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Edited Transcript of PRS.MC earnings conference call or presentation 27-Feb-20 10:00am GMT

Full Year 2019 Promotora de Informaciones SA Earnings Call

Madrid Mar 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Promotora de Informaciones SA earnings conference call or presentation Thursday, February 27, 2020 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Guillermo de Juanes

Promotora de Informaciones, S.A. - CFO

* Manuel Mirat Santiago

Promotora de Informaciones, S.A. - CEO & Executive Director

* Pilar Gil

Promotora de Informaciones, S.A. - Director of Institutional IR

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Conference Call Participants

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* Fernando Cordero Barreira

Grupo Santander, Research Division - Equity Analyst

* Ivón Leal

BBVA Research SA - Research Analyst

* James McKenzie

Fidentiis Equities S.V.S.A., Research Division - Head of Research

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Presentation

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Pilar Gil, Promotora de Informaciones, S.A. - Director of Institutional IR [1]

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Good morning. This is Pilar Gil speaking, Head of IR. Welcome to Prisa's Full Year 2019 Results Conference Call. Today's presentation will be led by Manuel Mirat, our CEO; and by Guillermo de Juanes, our CFO, who will be explaining in detail the results release.

Following our presentation, we will open the floor for Q&A, and the people on webcast will also have the chance to put their questions. It is important to remark for the reading of the results, the following: first and very important, reported numbers include operating allowance and sales returns provisions in EBITDA, which were included in previous years in EBIT; and second, and for a proper comparison on how the evolution of the business move, we will be showing comparable EBITDA numbers throughout the presentations, which include in the reported EBITDA, the IFRS 16 effect in 2018, and exclude in 2019, the extraordinary provisions related to Mediapro ruling. In order to better understand the underlying performance of the different businesses, we will also be showing organic performance, excluding one-offs.

With that, I will now hand it over to our CEO, Manuel.

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [2]

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Thank you, Pilar. Hello to everybody. This is Manuel Mirat speaking. Thank all of you for attending this conference call.

Let me share with you what have been the most relevant milestone for 2019. The presentation is going to be divided in 3 parts: first, we are going to cover the key highlights of the period; second, we are going to explain the group and the business unit detailed evolution; and lastly, we are going to -- through the outlook and next-step metric for 2020.

Please, as you move to Slide 4. We are going to cover over there the key highlight of the period. First, I want to point it out, the solid overall operating performance of the business with total EBITDA of the group reaching EUR 242 million, which mean a growth of 8% in euros and 12% in local currency.

In the Education business, so strong outstanding performance, reaching an EBITDA of EUR 175 million, supported by the good performance in both in private and public market, with a strong focus on accelerating Learning Systems growth. In this sense, the results achieved during 2019 on Learning Systems were according to the plan, 16% growth in number of students and EUR 142 million in revenues. We have a strong visibility for this year, 2020, where number of students are expected to grow over 20% according to contract already closed.

In the Radio business, we remain stable despite the difficulties faced in LatAm, especially in Chile, in the last quarter of the year and gain advertising share in main countries where we operated. And finally, the Press division increased EBITDA by double on the back of the continuous EBITDA growth and improve in efficiency.

Second, the recurrent free cash flow generation, which was positive in EUR 52 million, with a net debt of EUR 907 million pro forma of the Brazilian Public purchase pending to collect at December of 2019 and Media Capital Funds, being a ratio of 4.3% net debt-to-EBITDA.

I would like to point it out the net debt in the period was conditioned by the compensation of EUR 51 million made to Mediapro for the negative ruling of the approval right with repeated local -- sorry, total cash flow generation of the year. As today, all the litigation related with Mediapro has been completely settled.

Third, the company has fully delivered all the compliant with 2019 outlook metric that we will review later on. Four, the strategic repurchase of Santillana minority took place in 2019, improving the cash flow generation profile of the company and allowing the company to focus on group strategy in Education and Learning Systems, the path of the value creation.

