VSTA Vasta Platform Limited

 

 

 

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2023

 Commission File Number: 001-39415 

 

Vasta Platform Limited

(Exact name of registrant as specified in its charter)

 

Av. Paulista, 901, 5^th Floor

Bela Vista

São Paulo – SP, 01310-100

Brazil
+55 (11) 3047-2655

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F

X

Form 40-F

 

 

 

 

TABLE OF CONTENTS

 

ITEM
99.1	Press release dated November 8, 2023 – Vasta Platform Limited announces today its financial and operating results for the third quarter of 2023.
99.2	Vasta Platform Limited Unaudited Condensed Interim Consolidated Financial Statements as of September 30, 2023, and for the nine-month periods ended September 30, 2023 and 2022.

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Vasta Platform Limited
	By:	/s/ Guilherme Alves Melega
		Name:	Guilherme Alves Melega
		Title:	Chief Executive Officer

 

Date: November 8, 2023

 

 

 

 

Exhibit 99.1

 

 

São Paulo, November 8, 2023 – Vasta Platform Limited (NASDAQ: VSTA) – “Vasta” or the “Company” announces today its financial and operating results for the third quarter of 2023 (3Q23) ended September 30, 2023. Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

 

HIGHLIGHTS

 

Vasta’s accumulated subscription revenue during the 2023 sales cycle (from 4Q22 to 3Q23) totaled R$1,207 million, a 18% increase compared to the previous year (or 22%, excluding textbook subscription products (PAR)). In the third quarter, subscription revenue totaled R$194 million, a 15% increase compared to the previous year (or 20%, excluding PAR).

 

In the 2023 sales cycle (4Q22 and 3Q23) net revenue increased 24% to R$1,437 million, mostly due to the conversion of 2023 ACV into revenue and due to the performance of the Non-subscription products and B2G. In the third quarter, net revenue totaled R$258 million, a 36.7% increase compared to the previous year.

 

Starting in 2023, Vasta started to offer its products and services to the Brazilian public sector (B2G). Our broad portfolio of core content solutions, digital platform, and complementary products together with customized learning solutions tested over decades by the private sector are now available to the K-12 public schools. With the B2G sector, we generated R$40.7 million in revenues in the third quarter of 2023 and R$ 81.2 million in revenues in the 2023 sales cycle.

 

In the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. EBITDA margin remained stable compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%, mainly due to higher inventory cost caused by rising inflation on paper and production cost and a provision for doubtful accounts (PDA) made in the 4Q22 in connection with a large retailer that entered into bankruptcy proceeding in Brazil. Those increases were offset by operating efficiency gains, cost savings and better mix due to subscription products growth.

 

Adjusted Net Profit in the 2023 sales cycle totaled R$36 million, an 83% increase compared to Adjusted Net Profit of R$20 million for the 2022 sales cycle.

 

In the 2023 sales cycle, Free cash flow (FCF) totaled R$145 million, a 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 FCF totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23) as a result of company growth and constant efficiency pursuance.

 

 

MESSAGE FROM MANAGEMENT

 

In the third quarter, we concluded the 2023 sales cycle (4Q22 to 3Q23) and subscription revenue has reached R$1,207 million, a 18% increase over the 2022 sales cycle (from 4Q21 to 3Q22) or 22%, excluding textbook subscription products (PAR). Our ACV conversion was 98.1% for 2023, in comparison to an ACV conversion of 102.4% for 2022. For context, in the dynamic landscape of ACV-to-Revenue conversion, fluctuations around 2p.p. in either direction are considered normal by us. Such fluctuations are usually driven by slight differences in number of students per school and product mix.

 

In the 2023 sales cycle, our net revenue grew 24%, to R$1,437 million. Notably, our Complementary Solutions continues to stand out as the highest growth rate among our business segments, with a 42% increase in the current cycle compared to the 2022 sales cycle.

 

Moreover, the company’s cash flow generation was one of the main highlights of the 2023 sales cycle. In the 2023 sales cycle, FCF totaled R$145 million an 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 Free cash flow (FCF) totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23). This progress is the result of our company's growth and commitment to operational efficiency.

 

The normalization of the company’s profitability was another highlight of the 2023 sales cycle. Adjusted EBITDA was R$39 million in 3Q23 compared to R$23 million in the same quarter of the previous year and in the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. Despite the higher inventory costs in 2023, caused by rising global inflation and production costs, combined with the provision for doubtful accounts (PDA) made in the 4Q22 in connection with the bankruptcy proceedings of a large retailer in Brazil, such cost increases were offset by operating efficiency gains, other cost savings and a better mix owing to subscription products growth, which led to a stable EBITDA margin compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%.

 

During the year, we have announced that Vasta made a significant stride by extending its product and service offerings to the Brazilian public sector (B2G). Our diverse portfolio, which includes core content solutions, a digital platform, and complementary products, along with proven custom learning solutions previously tested in the private sector, are now accessible to K-12 public schools. With the B2G sector, we generated R$40.7 million in revenues in the third quarter of 2023 and R$ 81.2 million in revenues in the 2023 sales cycle. This expansion into the public sector marks a momentous opportunity for Vasta, allowing us to contribute to advance education in Brazil while creating new revenue streams. We are excited about the possibilities this development presents and are committed to delivering high-quality educational solutions that meet the unique needs of the public sector.

 

In relation to the bottom line, Adjusted Net Profit in the 2023 sales cycle totaled R$36 million, an increase of 83% compared to the 2022 sales cycle when Adjusted Net Profit totaled R$20 million. We remain focused on optimizing our operations and pursuing strategic opportunities to enhance our financial performance. Our commitment to delivering value to our customers and shareholders remains unwavering.

 

Finally, since 2022, we have dedicated a section of our earnings release for Environmental, Social and Governance (ESG) matters, including a panel of key indicators that has been updated on a quarterly basis, reinforcing our commitment to the highest ESG standards.

 

  

OPERATING PERFORMANCE

 

Student base – subscription models

 

		2023		2022		% Y/Y		2021		% Y/Y
Partner schools - Core content		5,032		5,274		(4.6%)		4,508		17.0%
Partner schools – Complementary solutions		1,383		1,304		6.1%		1,114		17.1%
Students - Core content		1,539,024		1,589,224		(3.2%)		1,335,152		19.0%
Students - Complementary content		453,552		372,559		21.7%		307,941		21.0%

Note: Students enrolled in partner schools

 

In the 2023 sales cycle, Vasta served nearly 1.5 million students with core content solutions. Aligned with the company´s strategy to focus on improving our client base in 2023 through a more diversified mix of schools and growth in premium education systems (Anglo, PH and Fibonacci), brands with a higher average ticket, lower defaults, greater adoption of complementary solutions and longer-term relationships. On the other hand, the reduction of our client base was concentrated on the low-end segment and PAR (paper-based), which have higher number of students on average, and a lower margin. Average ticket price of schools that remain in our client base in 2023 is 11% higher than that of schools that are no longer our clients.

 

The partners-school base that uses our complementary solutions increased by 79 new schools, growing 6% in the number of students served compared to the previous cycle.

 

FINANCIAL PERFORMANCE

 

Net revenue

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2023 sale cycle		2022 sales cycle		% Y/Y
Subscription		194,841		169,609		14.9%		1,207,155		1,024,051		17.9%
Subscription ex-PAR		184,278		153,574		20.0%		1,095,141		897,986		22.0%
Traditional learning systems		180,044		148,843		21.0%		937,344		787,217		19.1%
Complementary solutions		4,234		4,731		(10.5%)		157,797		110,769		42.46%
PAR		10,563		16,035		(34.1%)		112,014		126,065		(11.1%)
B2G		40,747		-		0.0%		81,199		-		0.0%
Non-subscription		22,346		19,115		16.9%		148,829		133,469		11.5%
Total net revenue		257,933		188,724		36.7%		1,437,183		1,157,520		24.2%
% ACV		15.8%		17.0%		(1.1 p.p.)		98.1%		102.4%		(4.3 p.p.)
% Subscription		75.5%		89.9%		(14.3 p.p.)		84.0%		88.5%		(4.5 p.p.)

Note: n.m.: not meaningful

 

In the 2023 sales cycle, net revenue increased 24.2% to R$1,437 million, mostly due to the conversion of 2023 ACV into revenue and due to the performance of the Non-subscription products and B2G. In the third quarter, net revenue totaled R$258 million, a 36.7% increase compared to the prior year. In the third quarter of 2023 we generated R$40.7 million in revenues with the B2G sector.

 

 

In the third quarter, we concluded the 2023 sales cycle (4Q22 to 3Q23) and Vasta’s accumulated subscription revenue during the 2023 sales cycle totaled R$1,207 million, a 18% increase compared to the previous year (or 22%, excluding textbook subscription products (PAR)).

 

Our ACV conversion was 98.1% for 2023, in comparison to an ACV conversion of 102.4% for 2022. For context, in the dynamic landscape of ACV-to-Revenue conversion, fluctuations around 2p.p. in either direction are considered normal by us. Such fluctuations are usually driven by slight differences in number of students per school and product mix. In the third quarter, subscription revenue totaled R$194 million, a 15% increase compared to the previous year (or 20%, excluding PAR).

 

EBITDA

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2023 sales cycle		2022 sales cycle		% Y/Y
Net revenue		257,933		188,724		36.7%		1,437,183		1,157,521		24.2%
Cost of goods sold and services		(101,161)		(91,855)		10.1%		(547,541)		(436,977)		25.3%
General and administrative expenses		(124,500)		(98,511)		26.4%		(489,760)		(477,809)		2.5%
Commercial expenses		(63,044)		(48,917)		28.9%		(229,173)		(189,238)		21.1%
Other operating (expenses) income		7,534		1,301		479.1%		(16,874)		6,293		(368.1%)
Share of loss equity-accounted investees		(2,878)		(2,150)		33.9%		(7,894)		(2,150)		267.2%
Impairment losses on trade receivables		(15,369)		(4,692)		227.6%		(55,550)		(27,859)		99.4%
Profit before financial income and taxes		(41,485)		(56,100)		(26.1%)		90,391		29,782		203.5%
(+) Depreciation and amortization		70,587		66,953		5.4%		275,791		260,498		5.9%
EBITDA		29,102		10,853		168.1%		366,182		290,280		26.1%
EBITDA Margin		11.3%		5.8%		5.5 p.p.		25.5%		25.1%		0.4 p.p.
(+) Layoff related to internal restructuring		115		869		(86.8%)		1,297		12,126		(89.3%)
(+) Share-based compensation plan		9,755		11,172		(12.7%)		20,369		33,376		(39.0%)
(+) M&A adjusting expenses		-		-		n.m.		23,562		-		n.m.
Adjusted EBITDA		38,972		22,894		70.2%		411,411		335,782		22.5%
Adjusted EBITDA Margin		15.1%		12.1%		3.0 p.p.		28.6%		29.0%		(0.4 p.p.)

Note: n.m.: not meaningful

 

In the 2023 sales cycle Adjusted EBITDA grew by 23%, reaching R$411 million. EBITDA margin remained stable compared to the same period in the previous year, with a slight decrease of 40 bps, from 29.0% to 28.6%, mainly due to higher inventory cost caused by rising inflation and production costs, combined with the provision for doubtful accounts (PDA) made in the 4Q22 in connection with the bankruptcy proceedings of a large retailer in Brazil. Those increases were offset by operating efficiency gains, cost savings and better mix due to subscription products growth.

 

In 2Q22, Vasta acquired a 45% minority stake in Educbank Gestão de Pagamentos Educacionais S.A. (“Educbank”), which registered a loss in equity-accounted investees in the amount of R$7.9 million in the 2023 sales cycle, mainly due to the performance of our equity-accounted investee in its early stage of operation.

 

 

The M&A adjusting expenses in the 2023 sales cycle were impacted by the one-off effect of a price adjustment calculation based on earn-outs and net debt.

 

(%) Net Revenue		3Q23		3Q22		Y/Y (p.p.)		2023 sales cycle		2022 sales cycle		Y/Y (p.p.)
Gross margin		60.8%		51.3%		9.5 p.p.		61.9%		62.2%		(0.3 p.p.)
Adjusted cash G&A expenses(1)		(15.3%)		(10.8%)		(4.5 p.p.)		(13.5%)		(14.5%)		1.0 p.p.
Commercial expenses		(24.4%)		(25.9%)		1.5 p.p.		(15.9%)		(16.3%)		0.4 p.p.
Impairment on trade receivables		(6.0%)		(2.5%)		(3.5 p.p.)		(3.9%)		(2.4%)		(1.5 p.p.)
Adjusted EBITDA margin		15.1%		12.1%		3.0 p.p.		28.6%		29.0%		(0.4 p.p.)

(1) Sum of general and administrative expenses, other operating income and profit (loss) of equity-accounted investees, less: depreciation and amortization, layoffs related to internal restructuring, share-based compensation plan and M&A one-off adjusting expenses.

 

In proportion to net revenue, gross margin dropped 30 bps in the 2023 sales cycle (from 62.2% to 61.9%) mainly due to higher inventory cost caused by rising inflation on paper and production costs while Adjusted cash G&A expenses and Commercial expenses reduced by 100 bps and 40 bps respectively, due to gains in operating efficiency, workforce optimization, cost savings and a sales mix that benefited from the growth of subscription products.

