Vasta Platform Third Quarter 2023 Financial Results

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SÃO PAULO, November 08, 2023--(BUSINESS WIRE)--Vasta Platform Limited (NASDAQ: VSTA) – "Vasta" or the "Company" announces today its financial and operating results for the third quarter of 2023 (3Q23) ended September 30, 2023. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

HIGHLIGHTS

  • Vasta’s accumulated subscription revenue during the 2023 sales cycle (from 4Q22 to 3Q23) totaled R$1,207 million, a 18% increase compared to the previous year (or 22%, excluding textbook subscription products (PAR)). In the third quarter, subscription revenue totaled R$194 million, a 15% increase compared to the previous year (or 20%, excluding PAR).

  • In the 2023 sales cycle (4Q22 and 3Q23) net revenue increased 24% to R$1,437 million, mostly due to the conversion of 2023 ACV into revenue and due to the performance of the Non-subscription products and B2G. In the third quarter, net revenue totaled R$258 million, a 36.7% increase compared to the previous year.

  • Starting in 2023, Vasta started to offer its products and services to the Brazilian public sector (B2G). Our broad portfolio of core content solutions, digital platform, and complementary products together with customized learning solutions tested over decades by the private sector are now available to the K-12 public schools. With the B2G sector, we generated R$40.7 million in revenues in the third quarter of 2023 and R$ 81.2 million in revenues in the 2023 sales cycle.

  • In the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. EBITDA margin remained stable compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%, mainly due to higher inventory cost caused by rising inflation on paper and production cost and a provision for doubtful accounts (PDA) made in the 4Q22 in connection with a large retailer that entered into bankruptcy proceeding in Brazil. Those increases were offset by operating efficiency gains, cost savings and better mix due to subscription products growth.

  • Adjusted Net Profit in the 2023 sales cycle totaled R$36 million, an 83% increase compared to Adjusted Net Profit of R$20 million for the 2022 sales cycle.

  • In the 2023 sales cycle, Free cash flow (FCF) totaled R$145 million, a 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 FCF totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23) as a result of company growth and constant efficiency pursuance.

MESSAGE FROM MANAGEMENT

In the third quarter, we concluded the 2023 sales cycle (4Q22 to 3Q23) and subscription revenue has reached R$1,207 million, a 18% increase over the 2022 sales cycle (from 4Q21 to 3Q22) or 22%, excluding textbook subscription products (PAR). Our ACV conversion was 98.1% for 2023, in comparison to an ACV conversion of 102.4% for 2022. For context, in the dynamic landscape of ACV-to-Revenue conversion, fluctuations around 2p.p. in either direction are considered normal by us. Such fluctuations are usually driven by slight differences in number of students per school and product mix.

In the 2023 sales cycle, our net revenue grew 24%, to R$1,437 million. Notably, our Complementary Solutions continues to stand out as the highest growth rate among our business segments, with a 42% increase in the current cycle compared to the 2022 sales cycle.

Moreover, the company’s cash flow generation was one of the main highlights of the 2023 sales cycle. In the 2023 sales cycle, FCF totaled R$145 million an 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 Free cash flow (FCF) totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23). This progress is the result of our company's growth and commitment to operational efficiency.

The normalization of the company’s profitability was another highlight of the 2023 sales cycle. Adjusted EBITDA was R$39 million in 3Q23 compared to R$23 million in the same quarter of the previous year and in the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. Despite the higher inventory costs in 2023, caused by rising global inflation and production costs, combined with the provision for doubtful accounts (PDA) made in the 4Q22 in connection with the bankruptcy proceedings of a large retailer in Brazil, such cost increases were offset by operating efficiency gains, other cost savings and a better mix owing to subscription products growth, which led to a stable EBITDA margin compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%.

During the year, we have announced that Vasta made a significant stride by extending its product and service offerings to the Brazilian public sector (B2G). Our diverse portfolio, which includes core content solutions, a digital platform, and complementary products, along with proven custom learning solutions previously tested in the private sector, are now accessible to K-12 public schools. With the B2G sector, we generated R$40.7 million in revenues in the third quarter of 2023 and R$ 81.2 million in revenues in the 2023 sales cycle. This expansion into the public sector marks a momentous opportunity for Vasta, allowing us to contribute to advance education in Brazil while creating new revenue streams. We are excited about the possibilities this development presents and are committed to delivering high-quality educational solutions that meet the unique needs of the public sector.

In relation to the bottom line, Adjusted Net Profit in the 2023 sales cycle totaled R$36 million, an increase of 83% compared to the 2022 sales cycle when Adjusted Net Profit totaled R$20 million. We remain focused on optimizing our operations and pursuing strategic opportunities to enhance our financial performance. Our commitment to delivering value to our customers and shareholders remains unwavering.

Finally, since 2022, we have dedicated a section of our earnings release for Environmental, Social and Governance (ESG) matters, including a panel of key indicators that has been updated on a quarterly basis, reinforcing our commitment to the highest ESG standards.