And lastly, in 2019, an agreement was reached to sell Media Capital, despite the final price agreed was below market expectation, I think, it was the right option to allowing the company to deleverage and continue with the strategic road map based on subscription business model.

The funds of the transaction we expected to receive in the first quarter of this year. As a whole, we can say that all business units performed according to expectations.

If we move to Slide 5 and 6, we will review the compliance for 2019 outlook metric that was provided to the market. First, in the Education, Santillana improved its organic EBITDA by 19%, excluding asset disposals. This performance in Santillana has been solely supported, first of all, for the good evolution in private LatAm sales with a strong focus in growing Learning Systems, where results, as I said before, were according to the plan for 2019, and we have a strong visibility for 2020.

Second, the extraordinary results achieved in the institutional sales, especially supported by the 32.5% of quota obtained in the Brazilian Public purchase program of this year. And despite 50% of that program was pending to be registered at the end of 2019. And third, Spain saw a strong growth, mainly on the back of novelties in primary.

Second, the Radio outperforming advertising growth in main markets, gaining market share with advertising in Spain growing by 2% compared with flat market and with 4% growth in Colombia compared with 3% market decline.

Radio organic EBITDA improved by 3%, excluding one-off related to the World Cup positive impact in 2018, and the crisis in the last part of the league year in Chile.

Third, the Press division improved EBITDA by double with margin improvement during 2019. Significant savings were achieved and Digital business continued growth. 9% growth on digital advertising revenues, which represented 57% of total advertising in the Press division. Four, the free cash flow of the company, pro forma from the Brazilian Public purchase achieved EUR 52 million compared with EUR 33 million of 2018. And finally, FX impact had negative effect, mainly coming from the Brazilian and Argentina countries below 2018 impact in line with the expected -- expectation of the company. As a result, the company has fully delivered on compliant the 2019 guidance that we provided to the market.

Now I will hand it over to Guillermo, who will explain the details of the P&L results, cash flow generation and debt evolution.

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [3]

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Thank you, Manuel. If we move on to Slide #8, we have the main operating figures of the group for the period. Total revenue amounted to EUR 1.1 billion, and EBITDA reached EUR 242 million, which means a growth of 8% in euros or 12% in local currency versus 2018.

On the bottom left-hand side of the slide, we can see that the positive evolution in the EBITDA is coming from both Spain and LatAm, supported by the good performance in all business areas, with growth coming from Santillana and Press and with a stable performance of Radio.

On the right-hand side of the slide, we can see the negative FX impact, both in revenue and EBITDA, which is largely explained by exchange rates evolution, mainly in Argentina and Brazil.

On Slide #9, we have the evolution from EBIT to net profit. Net profit has been negatively affected in the period by the impact of the disposal of Media Capital, the extraordinary negative provision related to the Mediapro ruling and some tax credit impairments.

Comparable net profit, excluding the extraordinary impacts, reached EUR 23 million. Interest on debt increased by EUR 7.4 million on the back of the financial agreement executed in June 2018. Other financial results declined mainly as 2018 included the accounting impact arising from the signing of this refinancing agreement.

Income tax expenses includes a noncash tax impairment of EUR 23 million on the back of Media Capital and Mediapro ruling outcomes. This is a noncash item and tax credits can be reactivated in the future.

Let's move to explain cash flow generation and net debt evolution in the period on Slide #10. Cash flow before operations reached EUR 18 million, which compared to EUR 38 million in 2018.

2018-'19 performance was mainly impacted by the amount of investment in working capital, which is mainly linked to the non-collection in Q4 of the Santillana, Brazilian Public sales, which is a seasonal effect and will be entirely collected by the end of Q1. Isolating this effect, the recurrent operating cash flow before operations amounted to EUR 52 million versus EUR 33 million from the previous year.

Operational improvement in business, lower redundancies and lack of refinancing costs have offset the higher interest expense for the new financing contract, increased investment in CapEx and lower divestments.