 

Reported provisions for doubtful accounts (PDA) grew 150 bps between the compared sales cycles. This increase in PDA is impacted due to the provisioning of 100% of accounts receivable from a large Brazilian retail company undergoing bankruptcy proceedings, in the amount of R$9 million in the 2023 sales cycle. Furthermore, this change in PDA is also influenced by the credit landscape, primarily among schools outside the premium brands segment. This has demanded a conservative approach to risk management and credit allocation, aligning our financial strategy with the prevailing market conditions and potential credit challenges. All factors considered, the participation of PDA in relation to Vasta's Net Revenue increased to 3.9% in the 2023 sales cycle compared to 2.4% in 2022 sales cycle.

 

Finance Results

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2023 sales cycle		2022 sales cycle		% Y/Y
Finance income		19,511		19,174		1.8%		85,831		70,186		22.3%
Finance costs		(74,966)		(68,426)		9.6%		(307,569)		(247,300)		24.4%
Total		(55,455)		(49,252)		12.6%		(221,738)		(177,114)		25.2%

 

In the third quarter of 2023, finance income totaled R$19.5 million, compared to R$19.2 million in 3Q22, representing a slight increase of 1.8% mainly due to interest on accounts receivable partially offset by lower interest on market securities. During the 2023 sales cycle, finance income has increased by 22% to R$85 million, mainly due to the impact of higher interest rates on financial investments and marketable securities. Additionally, finance income in the 2023 sales cycle includes a gain of R$10 million recorded in 4Q22, resulting from the reversal of interest on tax contingencies.

 

Finance costs increased by 9.6% (quarter-on-quarter) in 3Q23, amounting to R$75 million. In the 2023 sales cycle, finance costs have risen by 24.4% to reach R$307.6 million. This increase is driven by higher interest rates applicable to bonds and financings, accounts payable on business combinations, and provisions for tax, civil, and labor losses.

 

 

Net profit (loss)

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2023 sale cycle		2022 sales cycle		% Y/Y
Net (loss) profit		(62,111)		(75,994)		(18.3%)		(67,053)		(110,684)		(39.4%)
(+) Layoffs related to internal restructuring		115		869		(86.8%)		1,297		12,126		(89.3%)
(+) Share-based compensation plan		9,755		11,172		(12.7%)		20,369		33,376		(39.0%)
(+) Amortization of intangible assets(1)		38,940		38,778		0.4%		156,313		152,205		2.7%
(-) Income tax contingencies reversal		-		-		n.m.		(29,715)		-		n.m.
(+) M&A adjusting expenses		-		-		n.m.		23,562		-		n.m.
(-) Tax shield(2)		(16,595)		(17,278)		(4.0%)		(68,524)		(67,220)		1.9%
Adjusted net (loss) profit		(29,896)		(42,454)		(29.6%)		36,249		19,803		83.0%
Adjusted net margin		(11.6%)		(22.5%)		10.9 p.p.		2.5%		1.7%		0.8 p.p.

Note: n.m.: not meaningful; (1) From business combinations. (2) Tax shield (34%) generated by the expenses that are being deducted as net (loss) profit adjustments.

 

In the third quarter of 2023, adjusted net loss totaled R$29 million, a 29.6% increase compared to adjusted net loss of R$42 million in 3Q22. As for the 2023 sales cycle, adjusted net profit totaled R$36 million, reflecting an 83% increase from an adjusted net profit of R$19 million in the 2022 sales cycle.

 

The gain related to the reversal of tax contingencies was recorded in 4Q22 impacting corporate tax and finance results. On the other hand, the M&A adjusting expenses occurred in 2Q23 was adjusted as it relates to a one-off effect of a price adjustment calculation based on earn-outs and net debt.

 

Accounts receivable and PDA

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2Q23		% Q/Q
Gross accounts receivable		545,972		378,587		44.2%		632,151		(13.6%)
Provision for doubtful accounts (PDA)		(73,390)		(49,250)		49.0%		(64,870)		13.1%
Coverage index		13.4%		13.0%		0.4 p.p.		10.3%		3.2 p.p.
Net accounts receivable		472,582		329,337		43.5%		567,281		(16.7%)
Average days of accounts receivable(1)		118		102		16		149		(31)

(1) Balance of net accounts receivable divided by the last-twelve-month net revenue, multiplied by 360.

 

The average payment term of Vasta’s accounts receivable portfolio was 118 days in the 3Q23 which represents 31 days lower than the second quarter of 2023 and 16 days higher than the third quarter of the previous year.

 

Free cash flow

 

Values in R$ ‘000		3Q23		3Q22		% Y/Y		2023 sale cycle		2022 sales cycle		% Y/Y
Cash from operating activities(1)		102,532		61,814		65.9%		330,989		247,762		33.6%
(-) Income tax and social contribution paid		(279)		(1,247)		(77.6%)		(5,361)		(2,736)		95.9%
(-) Payment of provision for tax, civil and labor losses		(508)		52		(1077%)		(1,302)		(1,421)		(8.3%)
(-) Interest lease liabilities paid		(3,050)		(3,655)		(16.6%)		(14,264)		(13,941)		2.3%
(-) Acquisition of property, plant, and equipment		(8,899)		(2,374)		274.9%		(28,788)		(62,060)		(53.6%)
(-) Additions of intangible assets		(22,913)		(30,892)		(25.8%)		(106,696)		(85,934)		24.2%
(-) Lease liabilities paid		(8,623)		(6,682)		29.0%		(29,135)		(27,099)		7.5%
Free cash flow (FCF)		58,260		17,016		242.4%		145,444		54,573		166.5%
FCF/Adjusted EBITDA		149.5%		74.3%		75.2 p.p.		35.4%		16.3%		19.1 p.p.
LTM FCF/Adjusted EBITDA		35.4%		16.3%		19.1 p.p.		35.4%		16.3%		19.1 p.p.

(1) Net (loss) profit less non-cash items less and changes in working capital. Note: n.m.: not meaningful

 

 

In the 2023 sales cycle, FCF totaled R$145 million an 167% increase from R$55 million in the 2022 sales cycle. In 3Q23 Free cash flow (FCF) totaled R$58 million, a 242% increase from R$17 million in 3Q22. The last twelve-month (LTM) FCF/Adjusted EBITDA conversion rate improved from 16% (4Q21-3Q22) to 35% (4Q22-3Q23).

 

Financial leverage

 

Values in R$ ‘000		3Q23		2Q23		1Q23		4Q22		3Q22
Financial debt		765,350		846,443		815,927		842,996		811,612
Accounts payable from business combinations		601,171		591,620		599,713		625,277		647,466
Total debt		1,366,521		1,438,063		1,415,640		1,468,273		1,459,078
Cash and cash equivalents		106,757		38,268		42,680		45,765		44,343
Marketable securities		261,264		385,002		331,110		380,516		433,803
Net debt		998,500		1,014,793		1,041,850		1,041,992		980,932
Net debt/LTM adjusted EBITDA(1)		2.43		2.57		2.85		2.78		2.92

(1) LTM adjusted EBITDA includes Eleva. Eleva’s LTM adjusted EBITDA prior to November 2021 may not reflect Vasta’s accounting standards.

 

As of the end of 3Q23, Vasta recorded net debt in the amount of R$998 million, a reduction of R$16 million to the net debt position of 2Q23. The positive cash flow generated in the period helped surpass the negative impacts of interest rates and payments relating to our share buyback program. The net debt/LTM adjusted EBITDA of 2.43x as of 3Q23 is 0.14x lower than 2Q23 and 0.49x lower than 3Q22.

 

In comparison to 3Q22, the net debt position increased by R$18 million, due to the impact of higher interest rates and investments made in the minority-stake acquisitions of Educbank (in July 2022) both of which were partially offset our positive cash flow generated in the period.

 

 

 

ESG

 

Sustainability Report

 

In the third quarter, Vasta released its sustainability report for the year 2022. This report, which is the company's second, was prepared in accordance with international standards for reports of this category and showcases the implementation of our corporate strategy, challenges, and achievements, while also reaffirming our commitment to transparency and sustainability. These include the publication of its first Greenhouse Gas Inventory, the company's adherence to the UN Global Compact, the dedication of 3,216 thousand hours to the Corporate Volunteer Program, the SOMOS Afro program, an affirmative internship program, and the fact that 29% of the seats on the Board of Directors are occupied by women.

 

The report complies with the Global Reporting Initiative (GRI) 2021 version and also considers other standards recognized in Brazil and abroad, such as the Sustainability Accounting Standards Board (SASB) guidelines for the education sector, the guidelines of the IBC Stakeholder Capitalism Metrics from the World Economic Forum, and the principles of the International Integrated Reporting Council (IIRC).

 

The document is available at: https://ir.vastaplatform.com/esg/

 

In line with the topics identified in the materiality process, every quarter we present Vasta's most material indicators:

 

Key Indicators

 

ENVIRONMENT

 

Water withdrawal2
SDGs	GRI	Disclosure	Unit	3Q2023	3Q20223	% Y/Y	2Q2023	% Q/Q
3, 11, 12	303-3	Total water withdrawal	m³	5,290	3,565	48%	4,654	13.7%
		Municipal water supply1	%	100%	4%	96 p.p.	100%	0 p.p.
		Groundwater	%	0%	96%	(96 p.p.)	0%	0 p.p.
Energy consumption within the organization2
SDGs	GRI	Disclosure	Unit	3Q2023	3Q20223	% Y/Y	2Q2023	% Q/Q
12, 13	302-1	Total energy consumption	GJ	1,845	1,523	21%	2,909	-36.6%
		Energy from renewable sources2	%	59%	98%	(39 p.p.)	62%	(3 p.p.)

 

The decrease in groundwater consumption is due to the closure of our Distribution Center's well located in São José dos Campos, prompted by possible contamination from adjacent land which housed a factory. In the third quarter, the operations of the Anglo Tamandaré unit were closed in view of the inauguration of the Anglo Paulista unit, which was under construction during the first semester. The building features modernized facilities and provides greater mobility for the students.

 

 

SOCIAL

 

Diversity in workforce by employee category
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
5	405-1	C-level – Women	%	29%	25%	4 p.p.	29%	0 p.p.
		C-level – Men	%	71%	75%	(4 p.p.)	71%	0 p.p.
		C-level- total4	no.	7	4	75%	7	0.0%
		Leadership (≥ managers) – Women	%	45%	48%	(3 p.p.)	47%	(2 p.p.)
		Total - Leadership (≥ managers) – Men	%	55%	52%	3 p.p.	53%	2 p.p.
		Leadership (≥ managers) 5 – total	no.	144	134	7%	139	3.6%
		Academic staff – Women	%	18%	20%	(2 p.p.)	18%	0 p.p.
		Academic staff – Men	%	83%	80%	3 p.p.	82%	1 p.p.
		Academic staff 6 - total	no.	80	84	-5%	82	-2.4%
		Administrative/Operational – Women	%	55%	57%	(2 p.p.)	56%	(1 p.p.)
		Administrative/Operational – Male	%	45%	43%	2 p.p.	44%	1 p.p.
		Administrative/Operational 7 - total	no.	1,564	1,539	2%	1,524	2.6%
		Employees – Women	%	53%	54%	(1 p.p.)	53%	0 p.p.
		Employees – Men	%	47%	46%	1 p.p.	47%	0 p.p.
		Employees - total	no.	1,795	1,761	2%	1,752	2.5%

 

Social impact*
SDGs	GRI	Disclosure	Unit	1S2023	1S2022	2S2022
4, 10	-	Scholars of the Somos Futuro Program	no.	236	371	247

* Indicators presented progressively, referring to the total accumulated since the beginning of the year, which is why we are not presenting the variations compared to previous semesters.

 

 

We continue to maintain the Somos Futuro Program via Instituto SOMOS. The initiative enables public school students to attend high school at one of Vasta's partner schools. In the second quarter, 236 young people were studying through the program receiving didactic and teaching material, online school tutoring, mentoring and access to the entire support network of the program, which includes psychological monitoring, in addition to the scholarship offered by the school.

 

The difference between the figures for 2022 and 2023 is due to the number of students who graduated in 2022 being greater than the number of students who entered the cycle in 2023.

 

Health and Safety
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
3	403-5, 403-9	Units covered by the Risk Management Program (PGR)	%	100%	100%	0 p.p.	100%	0 p.p.
		Trained employees	no.	781	346	126%	729	7.1%
		Average hours of training per employee 9	no.	1.25	1.08	16%	1	64%
		Injury frequency 10	rate	4.58	4.06	13%	1.88	144%
		High-consequence injuries	no.	-	-	0%	-	0%
		Recordable work-related injuries 11	rate	-	3.04	-100%	0.94	-100%
		Fatalities resulted from work-related injuries	no.	-	-	0%	-	0%
		Fatalities 12	rate	-	-	0%	-	0%

 

The main causes of work-related injuries were impacts suffered in internal and external circulation areas causing abrasions, contusions, and sprains.

 

The increase in the volume of health and safety training hours per participant in the quarter is related to the increase in fire brigade training during that period, which has a longer duration in compliance with municipal regulations.

 

GOVERNANCE

 

Diversity in the Board of Directors (gender)
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
5	405-1	Members	no.	7	7	0%	7	0%
		Women	%	29%	29%	0 p.p.	29%	0 p.p.

 

 

Ethical conduct
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
16	2-25	Cases recorded in our Confidential Ethics Hotline 13	no.	20	ND	n.m	14	43%
10	406-1	Grievances regarding discrimination received through our Confidential Ethics Hotline 13	no.	1	ND	n.m	-	0%
		Confirmed incidents of discrimination 13	no.	-	ND	n.m	-	0%
5	405-1	Employees who have received training on anti-corruption policies and procedures	%	100%	100%	0.0 p.p.	100%	0 p.p.
		Operations assessed for risks related to corruption	%	100%	100%	0.0 p.p.	100%	0 p.p.
		Confirmed incidents of corruption	no.	-	-	0%	-	0%

 

In the third quarter, we continued the Company leadership literacy and engagement program by conducting a workshop on discrimination, workplace harassment, and sexual harassment, which was initiated in the second quarter. The workshop presents the topic through concepts and practical examples and reinforces the existence of the Confidential Channel for reporting any situation related to discrimination, harassment, and violations of the Code of Conduct. It also emphasizes the guarantee of confidentiality and provides detailed information about the investigation process for received complaints.