OPERATING PERFORMANCE

Student base – subscription models

2023

2022

% Y/Y

2021

% Y/Y

Partner schools - Core content

5,032

5,274

(4.6%)

4,508

17.0%

Partner schools – Complementary solutions

1,383

1,304

6.1%

1,114

17.1%

Students - Core content

1,539,024

1,589,224

(3.2%)

1,335,152

19.0%

Students - Complementary content

453,552

372,559

21.7%

307,941

21.0%

Note: Students enrolled in partner schools

In the 2023 sales cycle, Vasta served nearly 1.5 million students with core content solutions. Aligned with the company´s strategy to focus on improving our client base in 2023 through a more diversified mix of schools and growth in premium education systems (Anglo, PH and Fibonacci), brands with a higher average ticket, lower defaults, greater adoption of complementary solutions and longer-term relationships. On the other hand, the reduction of our client base was concentrated on the low-end segment and PAR (paper-based), which have higher number of students on average, and a lower margin. Average ticket price of schools that remain in our client base in 2023 is 11% higher than that of schools that are no longer our clients.

The partners-school base that uses our complementary solutions increased by 79 new schools, growing 6% in the number of students served compared to the previous cycle.

FINANCIAL PERFORMANCE

Net revenue

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2023 sales cycle

2022 sales cycle

% Y/Y

Subscription

194,841

169,609

14.9%

1,207,155

1,024,051

17.9%

Subscription ex-PAR

184,278

153,574

20.0%

1,095,141

897,986

22.0%

Traditional learning systems

180,044

148,843

21.0%

937,344

787,217

19.1%

Complementary solutions

4,234

4,731

(10.5%)

157,797

110,769

42.46%

PAR

10,563

16,035

(34.1%)

112,014

126,065

(11.1%)

B2G

40,747

-

0.0%

81,199

-

0.0%

Non-subscription

22,346

19,115

16.9%

148,829

133,469

11.5%

Total net revenue

257,933

188,724

36.7%

1,437,183

1,157,520

24.2%

% ACV

15.8%

17.0%

(1.1 p.p.)

98.1%

102.4%

(4.3 p.p.)

% Subscription

75.5%

89.9%

(14.3 p.p.)

84.0%

88.5%

(4.5 p.p.)

Note: n.m.: not meaningful

In the 2023 sales cycle, net revenue increased 24.2% to R$1,437 million, mostly due to the conversion of 2023 ACV into revenue and due to the performance of the Non-subscription products and B2G. In the third quarter, net revenue totaled R$258 million, a 36.7% increase compared to the prior year. In the third quarter of 2023 we generated R$40.7 million in revenues with the B2G sector.

In the third quarter, we concluded the 2023 sales cycle (4Q22 to 3Q23) and Vasta’s accumulated subscription revenue during the 2023 sales cycle totaled R$1,207 million, a 18% increase compared to the previous year (or 22%, excluding textbook subscription products (PAR)).

Our ACV conversion was 98.1% for 2023, in comparison to an ACV conversion of 102.4% for 2022. For context, in the dynamic landscape of ACV-to-Revenue conversion, fluctuations around 2p.p. in either direction are considered normal by us. Such fluctuations are usually driven by slight differences in number of students per school and product mix. In the third quarter, subscription revenue totaled R$194 million, a 15% increase compared to the previous year (or 20%, excluding PAR).

EBITDA

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2023 sales cycle

2022 sales cycle

% Y/Y

Net revenue

257,933

188,724

36.7%

1,437,183

1,157,521

24.2%

Cost of goods sold and services

(101,161)

(91,855)

10.1%

(547,541)

(436,977)

25.3%

General and administrative expenses

(124,500)

(98,511)

26.4%

(489,760)

(477,809)

2.5%

Commercial expenses

(63,044)

(48,917)

28.9%

(229,173)

(189,238)

21.1%

Other operating (expenses) income

7,534

1,301

479.1%

(16,874)

6,293

(368.1%)

Share of loss equity-accounted investees

(2,878)

(2,150)

33.9%

(7,894)

(2,150)

267.2%

Impairment losses on trade receivables

(15,369)

(4,692)

227.6%

(55,550)

(27,859)

99.4%

Profit before financial income and taxes

(41,485)

(56,100)

(26.1%)

90,391

29,782

203.5%

(+) Depreciation and amortization

70,587

66,953

5.4%

275,791

260,498

5.9%

EBITDA

29,102

10,853

168.1%

366,182

290,280

26.1%

EBITDA Margin

11.3%

5.8%

5.5 p.p.

25.5%

25.1%

0.4 p.p.

(+) Layoff related to internal restructuring

115

869

(86.8%)

1,297

12,126

(89.3%)

(+) Share-based compensation plan

9,755

11,172

(12.7%)

20,369

33,376

(39.0%)

(+) M&A adjusting expenses

-

-

n.m.

23,562

-

n.m.

Adjusted EBITDA

38,972

22,894

70.2%

411,411

335,782

22.5%

Adjusted EBITDA Margin

15.1%

12.1%

3.0 p.p.

28.6%

29.0%

(0.4 p.p.)

Note: n.m.: not meaningful

In the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. EBITDA margin remained stable compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%, mainly due to higher inventory cost caused by rising inflation and production costs, combined with the provision for doubtful accounts (PDA) made in the 4Q22 in connection with the bankruptcy proceedings of a large retailer in Brazil. Those increases were offset by operating efficiency gains, cost savings and better mix due to subscription products growth.

In 2Q22, Vasta acquired a 45% minority stake in Educbank Gestão de Pagamentos Educacionais S.A. ("Educbank"), which registered a loss in equity-accounted investees in the amount of R$7.9 million in the 2023 sales cycle, mainly due to the performance of our equity-accounted investee in its early stage of operation.

The M&A adjusting expenses in the 2023 sales cycle were impacted by the one-off effect of a price adjustment calculation based on earn-outs and net debt.

(%) Net Revenue

3Q23

3Q22

Y/Y (p.p.)