On the bottom-hand side of the slide, we see the net debt evolution in the year. Net debt reached EUR 1 billion, including the positive operating cash flow generation and one-offs such as the last payment to 3i for its stake in the Radio business, the Santillana minority acquisition, the impact of the Mediapro ruling and the nonconsolidation of Media Capital debt. Even Media Capital is an asset held for sale.

Pro forma Media Capital funds and 100% of PNLD pending collections, net debt-to-EBITDA stands at 4.3%.

Let's now move on quickly to review business units performance. If we move to Slide #12, we can see the main operating figures for Santillana. Total revenue in the period reached EUR 628 million with an EBITDA of EUR 175 million. The business showed solid growth and improved profitability, highlighting but excluding asset disposal, EBITDA grew by 19% in local currency.

On Slide 13, we have the evolution of Santillana's revenue broken down by 3 main segments: private LatAm sales, public LatAm sales and Spain. The 3 segments follow different dynamics and are important to better understand the overall performance of Santillana.

Firstly, private LatAm Education sales reached EUR 350 million, representing 57% of total revenues and growing as a whole, 3%, in euros and 6% in local currency. As you know, Santillana is fully focused on accelerating its digital transformation and migrated students from didactical traditional schools to Learning Systems. The evolution of the private LatAm sales confirms this focus. Learning Systems reached EUR 142 million, growing by 30% in euros and 21% in local currency with didactical traditional sales declining by 3.7%.

Secondly, public education sales reached EUR 131 million, representing 21% of total sales and growing by 8% in euros and 30% in local currency. The performance of public sales in 2019 was very strong, supported by a share of 32.5%, obtaining the new order of PNLD and good repositions from previous years.

And thirdly, Spain education sales representing 22% of total revenues, showing a 16% growth on the back of the adoption of new books in primary, in line with expectations. The decline of other revenues is explained by asset sales of EUR 13.6 million in 2018 compared to EUR 3.7 million in 2019. As a whole, an overall strong performance supported by the evolution of both private and public sales with strong focus on accelerating Learning Systems growth.

On Slide 14, we can review the key benefits of Learning Systems, the evolution during 2019 and the expectations in terms of students adoptions and revenue evolution for 2020 based on contracts already signed.

The key benefits of this new business model are the following: more revenue visibility, we signed contracts for an average life between 3 and 4 years. Average revenue per student, higher than the average price per student of the traditional model. Higher profitability with a gross margin above 80% superior to traditional education, average renewal rate on such systems of 86% and a fully invested scalable platform with high-growth potential.

2019 targets for revenue and number of students will reach growing number of students by 16% to surpass 1.4 million students, with a revenue growth of 13% in euros and 21% in local currency, reaching EUR 142 million.

For 2020, we already have visibility based on contracts already signed, expecting over 20% growth in number of students to surpass 1.75 million students, and a similar growth in revenues in local currency.

On Slide 15, we have further details on the 2019 number of students by type of systems and by country. Overall students adoptions grew by 16% with global systems such as UNO and Farias Brito growing 13% in 2019; flexible systems such as Compartir and Educa growing close to 10% in 2019; disciplinary systems such as Richmond Solutions which more than doubled the number of adoptions in 2019.

As you can see, all main countries show a significant growth compared to 2018, with Brazil growing by 18%, Colombia by 17%, and Mexico by 16% and the rest of the countries by 21%. As already anticipated, on the back of contracts that we have already signed, overall adoptions will grow north of 20% in 2020, with a special focus in Brazil, where we anticipate growth north of 30%.

On Slide 16, let me review the addressable market for Learning Systems to better understand the growth potential and Santillana positioning. In the LatAm private market within the deep wells, there are circa 18 million students, of which approximately 12 million studied through didactic methodology and 6 million through Learning Systems or subscription models.

Santillana is leading in LatAm. The transition from our B2C didactic book sales model to a B2B model based on Digital Learning Systems with benefits to all parties involved, including schools, parents and students. Santillana is the only global education player present in all Latin America countries with undisputed leadership position in most of the countries where it is present. And this is the only global player with a scalable platform to have developed learning system outside Brazil.

