EstáCio Morgan Stanley Conference 09

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EstáCio Morgan Stanley Conference 09

  1. 1. Corporate Presentation
  2. 2. ESTÁCIO Highlights <ul><li>Largest post-secondary education group in Latin America </li></ul><ul><li>202k students spread throughout 77 campuses in all major cities in Brazil </li></ul><ul><li>78 programs tailored to large and underserved middle and lower income individuals </li></ul><ul><li>54 Distance Learning accredited units strategically located in major centers </li></ul><ul><li>R$1 billion in LTM Net Revenues and R$110 million in LTM EBITDA, R$224 million in Net Cash </li></ul>Corporate Presentation
  3. 3. Value Creation Going Forward <ul><li>Scale and strong balance sheet pave the way for profitable growth, with major levers being: </li></ul><ul><ul><ul><li>Efficiency gains through centralization of business processes </li></ul></ul></ul><ul><ul><ul><li>Quality gains through investments in standardized high quality academic offerings and differentiated student support services </li></ul></ul></ul><ul><ul><ul><li>More impactful branding and marketing, coupled with selective M&A approach (“can´t miss” add-ons) </li></ul></ul></ul><ul><ul><ul><li>Attraction and retention of high quality talents </li></ul></ul></ul>Corporate Presentation
  4. 4. Value Creation Going Forward <ul><li>Focused on growing and underserved addressable market: middle and low income groups </li></ul><ul><ul><ul><li>1.9 million students graduating from High School every year </li></ul></ul></ul><ul><ul><ul><li>7% net enrollment growth (CAGR 2002-2007) </li></ul></ul></ul><ul><ul><ul><li>Quality at affordable cost / location </li></ul></ul></ul><ul><ul><ul><li>Career improvement to working adults </li></ul></ul></ul>Corporate Presentation
  5. 5. Largest Student Base: 202 k undergraduate students 3.5 12.8 0.6 4.7 4.3 1.8 1.4 3.0 11.6 2.9 1.2 3.0 22.1 Market-Share per Municipal 1 Source: SINAES/2006 1 – Undergraduate students enrolled (excludes public universities) 110.2 2.7 1.5 4.3 3.0 1.4 5.8 Estácio Students per State (thousand) Corporate Presentation 2 – Ministry of Education <ul><li>Average Ticket: R$424 (1H09;+3.1% yoy) </li></ul><ul><li>University </li></ul><ul><li>University Center </li></ul><ul><li>College </li></ul><ul><li> Upgrade to University Center </li></ul><ul><li>(in process of approval with the MEC 2 ) </li></ul>
  6. 6. History and Current Status Begin National Expansion 1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Turnaround and Preparation for IPO Strong Organic Growth National Leadership North and Northeast: subsidiaries for profit status Main subsidiary with for profit status (Feb/07) (Accounting and Management Systems) IPO (July/07) GP (May/08) Efficiency Gains and Consolidation CAGR of 25.7% - 1997/2005 (Vs 13.5% for Brazil) Asset Light Model: Long Term Leasing Agreements (Campuses) 1H09 Undergraduate Students (in thousand) Early Stages Corporate Presentation
  7. 7. Shareholder Structure and Corporate Governance Large Expertise in the Education Sector National Expansion and Market Leadership Active Management Meritocracy Culture Proven track record in the Brazilian Market (Gafisa, Lame, Ambev, Submarino, ALL, Magnesita and others) Founder Shareholders GP Investments 53% 20% 27% Corporate Governance Standards Free Float <ul><li>Listed at Novo Mercado: Only Voting Shares </li></ul><ul><li>100% Tag Along Rights </li></ul><ul><li>Independent Board Members </li></ul><ul><li>Dividend Policy (Shareholder Agreement) </li></ul><ul><li>Fiscal Council </li></ul><ul><li>Internal Audit and Risk Management </li></ul><ul><li>Audit and Compensation Committee </li></ul><ul><li>Clear Shareholder and Corporate Structure </li></ul>Corporate Presentation
