Cogna Education Group (COGN3), owner of FASTA and Croton, recorded an adjusted net loss of R$36.595 million in the second quarter of 2022 (Q222), reflecting the adjusted profit of R$55.29 million recorded in the same period in 2021. The company released its figures this Thursday (11). On the unadjusted side, the net loss was R$100 million, up 148.5% year over year.
In the quarter, net revenue was R$1.155 billion, a slightly positive year-over-year variance, of 0.2%, primarily driven by FASTA growth, in basic education.
Meanwhile, the company reported operational improvement, with recurring earnings before interest, tax, depreciation and amortization (Ebitda) R$355 million, a year-on-year increase of 11.4%, resulting in an Ebitda margin (between EBITDA and revenue) of 30.7%, an increase of 3.1 percentage points. in the annual comparison.
Refinitiv consensus forecast a loss of R$42.10 million, EBITDA of R$294.12 million and revenue of R$1.155 billion in the quarter.
“The restructuring has done a lot in Croton [de ensino superior] As at Vasta last year, in addition to the search for efficiency that we were doing, in the context of inflation, high competitiveness and a difficult economic scenario, are among the highlights,” Roberto Valerio, CEO of Cogna, noted in an interview with Infomoney.
Education group highlighted that EBITDA grew in the fifth consecutive quarter. “This result, of course, has more accounting characteristics, but it comes with a very strong cash generation, 47% in the first half of 2022 in an annual comparison,” the CEO explained.
Total operating cash generation after capital expenditures was R$290 million in the quarter, highlighting actions taken to reduce company costs and expenses and improve the net performance of the client portfolio.
Valério highlights two points of recovery, such as the 34.5% growth in Vasta’s net revenue, and the slower rate of decline in Kroton’s revenue (down 3.4% year over year).
Thus, he assesses, the inflection point in the higher education sector may be closer to occurring. “We have told the market that Croton revenue will start to grow in 2023, but with enrollment progressing well, our student base has grown by 12%, and we’re already saying it could be in the third quarter of 2022. Next quarter we should really see growth in revenue at Kroton,” he says.
This inflectional move comes close to two years after Cogna began making an impactful change in the higher education sector amid poor results and a strong pandemic impact on live teaching, leading the company to bet on hybrid courses and on this sector’s premium as the arms of recovery.
We conducted a Croton restructuring from 2020 to 2021, with 25% of the campus closed, as well as reducing marketing costs and renegotiating debt with students. This has had an impact on evasion, we have cleaned up the base of those with bad financial credit and we are now seeing an impact on results, with higher non-repayment. FASTA also cut costs. Having higher returns at lower cost, will have a greater result. In general, Croton and Fasta have good numbers,” says the executive.
One point that investors and market analysts always watch closely regarding Cogna is its debt, as its cost is putting more pressure on the balance sheet with the strong rise in Selic’s rate last year.
The education company highlighted that looking at the semester, with the interest rate increasing, the focus has shifted to managing responsibility to ease financial expenses.
In the first half of the year, R$347 million of substandard debt was renegotiated and in August there was a R$500 million issuance via CRI with an average duration much longer than the average duration of the company’s current debt (88 vs. 22 months).
“Financial expenses are something we look at with great dedication, our net debt is R$3 billion, and of course debt servicing affects our results. We are trying to replace more expensive lines of credit with cheaper lines of credit, and we are having great success (…) It is important to say that generating Our cash is more than enough to pay debt servicing while saving free cash. Of course, I prefer Selic over 4%, 5%, but the company is healthy enough to get through this moment until the interest rate returns to lower levels,” says Valerio.
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