Santillana today has its full focus on the transition and growth of subscription models based on Learning Systems. Its leadership and the respective position in the didactic business in most Latin American countries and its achievements in positioning its Learning Systems provide Santillana a privileged position to successfully accelerate this transaction.

Let's move on to Slide 17 to explain the Radio evolution. The Radio business remained stable in the period despite some difficulties in LatAm and despite positive impacts for World Cup in 2019, highlighting advertising share gains in most of the countries where it is present. Revenue in the period declined by 4.8% or by 1.5%, excluding one-off with a stable EBITDA which reached EUR 63 million, growing by 3.5%, excluding extraordinary effects. In the period, Spain represented 68% of total revenues, while its contribution to EBITDA was 64%.

On Slide 18, we have the evolution between Spain and LatAm Radio. In Spain, highlights the 3% improvement in EBITDA plus 6%, excluding one-off with improved margin supported by advertising, which grew by 2% in the period, outperforming market and efficiencies.

LatAm was affected in the comparison, especially by a difficult environment in Chile and Colombia, where our brand repositioning has allowed to gain share and have an operational performance above market. EBITDA declined by 2%, 1.7%, excluding one-offs.

Let's review the Press business on Slide 19. On Press highlights the strong operating improvement despite the positive impacts that World Cup had in 2018 due to the following: digital advertising growth; circulation margins, which, as you can see on the bottom left-hand side of the slide, improved by 22% after the agreements reaching distribution, printing and technology. EBITDA in the period reached EUR 12 million compared to EUR 6 million in the same period the previous year.

On Slide 20, we can see the main digital indicators of the Press. Digital advertising increased by 6%, reaching EUR 60 million in the period, growing at a higher rate than traditional advertising decline, which gives good prospects for the future. One digital advertising represents already 57% of total advertising revenues, almost 80% in the

audience. elpais.com continues increasing its audience worldwide. 51% of total audience figures come from international, still a minor source of revenues. Regarding media worldwide ranking, El Pais ranks #6 and rank #1 of news site worldwide in Spanish.

I will now hand it over back to Manuel, who will be concluding and explaining 2020 outlook metrics.

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [4]

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Thank you, Guillermo. As closing remarks, I would like to say the following. The business saw a solid underlying performance, fulfilling 2019 outlook metric. Cash flow generation profile has improved after Santillana minority repurchase and the improve of business profitability. Despite the disappoint trend with Mediapro payment of EUR 51 million in the year and the lower-than-expected final price agreed on Media Capital. Media Capital disposal is expected to fully completed in the first quarter of this year following the roadmap of the company.

Management is fully focused on continued deleveraging profitable growth and value creation. We have a clear strategy where the subscription model business both in Media and Education are key. And the Education business will provide us alternatives and opportunity of shareholder value creation.

If we move to Slide 24 to review the main outlook metric for 2020. For 2020, we expect a positive evolution in all business, with special focus in growing Learning Systems business, growing in digital advertising in Media and the implementation of the Press subscription model.

Regarding Education business, we expect operating growth basically explained by the private LatAm sales, where we expect growing in Learning Systems with expecting growth in number of student over 20% based on the contract, as I already mentioned, already signed it, and to continue decline in traditional business on the back of the focus in creating traditional studying into Learning Systems.

On the public sales, despite we do not expect new order for the Brazilian government for Ensino Medio, sales will grow. In Spain, we do not foresee novelties for 2020 as a new education reform is currently under discussion.

On Radio, we will maintain our leadership outperforming advertising market in main countries and cost control. We'll keep focus on content quality to maintain our leadership with digital growth base in [all the] business.

On Press, we are launching the paywall model, with expect monetization based on customer knowledge. Digital growth will continue to grow on the company, I would prefer this for the Latin American market. Operating improvement will continue on the back of digital growth and continuous efficiencies.