  8. 8. Shareholder Agreement with GP <ul><li>Co-Management  5 years (renewable for </li></ul><ul><li>2+ years) </li></ul><ul><li>Board Members  4 each party (being 2 </li></ul><ul><li>independent) </li></ul><ul><li>Lockup period of 3 years </li></ul><ul><li>M&A Agreement </li></ul><ul><li>Non-Competition Agreement </li></ul><ul><li>Minimum Dividend Payout (50% of Net Income) </li></ul><ul><li>Leading Private Equity Firm in LATAM / </li></ul><ul><li>First Listed Stock </li></ul><ul><li>Mission: Generate Exceptional </li></ul><ul><li>Long-Term Returns to its Investors </li></ul><ul><li>and Shareholders </li></ul><ul><li>Outstanding performance of invested </li></ul><ul><li>companies, with integrity, clear targets, </li></ul><ul><li>entrepreneurship, meritocracy and </li></ul><ul><li>professionalism. Some examples: </li></ul><ul><li> IRR: 1,339% </li></ul><ul><li> (3 year investment) </li></ul><ul><li> IRR: 148% </li></ul><ul><li> (3 year investment) </li></ul><ul><li> IRR: 17% </li></ul><ul><li> (12 year investment) </li></ul><ul><li> IRR: 24% </li></ul><ul><li> (10 year investment) </li></ul>Highlights of Shareholder Agreement Corporate Presentation
  9. 9. Distance Learning <ul><li>Recent accreditation by Ministry of Education (MEC) of 54 Distance Learning units strategically located in major cities throughout Brazil (ranked with grades “Very Good” and “Good”) </li></ul><ul><li>Satelite units for sales and infra structure support in advanced negotiations </li></ul><ul><li>High growth, high margin with low incremental investment </li></ul><ul><li>Lower prices and flexible schedules to access larger students prospects base </li></ul>Corporate Presentation New Students (Onground) – Private Inst. New Students (Online / Distance Learning) – Private Institutions
  10. 10. Efficiency Gains Through Centralization of Business Processes <ul><li>Recent Start-up of Shared Services Center (SSC): </li></ul><ul><ul><ul><li>Macro transactional / back office processes fully centralized </li></ul></ul></ul><ul><ul><ul><li>Streamlining of backoffice headcount </li></ul></ul></ul><ul><ul><ul><li>Lower transaction cost with higher quality (SLAs) </li></ul></ul></ul><ul><ul><ul><li>Key for scalability and profitable growth and acquisitions integration </li></ul></ul></ul>Corporate Presentation
  11. 11. Quality Gains <ul><li>Investment in high quality, standardized academic offerings: </li></ul><ul><ul><ul><li>40 Core programs being updated and nationally integrated towards labor market demands and better integration of shared disciplines: lower faculty costs </li></ul></ul></ul><ul><ul><ul><li>Better quality control with standardized lectures outlines, content, exercises and exams banks </li></ul></ul></ul><ul><ul><ul><li>Digital platform aimed at quality self-learning activities at minimized costs </li></ul></ul></ul><ul><ul><ul><li>Reference books and printed materials tailored made granted in all 40 core programs included in tuitions </li></ul></ul></ul>Corporate Presentation
  12. 12. Quality Gains <ul><li>Improved Students Support Services </li></ul><ul><ul><ul><li>New, fully integrated portal - prospects and students </li></ul></ul></ul><ul><ul><ul><li>Tracking of students performance for proactive support approach (“Gabaritando”) </li></ul></ul></ul><ul><ul><ul><li>Roll-out of national standardized students relationship support </li></ul></ul></ul><ul><ul><ul><ul><ul><li>Sourcing of new students </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Renewals </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Renegotiations </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Internship programs </li></ul></ul></ul>Corporate Presentation
  13. 13. Growth <ul><li>More impactful branding, marketing and sales efforts </li></ul><ul><ul><ul><li>National branding </li></ul></ul></ul><ul><ul><ul><li>Research oriented new media choices </li></ul></ul></ul><ul><ul><ul><li>Structured “on-the-road” sales team for cost effective and more resilient student sourcing (companies and schools) </li></ul></ul></ul><ul><li>Building highly scalable platform for maximum optimization of acquisitions </li></ul><ul><ul><ul><li>Standard academic model </li></ul></ul></ul><ul><ul><ul><li>Strong national brand with high quality products and services </li></ul></ul></ul><ul><ul><ul><li>Centralized backoffice (“plug and play”) </li></ul></ul></ul>Corporate Presentation