2023 sales cycle

2022 sales cycle

Y/Y (p.p.)

Gross margin

60.8%

51.3%

9.5 p.p.

61.9%

62.2%

(0.3 p.p.)

Adjusted cash G&A expenses(1)

(15.3%)

(10.8%)

(4.5 p.p.)

(13.5%)

(14.5%)

1.0 p.p.

Commercial expenses

(24.4%)

(25.9%)

1.5 p.p.

(15.9%)

(16.3%)

0.4 p.p.

Impairment on trade receivables

(6.0%)

(2.5%)

(3.5 p.p.)

(3.9%)

(2.4%)

(1.5 p.p.)

Adjusted EBITDA margin

15.1%

12.1%

3.0 p.p.

28.6%

29.0%

(0.4 p.p.)

(1) Sum of general and administrative expenses, other operating income and profit (loss) of equity-accounted investees, less: depreciation and amortization, layoffs related to internal restructuring, share-based compensation plan and M&A one-off adjusting expenses.

In proportion to net revenue, gross margin dropped 30 bps in the 2023 sales cycle (from 62.2% to 61.9%) mainly due to higher inventory cost caused by rising inflation on paper and production costs while Adjusted cash G&A expenses and Commercial expenses reduced by 100 bps and 40 bps respectively, due to gains in operating efficiency, workforce optimization, cost savings and a sales mix that benefited from the growth of subscription products.

Reported provisions for doubtful accounts (PDA) grew 150 bps between the compared sales cycles. This increase in PDA is impacted due to the provisioning of 100% of accounts receivable from a large Brazilian retail company undergoing bankruptcy proceedings, in the amount of R$9 million in the 2023 sales cycle. Furthermore, this change in PDA is also influenced by the credit landscape, primarily among schools outside the premium brands segment. This has demanded a conservative approach to risk management and credit allocation, aligning our financial strategy with the prevailing market conditions and potential credit challenges. All factors considered, the participation of PDA in relation to Vasta's Net Revenue increased to 3.9% in the 2023 sales cycle compared to 2.4% in 2022 sales cycle.

Finance Results

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2023 sales cycle

2022 sales cycle

% Y/Y

Finance income

19,511

19,174

1.8%

85,831

70,186

22.3%

Finance costs

(74,966)

(68,426)

9.6%

(307,569)

(247,300)

24.4%

Total

(55,455)

(49,252)

12.6%

(221,738)

(177,114)

25.2%

In the third quarter of 2023, finance income totaled R$19.5 million, compared to R$19.2 million in 3Q22, representing a slight increase of 1.8% mainly due to interest on accounts receivable partially offset by lower interest on market securities. During the 2023 sales cycle, finance income has increased by 22% to R$85 million, mainly due to the impact of higher interest rates on financial investments and marketable securities. Additionally, finance income in the 2023 sales cycle includes a gain of R$10 million recorded in 4Q22, resulting from the reversal of interest on tax contingencies.

Finance costs increased by 9.6% (quarter-on-quarter) in 3Q23, amounting to R$75 million. In the 2023 sales cycle, finance costs have risen by 24.4% to reach R$307.6 million. This increase is driven by higher interest rates applicable to bonds and financings, accounts payable on business combinations, and provisions for tax, civil, and labor losses.

Net profit (loss)

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2023 sales cycle

2022 sales cycle

% Y/Y

Net (loss) profit

(62,111)

(75,994)

(18.3%)

(67,053)

(110,684)

(39.4%)

(+) Layoffs related to internal restructuring

115

869

(86.8%)

1,297

12,126

(89.3%)

(+) Share-based compensation plan

9,755

11,172

(12.7%)

20,369

33,376

(39.0%)

(+) Amortization of intangible assets(1)

38,940

38,778

0.4%

156,313

152,205

2.7%

(-) Income tax contingencies reversal

-

-

n.m.

(29,715)

-

n.m.

(+) M&A adjusting expenses

-

-

n.m.

23,562

-

n.m.

(-) Tax shield(2)

(16,595)

(17,278)

(4.0%)

(68,524)

(67,220)

1.9%

Adjusted net (loss) profit

(29,896)

(42,454)

(29.6%)

36,249

19,803

83.0%

Adjusted net margin

(11.6%)

(22.5%)

10.9 p.p.

2.5%

1.7%

0.8 p.p.

Note: n.m.: not meaningful; (1) From business combinations. (2) Tax shield (34%) generated by the expenses that are being deducted as net (loss) profit adjustments.

In the third quarter of 2023, adjusted net loss totaled R$29 million, a 29.6% increase compared to adjusted net loss of R$42 million in 3Q22. As for the 2023 sales cycle, adjusted net profit totaled R$36 million, reflecting an 83% increase from an adjusted net profit of R$19 million in the 2022 sales cycle.

The gain related to the reversal of tax contingencies was recorded in 4Q22 impacting corporate tax and finance results. On the other hand, the M&A adjusting expenses occurred in 2Q23 was adjusted as it relates to a one-off effect of a price adjustment calculation based on earn-outs and net debt.

Accounts receivable and PDA

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2Q23

% Q/Q

Gross accounts receivable

545,972

378,587

44.2%

632,151

(13.6%)

Provision for doubtful accounts (PDA)

(73,390)

(49,250)

49.0%

(64,870)

13.1%

Coverage index

13.4%

13.0%

0.4 p.p.

10.3%

3.2 p.p.

