Vitru Limited (VTRU) Q4 2022 Earnings Call Transcript

Vitru Limited (NASDAQ:VTRU) Q4 2022 Earnings Call Transcript March 16, 2023 4:30 PM ET

Company Participants

Carlos Freitas - Chief Financial and Investor Relations Officer

Conference Call Participants

Lucca Marquezini - Itau BBA

Lucas Nagano - Morgan Stanley

Fred Mendes - Bank of America

Mauricio Cepeda - Credit Suisse

Operator

Good evening, everyone. Thank you for waiting. And welcome to Vitru’s Fourth Quarter and Full Year 2022 Earnings Conference Call. We advise you that this conference is being recorded and will be available in Vitru’s Investor Relations website where the complete material for our earnings call can be found. [Operator Instructions]

We emphasize that the information contained in this presentation and any statements that may be made during the earnings call regarding Vitru’s business prospects, projections and operational and financial goals constitute to beliefs and assumptions of the company’s management, as well as information currently available. Forward considerations are not performance guarantees. They involve risks, uncertainties and assumptions and they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect business performance and lead to the results that differ materially from those expressed in such forward-looking statements.

Today, we have the presence of the company’s executives, Pedro Graça, William Matos, Vitru’s CO-CEOs, Carlos Freitas, Vitru’s CFO and IRO and Guilherme Franco, VP of Marketing. I’ll now give the floor to Carlos Freitas, sir, you may begin.

Carlos Freitas

Thank you, everybody. And good afternoon, everyone, thanks for joining us here again. It’s a pleasure to be here with you all for the release of our fourth quarter and results of last year as well as the full year results. Here with me, I have Pedro Graça and William Matos, the Co-CEOs of Vitru; Guilherme Franco, our VP of Marketing and Sales. Maria Carolina de Freitas Gonçalves, the Head of IR [inaudible] and Leite San Lee Sun from all from our IR department.

A slides presentation will be part of today's webcast, which is available as you know in our IR website@investors.vitru.com.br. I trust you all have in front of you this presentation. For those that are not following our webcast here live with Zoom. So before we begin, just as a quick reminder, Safe Harbor is in effect for this call. So now I invite you all to follow me here for this presentation. In page 4, which is here, which brings the main highlights of the last month. The first one is the closing, as you will remember, of the primary capital increase of around R$400 million both from Crescera Capital or mostly from Crescera Capital, but also the issuance of new common shares that we made pursuant to a right offering that was executed throughout October and November of last year.

So with that we re-force our capital structures. Second, the key highlight was the price adjustment in our business combination with UniCesumar which resulted in a reduction in the price of around sanitary R$73 million that was part of the share purchase agreement with UniCesumar, it was part of the of the deal that we would evaluate changes in the balance sheet of UniCesumar between the reference balance sheet and the closing balance sheet which was in May of last year. So with that, we reduced the amount to be paid, being around R$73 million. And the third key highlight is clearly the advancement of the integration plan between Vitru UniCesumar, which has been executed ahead, in fact, of schedule, with over delivery of the promised synergies that we expected, and we guided the market, when we released this information in May of last year.

On the following page, we have the key highlights from a financial perspective, both the organic numbers, I mean, without the consolidation of UniCesumar into Vitru, and also on a consolidated basis. I mean, Vitru, UniCesumar since the closing of the combination, which as I said, took place in May of last year. So roughly with seven months UniCesumar in numbers, throughout this presentation and as we did last quarter, we're going to provide information on the organic basis and also on a fully consolidated basis to be as transparent and as clear as possible to you. So here's the first key highlight was the 88% increase in net revenue in our core business, which is the Digital Education undergraduate between 2022 and ‘21. While the overall consolidated net revenue increased around 109%, it is a huge increase, a huge jump in our net revenue in our core business. So more than doubling when took out the full package of consolidated numbers. And with an organic basis, we are showing an increase of around 29% in the case of UniCesumar and digital education undergrad business, and the 23% organic increases of Uniasselvi with a three business we have, including on campus and graduate business.

