EstáCio Apr Corporativa 1 Q09 Eng V2

Corporate Presentation 1Q09 Corporate Presentation 1Q09

June/2009June/2009

� Largest player in the undergraduate sector in Brazil

� 211k undergraduate students

� National Footprint: 77 campuses in 16 states and 54 Distance Learning Units

� 2 Universities, 2 University Centers and 27 Colleges

Who we are

Campus Rebouças

Campus Tom Jobim

� 2 Universities, 2 University Centers and 27 Colleges

� Asset Light Model: ROE of 15.5% (1Q09)

� LTM Revenues of R$1 billion and EBITDA of R$103 million

� Labor Market Oriented Programs

� High Governance Standards: the only Educational Company in the Novo Mercado (voting shares only)

Corporate Presentation 1Q09 2

Campus R9

141 144

162167

178

207211

History and Current Status

Turnaround andPreparation for IPO

Turnaround andPreparation for IPO

Strong Organic GrowthStrong Organic Growth

National Leadership

(Accounting and Management Systems)

IPO (July/07)

GP (May/08)

Efficiency Gains and

Consolidation

Efficiency Gains and

Consolidation

CAGR of 25.7% - 1997/2005 (Vs 13.5% for Brazil)

Un

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Early StagesEarly

Stages

23 2635

51

70

118

141135

144

3

Begin National Expansion

1970/96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

North and Northeast: subsidiaries for profit status

Main subsidiary with for profit status (Feb/07)

IPO (July/07)

Asset Light Model: Long Term Leasing Agreements (Campuses)

1Q09

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Corporate Presentation 1Q09

Largest Student Base: 211 k undergraduate students –Mar/09

3.5 13.6

0.7

4.9

3.1 12.0

Market-Share per Municipal2

1.5

4.6 3.2

1.5

6.1

Estácio Students per State (th.)

18,5%16,1%

15,1%15,0%

12,9%12,2%12,2%

11,8%11,6%

9,1%8,4%8,1%

6,8%6,0%

5,2%4,0%3,8%

1,8%

FORMACE

JNFLOR

JFBH

BELMCP

VITARAC

RECSAL

VVCG

NATGOSP

CTB

4

4.5

1.9

1.5 3.1

1.3

3.1 23.4

Fonte: SINAES/20062 – Estudante de graduação matriculados (exclui universidades públcas)

� Average Monthly Tuition: R$450 (1Q09;+4.4% yoy)

University

University Center

College

Upgrade to University Center(in process of approval with the MEC)

114.4 2.9

35,1%31,0%

18,5%

RJOURFOR


Labor Market Oriented Programs

Self-financed students (with family support)

Young working adults (~70%)

• Convenience multi-campus

• Location (work / home)

Target Market

Our Student Profile

5

Family income up to 10 minimum salaries (~73%)

Searching for Career Searching for Salary improvement

Living in Urban Centers (large cities)

• Internship Programs

• Adequate Facilities

• Competitive Price

• Perceived Quality (above average)

• Focus on Labor-Market


Highly Qualified Professional Management Aligned with Shareholders (Variable Compensation and Stock Option)

Widest Scope for Margin Improvement in the Industry (Streamlining, Centralization of Back-Office Operations and Scalability)

ESTC3: Competitive Advantages

Headquarter in RJ

Campus Tom Jobim

Scalability)

� Significant Growth Opportunities (M&A / Organic)

� Huge Undergraduate Student Base (Scale) & Geographic Coverage (presence in different markets/regions)

� Sound Balance Sheet: No Leverage and Strong Cash Position

6

Gastronomy Class


Shareholder Structure and Corporate Governance

Large Expertise in the Education Sector

National Expansion and Market Leadership

Active Management Meritocracy CultureProven track record in the Brazilian Market (Gafisa, Lame, Ambev, Submarino, ALL, Magnesita and others)

Founder Shareholders

GP Investments

55% 20% 25%

Free Float

7

Corporate Governance Standards

• Listed at Novo Mercado: Only Voting Shares

• 100% Tag Along Rights

• Independent Board Members

Dividend Policy (Shareholder Agreement)

• Fiscal Council

• Internal Audit and Risk Management

• Audit and Compensation Committee

• Clear Shareholder and Corporate Structure


� Co-Management �� 5 years (renewable for

2+ years)

� Board Members �� 4 each party (being 2

independent)

� Lockup period of 3 years

� Leading Private Equity Firm in LATAM /

First Listed Stock

� Mission: Generate Exceptional

Long-Term Returns to its Investors

and Shareholders

� Outstanding performance of invested

Shareholder Agreement with GP

Highlights of Shareholder Agreement

� Lockup period of 3 years

� M&A Agreement

� Non-Competition Agreement

� Minimum Dividend Payout (50% of Net Income)

� Outstanding performance of invested

companies, with integrity, clear targets,

entrepreneurship, meritocracy and

professionalism. Some examples:

IRR: 1,339%

(3 year investment)

IRR: 148%

(3 year investment)

IRR: 17%

(12 year investment)

IRR: 24%

(10 year investment)