Net accounts receivable

472,582

329,337

43.5%

567,281

(16.7%)

Average days of accounts receivable(1)

118

102

16

149

(31)

(1) Balance of net accounts receivable divided by the last-twelve-month net revenue, multiplied by 360.

The average payment term of Vasta’s accounts receivable portfolio was 118 days in the 3Q23 which represents 31 days lower than the second quarter of 2023 and 16 days higher than the third quarter of the previous year.

Free cash flow

Values in R$ ‘000

3Q23

3Q22

% Y/Y

2023 sales cycle

2022 sales cycle

% Y/Y

Cash from operating activities(1)

102,532

61,814

65.9%

330,989

247,762

33.6%

(-) Income tax and social contribution paid

(279)

(1,247)

(77.6%)

(5,361)

(2,736)

95.9%

(-) Payment of provision for tax, civil and labor losses

(508)

52

(1077%)

(1,302)

(1,421)

(8.3%)

(-) Interest lease liabilities paid

(3,050)

(3,655)

(16.6%)

(14,264)

(13,941)

2.3%

(-) Acquisition of property, plant, and equipment

(8,899)

(2,374)

274.9%

(28,788)

(62,060)

(53.6%)

(-) Additions of intangible assets

(22,913)

(30,892)

(25.8%)

(106,696)

(85,934)

24.2%

(-) Lease liabilities paid

(8,623)

(6,682)

29.0%

(29,135)

(27,099)

7.5%

Free cash flow (FCF)

58,260

17,016

242.4%

145,444

54,573

166.5%

FCF/Adjusted EBITDA

149.5%

74.3%

75.2 p.p.

35.4%

16.3%

19.1 p.p.

LTM FCF/Adjusted EBITDA

35.4%

16.3%

19.1 p.p.

35.4%

16.3%

19.1 p.p.

(1) Net (loss) profit less non-cash items less and changes in working capital. Note: n.m.: not meaningful

In the 2023 sales cycle, FCF totaled R$145 million an 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 Free cash flow (FCF) totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23).

Financial leverage

Values in R$ ‘000

3Q23

2Q23

1Q23

4Q22

3Q22

Financial debt

765,350

846,443

815,927

842,996

811,612

Accounts payable from business combinations

601,171

591,620

599,713

625,277

647,466

Total debt

1,366,521

1,438,063

1,415,640

1,468,273

1,459,078

Cash and cash equivalents

106,757

38,268

42,680

45,765

44,343

Marketable securities

261,264

385,002

331,110

380,516

433,803

Net debt

998,500

1,014,793

1,041,850

1,041,992

980,932

Net debt/LTM adjusted EBITDA(1)

2.43

2.57

2.85

2.78

2.92

(1) LTM adjusted EBITDA includes Eleva. Eleva’s LTM adjusted EBITDA prior to November 2021 may not reflect Vasta’s accounting standards.

As of the end of 3Q23, Vasta recorded net debt in the amount of R$998 million, a reduction of R$16 million to the net debt position of 2Q23. The positive cash flow generated in the period helped surpass the negative impacts of interest rates and payments relating to our share buyback program. The net debt/LTM adjusted EBITDA of 2.43x as of 3Q23 is 0.14x lower than 2Q23 and 0.49x lower than 3Q22.

In comparison to 3Q22, the net debt position increased by R$18 million, due to the impact of higher interest rates and investments made in the minority-stake acquisitions of Educbank (in July 2022) both of which were partially offset our positive cash flow generated in the period.

ESG

Sustainability Report

In the third quarter, Vasta released its sustainability report for the year 2022. This report, which is the company's second, was prepared in accordance with international standards for reports of this category and showcases the implementation of our corporate strategy, challenges, and achievements, while also reaffirming our commitment to transparency and sustainability. These include the publication of its first Greenhouse Gas Inventory, the company's adherence to the UN Global Compact, the dedication of 3,216 thousand hours to the Corporate Volunteer Program, the SOMOS Afro program, an affirmative internship program, and the fact that 29% of the seats on the Board of Directors are occupied by women. The report complies with the Global Reporting Initiative (GRI) 2021 version and also considers other standards recognized in Brazil and abroad, such as the Sustainability Accounting Standards Board (SASB) guidelines for the education sector, the guidelines of the IBC Stakeholder Capitalism Metrics from the World Economic Forum, and the principles of the International Integrated Reporting Council (IIRC).

The document is available at: https://ir.vastaplatform.com/esg/

In line with the topics identified in the materiality process, every quarter we present Vasta's most material indicators:

Key Indicators

ENVIRONMENT

Water withdrawal2

SDGs

GRI

Disclosure

Unit

3Q2023

3Q20223

% Y/Y

2Q2023

% Q/Q

3, 11, 12

303-3

Total water withdrawal

m³

5,290

3,565

48%

4,654

13.7%

Municipal water supply1

%

100%

4%

96 p.p.

100%

0 p.p.

Groundwater

%

0%

96%

(96 p.p.)

0%

0 p.p.

Energy consumption within the organization2

SDGs

GRI

Disclosure

Unit

3Q2023

3Q20223

% Y/Y

2Q2023

% Q/Q

12, 13

302-1

Total energy consumption

GJ

1,845

1,523

21%

2,909

-36.6%

Energy from renewable sources2

%

59%

98%

(39 p.p.)

62%

(3 p.p.)

The decrease in groundwater consumption is due to the closure of our Distribution Center's well located in São José dos Campos, prompted by possible contamination from adjacent land which housed a factory. In the third quarter, the operations of the Anglo Tamandaré unit were closed in view of the inauguration of the Anglo Paulista unit, which was under construction during the first semester. The building features modernized facilities and provides greater mobility for the students.

