic model is developed based on a Balanced Scorecard concept: Proficiency To develop proficiencies needed for a targeted profile Learning and Growth To prepare processes and actions for Human Resources development Strategic View Skills To develop procedural and attitude-related skills for a targeted profile Teaching - Learning Processes To develop teaching-learning processes, tools and actions Contents Vocational contents with prior knowledge for developing proficiencies 40

41 3 Bridge of EBITDA margin Target of 23% in 2013 Factors related to evolution in EBITDA until 2013: Factor Business impacted Action Gain on margins p.p. I Renegotiation of lease agreements Solutions are being implemented for 14 Post secondary units with inappropriate rental costs II End of classes with an insufficient number of students Post secondary New policy for opening new classes is already in place. Current classes will be graduating during the next 2 years III Impacts from the New FIES Post secondary Lower dropout rate, delinquency and provision for doubtful accounts IV Cost and expense management Primary & secondary and post secondary Strict control aligned with the previously approved budget V Dilution of the corporate structure Primary & secondary and post secondary The current structure allows for organic and inorganic growth of nearly 50% of the total number of students

42 Financial Results 3Q10 KROT11

43 Highlights Pro Forma Results* Values in R$ ('000) 3Q10 3Q09 Chg% 2Q10 Chg% 9M10 9M09 Chg% Gross revenue 180,996 93, % 187,082 (3.3)% 579, , % Adjusted net revenue 158,224 78, % 156, % 503, , % Recurrring gross profit 53,543 23, % 35, % 112, , % Recurring gross margin 33.8% 29.4% 4.4 p.p 22.9% 10.9 p.p 22.3% 38.0% (15.7) p.p. Recurrring EBITDA 18,992 9, % (1,322) n.a. 59,032 54, % Recurring EBITDA margin 12.0% 12.6% (0.6) p.p. -0.8% 12.8 p.p 11.7% 19.9% (8.1) p.p. Adjusted net income (loss) 7,943 11,993 (33.8)% (11,820) n.a. 23,701 44,865 (47.2)% Adjusted net income margin 5.0% 15.2% (10.2) p.p. -7.5% 12.6 p.p 4.7% 16.5% (11.8) p.p. *Results contemplating IUNI s January and February results, a period prior to the acquisition by Kroton. Corporate Results Values in R$ ('000) 3Q10 3Q09 Chg% 2Q10 Chg% 9M10 9M09 Chg% Gross revenue 180,996 93, % 187,082 (3.3)% 530, , % Adjusted net revenue 158,224 78, % 156, % 459, , % Recurrring gross profit 53,543 23, % 35, % 154, , % Recurring gross margin 33.8% 29.4% 4.4 p.p 22.9% 10.9 p.p 33.6% 38.0% (4.4) p.p. Recurrring EBITDA 18,992 9, % (1,322) n.a. 48,660 54,149 (10.1)% Recurring EBITDA margin 12.0% 12.6% (0.6) p.p. -0.8% 12.8 p.p 10.6% 19.9% (9.3) p.p. Adjusted net income (loss) 7,943 11,993 (33.8)% (11,820) n.a. 19,987 44,865 (55.4)% Adjusted net income margin 5.0% 15.2% (10.2) p.p. -7.5% 12.6 p.p 4.4% 16.5% (12.1) p.p. 43

44 Gross and net revenue Gross revenue R$ million Net revenue R$ million +70% 530,2 +69% 459,2 311,4 422,4-3% 187,1 181,0 219,4 93,1 159,5 156,4 76,4 92,0 107,8 16,7 27,6 24,6 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Primary and Secondary Education Post-Secondary Education 272,5 +1% 358,3 156,6 158,2 186,3 78,8 131,7 135,4 64,4 86,2 100,9 14,4 24,9 22,8 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Primary and Secondary Education Post-Secondary Education Average annual ticket primary & secondary education 2010: R$ Average monthly ticket post secondary education 3Q10: R$

45 Non recurring costs and expenses related to integration process reflect more severe adjustments than originally planned Non recurring itens 3Q10 9M10* IUNI acquisition - auditors, lawyers and closing balance R$ 0.5 million R$ 2.8 million Integration project consulting and IT R$ 2.2 million R$ 8.6 million Integration project - layoff expenses R$ 12.5 million R$ 17.0 million Other R$ 1.5 million R$ 4.1 million Total R$ 16.7 million R$ 32.5 million * Includes the full first quarter of 2010 of IUNI 45

