The educational company Cogna (COGN3), owner of Kroton, Somos and Saber, presented its balance sheet for the first quarter of 2024 (1Q24) on Wednesday night (8). Adjusted net profit fell by 57% compared to the same period in 2023 and stood at R$50.5 million. Without the adjustment, the loss was R$8.5 million compared to R$54 million profit in 1Q23.
The number was impacted by non-recurring expenses justified in the “M&A and expansion” line, which grew by 147% in the annual comparison. The impact occurred due to a transaction with Grupo Eleva, which had four schools with a contractual provision for payment after the purchase. Thus, one of the payments was made in 1Q24 and impacted the balance sheet.
Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 9.5% and reached R$495.5 million. The recurring EBITDA margin fell 1.8 percentage points, reaching 32.2%. The drop is related to strategic marketing expenses at Kroton, with a focus on improving student recruitment.
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“We understand that marketing investment helps not only in the short term, in attracting new students, but also builds the brand”, comments the company’s CEO, Roberto Valério, in an interview with InfoMoney. The executive highlighted that the investment converted into a 14% increase in funding and expanded the awareness of brand.
Net revenue reached R$1.538 billion, with growth of 15.7% compared to the same period in 2023. One of the highlights of the balance sheet was the generation of operating cash (GCO), which, disregarding capital expenditures (capex, in acronym in English) was R$210.2 million, a reduction of 7.4% compared to the first quarter of 2023.
“This result is mainly a consequence of the temporal mismatch of the PNLD [Programa Nacional do Livro Didático] in which we had receipts at the end of 2023. However, Operating Cash Generation after Capex and Debt Service was R$9.4 million in the quarter”, comments management in the statement that released the quarter’s numbers.
The company continues its efforts to reduce leverage, which fell from 2.03 times net debt to EBITDA to 1.79 times in 1Q24. Management reinforced that the drop is the result of liability management actions [gestão de passivos] added to the growing cash generation, in pursuit of the value proposed in the guidance for 2024. The Company’s net debt remained stable at R$3.27 billion compared to 4Q23.
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Advancement on three business fronts
The company’s CEO highlighted the increase in revenue in the three business units. “It’s another quarter of double-digit revenue growth, with 16% growth in Cogna’s revenue, with all business units growing double-digit as well, Kroton, Somos and Saber, which makes us very confident to the future, because if there is revenue growth, everything else will fall into place”, he considers.
Regarding the drop observed in operating cash generation (GCO), the executive highlighted that the change in the calendar of PNLD payments made had an impact on the figure presented in the first quarter balance sheet.
“We had a payment from the PNLD in the last days of December, which we actually expected in the first quarter, which is when they normally pay. Our understanding is that, in December, if we put in this R$50 million, add the R$50 million to the R$210 million that we have in our books, it would be R$260 million, which versus R$227 million [do primeiro trimestre de 2023] would lead to growth of more than 15%”, he explains.
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Furthermore, Valério highlights that operational cash generation is already sufficient for the operation of the entire company. According to the executive, the amount already generated in the quarter allows for the investments that the company foresees, the payment of all debt service and “there is still almost 10 million reais left”, he reinforces.
With leverage still high, the company is investing in strategies to reduce debt.
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According to the CEO, a possible interest rate stay at a higher level would not have such a strong impact on Cogna, considering the strategy already underway. “Regardless of what happens with the interest rate – of course, the more it falls, the better – we continue with the strategy of deleveraging the company. As we have been generating cash, we are confident that we will be able to significantly reduce this financial cost”, points out Valério.
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Optimism in 2024
The CEO reinforces that he has no reason not to consider 2024 with optimism both for the company and for the entire sector. The executive states that the guidance continues to be reinforced, built on the pillars of long-distance courses (EAD) and medicine for Kroton, migration to more premium products and growth of complementary solutions for Somos. Even with a challenging environment, considering still high interest rates, Valério reinforces his positive vision.
“I think that for us, in education, it is a good year and I agree that we have been building this here over practically four years. Structure the company better, carry out digital transformation, make sure we have the best talent, choose which businesses we want to invest in and invest intelligently over time”, he concludes.
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