So a clear advancement in our numbers here, as expected with UniCesumar, when we see the adjusted cash flow from operations, we increase in 161% in ‘22, with improvement in cash conversion for operations from 83%, more or less to 96% last year, it is an important pillar in our financing strategy. The fact that we do generate cash, we are a net positive cash flow provider and generator. So this was an important moment, not only from an organic perspective, but also and most importantly, because of the cash flow position and cashflow strength of UniCesumar. On the right part of slides, we have the adjusted EBITDA which increased 145% last year, with the adjusted margin, reaching 33.9%, from 28.9%. So five points increase in margin last year, organically, it was an increase of around 22% with a 28.6% margin. So it just confirms the resilience and the strength of UniCesumar is bringing to Vitru. And finally, on adjust net income perspective, it increased 124% more or less, reaching a bit more than R$200 million. So even with the debt financing that was raised for the business combination with UniCesumar we improve substantially our net income.

So before we go deeper onto the financial numbers and performance of last year, just a quick reminder of a few slides. And the first one, the one that I love the most here is representation, which is a follow up of what we said that we were going to do and what we did. So basically, we said that we were going to grow in four growth avenues, the ramp up of current hubs, the opening of new hubs throughout the country, the increase in the course offering and inorganic growth through M&A. So we basically tick the box in these four growth avenues. So now, as of end of last year, we had 91% of hubs still ramping up with a rough 73% of all digital education students in those expansion hubs. So the major hubs now represent around one fourth only of the student base, and three fourths are in those hubs are still maturing. So this, by itself, the most important driver of growth is the maturation of our existing hubs. We now have around 750,000 students, and organically within Uniasselvi, almost 400,000, coming from 287,000, a year and a half ago when see the hubs, we went from 600 to more than 2,100 hubs now, more or less have with UniCesumar and with Uniasselvi throughout the country, and a strong growth in the southeast region, as I'm going to show later. In more details, course offering as well, we are improving and increasing our portfolio of courses. And this was by the way, the most important driver for commercial synergies last year was the -- in the course offering within UniCesumar taking profits of the products that we had already within Uniasselvi also vice versa, but mostly new quarters within UniCesumar.

And finally, inorganic growth with the M&A with UniCesumar which made Vitru not only the fastest growing player in Brazil, in higher education sector, but also the number one player in the digital location segment in Brazil, which is growing, which was growing and which is growing, and that will keep growing, given the still low penetration of higher education industry. And it won't be slowly but steadily improved and closed through this education courses. On page 7, now going into more detail with each one in each and every one of these pillars. The ramp up of hubs is advancing as expected. You can see here, the cohorts, the different cohorts of hubs summing Uniasselvi and UniCesumar. They follow a very say, predicted pattern. And now we have as I said around 200,000 students in major hubs out of 800. So 25%, more or less. And we have a maturation index of around 42%. Meaning that all of these hubs on average, they have -- they are with less than half of the full capacity of hubs as they mature. And as they keep growing, we are going to increase the number of students with limited execution risk. The partner is there, the brand of Uniasselvi and/or UniCesumar is there in a given city, so it is a virtuous cycle that is operating and with that we are going to keep growing throughout the country.

On page 8, you see the distribution of our students base in Digital Education undergraduate. So important jump throughout the five regions of Brazil, especially in the southeast. So this here is the contribution of the mark plus the organic growth of Uniasselvi. And both organically and inorganically we are growing a lot in the southeast, which was one key concern of the market when we started to grow faster in the southeast is our capacity to expand to really expand throughout the four states of the southeast. So now we are going 340% there in the southeast. But in around 82% in south, 101% in northeast, so we are now truly presence throughout the country and the Southeast not only with now with the second largest student base but also with the largest portfolio of hubs as well in the country. Today, we have 730 hubs in the southeast, more or less one third of our hubs that we'll have in Brazil.

On page 9, the other pillar which is the expansion in portfolio of courses. We are now fully offering nursing courses in the two brands, it is important layer of growth and we are confident that one day in the future, we will have the capacity to offer law and psychology and other courses also through Digital Education courses. These are courses that are today, the three most important ones in the on campus a segment, but the true market with depth the true market as you assessed is not what we see here in the screen. Once we are able and allowed to offer digital education course in in law and psychology, the total addressable market will be larger than what we see here in the screen. Because of the pure characteristics of digital education, we can access more people throughout the country.