SOCIAL

Diversity in workforce by employee category

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

5

405-1

C-level – Women

%

29%

25%

4 p.p.

29%

0 p.p.

C-level – Men

%

71%

75%

(4 p.p.)

71%

0 p.p.

C-level- total4

no.

7

4

75%

7

0.0%

Leadership (≥ managers) – Women

%

45%

48%

(3 p.p.)

47%

(2 p.p.)

Total - Leadership (≥ managers) – Men

%

55%

52%

3 p.p.

53%

2 p.p.

Leadership (≥ managers) 5 – total

no.

144

134

7%

139

3.6%

Academic staff – Women

%

18%

20%

(2 p.p.)

18%

0 p.p.

Academic staff – Men

%

83%

80%

3 p.p.

82%

1 p.p.

Academic staff 6 - total

no.

80

84

-5%

82

-2.4%

Administrative/Operational – Women

%

55%

57%

(2 p.p.)

56%

(1 p.p.)

Administrative/Operational – Male

%

45%

43%

2 p.p.

44%

1 p.p.

Administrative/Operational 7 - total

no.

1,564

1,539

2%

1,524

2.6%

Employees – Women

%

53%

54%

(1 p.p.)

53%

0 p.p.

Employees – Men

%

47%

46%

1 p.p.

47%

0 p.p.

Employees - total

no.

1,795

1,761

2%

1,752

2.5%

Social impact* 8

SDGs

GRI

Disclosure

Unit

1S2023

1S2022

2S2022

4, 10

-

Scholars of the Somos Futuro Program

no.

236

371

247

* Indicators presented progressively, referring to the total accumulated since the beginning of the year, which is why we are not presenting the variations compared to previous semesters.

We continue to maintain the Somos Futuro Program via Instituto SOMOS. The initiative enables public school students to attend high school at one of Vasta's partner schools. In the second quarter, 236 young people were studying through the program receiving didactic and teaching material, online school tutoring, mentoring and access to the entire support network of the program, which includes psychological monitoring, in addition to the scholarship offered by the school.

The difference between the figures for 2022 and 2023 is due to the number of students who graduated in 2022 being greater than the number of students who entered the cycle in 2023.

Health and Safety

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

3

403-5, 403-9

Units covered by the Risk Management Program (PGR)

%

100%

100%

0 p.p.

100%

0 p.p.

Trained employees

no.

781

346

126%

729

7.1%

Average hours of training per employee 9

no.

1.25

1.08

16%

1

64%

Injury frequency 10

rate

4.58

4.06

13%

1.88

144%

High-consequence injuries

no.

-

-

0%

-

0%

Recordable work-related injuries 11

rate

-

3.04

-100%

0.94

-100%

Fatalities resulted from work-related injuries

no.

-

-

0%

-

0%

Fatalities 12

rate

-

-

0%

-

0%

The main causes of work-related injuries were impacts suffered in internal and external circulation areas causing abrasions, contusions, and sprains.

The increase in the volume of health and safety training hours per participant in the quarter is related to the increase in fire brigade training during that period, which has a longer duration in compliance with municipal regulations.

GOVERNANCE

Diversity in the Board of Directors (gender)

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

5

405-1

Members

no.

7

7

0%

7

0%

Women

%

29%

29%

0 p.p.

29%

0 p.p.

Ethical conduct

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

16

2-25

Cases recorded in our Confidential Ethics Hotline 13

no.

20

ND

n.m

14

43%

10

406-1

Grievances regarding discrimination received through our Confidential Ethics Hotline 13

no.

1

ND

n.m

-

0%

Confirmed incidents of discrimination 13

no.

-

ND

n.m

-

0%

5

405-1

Employees who have received training on anti-corruption policies and procedures

%

100%

100%

0.0 p.p.

100%

0 p.p.

Operations assessed for risks related to corruption

%

100%

100%

0.0 p.p.

100%

0 p.p.

Confirmed incidents of corruption

no.

-

-

0%

-

0%

In the third quarter, we continued the Company leadership literacy and engagement program by conducting a workshop on discrimination, workplace harassment, and sexual harassment, which was initiated in the second quarter. The workshop presents the topic through concepts and practical examples and reinforces the existence of the Confidential Channel for reporting any situation related to discrimination, harassment, and violations of the Code of Conduct. It also emphasizes the guarantee of confidentiality and provides detailed information about the investigation process for received complaints.

Compliance*

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

16

307-1, 419-1

Fines for social and economic noncompliance

R$ thousand

-

-

0%

-

0%

Non-financial sanctions for social and economic non-compliance

no.

-

-

0%

-

0%

Fines for environmental noncompliance

R$ thousand

-

-

0%

-

0%

Non-financial sanctions for environmental non-compliance

no.

-

-

0%

-

0%

* Only cases deemed material, i.e., cases that harm Vasta's image, that lead to a halt in operations, or where the amounts involved are over R$1 million.

We did not record significant sanctions or fines related to economic and social issues, except for the normal course of business.

Customer data privacy

SDGs

GRI

Disclosure

Unit

3Q2023

3Q2022

% Y/Y

2Q2023

% Q/Q

16

418-1

External complaints substantiated by the organization

no.

4

20

-80%

6

-33%

Complaints received from regulatory agencies or similar official bodies

no.

-

-

0%

0

0%

Cases identified of leakage, theft, or loss of customer data

no.