 

Compliance*
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
16	307-1, 419-1	Fines for social and economic noncompliance	R$ thousand	-	-	0%	-	0%
		Non-financial sanctions for social and economic non-compliance	no.	-	-	0%	-	0%
		Fines for environmental noncompliance	R$ thousand	-	-	0%	-	0%
		Non-financial sanctions for environmental non-compliance	no.	-	-	0%	-	0%

* Only cases deemed material, i.e., cases that harm Vasta's image, that lead to a halt in operations, or where the amounts involved are over R$1 million.

 

 

We did not record significant sanctions or fines related to economic and social issues, except for the normal course of business.

 

Customer data privacy
SDGs	GRI	Disclosure	Unit	3Q2023	3Q2022	% Y/Y	2Q2023	% Q/Q
16	418-1	External complaints substantiated by the organization	no.	4	20	-80%	6	-33%
		Complaints received from regulatory agencies or similar official bodies	no.	-	-	0%	0	0%
		Cases identified of leakage, theft, or loss of customer data	no.	-	-	0%	-	0%

 

FOOTNOTES:

 

SDG	Sustainable Development Goal. Indicates goal to which the actions monitored contribute.
GRI	Global Reporting Initiative. Lists the GRI standard indicators related to the data monitored.
ND	Indicator discontinued or not measured in the quarter.
NM	Not meaningful
1	Based on invoices from sanitation concessionaires.
2	Acquired from the free energy market.
3	The amounts referring to 1Q2022, 2Q2022 and 3Q2022 were equalized in 4Q2022 considering the total amount of invoices from concessionaires received in the respective quarters – considering the different closing deadlines for each location
4	Takes into the account the positions of CEO, vice presidents and director reporting directly to the CEO
5	Management, senior management and leadership positions not reporting directly to the CEO
6	Course coordinators, teachers, and tutors.
7	Corporate coordination, specialists, adjuncts, assistants and analysts.
8	Indicators reported on semi-annual basis (2Q and 4Q).
9	Total hours of training/employees trained.
10	Total accidents (with and without leave)/ Total man/hours worked (MHW) x 1,000,000
11	Work-related injury (excluding fatalities) from which the worker cannot recover fully to pre-injury health status within 6 months. Formula: Number of injuries/MHW x 1.000.000.
12	Fatalities/ MHW x 1,000,000.
13	Indicators measured from the first quarter of 2023. It used to be reported annually in Sustainability Reports

 

CONFERENCE CALL INFORMATION

 

Vasta will discuss its third quarter 2023 results on November 8, 2023, via a conference call at 5:00 p.m. Eastern Time. To access the call (ID: 3871721), please dial: +1 (888) 660-6819 or +1 (929) 203-1989. A live and archived webcast of the call will be available on the Investor Relations section of the Company’s website at https://ir.vastaplatform.com.

 

ABOUT VASTA

 

Vasta is a leading, high-growth education company in Brazil powered by technology, providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment, ultimately benefiting all of Vasta’s stakeholders, including students, parents, educators, administrators, and private school owners. Vasta’s mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. Vasta believes it is uniquely positioned to help schools in Brazil undergo the process of digital transformation and bring their education skill set to the 21st century. Vasta promotes the unified use of technology in K-12 education with enhanced data and actionable insight for educators, increased collaboration among support staff and improvements in production, efficiency and quality. For more information, please visit ir.vastaplatform.com.

 

 

CONTACT

 

Investor Relations

ir@vastaplatform.com

  

 

FORWARD-LOOKING STATEMENTS

 

This press release contains forward-looking statements that can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. Forward-looking statements appear in a number of places in this press release and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including (i) general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business; (ii) fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future; (iii) our ability to implement our business strategy and expand our portfolio of products and services; (iv) our ability to adapt to technological changes in the educational sector; (v) the availability of government authorizations on terms and conditions and within periods acceptable to us; (vi) our ability to continue attracting and retaining new partner schools and students; (vii) our ability to maintain the academic quality of our programs; (viii) the availability of qualified personnel and the ability to retain such personnel; (ix) changes in the financial condition of the students enrolling in our programs in general and in the competitive conditions in the education industry; (x) our capitalization and level of indebtedness; (xi) the interests of our controlling shareholder; (xii) changes in government regulations applicable to the education industry in Brazil; (xiii) government interventions in education industry programs, that affect the economic or tax regime, the collection of tuition fees or the regulatory framework applicable to educational institutions; (xiv) cancellations of contracts within the solutions we characterize as subscription arrangements or limitations on our ability to increase the rates we charge for the services we characterize as subscription arrangements; (xv) our ability to compete and conduct our business in the future; (xvi) our ability to anticipate changes in the business, changes in regulation or the materialization of existing and potential new risks; (xvii) the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors; (xviii) changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes; (xix) changes in labor, distribution and other operating costs; our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us; (xx) the effectiveness of our risk management policies and procedures, including our internal control over financial reporting; (xxi) health crises, including due to pandemics such as the COVID-19 pandemic and government measures taken in response thereto; (xxii) other factors that may affect our financial condition, liquidity and results of operations; and (xxiii) other risk factors discussed under “Risk Factors”. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

 

NON-GAAP FINANCIAL MEASURES

 

This press release presents our EBITDA, Adjusted EBITDA and Adjusted net (loss) profit and Free cash flow (FCF), which is information provided for the convenience of investors. EBITDA and Adjusted EBITDA are among the key performance indicators used by us to measure financial operating performance. Our management believes that these Non-GAAP financial measures provide useful information to investors and shareholders. We also use these measures internally to establish budgets and operational goals to manage and monitor our business, evaluate our underlying historical performance and business strategies and to report our results to the board of directors.

 

We calculate EBITDA as net (loss) profit for the period/year plus income taxes and social contribution plus/minus net finance result plus depreciation and amortization. The EBITDA measure provides useful information to assess our operational performance.

 

We calculate Adjusted EBITDA as EBITDA plus/minus: (a) income tax and social contribution; (b) net finance result; (c) depreciation and amortization; (d) share-based compensation expenses, mainly due to the grant of additional shares to Somos’ employees in connection with the change of control of Somos to Cogna (for further information refer to note 23 to the audited consolidated financial statements); (e) provision for risks of tax, civil and labor losses regarding penalties, related to income tax positions taken by the Predecessor Somos – Anglo and Vasta in connection with a corporate reorganization carried out by the Predecessor Somos – Anglo; (f) Bonus IPO, which refers to bonus paid to certain executives and employees based on restricted share units; and (g) expenses with contractual termination of employees due to organizational restructuring. We understand that such adjustments are relevant and should be considered when calculating our Adjusted EBITDA, which is a practical measure to assess our operational performance that allows us to compare it with other companies that operates in the same segment.

 

We calculate Adjusted net (loss) profit as the (loss) profit for the period/year as presented in Statement of Profit or Loss and Other Comprehensive Income adjusted by the same Adjusted EBITDA items, however, added by (a) Amortization of intangible assets from Business Combination and (b) Tax shield of 34% generated by the aforementioned adjustments.

 

We calculate Operating cash flow (OCF) as the cash from operating activities as presented in the Statement of Cash Flows less (a) income tax and social contribution paid; (b) tax, civil and labor proceedings paid; (c) interest lease liabilities paid; (d) acquisition of property, plant and equipment; (e) additions to intangible assets; and (f) lease liabilities paid.

 

We understand that, although Adjusted net (loss) profit, EBITDA, Adjusted EBITDA, and Operating cash flow (OCF) are used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS. Additionally, our calculations of Adjusted net (loss) profit, Adjusted EBITDA, and Operating cash flow (OCF) may be different from the calculation used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

 

 

REVENUE RECOGNITION AND SEASONALITY

 

Our main deliveries of printed and digital materials to our customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials we provide in the fourth quarter are used by our customers in the following school year and, therefore, our fourth quarter results reflect the growth in the number of our students from one school year to the next, leading to higher revenue in general in our fourth quarter compared with the preceding quarters in each year. Consequently, in aggregate, the seasonality of our revenues generally produces higher revenues in the first and fourth quarters of our fiscal year. Thus, the numbers for the second quarter and third quarter are usually less relevant. In addition, we generally bill our customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half.

 

A significant part of our expenses is also seasonal. Due to the nature of our business cycle, we need significant working capital, typically in September or October of each year, to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of our teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year.

 

Purchases through our Livro Fácil e-commerce platform are also very intense during the back-to-school period, between November, when school enrollment takes place and families plan to anticipate the purchase of products and services, and February of the following year, when classes are about to start. Thus, e-commerce revenue is mainly concentrated in the first and fourth quarters of the year.

 

KEY BUSINESS METRICS

 

ACV Bookings is a non-accounting managerial metric and represents our partner schools’ commitment to pay for our solutions offerings. We believe it is a meaningful indicator of demand for our solutions. We consider ACV Bookings is a helpful metric because it is designed to show amounts that we expect to be recognized as revenue from subscription services for the 12-month period between October 1 of one fiscal year through September 30 of the following fiscal year. We define ACV Bookings as the revenue we would expect to recognize from a partner school in each school year, based on the number of students who have contracted our services, or “enrolled students,” that will access our content at such partner school in such school year. We calculate ACV Bookings by multiplying the number of enrolled students at each school with the average ticket per student per year; the related number of enrolled students and average ticket per student per year are each calculated in accordance with the terms of each contract with the related school. Although our contracts with our schools are typically for 4-year terms, we record one year of revenue under such contracts as ACV Bookings. ACV Bookings are calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. Since the actual rates of returned goods from sales during the period may be different from the historical average rates and the actual volume of merchandise ordered by our customers may be different from the contracted amount, the actual revenue recognized during each period of a sales cycle may be different from the ACV Bookings for the respective sales cycle. Our reported ACV Bookings are subject to risks associated with, among other things, economic conditions and the markets in which we operate, including risks that our contracts may be canceled or adjusted (including as a result of the COVID-19 pandemic).

 

 

FINANCIAL STATEMENTS

 

Consolidated Statements of Financial Position

 

Assets		September 30, 2023				December 31, 2022
Current assets
Cash and cash equivalents			106,757				45,765
Marketable securities			261,264				380,514
Trade receivables			472,582				649,135
Inventories			313,452				266,450
Taxes recoverable			20,808				19,120
Income tax and social contribution recoverable			18,904				17,746
Prepayments			84,258				56,645
Other receivables			2,093				972
Related parties – other receivables			-				1,759
Total current assets			1,280,118				1,438,106
Non-current assets
Judicial deposits and escrow accounts			201,433				194,859
Deferred income tax and social contribution			248,990				170,851
Equity accounted investees			77,607				83,139
Other investments and interests in entities			9,879				8,272
Property, plant and equipment			180,065				197,688
Intangible assets and goodwill			5,344,283				5,427,676
Total non-current assets			6,062,257				6,082,485
Total Assets			7,342,375				7,520,591

 

Consolidated Statements of Financial Position (continued)

 

Liabilities		September 30, 2023				December 31, 2022
Current liabilities
Bonds			515,350				93,779
Suppliers			239,198				250,647
Reverse factoring			272,609				155,469
Lease liabilities			15,352				23,151
Income tax and social contribution payable			5,830				5,564
Salaries and social contributions			109,090				100,057
Contractual obligations and deferred income			8,302				57,852
Accounts payable for business combination and acquisition of associates			29,932				73,007
Other liabilities			24,802				29,630
Other liabilities - related parties			-				54
Total current liabilities			1,220,465				789,210
Non-current liabilities
Bonds			250,000				749,217
Lease liabilities			107,924				117,412
Accounts payable for business combination and acquisition of associates			571,239				552,270
Provision for tax, civil and labor losses			680,649				651,252
Other liabilities			15,180				31,551
Total non-current liabilities			1,624,992				2,101,702
Total current and non-current liabilities			2,845,457				2,890,912
Shareholder's Equity
Share capital			4,820,815				4,820,815
Capital reserve			89,995				80,531
Treasury shares			(24,792	)			(23,880	)
Accumulated losses			(391,683	)			(247,787	)
Total Shareholder's Equity			4,494,335				4,629,679
Interest of non-controlling shareholders			2,583				-
Total Shareholder's Equity			4,496,918				4,629,679
Total Liabilities and Shareholder's Equity			7,342,375				7,520,591

 

Consolidated Income Statement

 