  14. 14. Permanent Pursuit of Highest Quality Management Model and Professionals <ul><li>Result oriented management model and compensation scheme </li></ul><ul><li>Budgetary discipline in all business and support areas (Zero Based Budget and goals orientation) </li></ul><ul><li>Monthly tracking of results and acting upon deviations </li></ul><ul><li>“ On-the-Road” management and leadership by CEO and executive officers </li></ul><ul><li>Zero Based and Matrix Budget / internal and external benchmarks </li></ul><ul><li>Integrated systems (SAP and academic systems) </li></ul><ul><li>Streamline of organizational structure </li></ul><ul><li>Streamlined processes (process standardization </li></ul><ul><li>/ back office centralization) </li></ul>Corporate Presentation
  15. 15. Widest Scope for Margin Improvement in the Indutsry General and Administrative Expenses (G&A) Streamline of Organizational Structure Shared Services Center System Integration & Process Review Zero Based /Matrix Budgeting <ul><li>Cost of Services </li></ul><ul><li>Common Subjects </li></ul><ul><li>Course Standardization </li></ul><ul><li>Improved “Production Planning” (Students per Teacher) </li></ul><ul><li>On-Line Programs </li></ul><ul><li>Distance Learning </li></ul><ul><li>Extra-Class Activities </li></ul>12% 22% 17% EBITDA MARGIN (1H09) 25% Drivers of Efficiency Gains Corporate Presentation
  16. 16. Financial Highlights 60 (R$ million) 16% 20% 20% 124 164 762 829 851 (4) 73 229 (48) 11% 56 96 95 166 12% 7% (1) Adjusted in 2007, to the payment of taxes in January 07 (SESES became for profit in February 2007), Law 11.638 in 2008 and one-off expenses in 2008 and 2009 (2) Excluding goodwill amortization from acquisitions and one-ff expenses 980 98 10% 182 19% 72 191 476 513 51 61 11% 12% 92 106 19% 21% 39 44 256 224 Corporate Presentation Adjusted Net Income 2 2005 2006 2007 EBITDA Margin ex-rental EBITDA ex-rental 1 Net Revenue 1 Net Cash 23 Adjusted EBITDA 1 Adjusted EBITDA Margin 1H08 1H09 2008
  17. 17. Corporate Presentation Appendix Corporate Presentation
  18. 18. Sector Overview – Significantly Untapped Demand Fonte: INEP/MEC Post-secondary Enrollments – (Unesco – 2007, million) Gross Enrollment Rate (Unesco - 2007) Largest market in Latin America, with low penetration rates and increasing demand for qualified labour Post-secondary Institutions in Brazil (units) Total Enrollments (million) Corporate Presentation High Growth Potential
  19. 19. Sector Overview: Highly Fragmented Market Up to 499 Top10 largest post-secondary institutions account for less than 25% of total enrollments 1 Top 10 Non-Government Institutions Market Share Based on Number of Enrolled Students Non-Government Institutions (number & Size) 2K < 4.9K 1,001 687 204 Number of institutions 500 < 1.9K 5K or more 140 Number of students 22.6% 77.4 % 10+ Others Corporate Presentation (1) Source: Hoper Educational , MEC High Potential for Consolidation 2,032 Institutions 3.5 million enrollments
  20. 20. Sector Overview – Regulatory Framework University <ul><li>Autonomy, guaranteed by the constitution , to create programs within the city (except for Medicine, Law, Psychology and Odontology) </li></ul><ul><li>Allowed to create campuses outside the city, subject to authorization by the Ministry of Education (MEC) </li></ul><ul><li>Ability to register diploma without the MEC authorization </li></ul>University Centers <ul><li>Autonomy, guaranteed by federal gov’t decree , to create programs inside the city, except for Medicine, Law, Psychology and Odontology </li></ul><ul><li>Ability to register diploma without MEC authorization </li></ul><ul><li>No need to conduct research </li></ul>Colleges <ul><li>No minimum requirements on faculty qualification or hours of work ( full time regime) </li></ul><ul><li>1/3 of faculty must hold a master or PhD degree </li></ul><ul><li>1/3 of faculty must be in full time regime or must offer 3 master programs with CAPES (ministry’s graduate coordinator) recommendation </li></ul><ul><li>Need to conduct research </li></ul><ul><li>1/3 of faculty must hold a master or PhD degree </li></ul><ul><li>1/5 of faculty must be in full time regime </li></ul><ul><li>Not allowed to create other campuses outside the city </li></ul><ul><li>No autonomy to create new programs, vacancies or to register diplomas without the MEC authorization </li></ul>Costs Benefits Institution Corporate Presentation