On page 10, a quick reminder as well on our technology, today, the most important way to communicate with students and for them to study is through the app. By far, everybody in Brazil has a cell phone, everybody has a computer. So today we'll have more than 700,000 students, active student in our apps, the whole course is provided through the app, or through the computer, and our app, in fact, are rated the number one and number two, when you see the perfect rates, either in App store or play store. And finally, on slide 11 the distribution of hubs as of end of last year, and as I said a bit more than just the 2,100 hubs, more or less half in UniCesumar, half with Uniasselvi with a very complementary footprint attracting different people, different publics different audience. And today we have more than 740 cities and we have only one of those two brands. So here is an important driver for commercial synergies going forward, which is expansion with the same partner that is there offering, one of the two brands now will be able and is already offering a second brand.

So with that we move to page 12, to go a bit deeper about the financials. So as I said, digital education students are our focus around 700,000, as of end of December of last year, with together with the graduate, digital students represent around 91% of our base. So we're clearly the leader here in this business and the only listed player truly focused on digital education. And on the right, you'll see the evolution over time of our base. So, on organic basis, we grew 19% with Uniasselvi between December of ‘21 and ’22 and with UniCesumar the growth reach 129%. So now, we have as I said, almost 700,000 students as of December in undergraduates, digital education courses, when we see intake and tickets here on the bottom part of the slide, we show intake and tickets on a semester basis, which brings a more accurate picture given the academic cycles that we have in the postgrads sector in Brazil. So, first about intake, this information is not new, this is what we disclose already in November, Uniasselvi grew 23% in the second half of last year, compared to the second half of ‘21, while UniCesumar grew 51%. So this is important growth in the combined intake of around 31% of UniCesumar and Uniasselvi is a proof of the competitive advantage of our models and the differentiated quality of our products. So let's go deeper about tickets, as we saw in the third quarter results. And now again, the average ticket of Uniasselvi has been growing year after year, while the average ticket of UniCesumar has decreased this year.

Why was that? So in the case of Uniasselvi, this is mostly due to our pricing discipline, our market intelligence, and the tools and procedures that we have in place that we have been put in place in the last years. And as you all know, and that will be showing since the debut. So this is part of our model of our business proposition to have sustained tickets over time, this approach is now being taken to UniCesumar, this is one of the best practices that we are exchanging between the two brands, that going forward will have a positive impact on UniCesumar. Because in the case of UniCesumar, there were two main reasons for this decrease in tickets. The first one was the increase in the volume of new students, I mean, freshmen and fresh women, as a percentage of total students. As you know, the average ticket of a new student is slower than the ticket of a senior one. And secondly, also the decision taken in the past to be more aggressive in tickets within UniCesumar which was taken, a decision taken before the closing of the digital education. And, I mean, the closing of the accommodation was in late May, when the first intake of ‘22 was over. And the strategy for the second intake of ‘22 was already been implemented. So now, we have been working as a sole company. And what we are seeing, so far until today is that the intake tickets of UniCesumar is increasing by more than inflation. So we are seeing a real increase in the intake tickets up to today within UniCesumar. So we are starting to see the effects of this new approach to pricing. And regarding the intake overall, up to now, I mean as of Monday as of March 13. The growth of intake in the two brands combined was around 17.4% compared to the same period of last year. And as I said with health tickets, so again, we are increasing a lot even knowing that we had a very high comparable beta of last year, because of the important growth that we had in both brands in the first half of last year. Even knowing that this is the first full year after the pandemic. So we do believe that this year, the overall sector of digital education will grow slightly lower than what we saw last year, because it is the first March and the first February after the pandemic. As you know, one year ago, we were still discussing about Omicron. And despite the current crisis, so, the high comparable beta is the first year of pandemic and the crisis, we are still delivering a 70% growth in tickets in intake with health tickets. So this is just to show that we are a different company, we will provide a different service to our clients.