		July 01 to September 30, 2023				September 30, 2023				July 01 to September 30, 2022				September 30, 2022
Net revenue from sales and services			257,933				932,164				188,724				759,261
Sales			242,242				896,135				180,422				732,647
Services			15,691				36,029				8,302				26,614
Cost of goods sold and services			(101,161	)			(375,464	)			(91,855	)			(301,058	)
Gross profit			156,772				556,700				96,869				458,203
Operating income (expenses)			(195,379	)			(590,570	)			(150,819	)			(509,766	)
General and administrative expenses			(124,500	)			(369,872	)			(98,511	)			(351,738	)
Commercial expenses			(63,044	)			(178,968	)			(48,917	)			(143,838	)
Other operating income			7,534				18,015				1,301				2,941
Other operating expenses			-				(32,968	)			-				-
Impairment losses on trade receivables			(15,369	)			(26,777	)			(4,692	)			(17,131	)
Share of loss equity-accounted investees			(2,878	)			(5,532	)			(2,150	)			(2,150	)
(Loss) before finance result and taxes			(41,485	)			(39,402	)			(56,100	)			(53,713	)
Finance result			(55,455	)			(179,924	)			(49,252	)			(139,952	)
Finance income			19,511				53,612				19,174				56,339
Finance costs			(74,966	)			(233,536	)			(68,426	)			(196,291	)
Loss before income tax and social contribution			(96,940	)			(219,326	)			(105,352	)			(193,665	)
Income tax and social contribution			34,829				76,380				29,358				63,200
Current			(4,762	)			(2,299	)			1,946				(11,697	)
Deferred			39,591				78,679				27,412				74,897
Loss for the period			(62,111	)			(142,946	)			(75,994	)			(130,465	)
Allocated to:
Controlling shareholders			(62,389	)			(143,896	)			(75,994	)			(130,465	)
Non-controlling shareholders			278				950				-				-

 

 

Consolidated Statement of Cash Flows

 

		For the period ended September 30,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax and social contribution			(219,326	)			(193,665	)
Adjustments for:
Depreciation and amortization			205,948				198,841
Share of loss profit of equity-accounted investees			5,532				2,150
Impairment losses on trade receivables			26,777				17,131
Reversal for tax, civil and labor losses, net			(10,190	)			(9,151	)
Provision on accounts payable for business combination			23,562				-
Interest on provision for tax, civil and labor losses			41,313				39,639
Provision for obsolete inventories			19,504				27,896
Interest on bonds			91,361				77,636
Contractual obligations and right to returned goods			(38,080	)			(12,875	)
Interest on accounts payable for business combination			52,100				47,511
Imputed interest on suppliers			26,196				13,730
Bank and collection expense			-				6,056
Other financial expenses and net interest			-				(15,710	)
Share-based payment expense			14,335				16,436
Interest on lease liabilities			10,144				10,799
Interest on marketable securities			(31,065	)			(39,709	)
Cancellations of right-of-use contracts			(2,480	)			3,393
Write-off disposals of property and equipment and intangible assets			639				3,718
			216,270				193,826
Changes in
Trade receivables			150,983				159,242
Inventories			(78,690	)			(31,994	)
Prepayments			(27,551	)			(14,174	)
Taxes recoverable			(4,505	)			(20,329	)
Judicial deposits and escrow accounts			(7,025	)			(9,275	)
Other receivables			(1,072	)			1,381
Related parties – other receivables			1,759				(509	)
Suppliers			78,271				(14,090	)
Salaries and social charges			8,556				43,563
Tax payable			969				6,502
Contractual obligations and deferred income			(14,236	)			7,387
Other liabilities			(20,452	)			(22,494	)
Other liabilities - related parties			(54	)			(13,901	)
Cash from operating activities			303,223				285,135
Payment of interest on leases			(10,136	)			(10,813	)
Payment of interest on bonds			(118,901	)			(92,722	)
Payment of interest on business combinations			(8,096	)			-
Income tax and social contribution paid			(944	)			(2,736	)
Payment of provision for tax, civil and labor losses			(1,247	)			(1,308	)
Net cash from operating activities			163,899				177,556
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment			(18,247	)			(50,602	)
Additions of intangible assets			(61,425	)			(66,819	)
Acquisition of subsidiaries net of cash acquired			(3,212	)			(53,686	)
Purchase of investment in marketable securities			(937,409	)			(1,087,910	)
Proceeds from investment in marketable securities			1,087,724				860,165
Net cash from (applied in) investing activities			67,431				(398,852	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase shares on treasury			(5,783	)			-
Payments of loans from related parties			(50,885	)			(254,885	)
Lease liabilities paid			(22,541	)			(20,409	)
Payments of bonds and financing			-				(759	)
Issuance of bonds net off issuance costs			-				250,000
Payments of accounts payable for business combination			(91,129	)			(18,201	)
Net cash applied in financing activities			(170,338	)			(44,254	)
Net increase (decrease) in cash and cash equivalents			60,992				(265,550	)
Cash and cash equivalents at beginning of period			45,765				309,893
Cash and cash equivalents at end of period			106,757				44,343
Net increase (decrease) in cash and cash equivalents			60,992				(265,550	)

 

 

Exhibit 99.2

 

 

VASTA Platform Limited

 

Unaudited Condensed Interim Consolidated Financial Statements 

Nine-months period ended September 30, 2023 

 

 

CONTENT

 

Unaudited Condensed Interim Consolidated Financial Statements as of nine- months period ended September 30, 2023		Page
Unaudited Condensed Interim Consolidated Statements of Financial Position as of September 30, 2023 and December 31, 2022		3
Unaudited Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income for the nine-months periods ended September 30, 2023 and 2022		5
Unaudited Condensed Interim Consolidated Statements of Changes in Equity for the nine-months periods ended September 30, 2023 and 2022		6
Unaudited Condensed Interim Consolidated Statements of Cash Flows for the nine-months periods ended September 30, 2023 and 2022		7
Notes to the Unaudited Condensed Interim Consolidated Financial Statements		8

 

Unaudited Condensed Interim Consolidated Statements of Financial Position as of September 30, 2023 and December 31, 2022

 

Assets		Note				September 30, 2023				December 31, 2022
Current assets
Cash and cash equivalents			7				106,757				45,765
Marketable securities			8				261,264				380,514
Trade receivables			9				472,582				649,135
Inventories			10				313,452				266,450
Prepayments							84,258				56,645
Taxes recoverable							20,808				19,120
Income tax and social contribution recoverable							18,904				17,746
Other receivables							2,093				972
Related parties – other receivables			20				-				1,759
Total current assets							1,280,118				1,438,106
Non-current assets
Judicial deposits and escrow accounts			21.b				201,433				194,859
Deferred income tax and social contribution			22				248,990				170,851
Equity accounted investees			11				77,607				83,139
Other investments and interests in entities							9,879				8,272
Property, plant and equipment			12				180,065				197,688
Intangible assets and goodwill			13				5,344,283				5,427,676
Total non-current assets							6,062,257				6,082,485
Total Assets							7,342,375				7,520,591

The accompanying notes are an integral part of this Unaudited Condensed Interim Consolidated Financial Statements.

 

Unaudited Condensed Interim Consolidated Statements of Financial Position as of September 30, 2023 and December 31, 2022

 

Liabilities		Note				September 30, 2023				December 31, 2022
Current liabilities
Bonds			14				515,350				93,779
Suppliers			15				239,198				250,647
Reverse factoring			15				272,609				155,469
Lease liabilities			16				15,352				23,151
Income tax and social contribution payable							5,830				5,564
Salaries and social contributions			19				109,090				100,057
Contractual obligations and deferred income			17				8,302				57,852
Accounts payable for business combination and acquisition of associates			18				29,932				73,007
Other liabilities							24,802				29,630
Other liabilities - related parties			20				-				54
Total current liabilities							1,220,465				789,210
Non-current liabilities
Bonds			14				250,000				749,217
Lease liabilities			16				107,924				117,412
Accounts payable for business combination and acquisition of associates			18				571,239				552,270
Provision for tax, civil and labor losses			21.a				680,649				651,252
Other liabilities							15,180				31,551
Total non-current liabilities							1,624,992				2,101,702
Total current and non-current liabilities							2,845,457				2,890,912
Shareholder's Equity
Share capital			23.1				4,820,815				4,820,815
Capital reserve			23.3				89,995				80,531
Treasury shares			23.4				(24,792	)			(23,880	)
Accumulated losses							(391,683	)			(247,787	)
Total Shareholder's Equity							4,494,335				4,629,679
Interest of non-controlling shareholders							2,583				-
Total Shareholder's Equity							4,496,918				4,629,679
Total Liabilities and Shareholder's Equity							7,342,375				7,520,591

 

The accompanying notes are an integral part of this Unaudited Condensed Interim Consolidated Financial Statements.

 

Unaudited Condensed Interim Consolidated Statements of Profit or Loss and Other Comprehensive Income for the nine-months periods ended September 30, 2023, and 2022

 

		Note				July 01 to September 30, 2023				September 30, 2023				July 01 to September 30, 2022				September 30, 2022
Net revenue from sales and services			24				257,933				932,164				188,724				759,261
Sales							242,242				896,135				180,422				732,647
Services							15,691				36,029				8,302				26,614
Cost of goods sold and services			25				(101,161	)			(375,464	)			(91,855	)			(301,058	)
Gross profit							156,772				556,700				96,869				458,203
Operating income (expenses)
General and administrative expenses			25				(124,500	)			(369,872	)			(98,511	)			(351,738	)
Commercial expenses			25				(63,044	)			(178,968	)			(48,917	)			(143,838	)
Impairment losses on trade receivables			25				(15,369	)			(26,777	)			(4,692	)			(17,131	)
Other operating income			25				7,534				18,015				1,301				2,941
Other operating expenses			25				-				(32,968	)			-				-
Share of loss equity-accounted investees			11				(2,878	)			(5,532	)			(2,150	)			(2,150	)
Loss before finance result and taxes							(41,485	)			(39,402	)			(56,100	)			(53,713	)
Finance result
Finance income			26				19,511				53,612				19,174				56,339
Finance costs			26				(74,966	)			(233,536	)			(68,426	)			(196,291	)
							(55,455	)			(179,924	)			(49,252	)			(139,952	)
Loss before income tax and social contribution							(96,940	)			(219,326	)			(105,352	)			(193,665	)
Income tax and social contribution							34,829				76,380				29,358				63,200
Current			22				(4,762	)			(2,299	)			1,946				(11,697	)
Deferred			22				39,591				78,679				27,412				74,897
Loss for the period							(62,111	)			(142,946	)			(75,994	)			(130,465	)
Allocated to:
Controlling shareholders							(62,389	)			(143,896	)			(75,994	)			(130,465	)
Non-controlling shareholders							278				950				-				-
Loss per share (in %)
Basic			23.2				(0.74	)			(1.71	)			(0.91	)			(1.56	)
Diluted			23.2				(0.74	)			(1.71	)			(0.91	)			(1.56	)

 

The accompanying notes are an integral part of this Unaudited Condensed Interim Consolidated Financial Statements.

 

Unaudited Condensed Interim Consolidated Statement of Changes in Equity for the nine-months periods ended September 30, 2023 and 2022

 

		Share capital								Capital reserves
		Share Capital				Share  Issuance  costs				Share-based  compensation reserve   (granted)				Share-based compensation reserve  (vested)				Treasury  shares  (Note 23d)				Accumulated losses				Total Shareholders' Equity/ Net  Investment				Non-  controlling  shareholders				Total Non-  controlling   Shareholders'  Equity/ Net   Investment
Balance as of December 31, 2021			4,961,988				(141,173	)			30,445				31,043				(23,880	)			(193,214	)			4,665,209				-				4,665,209
Loss for the period			-				-				-				-				-				(130,465	)			(130,465	)			-				(130,465	)
Share based compensations granted and issued			-				-				16,436				-				-				-				16,436				-				16,436
Share based compensations vested			-				-				(2,636	)			2,636				-				-				-				-				-
Balance as of September 30, 2022(unaudited)			4,961,988				(141,173	)			44,245				33,679				(23,880	)			(323,679	)			4,551,180				-				4,551,180
Balance as of December 31, 2022			4,961,988				(141,173	)			46,245				34,286				(23,880	)			(247,787	)			4,629,679				-				4,629,679
Loss for the period			-				-				-				-				-				(143,896	)			(143,896	)			950				(142,946	)
Share based compensations granted and issued			-				-				14,335				-				-				-				14,335				-				14,335
Restricted shares transferred			-				-				(3,644	)			-				3,644				-				-				-				-
(Loss) gain on the sale of treasury shares			-				-				(1,227	)			-				1,227				-				-				-				-
Repurchase shares on treasury			-				-				-				-				(5,783	)			-				(5,783	)			-				(5,783	)
Participation non-controlling shareholders (note 5)			-				-				-				-				-				-				-				1,633				1,633
Balance as of September 30,2023 (unaudited)			4,961,988				(141,173	)			55,709				34,286				(24,792	)			(391,683	)			4,494,335				2,583				4,496,918

 

The accompanying notes are an integral part of this Unaudited Condensed Interim Consolidated Financial Statements.

