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Gente criando o futuro! Jan-Sep 2013
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Presenters
Jânyo Diniz is CEO of Grupo Ser Educacional.
Since 2008 he has been the president of the Association of Institutions of Higher Learning of Pernambuco (Siespe).
He worked as board member of Perpasa and administrative coordinator at CIV.
Mr. Diniz holds an undergraduate degree in mechanical engineering and a postgraduate specialization degree in production engineering from the Federal
University of Pernambuco (UFPE).
Habib Bichara is CFO of Grupo Ser Educacional and dean of finance and administration at Maurício de Nassau University Center (UniNassau).
Vice president for private entities at the Brazilian Institute of Finance Executives (Ibef) of Pernambuco.
Previously worked as auditor at Ernst Young, in-house auditor at Albras Alumínio Brasileiro S.A., and executive director at service companies.
Holds an undergraduate degree in economics and in accounting from the University of the Amazon (Unama). Also holds a master’s in accounting and
controllership from the University of São Paulo (USP) and an MBA in auditing from Getúlio Vargas Foundation (FGV).
Member of the M&A team of Grupo Ser Educacional.
Jânyo Diniz
2
Habib Bichara
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Natasha Nakagawa is Investor Relations Officer of Grupo Ser Educacional
She has 17 years of experience, having worked for Perdigão Agroindustrial, Votorantim Celulose e Papel, CSU CardSystem, Banco Fibra and Paraná
Banco, always in the Investor Relations area.
She holds a degree in Business Administration from the University of São Paulo (USP) and an MBA in Finance, Communications and Investor Relations
from the Institute for Accounting, Actuarial and Financial Research Foundation (FIPECAFI)
Natasha Nakagawa
Company Overview
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Company Overview
4
Who Is Grupo Ser Educacional
Date: 09/30/2013
Board of directors with majority of independent members 6
Leader in post-secondary private education in the North and Northeast of Brazil: 23 units in 11 states 1
1 6th largest education group in Brazil: Student-base of 113,500, 69,900 of whom enrolled in undergraduate courses,
8,200 in graduate courses, and 35,500 students with scholarships from Pronatec 2
Highest profitability in the sector: Ebitda margin of 37.7% and net margin of 28.5% in 9M2013 3
First brand recognition in the region: Maurício de Nassau 4
Strict financial planning and control A. Strictly adhered to strategic planning in its ten years of existence.
B. Audited from the outset by one of the Big Four.
C. In 2008, took on a private equity partner to add financial expertise.
D. Credit lines (IFC) with strict business and financial auditing.
5
Operates in Brazil’s fastest-growing market
Solid growth strategy
Standardization, processes, control, and scalability
High capacity to anticipate trends and innovate in products and services
Above-average operational and financial performance
Differentiated value proposition for students
Investment Highlights
7
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Northeast and North: High Growth and Low Market
Penetration
8
Unique Exposure to Brazil’s Fastest-Growing Regions
Source: Nielsen, Brazilian Statistics Bureau (IBGE), United Nations Educational, Scientific and Cultural Organization (Unesco), Hoper Educacional, CCG Estimates
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(2001 – 2010)
North and Northeast: Potential Market CAGR of Real GDP (2004-2010) (%) Rate of schooling in Brazil (net rate)
Growth in Post-Secondary Enrollments
(On-Campus Courses)
Brazil
Population (2012): 193.9 million
GDP (2010): R$3,770 billion
North and Northeast Regions
Population (2012): 70.2 million
GDP (2010): R$709 billion
South
18.6% Southeast
16.1%
Central West
19.7%
Northeast
10.6%
North
10.4%
Legend
Number of post-
secondary
students
Population within
the age group for
post-secondary
education
(2011)
5.2%5.6%
6.1%
4.0%
Northeast North Pernambuco Brazil ex-North and
Northeast
148%
129%
48%
69%
90%
North Northeast South Southeast Midwest
Largest Education Group in the Northeast Region(1)