-

-

0%

-

0%

FOOTNOTES:

SDG

Sustainable Development Goal. Indicates goal to which the actions monitored contribute.

GRI

Global Reporting Initiative. Lists the GRI standard indicators related to the data monitored.

ND

Indicator discontinued or not measured in the quarter.

NM

Not meaningful

1

Based on invoices from sanitation concessionaires.

2

Acquired from the free energy market.

3

The amounts referring to 1Q2022, 2Q2022 and 3Q2022 were equalized in 4Q2022 considering the total amount of invoices from concessionaires received in the respective quarters – considering the different closing deadlines for each location

4

Takes into the account the positions of CEO, vice presidents and director reporting directly to the CEO

5

Management, senior management and leadership positions not reporting directly to the CEO

6

Course coordinators, teachers, and tutors.

7

Corporate coordination, specialists, adjuncts, assistants and analysts.

8

Indicators reported on semi-annual basis (2Q and 4Q).

9

Total hours of training/employees trained.

10

Total accidents (with and without leave)/ Total man/hours worked (MHW) x 1,000,000

11

Work-related injury (excluding fatalities) from which the worker cannot recover fully to pre-injury health status within 6 months. Formula: Number of injuries/MHW x 1.000.000.

12

Fatalities/ MHW x 1,000,000.

13

Indicators measured from the first quarter of 2023. It used to be reported annually in Sustainability Reports

CONFERENCE CALL INFORMATION

Vasta will discuss its third quarter 2023 results on November 8, 2023, via a conference call at 5:00 p.m. Eastern Time. To access the call (ID: 3871721), please dial: +1 (888) 660-6819 or +1 (929) 203-1989. A live and archived webcast of the call will be available on the Investor Relations section of the Company’s website at https://ir.vastaplatform.com.

ABOUT VASTA

Vasta is a leading, high-growth education company in Brazil powered by technology, providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment, ultimately benefiting all of Vasta’s stakeholders, including students, parents, educators, administrators, and private school owners. Vasta’s mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. Vasta believes it is uniquely positioned to help schools in Brazil undergo the process of digital transformation and bring their education skill set to the 21st century. Vasta promotes the unified use of technology in K-12 education with enhanced data and actionable insight for educators, increased collaboration among support staff and improvements in production, efficiency and quality. For more information, please visit ir.vastaplatform.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that can be identified by the use of forward-looking words such as "anticipate," "believe," "could," "expect," "should," "plan," "intend," "estimate" and "potential," among others. Forward-looking statements appear in a number of places in this press release and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including (i) general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business; (ii) fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future; (iii) our ability to implement our business strategy and expand our portfolio of products and services; (iv) our ability to adapt to technological changes in the educational sector; (v) the availability of government authorizations on terms and conditions and within periods acceptable to us; (vi) our ability to continue attracting and retaining new partner schools and students; (vii) our ability to maintain the academic quality of our programs; (viii) the availability of qualified personnel and the ability to retain such personnel; (ix) changes in the financial condition of the students enrolling in our programs in general and in the competitive conditions in the education industry; (x) our capitalization and level of indebtedness; (xi) the interests of our controlling shareholder; (xii) changes in government regulations applicable to the education industry in Brazil; (xiii) government interventions in education industry programs, that affect the economic or tax regime, the collection of tuition fees or the regulatory framework applicable to educational institutions; (xiv) cancellations of contracts within the solutions we characterize as subscription arrangements or limitations on our ability to increase the rates we charge for the services we characterize as subscription arrangements; (xv) our ability to compete and conduct our business in the future; (xvi) our ability to anticipate changes in the business, changes in regulation or the materialization of existing and potential new risks; (xvii) the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors; (xviii) changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes; (xix) changes in labor, distribution and other operating costs; our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us; (xx) the effectiveness of our risk management policies and procedures, including our internal control over financial reporting; (xxi) health crises, including due to pandemics such as the COVID-19 pandemic and government measures taken in response thereto; (xxii) other factors that may affect our financial condition, liquidity and results of operations; and (xxiii) other risk factors discussed under "Risk Factors". Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

NON-GAAP FINANCIAL MEASURES

This press release presents our EBITDA, Adjusted EBITDA and Adjusted net (loss) profit and Free cash flow (FCF), which is information provided for the convenience of investors. EBITDA and Adjusted EBITDA are among the key performance indicators used by us to measure financial operating performance. Our management believes that these Non-GAAP financial measures provide useful information to investors and shareholders. We also use these measures internally to establish budgets and operational goals to manage and monitor our business, evaluate our underlying historical performance and business strategies and to report our results to the board of directors.

We calculate EBITDA as net (loss) profit for the period/year plus income taxes and social contribution plus/minus net finance result plus depreciation and amortization. The EBITDA measure provides useful information to assess our operational performance.

We calculate Adjusted EBITDA as EBITDA plus/minus: (a) income tax and social contribution; (b) net finance result; (c) depreciation and amortization; (d) share-based compensation expenses, mainly due to the grant of additional shares to Somos’ employees in connection with the change of control of Somos to Cogna (for further information refer to note 23 to the audited consolidated financial statements); (e) provision for risks of tax, civil and labor losses regarding penalties, related to income tax positions taken by the Predecessor Somos – Anglo and Vasta in connection with a corporate reorganization carried out by the Predecessor Somos – Anglo; (f) Bonus IPO, which refers to bonus paid to certain executives and employees based on restricted share units; and (g) expenses with contractual termination of employees due to organizational restructuring. We understand that such adjustments are relevant and should be considered when calculating our Adjusted EBITDA, which is a practical measure to assess our operational performance that allows us to compare it with other companies that operates in the same segment.