On the exchange rate, we are expected to contribute negatively, especially on the Brazilian and Chile market. And finally, the recurrent cash flow generation is expected to be higher compared with 2019.

I think as a closing remark, I would like to point it out that the management and the Board are currently working with an advisory in order to define a strategy with focus in education once -- last year, we have acquired 25% of Santillana, and to continue delivering company. This provides the company with several strategic alternatives to maximize the Santillana value and to reduce debt. I will announce it in due time over this year.

Thanks, all of you, and let's move to a Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question on the phone comes from the line of James McKenzie of Fidentiis.

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [2]

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Three quick questions. First of all, on the free cash flow. I think I understand pretty much what you're saying with the EUR 52 million. But just to check, you're talking about the cash flow that's been received from sales accrued in 4Q and not collected. Specifically, it doesn't include the 50% of the PNLD that you've talked about in the third quarter, of which I think 50% is going to be built and presumably collected in 2020.

Then just looking at the -- and on the same subject on the pro forma net debt of EUR 907 million. Now I understand that, that includes an additional EUR 34 million of free cash flow, and collection in eventually of an additional EUR 120 million for the sale of Media Capital. So that's a first question. Maybe if you could take those, and then I've got a couple of other ones.

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [3]

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That's correct, James. I mean, basically, cash flow before operation was EUR 20 million. What we've done is a pro forma for basically what would have been a comparable year to last year, 2018. As you know, we know we have pending collections of EUR 46 million. Half of them were registered in revenues and EBITDA at the end of the year. But the reality is that what we have pending collection is that EUR 46 million.

Regarding pro forma, as the EUR 907 million is basically the net debt position of financial net debt, so without IFRS, EUR 1,061 million. We expect to repay debt of around EUR 120 million from Media Capital proceeds and then we are doing this pro forma on the PNLD collection.

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [4]

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Okay. And then -- and once again, I think I understand your guidance for 2020. But if I was to say, if we were to take that EUR 907 million, you would expect, if we were to use a similar date in 2021, and assuming, obviously, no extraordinaries or anything, but the debt position would fall by more than EUR 52 million this year. So I'm just trying to get a clear picture on your guidance?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [5]

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Well, no, because we have step up in interest in March. And part of that comes from peak. So net debt will also be impacted by that, and that's around EUR 50 million of debt.

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [6]

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EUR 50 million, and that's all -- the step up is all peak?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [7]

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No. It's 0.5 -- it's a 1.5% step up, 0.5% is current and 1% is...

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [8]

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Got you. Okay. Brilliant, very, very clear. And then, I mean, thanks very much for the new disclosure on LatAm, which I think is going to help us to model Santillana more in line with your Brazilian peers, which is great news. A couple of questions. First on the growth in Learning Systems from 1.4 million to 1.75 million. How much of that is migration from the traditional didactic students? And I realize this is obviously ARPU enhancing. I mean, I've done a quick ARPU calculation here. How does your ARPU compared to your peers of Arco and Somos in the Brazilian market? And if you could sort of explain differences there?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [9]

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Well, I mean, what we're doing is transitioning as many students as we can. But we are also gaining new students. And as we mentioned, our renewal rate is of around -- between 85% and 90%. Okay. So that's with regards to your third question. Basically, as the plan of the company is to accelerate that transition as much as possible. And as we've disclosed in Page 16 of the presentation, and you can see, from the -- the plan is from our base, firstly, transition as much as possible. We have 3.6 million students across LatAm, and that's the first bucket of students that we are targeting. But definitely, we're also targeting new students.

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [10]

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So would you expect growth overall in private market students in 2020 or more or less flat?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [11]

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No, the overall market students is flat. I mean, those -- the base is the same. Now the transition is what we're focusing on.