On page 13, the key financial figure, net revenue, gross profit and adjusted EBITDA, again 109% of growth in net revenue, the gross profit was more or less growing the same level 109%. So the margin, gross margin was stable more or less. And the reason for that is that despite the gains of scale, the gross profit of the UniCesumar on campus business is smaller than the digital education. So on average, we are seeing the margin and the adjusted EBITDA growing five points as I said, the margin from 28.9 to 33.9, levered specially on G&A and I'm going to show this a bit later. So first of all net revenue on page 14, we had as I said an increase in 28% in digital education undergrad rate of Uniasselvi, a decrease of 20% in on campus. And the continuing education business was more or less stable year after year. And on the right part of this chart, the contribution of UniCesumar, very important contribution, including here R$130 million of the medical business in seven months. Now going, providing to you the breakdown about this -- the two companies combined. So more or less, we have about 75% of our net revenue in undergraduate digital education courses, more or less, around 5% in continuing education, which is basically digital as well. So we have almost 80% of our revenues coming from the digital segment. And on top of that, we have around 13% of our net revenue coming from a very resilient medical business. And going now deeper about this segment on page 16. The net revenue, as I said grew a lot 88% in the digital education undergraduate segment, both on organic and inorganic basis. And this was not because of any major shift in the mix of products. When you see the numbers are between ‘22 and ‘23, sorry, ‘21 and ‘22. The two brands were sort of a steadily improving in health but not much. There is still a lot of space for UniCesumar to improve and increase the percentage of health course as well. So this is also going to be an important lever for tickets over time. But basically, we have a very well distributed portfolio of courses in the two brands.

On page 17, our medical business with UniCesumar brand. Here, a number of highlights. Again, it is the fifth best private medical school in Brazil. Those who could attend our first Vitru Day there in Maringa that we held in January of this year could see that, could see the quality and the differentiated approach we have to this business. It is a different segment is the largest medical school in the south of Brazil, which brings scale, there in Maringa with around almost 200 seats with every ticket of more than R$10,000. So this is a business that on an annualized basis, we have a net revenue of roughly R$220 million per year. But tickets are increasing above inflation. And the seats are still maturing. So we do expect promising results from our medical business this year.

On page 18, on-campus and continuing education. So first on-campus on organic basis. I mean Uniasselvi alone, there was a reduction in net revenue in the segment mostly due to the shrinking base, which is aligned to our long term view for the education sector in Brazil. However, there was an important contribution of UniCesumar to the constellation numbers, given the resilience and the high quality of the health related on campus courses of UniCesumar. By the way, these health quarters in on-campus represent more than half of the on-campus revenue for UniCesumar excluding medicine. So it is a very resilient business with high tickets. And on that front, I'd like to highlight that in the current intake cycle as of today, we are seeing an increase in intake of slightly more than 20% in the UniCesumar on-campus business with rising tickets. So this is a nice complement to our digital education focus. Regarding continuing education on the right part of slide, in the last quarters, we saw a continuous reduction in the average duration of graduate courses. But this shift was basically over now. So we saw in the last two quarters, an organic increase already in the continuing education net revenue of Uniasselvi and now UniCesumar, we are growing around 30%. For now, going to adjusted EBITDA now jump to page 20, the cost of service and G&A. So cost of service when there was an increase, organic increase of 20%. So there was a clear gain of scale within Uniasselvi. But the overall number when you saw the presentation of net revenue was higher. And basically, as I said because of the lower gross margin of the on- campus segment of UniCesumar and when we saw G&A on the right part of the slide, there was a decrease both on the organic and inorganic betas, so organically, we increased only by 7% within the Vitru x UniCesumar conforming our lean structure and our lean approach to management. And when we saw the overall consolidated number, there was a reduction from 8.1% to 5.9%, only of net revenue, conforming the gain of scale and the synergies. So the key driver for synergies last year was in G&A, especially with UniCesumar, as I'm going to show a bit later.

On page 21, selling expenses and PDA. So selling expenses on organic basis, there was an increase of 24%, it’s slightly higher than the increase of net revenue as a whole, but at a lower CAC given the important intake that we had last year. So the overall CAC of 2022 was 1.5% lower than what we had in ’21. And regarding UniCesumar, the hubs are more active than in the case of Uniasselvi in this overall sale process. So that's why when you saw the overall picture, the overall number, there was a reduction from 17.7% to 16% of the overall net revenue in selling expenses. The same happened in PDA, the overall, PDA with a meaning the provision for doubtful accounts was down from 17.5% to 14.2% last year, so there was an increase in the PDA of Uniasselvi. So organically, the most important reason was the deterioration in the macro and overall credit scenario in the fourth quarter of last year, and that we thought that was clear for the whole economy. And we're not immune to that which affected more Uniasselvi given that the students of Uniasselvi have a lower average income than students of UniCesumar. So, we saw that deterioration in the third in the fourth quarter of last year. Nevertheless, it was more than was stated by UniCesumar and going forward, when we look at 323 as a whole, we expect the overall consolidated PDA level to remain more or less at this level of 14%. I mean, six months ago, if you asked me this question, I was expecting a lower PDA amount for ‘23 and even for ‘22. Now, see what we see today. We do expect that for 2023 we shall expect more or less the same level of PDA of around 14% of net revenue.