 

Unaudited Condensed Interim Consolidated Statements of Cash Flows for the nine-months period ended September 30, 2023, and 2022

 

						For the period ended September 30,
		Notes				2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax and social contribution							(219,326	)			(193,665	)
Adjustments for:
Depreciation and amortization			12 and 13				205,948				198,841
Share of loss profit of equity-accounted investees			11				5,532				2,150
Impairment losses on trade receivables			9				26,777				17,131
Reversal for tax, civil and labor losses, net			25				(10,190	)			(9,151	)
Provision on accounts payable for business combination			25				23,562				-
Interest on provision for tax, civil and labor losses			26				41,313				39,639
Provision for obsolete inventories			10				19,504				27,896
Interest on bonds			14				91,361				77,636
Contractual obligations and right to returned goods							(38,080	)			(12,875	)
Interest on accounts payable for business combination			26				52,100				47,511
Imputed interest on suppliers			26				26,196				13,730
Bank and collection expense							-				6,056
Other financial expenses and net interest							-				(15,710	)
Share-based payment expense							14,335				16,436
Interest on lease liabilities			16				10,144				10,799
Interest on marketable securities			26				(31,065	)			(39,709	)
Cancellations of right-of-use contracts							(2,480	)			3,393
Write-off disposals of property and equipment and intangible assets			12 and 13				639				3,718
							216,270				193,826
Changes in
Trade receivables							150,983				159,242
Inventories							(78,690	)			(31,994	)
Prepayments							(27,551	)			(14,174	)
Taxes recoverable							(4,505	)			(20,329	)
Judicial deposits and escrow accounts							(7,025	)			(9,275	)
Other receivables							(1,072	)			1,381
Related parties – other receivables							1,759				(509	)
Suppliers							78,271				(14,090	)
Salaries and social charges							8,556				43,563
Tax payable							969				6,502
Contractual obligations and deferred income							(14,236	)			7,387
Other liabilities							(20,452	)			(22,494	)
Other liabilities - related parties							(54	)			(13,901	)
Cash from operating activities							303,223				285,135
Payment of interest on leases			16				(10,136	)			(10,813	)
Payment of interest on bonds			14				(118,901	)			(92,722	)
Payment of interest on business combinations			18				(8,096	)			-
Income tax and social contribution paid							(944	)			(2,736	)
Payment of provision for tax, civil and labor losses			21				(1,247	)			(1,308	)
Net cash from operating activities							163,899				177,556
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment			12				(18,247	)			(50,602	)
Additions of intangible assets			13				(61,425	)			(66,819	)
Acquisition of subsidiaries net of cash acquired			-				(3,212	)			(53,686	)
Purchase of investment in marketable securities							(937,409	)			(1,087,910	)
Proceeds from investment in marketable securities							1,087,724				860,165
Net cash from (applied in) investing activities							67,431				(398,852	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase shares on treasury							(5,783	)			-
Payments of loans from related parties			14				(50,885	)			(254,885	)
Lease liabilities paid			16				(22,541	)			(20,409	)
Payments of bonds and financing							-				(759	)
Issuance of bonds net off issuance costs							-				250,000
Payments of accounts payable for business combination			18				(91,129	)			(18,201	)
Net cash applied in financing activities							(170,338	)			(44,254	)
Net increase (decrease) in cash and cash equivalents							60,992				(265,550	)
Cash and cash equivalents at beginning of period							45,765				309,893
Cash and cash equivalents at end of period							106,757				44,343
Net increase (decrease) in cash and cash equivalents							60,992				(265,550	)

 

The accompanying notes are an integral part of this Unaudited Condensed Interim Consolidated Financial Statements.

 

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

 

1.

The Company and Basis of Presentation

 

1.1.

The Company

 

Vasta Platform Ltd., together with its subsidiaries (the Company) is a publicly held company incorporated in the Cayman Islands on October 16, 2019, with headquarters in the city of São Paulo, Brazil. The Company is a technology-powered education content providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment. Vasta’s fiscal year begins on January 1 of each year and ends on December 31, of the same year. 

 

The Company has built a “Platform as a Service”, solution or PaaS, with two main modules: Content & EdTech Platform and Digital Services. The Company’s Content & EdTech Platform combines a multi-brand and tech-enabled array with digital and printed content through long-term contracts with partner schools.

 

Since July 31, 2020, VASTA Platform Ltd. has been a publicly-held company registered with SEC (“The US Securities and Exchange Commission) and its shares are traded on Nasdaq Global Select Market under ticker symbol “VSTA”.

 

1.2.

Significant events during the period

 

a.

Business Combination

 

On March 03, 2023 the Company, through its subsidiary Somos Sistemas de Ensino S.A. (“Somos”), acquired 51% interest in the capital of “Escola Start Ltda.” (“Start”), when the control over the entity was transferred upon all conditions established on the share purchase agreement and the liquidation was completed.

 

Start is a company dedicated to providing bilingual education services for kindergarten, primary and secondary education, and preparatory courses for entrance exams, including the sale of books, teaching materials, school uniforms and stationery. See note 5.

 

The Unaudited Condensed Interim Consolidated Financial Statements comprise the following entities, and the following shareholding ownership:

 

Company						Interest
		September 30, 2023				December 31, 2022
Somos Sistemas de Ensino S.A. (“Somos Sistemas”)			100	%			100	%
Livraria Livro Fácil Ltda. (“Livro Fácil”)			100	%			100	%
A & R Comércio e Serviços de Informática Ltda. (“Pluri”)			100	%			100	%
Colégio Anglo São Paulo (“Anglo”)			100	%			100	%
Sociedade Educacional da Lagoa Ltda. (“SEL”)			100	%			100	%
EMME – Produções de Materiais em Multimídia Ltda. (“EMME”)			100	%			100	%
Phidelis Tecnologia Desenvolvimento de Sistemas Ltda. (“Phidelis”)			100	%			100	%
MVP Consultoria e Sistemas Ltda. (“MVP”)			100	%			100	%
Escola Start Ltda. (“Start”)			51	%			-

2.

Basis of accounting

 

These interim financial statements for the nine-months period ended September 3o, 2023, have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group’s last annual consolidated financial statements as at and for the year ended December 31, 2022 (‘last annual financial statements’). They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company´s financial position and performance since the last annual financial statements.

 

The accounting practices adopted in preparing these interim financial statements are consistent with the disclosures made in the financial statements for the year ended December 31, 2022, except for:

 

(i)

Change in the presentation of Operating Segment, previously presented in two segments (“Content&Edtech” and “Digital Services”), for a Single Segment. More information is presented in note 2.1.

 

These Unaudited Condensed Interim Consolidated Financial Statements are presented in thousands of Brazilian Reais (“R$”), which is the Company functional currency. All financial information presented in R$ has been rounded to the nearest thousands, except as otherwise indicated.

 

(a)

Basis of consolidation and investments in other companies

  

Company										Interest
		Investment type				September 30, 2023				December 31, 2022
Somos Sistemas de Ensino S.A. (“Somos Sistemas”)			Subsidiary				100	%			100	%
Livraria Livro Fácil Ltda. (“Livro Fácil”)			Subsidiary				100	%			100	%
A & R Comércio e Serviços de Informática Ltda. (“Pluri”)			Subsidiary				100	%			100	%
Colégio Anglo São Paulo (“Anglo”)			Subsidiary				100	%			100	%
Sociedade Educacional da Lagoa Ltda. (“SEL”)			Subsidiary				100	%			100	%
EMME – Produções de Materiais em Multimídia Ltda. (“EMME”)			Subsidiary				100	%			100	%
Phidelis Tecnologia Desenvolvimento de Sistemas Ltda. (“Phidelis”)			Subsidiary				100	%			100	%
MVP Consultoria e Sistemas Ltda. (“MVP”)			Subsidiary				100	%			100	%
Escola Start Ltda. (“Start”)			Subsidiary				51	%			-
Educbank Gestão de Pagamentos Educacionais S.A.			Associate				45	%			45	%
Flex Flix Limited.			Investment				10	%			10	%

 

These Unaudited Condensed Interim Consolidated Financial Statements were authorized for issue by the Company’s board of directors on November 07, 2023.

 

2.1.

Operating Segment

 

The presentation of information by operating segment is consistent with the internal reporting provided to the Executive Board, which serves as the primary operational decision maker, responsible for resource allocation, performance evaluation, and strategic decision-making within the Company.

 

As of September 30, 2023, the Company implemented a change to its business segmentation structure. Previously, the business was divided into two primary segments: Content & Edtech and Digital Services. The decision to transition to a single reportable segment was driven by several key factors:

 

(i)

Internal Management Structure: The change considered the Company's internal management structure, which does not have specific leaders assigned to oversee individual business units. Instead,

 

operational and strategic decisions are made collectively and comprehensively, without distinct leaders for separate segments.

 

(ii)

Internal Reporting: The Company conducts rigorous result monitoring through regular meetings with senior management. This includes internal executive meetings, involving the Executive Board ("Direx"), as well as governance forums like the Financial Committee, presentations to the Audit Committee, and the Board of Directors. In a gradual process of improving its reports, the Company has been adopting, in these forums, financial results presented in a consolidated manner, without detailed disclosure of individual operations or specific business units.

 

(iii)

Nature of Activities: Recent changes in the Company's service provision structure have been significant, driven by the accelerated transition to digital operations in response to the impacts of the Covid-19 pandemic. This shift happened more quickly and extensively than initially anticipated. As the challenges of the pandemic were addressed, the Company evolved its business models to adopt 'hybrid' approaches, combining physical and digital interactions. Given this integrated nature of the business, segregating results into distinct segments is no longer viable.

 

(iv)

Structural Changes in the Company: Livro Fácil currently represents 90% of total revenue in the Digital Services segment. However, as of October 1, 2023, it is planned to incorporate Livro Fácil into the subsidiary Somos Sistemas de Ensino, which was previously part of the Content & Edtech segment. Given this structural change, it became impractical to allocate costs and expenses specifically related to Livro Fácil. Consequently, in addition to the items previously indicated the remaining companies in the Digital Services segment will represent less than 10% of total revenue and will no longer qualify as reportable segments under IFRS 8.

 

Based on the considerations outlined above, the Company's management has made the decision to report its results under a single operating segment ("Single Segment"). This change has already been reflected in this financial information. In accordance with IFRS 8, below we present the results by operating segment considering the new structure for nine-months period ended September 30, 2023 and 2022:

 

		Note				July 01 to September 30, 2023				September 30, 2023				July 01 to September 30, 2022				September 30, 2022
Net revenue from sales and services			24				257,933				932,164				188,724				759,261
Sales							242,242				896,135				180,422				732,647
Services							15,691				36,029				8,302				26,614
Cost of goods sold and services			25				(101,161	)			(375,464	)			(91,855	)			(301,058	)
Gross profit							156,772				556,700				96,869				458,203
Operating income (expenses)
General and administrative expenses			25				(124,500	)			(369,872	)			(98,511	)			(351,738	)
Commercial expenses			25				(63,044	)			(178,968	)			(48,917	)			(143,838	)
Impairment losses on trade receivables			25				(15,369	)			(26,777	)			(4,692	)			(17,131	)
Other operating income			25				7,534				18,015				1,301				2,941
Other operating expenses			25				-				(32,968	)			-				-
Share of loss equity-accounted investees			11				(2,878	)			(5,532	)			(2,150	)			(2,150	)
Loss before finance result and taxes							(41,485	)			(39,402	)			(56,100	)			(53,713	)

3.

Use of estimates and judgements

 

In preparing these interim Financial Statements, Management has made judgements and estimates that affect the application of Company´ accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

 

A number of the Group’s accounting policies require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

Measurement of fair values

 

•       Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

•       Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

•       Level 3 - valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

Where Level 1 inputs are not available, if needed, the Company engages third party qualified appraisers to perform the valuation using Level 2 and / or Level 3 inputs. If the inputs used to measure the fair value of an asset or a liability are categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Company’s management establishes the appropriate valuation techniques and inputs to the model, working closely with the qualified external advisors when they are engaged in such activities.

 

The valuations of identifiable assets and contingent liabilities in business combinations could be particularly sensitive to changes in one or more unobservable inputs considered in the valuation process. Further information on the assumptions used in the valuation process of such items is provided in Note 5.

 

Fair value measurement assumptions are used for determination of expenses with Share-based Compensation, which are disclosed in Note 23.

 

4.

Significant accounting policies and new and not yet effective accounting standards

 

The accounting policies applied in these interim financial statements are the same as those applied in the Group’s consolidated financial statements as at and for the year ended December 31, 2022. The accounting policies have been consistently applied to all consolidated companies. There are no new accounting policies that could be applicable since January 1, 2023, or early adopted in the Unaudited Condensed Interim Consolidated Financial Statements.

 

5.

Business Combinations and investments in other companies, without majority control

 

5.1.

Business Combinations

 

Acquisitions in 2023

 

As mentioned in Note 1.2, on March 03, 2023, the Company acquired a 51% interest in the capital of the Escola Start Ltda. (“Start”), when the control over the entity was transferred upon all conditions established on the share purchase agreement and the liquidation was completed.

 

The total acquisition price was R$4,482, of which: (i) R$2,874 relates to the price for acquiring 51% of the equity interest, and (ii) R$1,608 for acquiring the option to purchase the remaining percentage of the interest in 2028, recognized in “Other investments and interests in entities”, on Financial Position. This amount was paid in two installments, being a fixed installment of R$4,100 in cash on the acquisition date and a variable installment of R$382, subject to price adjustment depending on the calculation of financial indicators defined in contract and corrected by 100% of the CDI. The variable portion was paid on August 18, 2023.

 

As mentioned above, on the same date the Company acquired a purchase option for the acquisition of the remaining shares issued by Anglo Start held by the minority shareholder, representing 49% of the share capital, as of January 2028, through which the amount of R$11,700 (“exercise price”).

 

The acquisitions were accounted for using the acquisition method of accounting, i.e., the consideration transferred, and the net identifiable assets acquired, and liabilities assumed were measured at fair value, while goodwill is measured as the excess of consideration paid over those items. The following table presents the net identifiable assets acquired and liabilities assumed for business combination in 2023:

 

		Start Anglo
Current assets
Cash and cash equivalents			888
Trade receivables			1,207
Inventories			349
Other receivables			238
Total current assets			2,682
Non-current assets
Property and equipment			796
Intangible assets			3,667
Intangible assets - Customer Portfolio			1,844
Intangible assets – Trademarks			1,823
Total non-current assets			4,463
Total Assets			7,145
Current liabilities
Contractual obligations and deferred income			2,766
Other liabilities			940
Total current liabilities			3,706
Non-current liabilities
Other liabilities			16
Tax Installments			93
Total non-current liabilities			109
Total liabilities			3,815
Net identifiable assets at fair value			3,330
Percentage acquired (51%) (A)			1,698
Total of Consideration transferred (B)			2,874
Goodwill (A-B) (note 13)			1,176

From the date of acquisition to September 30, 2023, Start contributed to a net revenue from sales and services in the amount of R$ 6,445, and net profit for the period in the amount of R$ 1,941.