Unique Exposure to Regions with Highest Potential
11 8 0 Number of States
9
# of students: in proc.
# of units: 1
Amazonas
# of students: 2,121
# of units: 1
Pará
# of students: in proc.
# of units: 1
Maranhão
# of students: 3,371
# of units: 1
Rio Grande do Norte
# of students: 5,456
# of units: 1
Alagoas
# of students: 4,912
# of units: 3
Piauí
# of students: 10,923
Units: 2
Paraíba
# of students: 316
# of units: 1
Sergipe
# of students: 3,713
# of units: 1
Ceará
# of students: 33,173
# of units: 8(2)
Pernambuco
# of students: 5,931
# of units: 3(3)
Bahia
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Undisputed leadership in the Northeast region―a market
with 50 million people―, with a platform ready for the
company’s expansion into the North region Note: (1) Source: Companies’ websites
(2) Acquisition of Decisão College in Paulista, state of Pernambuco (PE), with 655 new students, was concluded on June 11, 2013
(3) Acquisition of Juvêncio Terra College in Vitória da Conquista, with 530 new students, was concluded on July 26, 2013
23 including one
university center
18 - # of units in Northeast
3
9
Differentiated Value Proposition for Students
8
Location Brand
Quality Infrastructure
Source: Report Análise Setorial do Ensino Superior do Brasil, 2013
Hoper Educação Survey: What are the most-wanted attributes for students?
Location Quality of the
education Recognized
Brand
Infrastructure Other
21.6% 20.4%
10.0% 8.4%
39.6%
Differentiated Value Proposition for Students
Location and Infrastructure
Location as an essential factor for choosing a college to our target audience
Location also has an impact on value perception (convenience, cost of transportation, etc.)
Colleges of Grupo Ser are strategically located in the largest capital cities and metropolitan areas
Large collection Bibliographic collection of approximately 320,000 titles
Modern classrooms Air-conditioned classrooms with multimedia equipment
Infrastructure built and planned for academic and
administrative activities
Structure designed to meet students’ real needs,
according to the profile of courses and of target
audience
All units have modern infrastructure and
technology:
Air-conditioned
classrooms
Wireless network
Laboratories
Study halls
Libraries
Clinics
Bookstores
Auditoriums
Gymnasiums
Cafeterias
Accessibility for the
disabled
Strategic Location of Units
Infrastructure Geared towards Education
9
Spacious Facilities 1,774 classrooms
Laboratories, clinics, and study halls
Gymnasiums
Modern teaching resources 250 specialized laboratories
Online learning platforms
Digital content
Differentiated Value Proposition for Students
Quality and Brand
10
Source: INEP/MEC and institutional IES evaluation
Community Relations
Strong Brand in the Northeast IGC – Quality Assessment Index
Business Relationship
Sports Marketing
Social Marketing
Institutional Marketing
Events Marketing
Recife:
Top of mind brand,
three years in a row
Source: Jornal do Commercio
newspaper
João Pessoa/Campina
Grande:
Second-most recalled
brand, two years in a row
Source: Sistema Correios
Maceió:
Second-most recalled
brand, two years in a
row
Source: Maurício de Nassau
Institute
Natal:
Third most-recalled
brand
Source: Maurício de Nassau
Institute
Social networks:
Third-largest Brazilian fan
page
Source: Facebook
10 Note: (1) Evaluation for 2012 published by the Ministry of Education in the 12/06/13 edition of the Diário Oficial da União