On page 22, cash flow and net income, but first net income and increase the margin from 14.5% to 15.6%. Driven by the business combination and we have a here, sorry this here is a high, slightly higher margin, a slightly higher margin. Given even, knowing that we have a higher leverage in this quarter, we raised funds for the combination with UniCesumar. And even with this debt level, that we today have a net debt of around R$2.4 billion. We managed to increase net income overall and seeing and because of the numbers UniCesumar. By the way about net debt, when we see the overall numbers that we have for last year, I mean, if we take the full year of Vitru x UniCesumar plus, if we take the normalized annualized numbers of UniCesumar for a full year, our adjusted EBITDA number for last year was more or less around R$600 million. So we had net debt R$2.4 billion as of December divided by R$600 million. So we had a net debt over EBITDA of around 4x, which is lower than our covenants and going down. So we do expect that this ratio for the end of this year will probably reach around 3x because of the growth of the business as a whole. And because as I said before, we are a net positive cash generator. And this cash generation here seen on the right part of the slide, we increase the cash flow generation from operations in 162%, between ‘21 and ‘22, and the cash conversion from 83% to 96%. So, this is a very important pillar of financing strategy. We managed to raise debt and to have the condition UniCesumar because the both companies together are important cash flow generator. And by the way, it's important to highlight that these numbers are before CapEx. But our CapEx for last year was only 7.4% of net revenue down from 9.2% in 2021. So, even with CapEx we are generating a cash on a net-net perspective.

So finally, on page 23, the integration plan and synergies so far, so the whole plan was designed before the closing of the business combination, and it was detailed and implemented after the combination of take into account several perspectives and with a lot of care in consideration for our people. But the plan is been executed ahead of schedule. We have around today, around 100 products throughout the country running at full steam each of them with an action plan with an owner with deliverables with a deadline with a timetable. So, this is being implemented, this is the key priority of the company today. And we with that we over delivered in the synergies expected for this year. So on the right part of the slide, you will see in yellow, the expected evolutions of synergies that we communicated to the market in May ’22. So as you will certainly remember, at that time, we mentioned that we expected an increase in the EBITDA margin of six points between 2021 and ‘25. So now, the synergies that we delivered I mean, the R$32 million more or less in costs and expenses represented an increase in our EBITDA margin of around 2.4 points. I mean, without the synergies, our margin would have been R$31.5 million instead of R$33.9. And on top of that, we started to have synergies as well on commercial front also over delivering instead of R$5.6 million we delivered R$10.7 million. So the main levers from commercial perspective will be for this year the better pricing at UniCesumar, again, the new offerings of course and products and the faster expansion of hubs throughout Brazil. So we already announced the market that we this year we are going to open around 500 hubs, which is more than the rate that we used to open and on an OpEx perspective, the main levers were and will be personnel optimization, but now with more importance in gains of scale in contracts, and also better retention practice at Uniasselvi. We already had a number of pilot projects implemented and tested within Uniasselvi using the intelligence and the procedures of UniCesumar for onboarding for retention for collection, which have shown already promising results and that now, we are starting to deploy this throughout Uniasselvi. So we are very confident in our capacity to deliver the expected synergies and the gains in margins.

So with that, I finished this presentation and like to open for questions.

Question-and-Answer Session

Operator

[Operator Instructions]

We have Lucca Marquezini, a sell-side analyst from Itau BBA.

Lucca Marquezini

Good evening, everyone. And thanks for taking our questions. We have two questions from our side. The first one would be regarding the integration plan and the initial synergy. So, the company has mentioned that it has executed the plan ahead of the schedule. So can you please provide some more detail on what has caused this overachievement? And then secondly, what are the new expectations for synergies in 2023? That will be our first question.

And then the second one would be regarding the average ticket. So we saw an 8% increase in the average ticket of Uniasselvi. The digital business, so can you please provide some more detail on what has driven this increase? And then besides the higher contribution of courses such as nursing, what was the company also able to readjust prices in other courses? Thanks.