 

Acquisitions in 2022

 

On January 14, 2022, the Company acquired the companies Phidelis Tecnologia Desenvolvimento de Sistemas Ltda. and MVP Consultoria e Sistemas Ltda. (“Phidelis”), when the control over the entity was transferred upon all conditions established on the share purchase agreement and the liquidation was completed. The Company will pay a total purchase price in the amount of R$21,966, comprised of (i) R$8,854 in cash, paid on the acquisition date, (ii) R$7,638 to be paid in annual installments over the course of two years, and (iii) a variable R$5,474, with the achievement of performance linked to net revenue of the years 2023 and 2024 to be paid in three annual installments between 2023 and 2026. The net identifiable assets acquired, and liabilities assumed for each business combination in 2022 are presented in last annual financial statements.

 

5.2.

Investments in other companies, without majority control

 

Investments in 2022

 

On July 19, 2022, the Company completed through its wholly owned subsidiary, Somos Sistemas de Ensino S.A. (“Somos”), the acquisition of a minority investment in Educbank Gestão de Pagamentos Educacionais S.A. (“Educbank”). Vasta invested a total of R$87,651, for a 45% stake in Educbank, of which R$63,814 was paid in cash, and the remaining amount of R$23,837 to be paid in four cash installments according to the growth of students served by Educbank. Vasta does not have control, but it has significant influence over Educbank.

 

On July 19, 2022, the Company completed through its wholly owned subsidiary, Somos Sistemas de Ensino S.A. (“Somos”), the acquisition of a minority investment in Flex Flix Limited (“Flex Flix”). Vasta invested a total of R$8,271, for a 10% stake in Flex Flix, which was fully paid in cash as of the closing date. Vasta has no control and no significant influence.

 

6.

Financial Risk Management

 

The Company has a risk management policy for regular monitoring and managing the nature and overall position of financial risks and to assess its financial results and impacts on its cash flows. Counterparty credit limits are also reviewed periodically or whenever the Company identifies significant changes in financial risk.

 

The economic and financial risks reflect the behavior of macroeconomic variables such as interest rates as well as other characteristics of the financial instruments maintained by the Company. These risks are managed through control and monitoring policies, specific strategies, and limits.

 

6.1.

Financial Instruments by Category

 

The Company holds the following financial instruments:

 

		Hierarchy				September 30, 2023				December 31, 2022
Assets - Amortized cost
Cash and cash equivalents			1				106,757				45,765
Trade receivables							472,582				649,135
Other receivables							2,093				972
Related parties – other receivables							-				1,759
							581,432				697,631
Assets - Fair value through profit or loss
Marketable securities			1				261,264				380,514
Other investments and interests in entities			3				9,879				8,272
							271,143				388,786
Liabilities - Amortized cost
Bonds							765,350				842,996
Lease liabilities							123,276				140,563
Reverse factoring							272,609				155,469
Suppliers							239,198				250,647
Accounts payable for business combination and acquisition of associates							571,761				569,360
Accounts payable for business combination and acquisition of associates (i)			3				29,410				55,917
Other liabilities - related parties							-				54
							2,001,604				2,015,006

 

(i)

Refers to a portion of the liability remeasured based on economic activity of the acquired entity (post-closing price adjustments and call option acquired). Valuation techniques and significant unobservable inputs related to this measured are consistent with the disclosures made in the financial statements for the year ended December 31, 2022, except for the acquisition of a call option mentioned in note 5.1, presented below.

 

Valuation techniques and significant unobservable inputs

 

The following table shows the valuation techniques used in measuring level 3 fair values, as well as the significant unobservable inputs used:

 

Entities		Valuation technique		Significant unobservable inputs		Inter-relationship between key unobservable inputs and fair value measurement
Start Anglo		Monte Carlo Method		Revenue: 1.3x the revenue of the last twelve months prior to exercising the option will be considered.		The estimated fair value would increase (decrease) if:  - The revenue is higher than expected (higher)

 

The Company has not disclosed the fair values of your financial instruments, because their carrying amounts approximates fair value.

 

6.2.

Financial risk factors

 

The Company’s activities expose it to certain financial risks mainly related to market risk, credit risk and liquidity risk. Management and the Group’s Board of Directors monitor such risks in line with their capital management policy objectives.

 

This note presents information on the Company’s exposure to each of the risks above, the objectives of the Company, measurement policies, and the Company’s risk and capital management process. The Company has no derivative transactions.

 

a.

Market risk – cash flow interest rate risk

 

This risk arises from the possibility that the Company incurs losses because of interest rate fluctuations that increase finance costs related to financing and bonds raised in the market and obligations for acquisitions from third parties payable in installments. The Company continuously monitors market interest rates in order to assess the need to contract financial instruments to hedge against volatility of these rates. Additionally, financial assets also indexed to CDI and IPCA (broad consumer price index) partially mitigate any interest rate exposures. Interest rates contracted are as follows:

 

		September 30, 2023				December 31, 2022				Interest rate
Bonds
Private bonds – 6th Issuance – series 2			-				53,688			CDI + 1.00% p.a.
Private bonds – 9th Issuance – series 2			255,167				259,843			CDI + 2.40% p.a.
Bonds – 1st Issuance – single			510,183				529,465			CDI + 2.30% p.a.
Lease liabilities			123,276				140,563			IPCA
Accounts payable for business combination and acquisition of associates			601,171				625,277			CDI
			1,489,797				1,608,836

 

b.

Credit risk

 

Credit risk arises from the potential default of a counterparty on an agreement or financial instrument, resulting in financial loss. The Company is exposed to credit risk in its operating activities (mainly in connection with trade receivables), see note 9 and financial activities that include reverse factoring deposits with banks and other financial institutions and other financial instruments contracted.

 

The Company mitigates its exposure to credit risks associated with financial instruments, deposits in banks and short-term investments by investing in prime financial institutions and in accordance with limits previously set in the Company’s policy. See notes 7 and 8.

 

To mitigate risks associated with trade receivables, the Company adopts a sales policy and an analysis of the financial and equity condition of its counterparties. The sales policy is directly associated with the level of credit risk the Company is willing to accept in the normal course of its business.

 

The diversification of its receivable’s portfolio, the selectivity of its customers, as well as the monitoring of sales financing terms and individual position limits are procedures adopted to minimize defaults or losses in the realization of trade receivables. Thus, the Company does not have significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

 

Furthermore, the Company reviews the recoverable amount of its trade receivables at the end of each reporting period to ensure that adequate credit losses are recorded. See note 9.

 

c.

Liquidity risk

 

To cover possible liquidity deficiencies or mismatches between cash and cash equivalents and short-term debt and financial obligations, the Company continues to operate with reverse factoring if this credit line is offered by banks and accepted by Company suppliers. This is the risk of the Company not having enough funds and or bank credit limits to meet its short-term financial commitments, due to mismatching terms in expected receipts and payments.

 

The Company continuously monitors its cash balance and indebtedness level and implemented measures to allow access to the capital markets, when necessary. It also endeavors to assure they remain within existing credit limits. Management also continuously monitors projected and actual cash flows and the combination of the maturity profiles of the financial assets, liabilities and takes into consideration its debt financing plans, covenant compliance, internal liquidity targets and, if applicable, regulatory requirements.

 

Cash surplus generated by the Company is handled in short-term deposits being those investments composed by enough liquidity thus providing to the Company the appropriate commitment with the going concern presumption.

 

The table below presents the maturity of the Company’s financial liabilities.

 

Financial liabilities by maturity ranges

 

September 30, 2023		Less than one year				Between one and two years				Over two years				Total
Bonds (note 14)			515,350				250,000				-				765,350
Lease liabilities (note 16)			15,352				17,680				90,244				123,276
Accounts payable for business combination and acquisition of associates (note 18)			29,932				383,524				187,715				601,171
Suppliers (note 15)			239,198				-				-				239,198
Reverse factoring (note 15)			272,609				-				-				272,609
			1,072,441				651,204				277,959				2,001,604

 

The table below reflects the estimated interest rate based on CDI for 12 months (13.50% p.a.) and IPCA for 12 months (5.19% p.a.) extracted from BACEN (Brazilian Central Bank) on base period September 30, 2023. Amounts payable refer to principal and interest based on undiscounted contractual amounts and, therefore, do not reflect the financial position presented as of September 30, 2023:

 

September 30, 2023		Less than one year				Between one and two years				Over two years				Total
Bonds			584,906				283,742				-				868,648
Lease liabilities			16,148				18,597				94,923				129,668
Accounts payable for business combination and acquisition of associates			33,972				435,287				213,051				682,310
Suppliers			271,481				-				-				271,481
Reverse factoring			309,403				-				-				309,403
			1,215,910				737,626				307,974				2,261,510

 

d.

Capital management.

 

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

 

In order to maintain or adjust the capital structure of the Company, management can make, or may propose to the shareholders when their approval is required, adjustments to the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce, for example, debt. 

 

The Company monitors capital based on the gearing ratio. This ratio corresponds to the net debt expressed as a percentage of total capitalization. Net debt comprises financial liabilities less cash and cash equivalents. Total capitalization is calculated as shareholders’ equity as shown in the consolidated balance sheet plus net debt. The Company’s main capital management objectives are to safeguard its ability to continue as a going concern, optimize returns, allow consistency of operations to other stakeholders, and maintain an optimal capital structure reducing financial costs and maximizing the returns. In addition, the Company monitors financial leverage adequacy, and mitigates risks that may affect the availability of capital for Company development.

 

		September 30, 2023				December 31, 2022
Net debt (i)			1,894,847				1,969,241
Total shareholders' equity			4,496,918				4,629,679
Total capitalization (ii)			2,602,071				2,660,438
Gearing ratio - % - (iii)			73	%			74	%

 

(i)

Net debt comprises financial liabilities (note 6.1) net of cash and cash equivalents.

 

(ii)

Refers to the difference between Shareholders’ Equity and Net debt.

 

(iii)

The Gearing Ratio is calculated based on Net Debt/Total Capitalization.

 

e.

Sensitivity analysis

 

The following table presents the sensitivity analysis of potential losses from financial instruments, according to Management’s assessment of relevant market risks presented above. 

 

A probable scenario (Base scenario) over a 12-months horizon was used, with a projected rate of 13.50% p.a. as per DI Interest Deposit rate (“CDI”), and IPCA 5.19% p.a., reference rates disclosed by B3 S.A. (Brazilian stock exchange). Two further scenarios are presented, stressing, respectively, a 25% deterioration in scenario I and 50% deterioration in scenario II, of the projected rates.

 

		Index - % per year				September 30, 2023				Base scenario				Scenario I				Scenario II
Financial investments			CDI				88,823				11,988				14,986				17,982
Marketable securities			CDI				261,264				35,263				44,078				52,894
							350,087				47,251				59,064				70,876
Accounts payable for business combination and acquisition of associates			CDI				(601,171	)			(81,139	)			(101,425	)			(121,709	)
Lease liabilities			IPCA				(123,276	)			(6,392	)			(7,990	)			(9,588	)
Bonds			CDI				(765,350	)			(103,299	)			(129,123	)			(154,948	)
							(1,489,797	)			(190,830	)			(238,538	)			(286,245	)
Net exposure							(1,139,710	)			(143,579	)			(179,474	)			(215,369	)
Interest rate CDI -% p.a.			-				-				13.50	%			16.87	%			20.25	%
Interest rate IPCA -% p.a.			-				-				5.19	%			6.48	%			7.78	%
Stressing scenarios															25	%			50	%

 

7.

Cash and cash equivalents

 

 

The balance of this account comprises the following amounts:

 

		September 30, 2023				December 31, 2022
Cash			3				7
Bank account			17,931				6,546
Financial investments (i)			88,823				39,212
			106,757				45,765

 

(i)

The Company invests in short-term fixed income investment funds with daily liquidity and no material risk of change in value. Financial investments presented an average gross yield of 103% of the annual CDI rate on September 30, 2023 (103% on December

 

31, 2022). All investments are highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and correspond to the cash obligations for the period.

 

8.

Marketable securities

 

a.

Composition

 

			Credit Risk		September 30, 2023				December 31,2022
Private investment fund			AAA			261,264				31,842
Private investment fund			AA			-				348,672
						261,264				380,514

 

The average gross yield of securities is based on 104% CDI on September 30, 2023 (104% CDI on December 31, 2022).

 

9.

Trade receivables

 

The balance of this account comprises the following amounts:  

 

a.

Composition

 

		September 30, 2023				December 31, 2022
Trade receivables			525,703				711,439
Related parties (note 20)			20,269				7,177
(-) Impairment losses on trade receivables			(73,390	)			(69,481	)
			472,582				649,135

 

b.

Maturities of trade receivables

 

		September 30, 2023				December 31, 2022
Not yet due			288,923				563,005
Past due
Up to 30 days			39,660				19,435
From 31 to 60 days			33,359				22,637
From 61 to 90 days			20,931				12,193
From 91 to 180 days			71,993				42,169
From 181 to 360 days			40,429				31,357
Over 360 days			30,408				20,643
Total past due			236,780				148,434
Related parties (note 20)			20,269				7,177
Impairment losses on trade receivables			(73,390	)			(69,481	)
			472,582				649,135

 

The gross carrying amount of trade receivables is written off when the Company has no reasonable expectations of recovering the financial asset in its entirety or a portion thereof. Collection efforts continue to be made, even for the receivables that have been written off, and amounts recoverable are recognized directly in Consolidated Statement of Profit or Loss and Other Comprehensive Income upon collection. 