(2) Excluding acquisitions
IGC
- Q
ua
lity
As
se
ss
me
nt
Ind
ex
(1
)
2
2,1
2,2
2,3
2,4
2,5
2,6
2,7
2,8
2,9
2009 2010 2011 2012
UNINASSAU
Faculdade Maurício de Nassau - Maceió
Faculdade Maurício de Nassau - Salvador
Faculdade Maurício de Nassau - Lauro de Freitas
Faculdade Joaquim Nabuco - Recife
Historic IGC Series - Ser Educacional – IGC 3
IGC3 since 2009 IGC3 = range of 1.95 to 2.94
CP
C -
Pre
lim
ina
ry C
ou
rse
Co
nc
ep
t (1
)
SCORE % QUANT TOTAL
IGC 01 0% 0
IGC 02 0% 0
IGC 03 100% 10
IGC 04 0% 0
10
SCORE % QUANT TOTAL
IGC 01 0% 0
IGC 02 14% 2
IGC 03 86% 12
IGC 04 0% 0
14TOTAL
IGC PERFORMANCE (EXCEPT RECENT ACQUISITIONS)
(INCLUDING RECENT ACQUISITIONS)
0%
100%
TOTAL
IGC PERFORMANCE - GRUPO SER EDUCACIONAL
86%
14%
SCORE % TOTAL TOTAL
CPC 02 6% 2 6%
CPC 04 19% 6
CPC 03 75% 24
32
SCORE % TOTAL TOTAL
CPC 02 10% 4 10%
CPC 03 76% 32
CPC 04 14% 6
42
CPC PERFORMANCE- GRUPO SER EDUCACIONAL
90%
CPC PERFORMANCE (EXCEPT RECENT ACQUISITIONS)
94%
TOTAL
TOTAL
(INCLUDING RECENT ACQUISITIONS)
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Superior Execution Capabilities
High Capacity to Anticipate Trends
Knowledge of legislation and regulating agencies
Founder and controlling shareholder has been presiding the Brazilian Association of Colleges
(Abrafi) for 8 years, and acts as vice president of the Brazilian Association of Sponsors of
Higher Education (Abmes)
Strong track record in quickly obtaining authorization for new courses (anticipation of trends)
Periodical market surveys in all cities where the group operates – allows the Company to
anticipate demands
Active board of directors with independent members
Standard systems,
procedures, and
processes: ISO 9000
Development
of a specific academic
audit area
Standardization, Processes, Control, and Scalability
Pioneer in the Implementation of Control Systems
Systems Implemented
Main Systems
Unified syllabus Electronic
attendance ledger
Standardized
tests
Self-service kiosks
12
2007 2008 2009 2010 2011 2012 2013
Beginning of the
Group’s external
auditing services
Installation of an
Advisory Board
Installation of the
Board of Directors
Virtualization of IT
environment
Implementation of
academic audit
Unification of course
syllabi
Unification of teaching
plans
Implementation of the
Electronic Attendance
Ledger methodology
Creation of NaveSer
Beginning of the
ISO project
Creation of the
Group’s second
proprietary Data
Center
Implementation of
Prova Colegiada
(standardized test)
Beginning of
implementation of
student document
digitalizaton
Creation of the
Mobile Academic
Portal
ISO 9000
Certification
(Uninassau)
Implementation of
ECM (standardized
documentation
control system)
Implementation of
the Virtual Learning
Environment (AVA)
to train and qualify
employees.
Structuring of the
Shared Services
Center (CSC)
Structuring of the
Student
Relationship Center
(CRA)
Operating and Financial Highlights
13
Lines of Business
Postgrad.
(’000 students)
K-12 education
Vocational-Technical
(’000 students)
Undergrad.
(’000 students)
Distance Learning
(’000 students)
Adjusted Ebitda
Margin (9M13)
Gross Revenues
(9M13)
Adjusted Ebitda
(9M13)
1.
2.
3.
4.
5.
1.
2.
3.
Geographical scope Northeast and North regions
R$398 MM
R$123 MM
37.0%
Published in the Diário
Oficial da União (12/23/13) -
APPROVED
69.9
8.2
35.5
18 courses 36 thousand places 6 diferent states in the Northeast region of Brazil: - Pernambuco, - Paraíba, - Alagoas, - Rio Grande do Norte, - Bahia and - Ceará.