We calculate Adjusted net (loss) profit as the (loss) profit for the period/year as presented in Statement of Profit or Loss and Other Comprehensive Income adjusted by the same Adjusted EBITDA items, however, added by (a) Amortization of intangible assets from Business Combination and (b) Tax shield of 34% generated by the aforementioned adjustments.

We calculate Operating cash flow (OCF) as the cash from operating activities as presented in the Statement of Cash Flows less (a) income tax and social contribution paid; (b) tax, civil and labor proceedings paid; (c) interest lease liabilities paid; (d) acquisition of property, plant and equipment; (e) additions to intangible assets; and (f) lease liabilities paid.

We understand that, although Adjusted net (loss) profit, EBITDA, Adjusted EBITDA, and Operating cash flow (OCF) are used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS. Additionally, our calculations of Adjusted net (loss) profit, Adjusted EBITDA, and Operating cash flow (OCF) may be different from the calculation used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

REVENUE RECOGNITION AND SEASONALITY

Our main deliveries of printed and digital materials to our customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials we provide in the fourth quarter are used by our customers in the following school year and, therefore, our fourth quarter results reflect the growth in the number of our students from one school year to the next, leading to higher revenue in general in our fourth quarter compared with the preceding quarters in each year. Consequently, in aggregate, the seasonality of our revenues generally produces higher revenues in the first and fourth quarters of our fiscal year. Thus, the numbers for the second quarter and third quarter are usually less relevant. In addition, we generally bill our customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half.

A significant part of our expenses is also seasonal. Due to the nature of our business cycle, we need significant working capital, typically in September or October of each year, to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of our teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year.

Purchases through our Livro Fácil e-commerce platform are also very intense during the back-to-school period, between November, when school enrollment takes place and families plan to anticipate the purchase of products and services, and February of the following year, when classes are about to start. Thus, e-commerce revenue is mainly concentrated in the first and fourth quarters of the year.

KEY BUSINESS METRICS

ACV Bookings is a non-accounting managerial metric and represents our partner schools’ commitment to pay for our solutions offerings. We believe it is a meaningful indicator of demand for our solutions. We consider ACV Bookings is a helpful metric because it is designed to show amounts that we expect to be recognized as revenue from subscription services for the 12-month period between October 1 of one fiscal year through September 30 of the following fiscal year. We define ACV Bookings as the revenue we would expect to recognize from a partner school in each school year, based on the number of students who have contracted our services, or "enrolled students," that will access our content at such partner school in such school year. We calculate ACV Bookings by multiplying the number of enrolled students at each school with the average ticket per student per year; the related number of enrolled students and average ticket per student per year are each calculated in accordance with the terms of each contract with the related school. Although our contracts with our schools are typically for 4-year terms, we record one year of revenue under such contracts as ACV Bookings. ACV Bookings are calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. Since the actual rates of returned goods from sales during the period may be different from the historical average rates and the actual volume of merchandise ordered by our customers may be different from the contracted amount, the actual revenue recognized during each period of a sales cycle may be different from the ACV Bookings for the respective sales cycle. Our reported ACV Bookings are subject to risks associated with, among other things, economic conditions and the markets in which we operate, including risks that our contracts may be canceled or adjusted (including as a result of the COVID-19 pandemic).

FINANCIAL STATEMENTS

Consolidated Statements of Financial Position

Assets

September 30, 2023

December 31, 2022

Current assets

Cash and cash equivalents

106,757

45,765

Marketable securities

261,264

380,514

Trade receivables

472,582

649,135

Inventories

313,452

266,450

Taxes recoverable

20,808

19,120

Income tax and social contribution recoverable

18,904

17,746

Prepayments

84,258

56,645

Other receivables

2,093

972

Related parties – other receivables

-

1,759

Total current assets

1,280,118

1,438,106

Non-current assets

Judicial deposits and escrow accounts

201,433

194,859

Deferred income tax and social contribution

248,990

170,851

Equity accounted investees

77,607

83,139

Other investments and interests in entities

9,879

8,272

Property, plant and equipment

180,065

197,688

Intangible assets and goodwill

5,344,283

5,427,676

Total non-current assets

6,062,257

6,082,485

Total Assets

7,342,375

7,520,591

Consolidated Statements of Financial Position (continued)

Liabilities

September 30, 2023

December 31, 2022

Current liabilities

Bonds

515,350

93,779

Suppliers

239,198

250,647

Reverse factoring

272,609

155,469

Lease liabilities

15,352

23,151

Income tax and social contribution payable

5,830

5,564

Salaries and social contributions

109,090

100,057

Contractual obligations and deferred income

8,302

57,852

Accounts payable for business combination and acquisition of associates

29,932

73,007

Other liabilities

24,802

29,630

Other liabilities - related parties

-

54

Total current liabilities

1,220,465

789,210

Non-current liabilities

Bonds

250,000

749,217

Lease liabilities

107,924

117,412

Accounts payable for business combination and acquisition of associates

571,239

552,270

Provision for tax, civil and labor losses

680,649

651,252

Other liabilities

15,180

31,551

Total non-current liabilities

1,624,992

2,101,702

Total current and non-current liabilities

2,845,457

2,890,912

Shareholder's Equity

Share capital

4,820,815

4,820,815

Capital reserve

89,995

80,531

Treasury shares

(24,792)