8Corporate Presentation 1Q09

Highly Qualified Professional Management Team

Diretoria Executiva Variable compensation (Bonus + Stock Option)EduardoEduardo AlcalayAlcalay –– CEOCEO

GP Partner; Former board member at Estácio, Cemar andEquatorial; Partner at Singular Partners and Vice President at UOL

Lorival Luz – CFO

Treasury Director at Citibank - Banco Credicard; Corporate BankChief of Staff

Rogério Melzi – Economic and Operational Planning

Head of Financial Planning in Suzano; Planning Officer inInbev/Labat and Ambev

Miguel de Paula – People and Management

Align interests of shareholders andmanagement

Implement targets on global and individual basis (cost cutting, quality goals)

Reconcile quality and long-term targets

Retain key managers and professionals

Maximum dilution of 4.15%

• Faculty Training Program

• Trainee Program for Estácio´s students

• Executive Development Plan

• Qualification for Course Coordinators

• Variable Compensation for Course Coordinators & Teachers

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People Development

Miguel de Paula – People and Management

Head of Human Resources in Farmasa and Votorantim; HRManager at Gerdau

Paula Caleffi – Academic Officer

Ph.D. in American History; Academic Officer in UNISINOS; Teacherin Fundação Dom Cabral

Jessé Hollanda – Operations Officer

Principal of Estácio´s College in Ceará; Academic Director of CSNFoundation and Executive Board member of CBS

AntonioAntonio HiginoHigino ViegasViegas –– MarketMarket OfficerOfficer

Head of Marketing and Sales in Anhanguera Educacional, RegionalManager Brahma (Ambev). Marketing Manager (Infoglobo)

JoãoJoão LuisLuis BarrosoBarroso –– InstitutionalInstitutional RelationsRelations OfficerOfficer

Executive Officer in CSN’s Corporate Center, Institutional RelationsOfficer in Vivo


General and Administrative Expenses (G&A)

Streamline of Organizational Structure

Shared Services Center

System Integration & Process Review

Zero Based /Matrix Budgeting

General and Administrative Expenses (G&A)

Streamline of Organizational Structure

Shared Services Center

System Integration & Process Review

Zero Based /Matrix Budgeting

Widest Scope for Margin Improvement in the Indutsry

27%

EBITDA MARGIN (1Q09)

33%

Drivers of

Cost of Services - Common Subjects

- Course Standardization

- Improved “Production Planning” (Students per Teacher)

- On-Line Programs

Distance Learning

Extra-Class Activities

Cost of Services - Common Subjects

- Course Standardization

- Improved “Production Planning” (Students per Teacher)

- On-Line Programs

Distance Learning

Extra-Class Activities

10

KROT AEDU SEB ESTC

16%

27%

18%

Drivers ofEfficiencyGains


• Streamline of organizational structure

• Process Standardization (Shared Services / Academic Content /

Student Assistance / Corporate Centers)

• BackOffice Centralization: Procurement / Accounting / HR / Legal /

Accounts Payable / Treasury / IT / Real Estate Management

Streamlined Processes

Margin Improvement: Opportunities on G&A expenses

• Management (SAP) and Academic (SIA) Systems – Already

• Zero Based / Matrix Budget

• Internal / External Benchmarks (“Projeto Modelo”)

• Sharing of Best Practices

• Monitoring and acting upon it

Zero Based Budgeting and

Monitoring

IntegratedSystems

11

• Management (SAP) and Academic (SIA) Systems – Already

running in all our units


Margin Improvement: Opportunities on COGS - Faculty Costs

Academic Reform

Labor Agreement - Rio Increase wages below inflation

Increase the number of students per class

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COMMON COURSES: Same Course for Different Programs (Languages, Maths, etc)

STANDARDIZED PROGRAMS in all our campuses

DISTANCE LEARNING: Launching of 5 programs for the second semester/2009: Business, Accounting, Pedagogy, Human Resources Management and Marketing


Growth Opportunities

Organic

• Undergraduate market highly untapped

• Upgrading Colleges to University Centers

• Opening of new campuses, programs and seats

• Market share relevance – expansion and consolidation

• Maximizing growth opportunities in São Paulo and NE Markets

13

Acquisitions

Distance Learning

• Market share relevance – expansion and consolidation

• Strategic fit – compatible market positioning

• Priority for university centers

• Take advantage of potential synergies

• Opening a new market; reaching new segments

• Produce and distribute Estácio s own learning content

• Marginal CAPEX - sunk costs


Asset Light Model: Low Investiment in Real State

Best ROE in the Industry in Brazil

16%16%

Best ROE In Industry

Lowest Permanent Assets1

per Student

ESTC R$1,013 x Industry Average of ~R$2,305

Return on Equity (March/ 09)1

14

AEDU SEB KROT ESTC1 – Receita Líquida do UDM / Patrimônio Líquido

Fonte: Dados das Empresas

9%

16%

11%

16%

1 – Exclui investimentos / Ágio / Ativo Diferido

High Mobility to Grow

per Student


Financial Highlights

(R$ million) 2005 2006 2007

Net Revenue1 762 829 851

Adjusted EBITDA1

Adjusted EBITDA Margin 11%

56 96 95

12%7%

2008

980

98

10%

1Q08 1Q09

238 265

39 43

16% 16%

15

Adjusted Net Income2 60

EBITDA Margin ex-rental 16% 20% 20%

EBITDA ex-rental1 124 164

Net Cash

23

(4)