  21. 21. Undergraduate Student Base and Revenue Growth Students (thousand) Net Revenue (R$ million) CAGR: 8.5% CAGR: 8.7% + 7.9% + 4.7% Corporate Presentation
  22. 22. Cost of Service and SG&A (R$ million) Cost of Services NR = Net Revenue SG&A Gross Margin : 39.3% Gross Margin : 38.3% R$111.2 M R$28.4 M R$35.3 M R$105.2 M Corporate Presentation
  23. 23. Adjusted EBITDA and Net Income (R$ million) Adjusted Net Income 2 Adjusted EBITDA 1 1 - Adjusted in 2007 to the payment of taxes in January 2007 , Law 11.638 in 2008 and to one-off expenses in 2008/2009 2 - Excluding goodwill amortization from acquisitions and one-off expenses 7.3% 11.6% 11.1% 10.0% 10.7% 11.9% Corporate Presentation
  24. 24. Organic Capex (R$ million) Corporate Presentation
  25. 25. Analyst Coverage & Forecast: Corporate Presentation (*) – BTG is revising UBS´s Projections Santander CS Average 10/05 08/31 09/17 R$ 23.6 R$ 27.0 R$ 28.0 - - 1,019 R$ 26.0 06/28 R$ 27.5 Brokers Analyst Coverage & Forecast 2009 2010 2011 2012 R$ million Report Date Target Price Bradesco Net Revenue EBITDA Net Income Morgan Stanley ITAÚ BTG* 09/29 109 81 1,065 120 87 Net Revenue EBITDA Net Income 1,010 116 77 1,058 127 95 999 107 69 - - - 1,057 127 94 1,207 164 119 1,105 157 113 1,153 174 140 1,064 138 101 - - - 1,143 143 Net Revenue EBITDA Net Income Net Revenue EBITDA Net Income 116 1,247 173 148 1,300 187 133 1,254 208 149 1,304 1,187 - 248 179 - 184 138 - 1,415 1,400 1,449 - 218 247 315 - 157 176 236 - 1,238 193 1,117 152 113 82 116 1,030 144 1,336 229 188 1,370 236 181
  26. 26. Capitalization and Market Data Sound balance sheet and strong cash flow support our strategic positioning as one of the main players in sector consolidation in Brazil 06/30/09 460.6 (8.1) 215.6 <ul><ul><li>Stock Price (Sep - 30, 2009): R$20.41 / share </li></ul></ul><ul><ul><li>Number of Shares: 78.6 million </li></ul></ul><ul><ul><li>Market Cap: R$1.6 Billion </li></ul></ul><ul><ul><li>Enterprise Value: R$1.4 Billion </li></ul></ul><ul><ul><li>Daily Volume (3-month average): R$1.8 million </li></ul></ul>Free Float: 27% Market Data Corporate Presentation R$ Million Shareholders Equity Debt Net Cash
  27. 27. IR Contacts and Disclaimer Visit our website: www.estacioparticipacoes.com Investor Relations Team: Lorival Luz – CFO Daniella Guanabara – [email_address] Fernando Santino – [email_address] e-mail: [email_address] Phone: (55) 21 3311 9789 / 9790 / 9791 Fax: (55) 21 3311 9676 Disclaimer: This presentation may contain forward-looking statements concerning the industry’s prospects and Estácio Participações’ estimated financial and operating results; these are ere projections and, as such, are based solely on the Company management’s expectations regarding the future of the business and its continuous access to capital to finance Estácio Participações’ business plan. These considerations depend substantially on changes in market conditions, government rules, competitive pressures and the performance of the sector and the Brazilian economy as well as other factors and are, therefore, subject to changes without previous notice. We are a holding company, and our only assets are our interests in SESES, STB, SESPA, SESCE, SESPE and IREP, and we currently hold 99.9% of the capital stock of each of these subsidiaries. Considering that the Company was incorporated on March 31 2007, the information presented herein is for comparison purposes only, on a proforma unaudited basis, relative to the first three months of 2007, as if the Company had been organized on January 1 2007. Additionally, information was presented on an adjusted basis, in order to reflect the payment of taxes on SESES, our largest subsidiary, which from February 2007, after becoming a for-profit company, is subject to the applicable taxation rules applied to the remaining subsidiaries, except for the exemptions arising out of the PROUNI – University for All Program (“PROUNI”). Information presented for comparison purposes should not be considered as a basis for calculation of dividends, taxes or for any other corporate purposes. Av. Embaixador Abelardo Bueno, 199 – Office Park – 6 th floor Cep 22775-040 - Barra da Tijuca - Rio de Janeiro Corporate Presentation

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