14
Northeast and North National Southeast National
R$332 MM
R$125 MM
37.7%
APPROVED
69.9
8.2
35.5
R$1,295 MM
R$255 MM
19.7%
251.6
13.8
67.4
R$1,380 MM
R$268 MM
19.4%
301.3(2)
NA
127.5
R$1,497 MM
R$541 MM
36.1%
160.2
12.1
362.0
8.0
(1) (1) ((1) (1)
(1) As of Sep 30, 2013
(2) Inclui alunos de graduação e pós-graduação.
Operating and Financial Highlights
Lines of Business
Postgrad.
(’000 students)
K-12 education
Vocational-Technical
(’000 students)
Undergrad.
(’000 students)
Distance Learning
(’000 students)
Ebitda Margin
(9M13)
Net Revenues
(9M13)
Ebitda (9M13)
1.
2.
3.
4.
5.
1.
2.
3.
Geographical scope
Outstanding Operating Performance
15
5
9M13 Net Revenue
R$332.2 million +58.5%
113.5 thousand students +105.5%
9M13 Net Income R$94.8 million +63.8%
Highlights (R$ '000) 3Q13 3Q12 % Chg. 9M13 9M12 % Chg.
Financial
Net Revenue 111,604 73,289 52.3% 332,205 209,543 58.5%
Gross Profit 67,434 47,745 41.2% 207,302 135,868 52.6%
Gross Margin 60.4% 65.1% -4.7 p.p. 62.4% 64.8% -2.4 p.p.
Operating Income 34,594 24,038 43.9% 111,680 69,232 61.3%
Operating Margin 31.0% 32.8% -1.8 p.p. 33.6% 33.0% 0.6 p.p.
EBITDA 39,719 26,912 47.6% 125,211 77,543 61.5%
EBITDA Margin 35.6% 36.7% -1.1 p.p. 37.7% 37.0% 0.7 p.p.
Adjusted EBITDA 37,047 25,604 44.7% 123,023 73,488 67.4%
Adjusted EBITDA Margin 33.2% 34.9% -1.7 p.p. 37.0% 35.1% 2.0 p.p.
Net Income (Loss) 25,958 20,168 28.7% 94,767 57,841 63.8%
Net Margin 23.3% 27.5% -4.3 p.p. 28.5% 27.6% 0.9 p.p.
Number of Undergrad Students and Units (’000 of students and # of units – end of period)
Outstanding Operating Performance
16
Enrollment of new students (’000 of students)
28.1 33.8
48.7 48.3
69.9
9
12 13
13
23
2010A 2011A 2012A 9M12 9M13
Students (‘000) Units
Undergraduate Total Graduate Vocational
11,819
13,996
3Q12 3Q13
18.4%
1,086 1,069
3Q12 3Q13
-1.6%
213
35,183
3Q12 3Q13
13,118
50,248
3Q12 3Q13
Exceptional Financial Performance
17
Net Revenues (R$ million)
Doubtful Debt Provisioning (PDD) Expenses (R$ million and % of net revenues, respectively)
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512 539 579
Gross average ticket (R$/month)
141.3
183.5
283.3
209.5
332.2
2010A 2011A 2012A 9M12 9M13
3,4% 5,9% 4,6%
PDD Normalized1
Nota: (1) From 2012 on, the Company adopted a new policy to record PDD based on overdue credit for more than 180 days. Normalized PDD is the estimated provision based on the current criteria.
454 512
2.2 6.7
15.6
7.3 11.8
1.6% 3.7% 5.5% 3.5% 3.5%
2010A 2011A 2012A 9M12 9M13
44.9 45.3
76.4
2010 2011 2012
52.4 54.2
82.7
73.5
123.0
2010A 2011A 2012A 9M12 9M13
Exceptional Financial Performance (cont’d)
Operating Income (R$ million and % of net revenues, respectively)
Adj. EBITDA(1) and EBITDA margin (R$ million and % of net revenues, respectively)
18
30%
35%
30%
37%
28%
37%
31.8% 24.7% 27.0% 33.0% 33.6%
69.2
111.7
9M12 9M13
Notes: (1) Values adjusted for the purposes of the financial lease and pro-forma values of the spun-off real estate property to JJ Participações.