 

c.

Changes on provision

 

The following table shows the changes in impairment losses on trade receivables for the periods ended September 30, 2023, and 2022:

 

		September 30, 2023				September 30, 2022
Opening balance			69,481				46,500
Additions			33,396				17,131
Reversals			(6,619	)			-
Write offs			(22,868	)			(14,381	)
Closing balance			73,390				49,250

10.

Inventories

 

The balance of this account comprises the following amounts:

 

a.

Composition

 

		September 30, 2023				December 31, 2022
Finished products (i)			213,472				151,534
Work in process			75,874				73,993
Raw materials			23,230				30,773
Imports in progress			-				347
Right to returned goods (ii)			876				9,803
			313,452				266,450

 

(i)

These amounts are net of slow-moving items and net realizable value.

 

(ii)

Represents the Company’s right to recover products from customers when customers exercise their right of return under the Company’s returns policies, where the Company estimates the volume of goods returned based on experience and foreseen expectations.

 

Changes in provision for losses with slow-moving inventories and net realizable value are broken down as follows:

 

b.

Changes in provision

 

		September 30, 2023				September 30, 2022
Opening balance			84,049				58,723
Additions			26,041				27,896
Reversals			(6,537	)			-
Write-off inventories (i)			(22,529	)			(15,490	)
Closing balance			81,024				71,129

 

(i)

Refers substantially to physical books destroyed, previously provisioned, due to indication of damage or obsolescence caused by changes in the educational content during the school year.

 

11.

Equity accounted investees

 

a.

Composition of investments

 

Investment type

Interest

Investment

Fair value

Goodwill

September 30, 2023

Educbank

Associate

45%

36,850

6,971

33,786

77,607

 

Investment type

Interest

Investment

Fair value

Goodwill

December 31, 2022

Educbank

Associate

45%

41,485

7,868

33,786

83,139

 

b.

Investments without control and significant influence

 

		Educbank
As of December 31, 2021			-
Acquisition			87,651
Equity method			(2,150	)
As of September 30,2022			85,501
As of December 31, 2022			83,139
Equity method			(5,532	)
As of September 30,2023			77,607

 

12.

Property, plant and equipment

 

The cost, weighted average depreciation rates and accumulated depreciation are as follows:

 

			September 30, 2023						December 31, 2022
	Weighted average depreciation rate		Cost		Accumulated depreciation		Net book value		Cost		Accumulated depreciation		Net book value
IT equipment	10% - 33%		83,285		(57,700)		25,585		80,262		(43,294)		36,968
Furniture, equipment and fittings	10% - 33%		60,538		(37,026)		23,512		60,920		(36,818)		24,102
Property, buildings and improvements	5%-20%		57,461		(44,987)		12,474		53,027		(40,381)		12,646
In progress	-		15,305		-		15,305		4,495		-		4,495
Right of use assets	12%		204,239		(101,441)		102,798		257,034		(137,948)		119,086
Land	-		391		-		391		391		-		391
Total			421,219		(241,154)		180,065		456,129		(258,441)		197,688

 

Changes in property, plant and equipment are as follows:

 

		IT equipment				Furniture, equipment and fittings				Property, buildings and improvements				In progress				Right of use assets				Land				Total
As of December 31, 2022			36,968				24,102				12,646				4,495				119,086				391				197,688
Additions			2,076				1,066				-				15,105				21,408				-				39,655
Business combinations (Note 5.1)			-				613				183				-				-				-				796
Disposals / Cancelled contracts			-				(93	)			(373	)			-				(13,683	)			-				(14,149	)
Depreciation			(13,459	)			(2,176	)			(4,277	)			-				(24,013	)			-				(43,925	)
Transfers			-				-				4,295				(4,295	)			-				-				-
As of September 30, 2023			25,585				23,512				12,474				15,305				102,798				391				180,065

 

		IT equipment				Furniture, equipment and fittings				Property, buildings and improvements				In progress				Right of use assets				Land				Total
As of December 31, 2021			16,615				8,390				17,872				677				141,737				391				185,682
Additions			34,190				13,301				657				2,454				9,618				-				60,220
Business combinations			54				12				-				7				-				-				73
Disposals / Cancelled contracts			-				(6	)			-				(18	)			(3,472	)			-				(3,496	)
Depreciation			(11,245	)			(3,798	)			(4,031	)			-				(22,223	)			-				(41,297	)
Transfers			833				(378	)			(455	)			-				-				-				-
As of September 30, 2022			40,447				17,521				14,043				3,120				125,660				391				201,182

 

The Company assesses annually, whether there is an indication that a property, plant and equipment asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. There were no indications of impairment of property, plant and equipment as and for the nine-months periods ended September 30, 2023 and 2022.

 

13.

Intangible Assets and Goodwill

 

The cost, weighted average amortization rates and accumulated amortization of intangible assets and goodwill comprise the following amounts: 

 

						September 30, 2023												December 31, 2022
		Weighted average amortization rate				Cost				Accumulated amortization				Net book value				Cost				Accumulated amortization				Net book value
Software			20	%			324,837				(212,655	)			112,182				263,433				(182,711	)			80,722
Customer Portfolio			8	%			1,202,000				(453,626	)			748,374				1,201,074				(377,891	)			823,183
Trademarks			5	%			633,154				(133,198	)			499,956				631,582				(112,967	)			518,615
Trade Agreement			8	%			243,113				(42,858	)			200,255				247,622				(28,795	)			218,827
Platform content production			33	%			169,999				(111,643	)			58,356				123,251				(74,881	)			48,370
Other Intangible assets			33	%			12,307				(5,029	)			7,278				39,422				(32,142	)			7,280
In progress			-				4,985				-				4,985				18,958				-				18,958
Goodwill			-				3,712,897				-				3,712,897				3,711,721				-				3,711,721
							6,303,292				(959,009	)			5,344,283				6,237,063				(809,387	)			5,427,676

 

Changes in intangible assets and goodwill were as follows:

 

		Software				Customer Portfolio				Trade-marks				Trade Agreement				Platform content production				Other Intangible assets				In progress				Goodwill				Total
As of December 31, 2022			80,722				823,183				518,615				218,827				48,370				7,280				18,958				3,711,721				5,427,676
Additions			14,693				-				-				-				40,565				-				27,669				-				82,927
Business combination (note 5.1)			-				1,844				1,823				-				-				-				-				1,176				4,843
Disposals			(172	)			-				-				-				-				-				-				-				(172	)
Amortization			(24,703	)			(76,653	)			(20,482	)			(18,572	)			(30,579	)			(2	)			-				-				(170,991	)
Transfers (i)			41,642				-				-				-				-				-				(41,642	)			-				-
As of September 30, 2023			112,182				748,374				499,956				200,255				58,356				7,278				4,985				3,712,897				5,344,283

 

(i)

Refers to the transfer of software implementation projects completed throughout the period, especially those related to our Plurall platform.

 

		Software				Customer Portfolio				Trade-marks				Trade Agreement				Platform content production				Other Intangible assets				In progress				Goodwill				Total
As of December 31, 2021			96,044				922,105				546,277				243,495				24,294				7,282				3,991				3,694,879				5,538,367
Additions			11,725				-				-				-				41,803				19				9,672				3,600				66,819
Business combination			3,145				-				-				-				-				-				-				34,176				37,321
Disposals			-				-				-				-				-				(17	)			-				(3,677	)			(3,694	)
Amortization			(23,623	)			(76,190	)			(20,482	)			(18,572	)			(18,627	)			(50	)			-				-				(157,544	)
Transfers			(2,085	)			1,281				-				1,353				-				(1,100	)			-				551				-
As of September 30, 2022			85,206				847,196				525,795				226,276				47,470				6,134				13,663				3,729,529				5,481,269

Impairment test for goodwill

 

The Company performs its impairment test annually or when circumstances indicate that the carrying value may be impaired. The Company’s impairment test for goodwill is assessed by comparing it carrying amount with its recoverable amount. The key assumptions used to determine the recoverable amount for the different cash generating units were disclosed in the annual consolidated financial statements for the year ended December 31, 2022. 

 

There were no indications of impairment for nine-months period ended September 30, 2023 and December 31, 2022.

 

14.

Bonds

 

The balance of bonds comprises the following amounts:

 

		December 31, 2022				Payment of interest (i)				Payment (ii)				Interest accrued				Transaction cost of bonds				Transfers				September 30, 2023
Bonds with related parties			63,325				(40,984	)			(50,885	)			33,505				-				206				5,167
Bonds			30,454				(77,917	)			-				57,856				779				499,011				510,183
Current liabilities			93,779				(118,901	)			(50,885	)			91,361				779				499,217				515,350
Bonds with related parties			250,206				-				-				-				-				(206	)			250,000
Bonds			499,011				-				-				-				-				(499,011	)			-
Non-current liabilities			749,217				-				-				-				-				(499,217	)			250,000
Total			842,996				(118,901	)			(50,885	)			91,361				779				-				765,350

 

Emission		Payments				Interest				Principal
Private Bonds – 6th Issuance - serie 2			02/15/2023 and 08/14/2023				7,258				50,885
SEDU21 – 7th. SOMOS 2nd. Série			02/15/2023 and 08/11/2023				14,711				-
Private Bonds – 9th Issuance			08/07/2023				19,016				-
GAGL11 - Somos Sistemas			02/06/2023 and 08/07/2023				77,916				-
							118,901				50,885

a.

Bonds’ description

 

See below the bonds outstanding on September 30, 2023: 

 

Subscriber		Related parties		Third parties
Issuance		9th		1st
Series		2nd Series		Single Series
Date of issuance		09/28/2022		08/06/2021
Maturity date		09/28/2025		07/06/2024
First payment after		36 months		35 months
Remuneration payment		Semi-annual interest		Semi-annual interest
Financials charges		CDI + 2.40% p.a.		CDI + 2.30% p.a.
Principal amount (in millions of R$)		250		500

 

b.

Bond’s maturities

 

The maturities range of these accounts, considering related and third parties are as follow:

 

Maturity of installments		September 30, 2023				%				December 31, 2022				%
In up to one year			515,350				67.3				93,779				11.1
One to two years			250,000				32.7				499,217				59.2
Two years on			-				0.0				250,000				29.7
Total non-current liabilities			250,000				32.7				749,217				88.9
			765,350				100.0				842,996				100.0

 

c.

Debit commitments

 

The maintenance of the contractual maturity of debentures at their original maturities is subject to covenants, which are calculated annually. The main assumptions adopted in this calculation are described in the Financial Statements as of December 31, 2022. Additionally, the Company complied with all debt commitments in the period applicable on December 31, 2022.

 

15.

Suppliers

 

The balance of this account comprises the following amounts:

 

a.

Composition

 

		September 30, 2023				December 31, 2022
Local suppliers			180,419				215,593
Related parties (note 20)			49,290				13,781
Copyright			9,489				21,273
			239,198				250,647
Reverse Factoring (i)			272,609				155,469

 

(i)

As of September 30, 2023, the balance of reverse factoring was R$ 272,609 (R$ 155,469 as of December 31, 2022), and the discount rates of assignment operations carried out by our suppliers with financial institutions had a weighted average of 1.09% per month (as of December 31, 2022, the weighted average was 1.27% per month) and a maximum payment term of 360 days. The balance is initially recognized net of the present value adjustment, which is subsequently recognized as a financial expense.

 

16.

Lease liabilities

 

		September 30, 2023				September 30, 2022
Opening balance			140,563				160,542
Additions for new lease agreements			21,408				1,268
Renegotiation			-				8,350
Cancelled contracts			(16,162	)			(2,592	)
Interest			10,144				10,799
Payment of interest			(10,136	)			(10,813	)
Payment of principal			(22,541	)			(20,409	)
Closing balance			123,276				147,145
Current liabilities			15,352				28,426
Non-current liabilities			107,924				118,719
			123,276				147,145

 

Short-term leases (lease period of 12 months or less) and leases of low-value assets (such as personal computers and office furniture) are recognized on a straight-line basis in rent expenses for the period and are not included in lease liabilities.  

 

The Company recognized rent expense from short-term leases and low-value assets of R$ 18,613 for the nine-months period ended September 30, 2023 (R$ 16,413 as of September 30, 2022).

 

17.

Contractual obligations and deferred income

 

		September 30, 2023				December 31, 2022
Refund liability (i)			4,809				51,533
Contract of exclusivity for processing payroll			-				587
Deferred income in leaseback agreement			3,493				4,075
Other contractual obligations			-				1,657
Current			8,302				57,852

(i)

Refers to the customer’s right to return products, as mentioned in Note 10, the Company business cycle is from October to September for each year, being the provision reduced in the end of business cycle and estimated in the fourth quarter.

 

18.