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [12]

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Just maybe, James, to point it out that this year, 2019, we have the company who has more growth in the Learning Systems market. We have grown around 37% compared with our core[ambassador] that what they have to close is roughly between 20% and 25%. That means we have to really -- have a really incredible pro forma on the Brazilian market. You mentioned also what is the comparison with the ARPU. I mean, we have -- our blended ARPU on the subscription model, that is roughly EUR 109 million. And ARPU on ambassador has a bit more ARPU on the Learning Systems platform that they have, okay?

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James McKenzie, Fidentiis Equities S.V.S.A., Research Division - Head of Research [13]

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Is that a competitive advantage for you?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [14]

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I mean, think about that, they are just company who are based on the Brazilian market. I mean, as you know, we are pressing -- fitting in countries in Latin America. We have opening that model in all of them. The ARPU blended of all these countries make a bit below what Arco and Kroton has in the Brazilian market. That is an opportunity in the future coming. I mean, as you know, we have the largest platform, the only platform that it is on the Latin American country. This advantage is a real advantage that we have and what we have to put all the focus on the company in the next years. I mean, nowadays, we have very good outlook for the year, 20% growth in students. These are contracts that they already signed. I really believe on the growth that we can deliver to the market in the year.

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Operator [15]

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Your next question comes from the line of Ivón Leal Macia of BBVA.

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Ivón Leal, BBVA Research SA - Research Analyst [16]

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Just maybe a first one regarding your free cash flow guidance to just be sure I have understand. The growth in free cash flow for 2020 assumes stead up of 0.5% in the cost of debt. And are you assuming also flat working capital?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [17]

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Well, what we're assuming is, again, it's difficult to predict working capital because it's difficult to predict how the public sales at the end of the year will be collected, correct? I mean, at the moment, what we're foreseeing is our level of working capital, which is lower than the one we had at year-end. Still we are not projecting or we're not anticipating that 100% of those public sales will be collected, okay? So I would assume around EUR 25 million or so. And -- but as you know, it will really depend on how we perform on that public sale and then how we collect. So as of today, it's difficult to anticipate a number. But what we are -- in our guidance, the number is below what we ended up in 2019.

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Ivón Leal, BBVA Research SA - Research Analyst [18]

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Okay. And have you started negotiations for the refinancing of the debt now?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [19]

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No. I mean, basically, as you know, we have a debt that matures in 2022. So we are comfortable with our current contracts. I mean, we signed it in June 2018. So 18 months ago, have 3 years ahead of us. And basically, we'll be opportunistic and start any refinancing when we think it makes sense and conditions other parts.

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Ivón Leal, BBVA Research SA - Research Analyst [20]

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Okay, okay, okay. Then a second round of questions regarding what's going on in Santillana. I don't know if you could give us an idea of how you expect performance by country in the Learning Systems. And by this, I mean, do you think you could increase your share in Brazil? Okay. The second one is on Slide 15. That's very useful information, how students have performed by country. Do you think that's a fair assumption for 2020, 2021? Or there is a country which -- where growth is going to pick up?

And the third one is, I struggle to see how the margins are going to perform within the whole business. So I don't know if I'm right, I've read somewhere, I don't know whether it's press release or presentation that Learning Systems have like margins around 30%, okay. That is expected to grow significantly as your increase in number of students. And then in the traditional private schools as students decrease, is there negative impact in margins there?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [21]

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Okay. Many questions, Ivón. On number of students and how we see growth on a country-by-country basis, I think, we already mentioned in Brazil, we expect north of 30% growth for 2020. Okay.

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Ivón Leal, BBVA Research SA - Research Analyst [22]

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That gaining share, that means gaining share against Arco and...

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [23]

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Exactly. Exactly.

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [24]

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As I mentioned to you, Ivón, for 2019. I mean, we are the company who has more growth on the market. We have grown 37% compared with Arco and Kroton that they are in the range between 20% and 25%.

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Ivón Leal, BBVA Research SA - Research Analyst [25]

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And that's because your ARPU is lower than these guys, that it's the difference in prices? Or it's just because we're leveling?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [26]

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Really it's coming -- our ARPU is below Arco and Kroton, but it's not just a huge difference between them.