Carlos Freitas

Thank you, Lucca for your questions. So regarding the integration, the reason for the overachievement here on page 23. I mean the most important reason for this overachievement was that we were able to integrate areas faster than what we thought. So we had a plan per area per sector with different timetables, tech sectors that we were going to integrate last year, sector that we were not going to integrate and we had an idea a plan for this integration of areas. And what we saw is that detailing the plan after that we were able to accelerate this integration and now, we have already several areas of the company operating as one area and this was the key driver for the overall delivery of synergies. So going forward, I mean for ‘23 what we expect is what we have here on screen, add in [inaudible] in EBITDA impact coming from synergies, I mean the 31 that we had delivered plus 50 more or less. So, this is the guidance for synergies, that we expect EBITDA impact coming from synergies of adding [inaudible] more or less in ‘23 being the 30 that we had already plus 50 more or less for ‘23. So with that we shall expect coming from synergies, a continued improvement in margins overall within feature.

The second question about ticket of Uniasselvi and I am going to go back there on page 12. In fact that ticket of Uniasselvi in the semester, in the second semester grew 8.4% which is above inflation. This was not really because of mixing of nursing, because nursing started to be offered in August of ‘21. So there was an increase in the tickets last year. I mean, when we show the second half of ‘21, we saw an increase compared to ’20 because of nursing, not the case now, we are already offering not nursing since August 2021. So the reason for the increase here is basically twofold. The first one is that we were able to increase prices in the intake cycles, because of the resilience of our model and the differentiated aspects of our product, that we were able, on average increase prices throughout the country in some areas more in some areas less in some products more than in others. But on average, we were able to increase intake tickets last year. And the second reason, also is that we generally, and we have been doing this for the last years, we also raise ticket for the seniors above inflation. So we, for example, this year just to give one real example, this year, we, in January of this year, we increased the seniors tickets in 8.8%, which is more than inflation. So and there is a third one as well that throughout the course, we also increase the density of the course. So that's when you saw a ticket of a senior for example in the eighth semester, the ticket of those people is higher than the ticket of someone in the second semester, for example, because of the higher density, we add more disciplines and more courses. And with that we charge a bit more. So those are the three I'd say reasons being the first one, the most important one, the capacity to increase prices given our pricing discipline, and the differentiated aspects of our product is what has been has made us possible to increase prices above inflation at Uniasselvi. And this pricing intelligence, this granularity that we have this first reaction to changes in the market that we have been implementing within Uniasselvi in the last four or five years. We are now also starting to implement within UniCesumar. And that's why we are seeing already an increase in the intake tickets of UniCesumar these last two months.

Operator

The next question now comes from Lucas Nagano, a sell-side analyst from Morgan Stanley.

Lucas Nagano

Hey, good evening. Thanks for taking our questions. First question is regarding the intake cycle. You mentioned the combined volume growth is 17%. But we were wondering if you could give a bit more color on the mix between both brands to get a sense on how the ticket repositioning at UniCesumar is impacting demand.

And the second question is regarding the delay of the loss, distance learning loss prevention. In our view doesn't seem to be a priority for right now. But it could be an important catalyst for the sector. And could you give some your comments and perspectives on the outcomes of this working group?

Carlos Freitas

Hi, Lucas. Perfect. So the first one that we got an intake. So today, as of March 13, I mean Monday, we have on average or the two brands combined 17.4% slightly more than that within Uniasselvi, if that's less than that within UniCesumar. So, more or less, 14, tomorrow more or less 20 a bit more than 21% in Uniasselvi more or less. So this is, I mean not only an impact of the tickets but most importantly, the high comparable basis, I guess this is more important in this case. Now when you see the two different brands, you saw that there was a very important increase in intake at UniCesumar not only the second half of last year, which is here on the screen 51%. But also in the first semester, in the first method, there was even higher increase in intake within UniCesumar, why would that number of Uniasselvi was more or less aligned to more or less between 20% and 30% growth that we have been showing in the last year. So the comparable basis, the bar of UniCesumar is higher than the bar of Uniasselvi. That's why it is natural now, that UniCesumar show grow less than Uniasselvi in this currency intake cycle.

