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Corporate Presentation
ESTÁCIO Highlights
Largest post-secondary education group in Latin America
201k students spread throughout 76 campuses in all major
cities in Brazil
78 programs tailored to large and underserved middle and
lower income individuals
54 Distance Learning accredited units strategically located
in major centers
R$1 billion in LTM Net Revenues and R$107 million in LTM
EBITDA, R$229 million in Net Cash
Corporate Presentation
2
History and Current Status
Early
Stages
Efficiency Gains
and
Consolidation
Turnaround and
Preparation for IPO
Strong Organic Growth
(Accounting and Management Systems)
CAGR of 14.3% - 2000/2007 (Vs 8.9% for Brazil)
Undergraduate Students
(in thousand)
207
National
Leadership
141
167
162
144
IPO (July/07)
Main subsidiary
with for profit
status (Feb/07)
North and
Northeast:
subsidiaries for
profit status
118
Begin National
Expansion
GP (May/08)
178
135
201
70
51
23
26
35
Asset Light Model: Long Term Leasing Agreements (Campuses)
1970/96
1997
Corporate Presentation
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
9M09
3
Largest Student Base: 201 k undergraduate students
Estácio Students per State (th.)
1.6
3.6
Market-Share per Municipal1
13.3
0.7
1.6
6.0
4.5
4.2
2.9
11.0
3.3
3.1
1.6
2.0
1.4
CTB
SP
GO
NAT
CG
VV
SAL
REC
ARAC
VIT
MCP
BEL
BH
JF
FLOR
JN
MACE
FOR
OUR
RJ
1.8%
3.8%
4.0%
5.2%
6.0%
6.8%
8.1%
8.4%
9.1%
11.6%
11.8%
12.2%
12.2%
12.9%
15.0%
15,1%
16.1%
18.5%
31.0%
35.1%
1 – Undergraduate students enrolled (excludes public universities)
Source: SINAES/2006
Average Ticket: R$435 (9M09;+5.5% yoy)
University
3.2
21.3
2.5
4.6
108.2
University Center
College
Upgrade to University Center
(in process of approval with the MEC2)
2 – Ministry of Education
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Shareholder Structure and Corporate Governance
Founder
Shareholders
Large Expertise in the
Education Sector
National Expansion
and Market Leadership
GP Investments
Active Management
Meritocracy Culture
Proven track record in
the Brazilian Market
(Gafisa, Lame, Ambev,
Submarino, ALL,
Magnesita and others)
53%
Free Float
27%
20%
Corporate Governance Standards
• Listed at Novo Mercado: Only Voting Shares
• 100% Tag Along Rights
• Independent Board Members
Dividend Policy (Shareholder Agreement)
Corporate Presentation
• Fiscal Council
• Internal Audit and Risk Management
•
Audit and Compensation Committee
• Clear Shareholder and Corporate Structure
5
Shareholder Agreement with GP
Highlights of Shareholder Agreement
Leading Private Equity Firm in LATAM /
First Listed Stock
Co-Management 5 years (renewable for
2+ years)
Mission: Generate Exceptional
Long-Term Returns to its Investors
and Shareholders
Board Members 4 each party (being 2
independent)
Outstanding performance of invested
companies, with integrity, clear targets,
entrepreneurship, meritocracy and
professionalism. Some examples:
Lockup period of 3 years
M&A Agreement
Non-Competition Agreement
Minimum Dividend Payout (50% of Net Income)
IRR: 1,339%
(3 year investment)
IRR: 148%
(3 year investment)
IRR: 17%
(12 year investment)
IRR: 24%
(10 year investment)
Corporate Presentation
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Value Creation Going Forward
Scale and strong balance sheet pave the way for
profitable growth, with major levers being:
Efficiency gains through centralization of
business processes
Quality gains through investments in
standardized high quality academic offerings
and differentiated student support services
More impactful branding and
marketing, coupled with selective M&A
approach (“can´t miss” add-ons)
Attraction and retention of high quality talents
Corporate Presentation
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Value Creation Going Forward
Focused on growing and underserved addressable market: middle and low
income groups
1.9 million students graduating from High School every year
7% net enrollment growth (CAGR 2002-2007)
Quality at affordable cost / location
Career improvement to working adults
Corporate Presentation
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Distance Learning (DL)
Satelite units for sales and infra structure support in advanced negotiations
High growth, high margin with low incremental investment
Lower prices and flexible schedules to access larger students prospects base
20,685
14,233
25,006
2002
2003
2004
New Students (Onground) - Private Inst.
Corporate Presentation
2006
430,259
302,525
1,151,102
2005
212,246
6,618
2001
127,014
1,108,600
1,015,868
995,873
924,649
792,069
5,287
664,474
2000
1,198,506
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”)
1,201,046
2007
2008
New Students (Online / DL) Private Inst.