35.7 31.7
64.3
57.8
94.8
25%
17% 23%
28% 29%
2010A 2011A 2012A 9M12 9M13
Exceptional Financial Performance (cont’d)
19
Net Income and Net Margin (R$ million and %, respectively)
Net Debt(1) and Net Debt / Adjusted EBITDA (R$ million)
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19
0,6x
0,9x 0,9x
0,3x
16.8
49.1
78.4 108.7
0.3x
0.9x 0.9x
0.8x
2010A 2011A 2012A 9M13
Notes: (1) Amounts payable for acquisitions are considered as debt.
Growth Strategy
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Company Best Prepared to Seize on the Growth and
Sustainability Opportunities
Growth Gains in efficiency and
profitability
21
Organic growth in North and Northeast
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Acquisition of new units
Continual investment in technology
Development of Distance learning
Vocational-technical education under
Pronatec
Growth in the
portfolio of courses:
greater
attractiveness
Requests for
accreditation of 25
new units have
been filed
One new university
center pending
approval at the
Ministry of
Education (MEC)
Projects for the
construction of five
campuses:
Fortaleza, Aracaju,
Campina Grande,
Recife and Salvador
“Diário Eletrônico”
(electronic attendance
ledger) allows for control
and standardization of
method of teaching at
different units
“Prova Colegiada”
(Standardized test)
evaluates performance of
professors and students
and allows for quality
control
Implementation of the
Shared Services Center
(CSC)
Implementation of the
Student Relationship
Center (CRA)
Constant mapping
of acquisition
opportunities
Highly selective and
opportunistic profile
Proven experience
resulting in gains of
efficiency and
profitability with its
own integration
method
Focus on cities with
more than 200,000
inhabitants in the
North and Northeast
regions
Educational
institution with the
highest number of
slots applied for
under the Pronatec
Base of 35,000
students enrolled in
vocational programs
in five units
A further three units
(João Pessoa,
Campina Grande
and Natal) will offer
vocational programs
in 2014
Organic growth of
distance-learning
business
High potential for
returns
Partnership with
Pearson to develop
teaching material
Proven experience
in existing programs
Nine units equipped
to offer distance
learning courses
(EAD), with 18
different courses
New Units
21,34526,985
49,505
61,705
74,620
2009 2010 2011 2012 2013YTD
41 new courses approved in 2013
35 programs in final phase of accreditation at MEC (~2014)
252 programs in initial phase of accreditation (~2015)
2013–2018: 554 new programs expected to open
New Programs:
Number of Authorized Slots vs. Number of Accredited Programs(1)
Higher offering = more attractive proposition for students
Programs highly sought after and profitability potential
Boosts the company’s organic growth, with low need for
investments
Number of authorized admission slots
Number of authorized programs
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Organic Growth
On-Campus S
tatu
s
Str
ate
gy
1 1 1 1
5
9 9 9
1213
23
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Annual
admission
slots
75 104
200
252
319
+ University
Center in Maceió
to be accredited
22
9M13
The company has proven its capacity to significantly expand its network of units in only ten years
Currently, there are 25 units being accredited by the Ministry of Education, which ensures future growth and is a strong competitive
advantage against its competitors
New university center with greater autonomy to create new programs: Maceió
under accreditation process at the MEC
74,620
23
9M13
Own campuses; distance-learning centers
100% online
Vocational-technical; professional; undergraduate;
postgraduate
Products
18 programs and 36,000 places in six states of the Northeast
region in 2014
Tutoring and assistance
Exclusive content
Personalized services
Video classes
Digital books/ mobility
Integrated systems
Games and tools
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Organic Growth
Distance Learning
Distance-learning format
Infrastructure Distance learning program already approved and
authorized
1
2
3 6
Partnership with Pearson
Cross-selling to the student base
Offer of complementary services
Sale of digital content
Curriculum grid similar to that of undergraduate courses
Integrated curriculum grid
Strategies 4
Distance-learning students seek renowned institutions, with