So the second question about law and psychology, yes, you're fully right, there was a committee created by the Minister of Education in September of last year for six months, with the possibility to be renewed for more six months. So now, what was done was that this term was extended to 270 days, so nine months with the possibility to be extended again. So, I mean, we are expecting evolutions of on the front so far, nothing that we can commit here. We are still positive about the intrinsic capacity of being able to offer law and psychology in digital location, there is no underlying reason for us or for the sector, not to be allowed to offer law and psychology through a hybrid quality digital education solution. But if it is something that will take some time. So, I mean, for with this committee, we do not expect this to be a possibility this year. That's clear for now. But we are still optimistic that in the middle term, there will be a possibility.

Operator

The next question from Fred Mendes, sell-side analyst from Bank of America.

Fred Mendes

Hello, good afternoon, everyone. I have two questions here as well. The first one, Carlos, if you can just comment a little bit more on the strategy about entering into the southeast. How's that working out? And even with that, you're able to raise prices and decrease the CAC you're expecting since you're expanding to somehow, I wouldn't say a new region, but a region where market share is lower. There would probably be an impact in CAC.

This is the first one and then the second is more like a strategic question. When does your market share it starts to become, I wouldn't say a concern but something that you start to think okay, maybe that's is getting too much. It's going to be harder to grow from now on. Maybe I need to expand my addressable market, maybe I need to come out of some English course I don't know. But at which level, you think it would start to make sense to have a not only strategy after gaining market share, but also may be trying to expand this market through your platform. Thank you.

Carlos Freitas

Thank you, Fred, for these very good questions. So the first one about southeast here on the screen on page 8. Not only within the southeast, but throughout the country in any new region or macro region that we enter, we have to start offering a slightly lower tickets, that's a price to be paid. That's natural. After we have more brand recognition locally, we start to normalize prices that what we have did in the past in other regions that we did in the past in [inaudible]. That's what we are starting to do now in some areas of Rio and Sao Paulo. But clearly, when you see the southeast, it is I’d say the last frontier or especially Rio and Sao Paulo from the perspective of Uniasselvi because in case of UniCesumar, there was already an important presence there. But overall, it is still the region in which will have the lower presence. So when see for example tickets that we offer, in Sao Paulo and Rio today, they are on their average smaller than the ones that we offer in other regions in other states. This is part of the overall commercial approach to enter on the Uniasselvi the first one to three semesters, we have to pay the price. And then once we have more brand recognition locally, and we have word-of-mouth, as well work in our favor, once we have as well, the partner going through a learning curve to operate and to sell locally with our support. So once we pay this initial, I'd say price, we start to normalize tickets, and that's what we have been doing in the last years and that is working all right. So for the southeast, it is a region that we are growing a lot that we are growing the most. In fact, throughout the country, both organic and inorganic levels. And we're very confident that we are going to keep growing there.

For the overall market share to be a concern or not. We are still far from the level in which we will be concerned with being too big. Today, we have, in the last census, we had around 23% of the market as after 2021 probably now with a bit higher than that maybe 25%. We're not in a position in which we don't have space to grow. There are several regions in which we're not present, either with both brands or with one out of two brands. And as I said, they attract different people. The hybrid product of Uniasselvi attracts a different person than the model of UniCesumar. So our market is not the same. And we are present in some areas with only one brand in some areas with no brand. So there's still a lot of space to be occupied. That's the issue. So there's no a single answer to your question. But on average, we are not concerned from a market share perspective. And in any way, the most important single driver for growth in student base is not going to be gaining market share is because of the overall market is going to keep growing. It's not a [inaudible] important. Again, this is a sector that has been growing a lot, grew even faster during the pandemic. This year, we do believe that we grow slightly lower than I’d say normalized numbers because of the high comparable beta of last year. But for several years, we will keep growing because of the lower penetration of higher education in Brazil. So the overall, when we see the overall postgrad sector in Brazil is 7 million people in the private sector in Brazil as opposed to 2021.