46 Cost of products and services Total cost breakdown 9M10 Costs R$ million , % 12% Primary and Secondary Education Post-Secondary Education 55,6 120,7 116,6 104,7 101,0 169,0 156,3 288,3 53,6 2,0 4,1 3,7 12,7 16,8 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Costs of Goods Costs of Services Total Costs / % Adjusted Net Revenue Cost of services breakdown on post secondary 9M10 17 % 14% 6% 1% Faculty and Personnel Rents 62% Administrative Costs Depreciation Others 46

47 Recurring gross profit 49% higher than 9M09 Gross profit R$ million ,2 Gross margin breakdown 3Q10 43, ,6 10,3 31.9% 23,2 35,9 53,5 45.1% Primary and Secundary Education Post-secundary Education 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Gross Profit Gross Margin 47

48 Operating expenses impacted by IUNI s acquisition and with no synergies yet; expenses with PDA inline with target Operating expenses R$ million 104,9 Provision for doubtful accounts (PDA) and net revenue % R$ million ,9 14,5 38, ,6 33, Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Operating Expenses SG&A / % Adjusted Net Revenue 2,8 8,3 7,4 22,2 8,1 7,2 2,6 0,2 0,2 0,2 0,7 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M10 Primary and Secundary Education Post-Secundary Education PDA / % Net Adjusted Net Revenue *Excluding non recurring expenses, goodwill amortization and PDA. % of net revenue per segment 3Q09 2Q10 3Q10 Primary and secondary education 1.3% 0.7% 0.7% Post secondary education 4.1% 6.2% 5.3% 48

49 EBITDA in August and September is already reflecting the benefits of the integration project Values in R$ ( 000) 3Q10 2Q10 Chg % 9M10 (Pro Forma) Actual EBITDA 2,266 (13,045) n.a. 27,124 (+) Non recurring costs and expenses 16,726 11, % 32,489 Recurring EBITDA 18,992 (1,322) n.a. 59,032 Recurring EBITDA margin(%) 12.0% (0.8%) 12.8 p.p. 11.7% (+) Expenses and costs of start-up and greenfields 3,224 3,674 (12.2%) 9,437 Adjusted EBITDA 22,216 2,352 n.a. 69,050 Adjusted EBITDA margin(%) 14.0% 1.5% 10.8 p.p. 13.7% Values in R$ ( 000) Jul/10 Aug/10 Sep/10 3Q10 Recurring EBITDA ,083 7,939 18,992 Recurring EBITDA margin(%) 2.0% 18.8% 13.9% 12.0% 49

50 Adjusted net profit* Net profit R$ million ,9 12, ,9 19,4 1.8 (7.5) -11,8 3Q09 Colunas1 2Q10 3Q10 Colunas2 9M09 9M10 Net Profit Adjusted Net Margin * Excluding non-recurring expenses, deferred income tax / social contribution and goodwill amortization. 50

51 Capex: 6.4% of 9M10 adjusted net revenue Capex R$ million 29,4 Capex 3Q10 breakdown R$ million 14% Computer equipment and library 7,9 11,5 10,0 18% 36% Expansion of physical facilities - Construction Laboratory and similar equipment 1Q10 2Q10 3Q10 9M10 32% Systems development and software licenses 51

52 Accounts Receivable: Behavior of the portfolio reflects the initial benefits from FIES Values in R$ ( 000) 3Q10 3Q09 Chg % 2Q10 Chg % Accounts receivable 128,987 92, % 142,059 (9.2)% (+) Primary and secondary 27,713 22, % 46,441 (40.3)% (+) Post secondary 90,857 70, % 95,618 (5.0)% (+) Balance FIES 10, Accounts receivable turnover (days) Primary and secondary (days) % 107 (32.7)% Post secondary (days) (38.9)% 65 (7.6)% 52

53 Cash flow Cash flow R$ million 14,9 56,0 16,7 6,8 10,0 3,6 41,0 Cash Position on 06/30/10 Cash generated from operations excluding nonrecurring Non-recurring costs and expenses Acquisitions/Sales of Investments Capex Cash Flow from Financing Activities Cash Position on 09/30/10 53

54 Investor Relations Carlos Lazar Phillipe Casale