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Ivón Leal, BBVA Research SA - Research Analyst [27]

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Okay, okay. Okay. In the rest of countries, then...

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [28]

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I mean, you can see that 70% of the students come from 3 countries really, Brazil, Colombia and Mexico. In Mexico, we see growth around 20%. And Colombia, perhaps, is the country with a growth which will be between 5% and 10%, but it's true that we already have an 80% market share there. So it's more difficult to grow in that market. Okay.

Regarding margins, as you were mentioning, I think how you have to think about the business is, as you mentioned, Learning Systems around 30%, I would say, private sales -- private traditional business is in the -- depending on the countries, but should be around plus 25% and 30%, and then Spain has a very strong margin, close to 40% and the public institutional sales above 20%, okay?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [29]

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For the view of the ARPU for the year coming, I mean, we expect -- I mean to be maintained the ARPU level that we have already.

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Ivón Leal, BBVA Research SA - Research Analyst [30]

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Okay. And so far, I guess, there are no news about Arco and Cogna potentially moving to other countries outside Brazil?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [31]

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Correct. I think they are more focused, as you know, I mean, Cogna has made a follow-on on a capital increase 1 month ago, a few weeks ago. And I think that what they are focused now is to prepare the company for putting value in the market. I think that is what they are thinking now, not going abroad. They are focused now, I think, on the Brazilian market.

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Operator [32]

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(Operator Instructions) Your next question comes from the line of Fernando Cordero of Banco Santander.

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Fernando Cordero Barreira, Grupo Santander, Research Division - Equity Analyst [33]

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Thanks for taking my 2 questions. The first one is related with the regulation on -- with PNLD delays happening in the first quarter. Just to understand not only impacting cash flow and also in revenues that you have already disclosed also impacting EBITDA? The second question is related with price and the upcoming paywall launch, as you are already also included into the outlook. I just would like to have a little bit more color on what is going to be the strategy, and I understand -- on where do you see the breakeven in terms of number of subscribers for the paywall in base?

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [34]

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Fernando, I mean, with regards to the public sales, basically, as you know, we sold BRL 220 million. Basically, we booked 50% of that. So 50% of the BRL 220 million were not booked in Q4. Okay? I mean, frankly, there is EUR 7 million of EBITDA roughly, I mean, depending on the exchange rate, okay?

With regard to your second question, I think, breakeven, it depends on price, advertising cost and number of subscribers. So it's difficult to give you a number, but how we see it is that it should be around 60,000, 70,000 subscribers to have a breakeven.

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [35]

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And Fernando, it's one of the -- we expect it to implement the paywall model next month, in March. It's going to be a metric solution. That means that after reading a number of sequels you will have to pay for continuing reading the newspaper. And as Guillermo mentioned, there is a breakeven around 70,000 subscribers.

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Guillermo de Juanes, Promotora de Informaciones, S.A. - CFO [36]

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But as you know, Fernando, it will depend on digital advertising, how much marketing you put on launching the system and price. So it's also very difficult to anticipate. I mean, it could be with a lower number.

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Fernando Cordero Barreira, Grupo Santander, Research Division - Equity Analyst [37]

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Where do you see more opportunity for the paywall? With your national or with your domestic audience, or with your international audience, which is already 50% of your base audience?

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Manuel Mirat Santiago, Promotora de Informaciones, S.A. - CEO & Executive Director [38]

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I think we expect in both markets. I mean, we have a lot of loyalty, especially at Spanish market. That means that we expect to have a stake or relevant subscriber number also outside the stake.

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Operator [39]

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(Operator Instructions) We have no further questions at this time, please continue.

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Pilar Gil, Promotora de Informaciones, S.A. - Director of Institutional IR [40]

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Okay. Thank you very much for attending the call today. Should you have any further questions, do not hesitate to contact us back to the IR department. Thank you, and bye-bye.

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Operator [41]

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That concludes the conference for today. Thank you for participating. You may all disconnect.