9
Efficiency Gains Through Centralization of Business
Processes
Recent Start-up of Shared Services Center (SSC):
Macro transactional / back office processes
fully centralized
Streamlining of backoffice headcount
Lower transaction cost with higher quality
(SLAs)
Key for scalability and profitable growth
and acquisitions integration
Corporate Presentation
10
Quality Gains
Investment in high quality, standardized academic
offerings:
41 Core programs being updated and nationally
integrated towards labor market demands and
better integration of shared disciplines: lower
faculty costs
Better quality control with standardized lectures
outlines, content, exercises and exams banks
Digital platform aimed at quality self-learning
activities at minimized costs
Reference books and printed materials tailored
made granted in all 41 core programs included
in tuitions
Corporate Presentation
11
Quality Gains
Improved Students Support Services
New, fully integrated portal - prospects and students
Tracking of students performance for proactive support approach
(“Gabaritando”)
Roll-out of national standardized students relationship support
Sourcing of new students
Renewals
Renegotiations
Internship programs
Corporate Presentation
12
Growth
More impactful branding, marketing and sales efforts
National branding
Research oriented new media choices
Structured “on-the-road” sales team for cost
effective and more resilient student sourcing
(companies and schools)
Building highly scalable platform for maximum
optimization of acquisitions
Standard academic model
Strong national brand with high quality
products and services
Centralized backoffice (“plug and play”)
Corporate Presentation
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Permanent Pursuit of Highest Quality Management
Model and Professionals
Result oriented management model and compensation
scheme
Budgetary discipline in all business and support areas
(Zero Based Budget and goals orientation)
Monthly tracking of results and acting upon deviations
“On-the-Road” management and leadership by CEO and
executive officers
Zero Based and Matrix Budget / internal and external
benchmarks
Integrated systems (SAP and academic systems)
Streamline of organizational structure and processes
(process standardization / back office centralization)
Corporate Presentation
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Widest Scope for Margin Improvement in the Industry
General and Administrative
Expenses (G&A)
Streamline of Organizational
Structure
Shared Services Center
System Integration & Process
Review
Zero Based /Matrix Budgeting
EBITDA MARGIN (9M09)
22.4%
21.9%
Drivers of
Efficiency
Gains
20.3%
12.1%
Cost of Services
-
AEDU
KROT
Corporate Presentation
SEB
Common Subjects
Course Standardization
Improved “Production Planning”
(Students per Teacher)
On-Line Programs
Distance Learning
Extra-Class Activities
ESTC
15
Financial Highlights
(R$ million)
Net Revenue1
2005
2006
2007
2008
9M08
9M09
762
829
851
980
727
764
Adjusted EBITDA1
56
96
95
98
85
93
Adjusted EBITDA Margin
7%
12%
11%
10%
12%
12%
124
164
166
182
148
161
16%
20%
20%
19%
20%
21%
23
60
73
72
68
66
(48)
(4)
229
191
271
229
EBITDA ex-rental1
EBITDA Margin ex-rental
Adjusted Net Income2
Net Cash
(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
Corporate Presentation
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Corporate Presentation
Appendix
Corporate Presentation
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Sector Overview – Significantly Untapped Demand
Largest market in Latin America, with low penetration rates and increasing demand for qualified labour
Post-secondary Enrollments – (Unesco – 2007, million)
Gross Enrollment Rate (Unesco - 2007)
23.4
82%
High Growth Potential
17.5
72%
64%
12.9
47%
9.2
China
USA
India
Russia
22%
4.9
4.1
12%
Brazil
Japan
India
Post-secondary Institutions in Brazil (units)
1,208
1,442
1,652
1,789
2,022
2,032
249
236
2007
2008
183
195
207
224
231
2001
2002
2003
2004
2005
2006
Private
Corporate Presentation
Public
26%
Brazil
Mexico
Total Enrollments (million)
3.0
3.9
3.5
1,934
248
China
25%
2,016
Chile Argentina Russia
USA
4.2
4.5
4.7
4.9
5.1
69%
70%
71%
72%
73%
74%
75%
75%
31%
30%
29%
28%
27%
26%
25%
25%
2001
2002
2003
2004
2005
2006
2007
2008
Private
Public
Source: INEP/MEC
18
Sector Overview: Highly Fragmented Market
Top10 largest post-secondary institutions account for less than 25% of total enrollments1
Top 10 Non-Government Institutions Market Share
Non-Government Institutions (number & Size)
Based on Number of Enrolled Students
22.6%
140
5K or more