73

229(48)

11%

166

12%7%

(1) Adjusted in 2007, to the payment of taxes in January 07 (SESES became for profit in February 2007) and one-off expenses in 2008

(2) Excluding goodwill amortization from acquisitions and one-ff expenses

10%

182

19%

72

191

16% 16%

60 67

25% 25%

33 33

274 242


Corporate Presentation – 1Q09

Annex


23.4

17.5

12.9

9.2

4.9 4.1

Sector Overview – Significantly Untapped Demand

12%

22%25% 26%

47%

64%

72%

82%

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

High Growth Potential

31% 30% 29% 28% 27% 26% 25%

69% 70% 71% 72% 73% 74% 75%

2001 2002 2003 2004 2005 2006 2007

Private Public

3.0 4.74.23.9 4.53.5 4.9

China USA India Russia Brazil Japan

183 195 207 224 231 248 249

1.208 1.442

1.652 1.789

1.934 2.022 2.032

2001 2002 2003 2004 2005 2006 2007

Private Public

17

Índia China Brasil México Chile Argentina Rússia EUA

Fonte: INEP/MEC

Post-secondary Institutions in Brazil (units) Total Enrollments (million)


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

Based on Number of Enrolled Students

Non-Government Institutions (number & Size)

2K < 4.9K

687

204

500 < 1.9K

5K or more140

22.6%

Up to 499

18

High Potential for Consolidation

2,032 Institutions3.5 million enrollments

1,001

77.4%

10+ Others


Sector Overview – Regulatory Framework

University

� Autonomy, guaranteed by the constitution, to 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

� Autonomy, guaranteed by federal gov’t decree, to create programs inside the city, except for

� 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


CostsBenefitsInstitution

19

University Centers

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

Colleges� No minimum requirements on faculty qualification or hours of work ( full time regime)


� 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


162167

178

207198

211

762

829 851

980

Undergraduate Student Base and Revenue Growth

Students (thousand) Net Revenue (R$ million)

2005 2006 2007 2008 1Q08 1Q09

238265

2005 2006 2007 2008 1Q08 1Q09


Cost of Service and SG&A (R$ million)

13.8%24.8%

R$ 66.6 M (28.1% NR)

R$ 71.5 M (27.0% NR)

Cost of Services SG&A

Gross Margin: 42.8% Gross Margin: 42.3%

R$9.2 M R$17.7 M 16.6% 16.8%

8.0% 8.7%

R$ 136.0 M R$ 152.6 M

21

86.2%75.2%

1Q08 1Q09

G&A Selling

*NR = Net Revenue

R$57.5 M R$53.8 M 75.4% 74.5%

1Q08 1Q09

Faculty Costs Rental Third-Party Services/Other


Adjusted EBITDA and Net Income (R$ million)

96 9598

Adjusted Net Income2Adjusted EBITDA1

7.3%

11.6% 11.1% 10.0%

16.3% 16.3%

60

73 72

33

22

56

3943

2005 2006 2007 2008 1Q08 1Q09

1 - Adjusted in 2007 to the payment of taxes in January 2007 (SESES became for-profit in February 2007) and to the one-off expenses in 2008/2009

2 - Excluding goodwill amortization from acquisitions and one-off expenses

16.3% 16.3%

23

33 33

2005 2006 2007 2008 1Q08 1Q09


Organic Capex (R$ million)

18.7

23

18.7

6.8

1Q08 1Q09


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

R$ Million 03/31/09

Shareholders Equity

Debt

451.8

(9.7)

Net Cash 242.2

24

Stock Price (Jun - 08, 2009): R$20.30 / share

Number of Shares: 78.6 million

Market Cap: R$1,595.6 million

Enterprise Value: R$1,353.4 million

Daily Volume (3-month average): R$1.5 million

Free Float: 25.2%Market Data

Brazilian Investors

25%

Foreign Investors

75%


IR Contacts and Disclaimer

Visit our website: www.estacioparticipacoes.com

Investor Relations Team:

Lorival Luz – CFO

Daniella Guanabara – [email protected]

Fernando Santino – [email protected]

e-mail: [email protected]

Phone: (55) 21 2433 9789 / 9790 / 9791

Fax: (55) 21 2433 9700

Av. das Américas, 3434 - Bloco 7 - 2º andarCep 22640-102 Barra da Tijuca - Rio de Janeiro

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Disclaimer:

This presentation may contain forward-looking statements concerning the industry’s prospects and Estácio Participações’ estimated financial and operating

results; these are mere 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.


EstáCio Apr Corporativa 1 Q09 Eng V2

Business

Transcript of EstáCio Apr Corporativa 1 Q09 Eng V2