(23,880)

Accumulated losses

(391,683)

(247,787)

Total Shareholder's Equity

4,494,335

4,629,679

Interest of non-controlling shareholders

2,583

-

Total Shareholder's Equity

4,496,918

4,629,679

Total Liabilities and Shareholder's Equity

7,342,375

7,520,591

Consolidated Income Statement

July 01 to September 30, 2023

September 30, 2023

July 01 to September 30, 2022

September 30, 2022

Net revenue from sales and services

257,933

932,164

188,724

759,261

Sales

242,242

896,135

180,422

732,647

Services

15,691

36,029

8,302

26,614

Cost of goods sold and services

(101,161)

(375,464)

(91,855)

(301,058)

Gross profit

156,772

556,700

96,869

458,203

Operating income (expenses)

(195,379)

(590,570)

(150,819)

(509,766)

General and administrative expenses

(124,500)

(369,872)

(98,511)

(351,738)

Commercial expenses

(63,044)

(178,968)

(48,917)

(143,838)

Other operating income

7,534

18,015

1,301

2,941

Other operating expenses

-

(32,968)

-

-

Impairment losses on trade receivables

(15,369)

(26,777)

(4,692)

(17,131)

Share of loss equity-accounted investees

(2,878)

(5,532)

(2,150)

(2,150)

(Loss) before finance result and taxes

(41,485)

(39,402)

(56,100)

(53,713)

Finance result

(55,455)

(179,924)

(49,252)

(139,952)

Finance income

19,511

53,612

19,174

56,339

Finance costs

(74,966)

(233,536)

(68,426)

(196,291)

Loss before income tax and social contribution

(96,940)

(219,326)

(105,352)

(193,665)

Income tax and social contribution

34,829

76,380

29,358

63,200

Current

(4,762)

(2,299)

1,946

(11,697)

Deferred

39,591

78,679

27,412

74,897

Loss for the period

(62,111)

(142,946)

(75,994)

(130,465)

Allocated to:

Controlling shareholders

(62,389)

(143,896)

(75,994)

(130,465)

Non-controlling shareholders

278

950

-

-

Consolidated Statement of Cash Flows

For the period ended September 30,

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES

Loss before income tax and social contribution

(219,326)

(193,665)

Adjustments for:

Depreciation and amortization

205,948

198,841

Share of loss profit of equity-accounted investees

5,532

2,150

Impairment losses on trade receivables

26,777

17,131

Reversal for tax, civil and labor losses, net

(10,190)

(9,151)

Provision on accounts payable for business combination

23,562

-

Interest on provision for tax, civil and labor losses

41,313

39,639

Provision for obsolete inventories

19,504

27,896

Interest on bonds

91,361

77,636

Contractual obligations and right to returned goods

(38,080)

(12,875)

Interest on accounts payable for business combination

52,100

47,511

Imputed interest on suppliers

26,196

13,730

Bank and collection expense

-

6,056

Other financial expenses and net interest

-

(15,710)

Share-based payment expense

14,335

16,436

Interest on lease liabilities

10,144

10,799

Interest on marketable securities

(31,065)

(39,709)

Cancellations of right-of-use contracts

(2,480)

3,393

Write-off disposals of property and equipment and intangible assets

639

3,718

216,270

193,826

Changes in

Trade receivables

150,983

159,242

Inventories

(78,690)

(31,994)

Prepayments

(27,551)

(14,174)

Taxes recoverable

(4,505)

(20,329)

Judicial deposits and escrow accounts

(7,025)

(9,275)

Other receivables

(1,072)

1,381

Related parties – other receivables

1,759

(509)

Suppliers

78,271

(14,090)

Salaries and social charges

8,556

43,563

Tax payable

969

6,502

Contractual obligations and deferred income

(14,236)

7,387

Other liabilities

(20,452)

(22,494)

Other liabilities - related parties

(54)

(13,901)

Cash from operating activities

303,223

285,135

Payment of interest on leases

(10,136)

(10,813)

Payment of interest on bonds

(118,901)

(92,722)

Payment of interest on business combinations

(8,096)

-

Income tax and social contribution paid

(944)

(2,736)

Payment of provision for tax, civil and labor losses

(1,247)

(1,308)

Net cash from operating activities

163,899

177,556

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

(18,247)

(50,602)

Additions of intangible assets

(61,425)

(66,819)

Acquisition of subsidiaries net of cash acquired

(3,212)

(53,686)

Purchase of investment in marketable securities

(937,409)

(1,087,910)

Proceeds from investment in marketable securities

1,087,724

860,165

Net cash from (applied in) investing activities

67,431

(398,852)

CASH FLOWS FROM FINANCING ACTIVITIES

Repurchase shares on treasury

(5,783)

-

Payments of loans from related parties

(50,885)

(254,885)

Lease liabilities paid

(22,541)

(20,409)

Payments of bonds and financing

-

(759)

Issuance of bonds net off issuance costs

-

250,000

Payments of accounts payable for business combination

(91,129)

(18,201)

Net cash applied in financing activities

(170,338)

(44,254)

Net increase (decrease) in cash and cash equivalents

60,992

(265,550)

Cash and cash equivalents at beginning of period

45,765

309,893

Cash and cash equivalents at end of period

106,757

44,343

Net increase (decrease) in cash and cash equivalents

60,992

(265,550)

View source version on businesswire.com: https://www.businesswire.com/news/home/20231108889630/en/

Contacts

Investor Relations
ir@vastaplatform.com

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