strong brand and high quality
Regional presence is a key factor for distance-learning
programs: recognition of the institution and track record in
onsite undergraduate programs are key attraction drivers
Local attraction for a renowned brand 5
23
Federal government program to increase the offer of technical-vocational
programs in Brazil by granting full scholarships, paid directly to education
institutions
Ser Educational was the private postsecondary education institution with the highest number of slots applied for
under the Pronatec in the first round of enrollments
Organic Growth
Pronatec
24
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What is it? Number of authorized slots and students enrolled in Pronatec (in 000)
Pronatec budget (R$ billion)
Source: Ministry of Education
Source: Ministry of Education
Enrollments in technical-vocational programs in Brazil (’000 students)
2.6 2.5
3.6
5.2
2011 2012 2013E 2014E
Source: Ministry of Education
Pronatec: Opportunities
Government incentive through a direct subsidy to
scholarships 4
Short-duration programs (12-18 months), reducing
dropout rates 2
Lack of labor with formal education 1
Programs with flexible schedule, optimizing the use of
space 3
As of September 2013 Ser Educacional already had
35,000 students enrolled in the Pronatec
780
928 1,037
1,140
1,251
1,362
2007 2008 2009 2010 2011 2012
Pronatec will have 800,000 private enrollments in 2014 through two selection processes in February and August, each with 400,000 places (Source: Valor Econômico)
43 18%
Other Education Institutions
197 82%
4
2
2
5
8
2
6
8
10
15 15
23
2006 2008 2011 2012 2013 Total Targets
4 Process for acquiring institutions: Acquisition of (i) students and (ii) accreditations
3 Focus of acquisitions will remain on postsecondary institutions
1 Company with experience in acquisition processes, having acquired 15 institutions since 2006
2 New acquisitions feasible under the Company’s new capital structure
25
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The company has a track record of success in the acquisition of colleges and their integration into its portfolio
Currently, the company is analyzing 8 potential targets, one of which already with a signed MoU (UNAMA and FIT)
Growth through Acquisitions
Number of Acquisitions
26
Growth through Acquisitions
“Warming-up” Process
Grupo Ser Educacional has an M&A team dedicated to analyzing acquisition opportunities.
The company’s strategy combines a mix between strategic acquisitions and strong organic expansion thereafter, with the addition of new courses and expansion of the acquired unit.
Targets with the following characteristics:
Potential for subsequent organic
growth Strategic geographic location Recognized brand in the region
Case Studies of Acquisitions
# of students
# of courses
Ebitda (R$)(1)
1 2 3
Growth of acquired units
Status at the time of acquisition Status - September 2013
Purchase price Year of acquisition
Unit acquired
5,456
33
R$12.9 million
3,371
21
R$6.7 million
2,121
10
R$2.3 million
0
1
Negative
5,125
23
R$16.7 million
1,005
4
Negative
694
4
Negative
81
10
Negative
2007
2008
2008
2011
R$2.3 million
R$10 million
R$5 million
R$3 million
Maceió
Belém
Natal
Campina Grande
# of students
# of courses
Ebitda (R$)(1)
# of students
# of courses
Ebitda (R$)(1)
# of students
# of courses
Ebitda (R$)(1)
Note: (1) Ebitda for the first nine months of 2013. Excludes overhead expenses
27
Growth through Acquisitions
Acquisition of UNAMA and FIT
Memorandum of Understanding for the acquisition of UNAMA (University of the Amazon) and FIT (Tapajós Integrated Faculties)
Investment: R$152 million
Characteristics:
Potential for subsequent organic
growth
Strategic geographic location
Renowned brand in the region
1
2
3
University: increase in the number of places and courses
Brazil’s North Region, in Pará state
10,000 undergraduate students
2,000 graduate students
More than 30 courses
Second most recalled brand in Pará
Operates in Brazil’s fastest-growing market
Solid growth strategy
Standardization, processes, control, and scalability
High capacity to anticipate trends and innovate services and products
Above-average operational and financial performance
Differentiated value proposition for students
Investment Highlights
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28