This is not the total addressable market that we can tap. The more we have hubs from Vitru or other players been open throughout the country, the bigger the market will be. So the increase in supply drives demand. So we're not concerned about being too big here and no, but anyway, but which does not prevent us from exploring other avenues for growth. I mean, when we IPO the company, we said that we had a number of M&A possibilities. And most of them by the way, were not in our core business, most of them were not in undergrad business in digital education, we had discussions going on in other players that offer graduate courses that offer technical courses, prepare their course for the first jobs. And then we are now already offering we already have these courses in our portfolio. So when we see our continuing education segment, it is a bunch of things, mostly graduate courses within only, but we are looking for future growth not now in the very short term, but more in the medium term, with other growth avenues, apart from our core business of undergrad business because we do believe that we have the two leading brands that on an organic basis Uniasselvi and UniCesumar will keep growing and we'll keep gaining market share. But the key driver for growth in our revenues is the expansion of the market as a whole. Not only gaining market share.

Operator

The next question now comes from Mauricio, sell-side analyst from Credit Suisse.

Mauricio Cepeda

Thank you taking Carlos. This is Cepeda from Credit Suisse. edX reported yesterday results. So I think there are things that we asked then that we should ask you because first of all, congratulations on the results and the clarity of the presentation. One of the things that was discussed with then and I think it's a fair point to ask you as well is about all these commercial dynamics to attract first year students, all the commercial dynamics to have more intakes. So I ask you a little bit about the necessity to in a certain way, subsidize this first year students so that you can have intake and then let's say try to retain them even with all the subsidies throughout time. You mentioned that says UniCesumar had a period where the tickets were still were a little bit lower. And now there has been a recovery of tickets in UniCesumar. So, my question would be okay, if you keep this kind of policy, which kind of policy how aggressive the market in terms of prices, so that you can obtain more or less growth in this first year?

And the second question would be about CS, I know, it's kind of a tricky discussion, because there is nothing concrete about that, but what is the sector discussing with the working group there about inclusion of distance learning in a future program design, thank you.

Carlos Freitas

Hi, Cepeda. So, regarding the market and prices in intake et cetera, I mean, what we are seeing in this current intake cycle, which was already saw also just extend last year was a more is and was a more rational market I mean competition is here is here is fierce, it has always been. We are operating in a competitive environment. It is as tough this year as it was last year as it was in ’21. It is a tough market in which you have to have differentiation, we have to have high quality, you must have delivery. So, but anyway what we are seeing the last, didn't take in the last year I mean the last 12 months more or less is a more rational environment. I mean rationally is a strange word, I’ll say a less players with more with too aggressive strategies. So, in the end, a sector that is actually I’d say operating in a very competitive environment, but in a more say disciplined approach with some differences for region for products. It is in some case with some changes over time with some players start to be less aggressive and then more aggressive at the end it changed from player to player from region to region but overall, it is a competitive environment in which we keep gaining market share with a disciplined tickets.

So we don't want to grow for the sake of growing, we are growing, operating in a market that is growing and we are delivering what we believe to be a high quality product. And we keep gaining market share. So this is not, we don't see today a more competitive market than what we saw in ‘22 or ’21 or ‘20. And for CS, I mean, that's the million dollar question or billion dollar question. We, our opinion is the following. When CS was created, distant learning or digital education was the exception. Now it is the norm. So now when we see that more than two thirds of the new students are deciding to roll in digital education courses instead of on-campus. So one third of the newcomers is going to on-campus, two thirds to digital, the norm is the standard decision, the base case decision now is to go to digital education. So in our opinion, a potential new version of CS or any other name, will include distant learning, for sure, we do not believe in possibility only for on- campus, it is not impossible. We do believe it is unlikely. We mean, and also from a purely economic perspective, when we see, I’d say the efficiency of capital allocation, it is more efficient also to allocate capital to impact more people, especially people that need education, and that also part of the overall base of the current administration. We do believe that in case there is new CS, it will include on-campus and digital education. And also because today there's more gray areas than the past. It is today, education is becoming more and more hybrid, than what we thought 10 years ago. So the short answer is that we don't know. But we do believe that if there is something it will be for the overall sector.

Operator

The Q&A session is closed. And now we would like to turn the floor over to the company's closing remark. So Mr. Carlos Freitas. Please make your final remarks and close the call.

Carlos Freitas

So thank you all. Thanks for following Vitru, thanks for your interest. And we keep open for any final questions that you may have. Thank you. Goodnight.

Operator

The video conference of results referring to Vitru’s fourth quarter and full year 2022 is closed. The Investor Relations Department is available to answer other questions and concerns. Thanks so much to the participants and have a good evening.