204
2K < 4.9K
500 < 1.9K
687
Up to 499
1,001
77.4%
10+
Others
3.5 million enrollments
2,032 Institutions
High Potential for Consolidation
(1) Source: Hoper Educational , MEC
Corporate Presentation
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Sector Overview – Regulatory Framework
Institution
Benefits
Costs
Autonomy, guaranteed by the constitution, to
University
create programs within the city (except for
Medicine, Law, Psychology and Odontology)
Allowed to create campuses outside the
city, subject to authorization by the Ministry of
Education (MEC)
Ability to register diploma without the MEC
authorization
1/3 of faculty must hold a master or PhD degree
1/3 of faculty must be in full time regime or must
offer 3 master programs with CAPES (ministry’s
graduate coordinator) recommendation
Need to conduct research
Autonomy, guaranteed by federal gov’t
University Centers
Colleges
Corporate Presentation
decree, to create programs inside the city, except
for Medicine, Law, Psychology and Odontology
Ability to register diploma without MEC
authorization
No need to conduct research
No minimum requirements on faculty qualification
or hours of work ( full time regime)
1/3 of faculty must hold a master or PhD degree
1/5 of faculty must be in full time regime
Not allowed to create other campuses outside the
city
No autonomy to create new programs, vacancies
or to register diplomas without the MEC
authorization
20
Undergraduate Student Base and Revenue Growth
Students (thousand)
Net Revenue (R$ million)
201
6
980
829
851
762
207
162
167
2005
2006
178
2007
onground
Corporate Presentation
2008
196
195
9M08
9M09
2005
727
2006
2007
2008
9M08
764
9M09
DL
21
Cost of Service and SG&A (R$ million)
Cost of Services
Gross Margin: 39.9%
SG&A
Gross Margin: 38.8%
R$ 211,4 M
(27.7% NR)
R$ 211.0 M
(29.0% NR)
R$ 437.1 M
R$ 467.8 M
4.9% NR
5.2% NR
9.5% NR
9.8% NR
6.0% NR
R$43.5 M
6.9% NR
45.7% NR
46.2% NR
23.0% NR
R$167.5 M
20.7% NR
9M08
9M09
9M08
Faculty Costs
Rental
Third-Party Services/Other
R$52.8 M
R$158.5 M
9M09
G&A
Selling
NR = Net Revenue
Corporate Presentation
22
Adjusted EBITDA and Net Income (R$ million)
Adjusted EBITDA1
11.6%
96
11.1%
95
Adjusted Net Income2
10.0%
98
11.7%
85
7.3%
73
12.1%
72
68
66
9M08
9M09
60
93
56
23
2005
2006
2007
2008
9M08
1 - Adjusted in 2007 to the payment of taxes in January 2007 , Law 11.638 in
2008 and to the one-off expenses in 2008/2009
Corporate Presentation
9M09
2005
2006
2007
2008
2 - Excluding goodwill amortization from acquisitions and one-off expenses
23
Organic Capex (R$ million)
47.0
35.0
20.4
13.5
3Q08
Corporate Presentation
3Q09
9M08
9M09
24
Analyst Coverage & Forecast
Analyst Coverage & Forecast
2009
R$ million
Brokers
Report
Date
Target
Price
Bradesco
09/29
R$ 26.0 1,019
109
CS
08/31
R$ 27.0 1,065
ITAÚ
10/05
R$ 23.6 1,010
Morgan
Stanley
06/28
Santander
2010
Net
Net
EBITDA
Income
Revenue
2011
2012
Net EBITDA
Revenue
Net
Income
Net EBITDA
Revenue
81
1,057 127
94
1,143 143
116 1,247
120
87
1,207 164
119
1,300 187
133 1,415 218
157
116
77
1,105 157
113
1,254 208
149
1,400 247
176
R$ 27.5
1,058 127
95
1,153 174 140
1,304 248
184
1,449 315
236
09/17
R$ 28.0
999 107
69
1,064 138 101
1,187 179
138
1,336 229
188
BES
11/06
R$ 25.0
1,011
99
65
1,121 152
131
1,269 171
154
1,428 215 199
BTG
11/27
R$ 30.0
1,011
104
63
1,087 131
94
1,221 176
137
1,298 220 176
1,025 112
77
1,113 149 113
1,240 187
144
1,368 231
Average
Corporate Presentation
Net
Income
Net EBITDA
Revenue
Net
Income
173 148
183
25
Capitalization and Market Data
R$ Million
09/30/09
Shareholders Equity
476.7
Debt
(6.8)
Net Cash
229.2
Sound balance sheet and strong cash flow support our strategic positioning as
one of the main players in sector consolidation in Brazil
Free Float: 27%
Market Data
Stock Price (Dec - 08, 2009): R$23.89 / share
Others: 16%
BRA: 6%
Number of Shares: 78.6 million
Market Cap: R$1.9 Billion
Enterprise Value: R$1.7 Billion
US: 38%
Europe: 40%
Daily Volume (3-month average): R$1.5 million
Corporate Presentation
26
IR Contacts and Disclaimer
Investor Relations Team:
Lorival Luz – CFO
Fernando Santino – fernando.santino@estacio.br
Matheus Guimarães – matheus.guimaraes@estacio.br
e-mail: ri@estacioparticipacoes.com
Phone: (55) 21 3311 9789 / 9790 / 9791
Fax: (55) 21 3311 9676
Av. Embaixador Abelardo Bueno, 199 – Office Park – 6th floor
Cep 22775-040 - Barra da Tijuca - Rio de Janeiro
Visit our website: www.estacioparticipacoes.com
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, SESAL, SESSE, SESAP, UNEC, SESSA 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.
Corporate Presentation
27