Accounts payable for business combination and acquisition of associates

 

		September 30, 2023				December 31, 2022
Pluri			-				3,653
Mind Makers			-				7,915
Livro Fácil			-				10,516
Meritt			300				300
SEL			17,425				30,267
Redação Nota 1000			4,574				6,030
EMME			8,435				10,827
Editora De Gouges			555,728				514,299
Phidelis			12,664				16,976
Educbank			2,045				24,494
			601,171				625,277
Current			29,932				73,007
Non-current			571,239				552,270
			601,171				625,277

 

The changes in the balance are as follows: 

 

		September 30, 2023				December 31, 2022
Opening balance			625,277				532,313
Additions (i)			28,043				120,344
Cash payment			(4,100	)			(80,939	)
Payments in installments			(91,129	)			(11,379	)
Interest payment			(8,096	)			(603	)
Interest adjustment			52,100				65,725
Remeasurement			(924	)			(184	)
Closing balance			601,171				625,277

 

(i)

Composed of the purchase price of the company Start Anglo, in the amount of R$ 4,481 (as per note 5),     and the price adjustment in the acquisition of companies, in the amount of R$ 23,562 (as per note 25), as follows: (i) increase of R$33,190 in the purchase price of Mind Makers, due to the performance of the business, considering the number of students who used the products made available by the entity in April 2023, in accordance with the 4th contractual amendment, which defined the targets for the payment of earnout, and (ii) reduction of R$9,628 in the acquisition of the company Editora de Gouges (“Eleva”), as a result of the review of the net debt provided for in the shareholder’s agreement.

 

The maturity years of such balances as of September 30, 2023 and December 31, 2022, are shown in the table below:

 

		September 30, 2023								December 31, 2022
Maturity of installments		Total				%				Total				%
In up to one year			29,932				5.0				73,007				11.7
One to two years			189,386				31.5				235,923				37.7
Two to three years			194,138				32.3				153,264				24.5
Three years on			187,715				31.2				163,083				26.1
			601,171				100.0				625,277				100.0

 

19.

Salaries and Social Contribution

 

		September 30, 2023				December 31 2022
Salaries payable			26,199				28,351
Social contribution payable (i)			24,794				25,205
Provision for vacation pay and 13th salary			37,935				21,454
Provision for profit sharing (ii)			20,162				25,047
			109,090				100,057

 

(i)

Refers to the effect of social contribution over restricted share units' compensation plans issued on July 31 and November 10, 2020. The Company records the taxes over the shares on a monthly basis according to the Company’s share price.

 

(ii)

The provision for profit sharing is based on qualitative and quantitative metrics determined by Management.

 

20.

Related parties

 

The Company is part of Cogna Group and some of the Company’s transactions and arrangements involve entities that belong to the Cogna Group. The effect of these transactions is reflected in the Consolidated Financial Statements, with these related parties segregated by nature of transaction measured on an arm’s length basis and determined by intercompany agreements and approved by the Company’s Management.

 

The balances and transactions between the Company and its associates have been eliminated in the Company’s Unaudited Condensed Interim Consolidated Financial Statements. Additionally, the main contracts with related parties are presented in greater detail in the Consolidated Financial Statements for the year ended December 31, 2022, which did not change until the end of this quarter. The balances and transactions between related parties are shown below:

 

	September 30, 2023
	Other receivables				Trade receivables (Note 9)				Indemnification asset (note 21b)				Other liabilities				Suppliers (note 15)				Bonds (note 14)
Cogna Educação S.A.		-				-				198,321				-				3,869				255,167
Editora Atica S.A.		-				15,004				-				-				43,209				-
Editora E Distribuidora Educacional S.A.		-				1,350				-				-				2,193				-
Editora Scipione S.A.		-				87				-				-				-				-
Anhanguera Educacional		-				21				-				-				-				-
Pitagoras Sistema De Educacao Superior Ltda.		-				1				-				-				-				-
Maxiprint Editora Ltda.		-				139				-				-				-				-
Saraiva Educação S.A.		-				3,197				-				-				19				-
Somos Idiomas S.A.		-				470				-				-				-				-
		-				20,269				198,321				-				49,290				255,167

 

		December 31, 2022
		Other receivables (i)				Trade receivables (Note 9)				Indemnification asset (note 21b)				Other liabilities				Suppliers (note 15)				Bonds (note 14)
Cogna Educação S.A.			-				-				180,417				-				3,828				313,531
Editora Atica S.A.			-				5,754				-				-				9,778				-
Editora E Distribuidora Educacional S.A.			1,722				19				-				-				-				-
Educação Inovação e Tecnologia S.A.			-				389				-				-				175				-
Nice Participações Ltda.			-				37				-				-				-				-
Saraiva Educação S.A.			-				749				-				-				-				-
Somos Idiomas S.A.			-				229				-				-				-				-
Others			37				-				-				54				-				-
			1,759				7,177				180,417				54				13,781				313,531

 

(i)

Refers substantially to accounts receivable generated from sharing costs e.g IT services shared by the Company to Cogna Group.

 

		September 30, 2023																September 30, 2022
Transactions held:		Revenues				Finance costs (note 14)				Cost Sharing				Sublease				Revenues				Finance costs (note 14)				Cost Sharing				Sublease
Cogna Educação S.A.			-				33,505				-				-				-				25,315				-				-
Editora Ática S.A.			8,127				-				1,302				6,926				9,919				-				4,327				6,165
Editora E Distribuidora Educacional S.A.			665				-				-				-				-				-				22,155				-
Editora Scipione S.A.			2,605				-				-				-				1,908				-				-				-
Maxiprint Editora Ltda.			6,213				-				-				-				3,882				-				-				-
Saber Serviços Educacionais S.A.			-				-				-				-				41				-				-				-
Saraiva Educacão S.A.			2,028				-				-				2,000				3,226				-				-				1,484
Somos Idiomas Ltda.			-				-				-				429				-				-				-				1,158
SSE Serviços Educacionais Ltda.			938				-				-				-				437				-				-				-
			20,576				33,505				1,302				9,355				19,413				25,315				26,482				8,807

 

a)

Compensation of key management personnel

 

Key management personnel include the members of the Board of Directors, Audit Committee, the CEO and the vice-presidents, for which the nature of the tasks performed were related to the activities of the Company.

 

For the nine-months period ended September 30, 2023, key management compensation, including charges and variable compensation amounted to R$ 4,967 (R$ 7,134 in September 30, 2022). The Audit Committee and Board of Directors were established in July 2020 as a result of the IPO.   

 

The Key management personnel compensation expenses comprised the following:

 

		July 01, to September 30, 2023				July 01, to September 30, 2022
Short-term employee benefits			1,508				2,728
Share-based compensation plan			3,459				4,406
			4,967				7,134

 

21.

Provision for tax, civil and labor losses and Judicial deposits and escrow accounts

 

The Company classifies the likelihood of loss in judicial/administrative proceedings in which it is a defendant. Provisions are recorded for contingencies classified as probable loss in an amount that Management, in conjunction with its legal advisors, believes is enough to cover probable losses or when related to contingences resulting from business combinations.

 

In connection with the acquisition of Somos Group by Cogna Group, provisions for contingent liabilities assumed by Cogna were recognized when potential non-compliance with labor and civil legislation arising from past practices of subsidiaries acquired were identified. Thus, at the acquisition date, Cogna reviewed all proceedings for which liabilities were transferred to assess whether there was a present obligation and if the fair value could be measured reliably. The contingent liabilities are composed as follows: 

 

a.

Composition

 

		September 30, 2023				December 31, 2022
Proceedings whose likelihood of loss is probable
Tax proceedings (i)			659,706				623,189
Labor proceedings (ii)			20,792				27,567
Civil proceedings			151				496
Total of provision for tax, civil and labor losses			680,649				651,252

 

(i)

Primarily refers to income tax positions taken by Somos and the Company in connection with a corporate restructuring held by the predecessor in 2010, In 2018, given a tax assessment via an Infraction Notice received by the predecessor for certain periods opened for tax audit coupled with unfavorable case law on a similar tax case also reached in 2018, the Company reassessed this income tax position and recorded a liability, including interest and penalties.

 

(ii)

The Company is a party to labor demands, which mostly refer to proportional vacation, salary difference, night shift premium, overtime and social charges, among others. There are no individual labor demands with material amounts that require specific disclosure.

 

The changes in provision for the nine-months periods ended September 30, 2023 and 2022 were as follows:

 

 

		December 31, 2022				Additions				Reversals				Interest				Payments				September 30, 2023
Tax proceedings			623,189				-				(1,199	)			37,716				-				659,706
Labor proceedings			27,567				4,195				(13,369	)			3,643				(1,244	)			20,792
Civil proceedings			496				106				(472	)			24				(3	)			151
Total			651,252				4,301				(15,040	)			41,383				(1,247	)			680,649
Finance expense							-				-				(41,313	)
General and administrative expenses							(4,299	)			14,489				-
Income tax and social contribution							-				28				-
Indemnification asset – Former owner							(2	)			523				(70	)
Total							(4,301	)			15,040				(41,383	)

 

 

		December 31, 2021				Additions				Reversals				Interest				Payments				September 30, 2022
Tax proceedings			607,084				1,019				(2,461	)			38,028				(1,019	)			642,651
Labor proceedings			38,159				1,773				(9,670	)			1,595				(109	)			31,748
Civil proceedings			1,607				212				(24	)			16				(180	)			1,631
Total			646,850				3,004				(12,155	)			39,639				(1,308	)			676,030
Finance expense							-				-				(39,639	)
General and administrative expenses							(3,004	)			12,155				-
Total							(3,004	)			12,155				(39,639	)

 

b.

Judicial Deposits and Escrow Accounts

 

Judicial deposits and escrow accounts recorded as non-current assets are as follows:

 

		September 30, 2023				December 31, 2022
Tax proceedings			1,641				2,126
Indemnification asset – Former owner			1,471				1,801
Indemnification asset – Related parties (i)			198,321				180,417
Escrow-account			-				10,515
			201,433				194,859

 

(i)

Refers to an indemnification asset of the seller in connection with the acquisition of Somos by Cogna Group and recognized at the date of the business combination, in order to indemnify the Company for all losses that may be incurred in connection with all contingencies or lawsuits, substantially tax proceedings related to business combinations up to the maximum amount of R$198,321 (R$ 180,417 on December 31, 2022). This asset is indexed to CDI (Certificates of Interbank Deposits).

 

22.

Current and Deferred Income Tax and Social Contribution

 

Income tax expense is recognized at an amount determined by multiplying profit (loss) before tax for the interim reporting period by the Company’s best estimate of the weighted-average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognized in full in the interim period. As such, the effective rate in the Unaudited Condensed Interim Consolidated Financial statements may differ from the Consolidated estimate of the effective tax rate for the annual financial statements. The Company’s effective tax rates for the period ended September 30, 2023 and 2022 were 35% and 33% respectively (Combined nominal statutory rate of income tax and social contribution is 34%).

 

23.

Shareholder’s Equity

 

23.1. Share Capital

 

The Company holds Class A shares (issued and sold in the IPO), in addition to Class B shares (owned by Cogna).

 

On September 30, 2023, the Company’s capital stock totals 83,649,887 shares (83,649,887 on December 31, 2022), of which 64,436,093 are Class B shares owned by the Cogna Group and 18,134,094 are Class A shares owned by third-parties and 1,079,700 shares Class A are held in treasury.

 

The Company’s Shareholders Agreement authorizes the Board of Directors to grant restricted share units to certain executives and employees and other service providers with respect to up to 3% (three per cent) of the issued and outstanding shares of the Company. Below we present the movements that occurred in the nine-months period ended September 30, 2023:

 

		Class A Shares (units)								Class B Shares (units)				Total
			Free float				Treasury shares (23.4)
December 31, 2022			18,213,794				1,000,000				64,436,093				83,649,887
ILP exercised			203,973				-				-				203,973
Treasury shares			-				(203,973	)			-				(203,973	)
Repurchase shares			(283,673	)			283,673				-				-
September 30, 2023			18,134,094				1,079,700				64,436,093				83,649,887

 

The Company’s shareholders on September 30, 2023, are as follows:

 

		In units
Company Shareholders		Class A				Class B				Total
Cogna Group			-				64,436,093				64,436,093
Free Float			18,134,094				-				18,134,094
Treasury shares (Note 23.4)			1,079,700				-				1,079,700
Total (%)			23	%			77	%			83,649,887

 

23.2.

Loss per share

 

The basic loss per share is measured by dividing the profit attributable to the Company’s shareholders by the weighted average common shares outstanding during the year. The Company considers as diluted loss per share, the number of common shares calculated added by the weighted average number of common shares that should be issued upon conversion of all potentially dilutive shares into common shares; potentially dilutive shares were deemed to have been converted into common shares at the beginning of the period.

 

		July 01, to September 30, 2023				September 30, 2023				July 01, to September 30, 2022				September 30, 2022
Loss attributable to parent company			(62,111	)			(142,946	)			(75,994	)			(130,465	)
Weighted average number of ordinary shares outstanding (thousands)			83,650				83,650				83,605				83,605
Basic and diluted loss per share – R$			(0.74	)			(1.71	)			(0.91	)			(1.56	)

  

23.3.

Capital reserve – Share-based compensation (granted)

 

The Company as of September 30, 2023, had two share-based compensation plans and one bonus plan paid in restricted share units, being: 

 

a)

Long Term Investment – (“ILP”) – Refers to two tranches granted being the first issued on July 23, 2020 and November 10, 2020. The Company compensates part of its employees and management. This plan will grant up to 3% of the Company’s class A share units. The Company will grant the limit of five tranches approved by the Company’s Board of Directors. The fair value of share units is measured at fair value quoted on the grant date. The plan has a vesting period corresponding to 5 years added by expected volatility of 30% and will be settled with Company’s shares. All taxes and contributions are paid by the Company without additional costs to employees and management. This program should be wholly settled with the delivery of the shares. The effect of events on share-based compensation in the Statement of Profit or Loss for the nine-months period ended September 30, 2023 was R$ 12,403, being R$ 11,555 in Shareholder’s the Equity and a credit of R$ 848 as labor charges in liabilities.

 

b)

Bonus paid in restricted share units – “Premium recognized” – The Company granted and vested 101,798 shares on April, 2023 to certain members of management based on performance recognized. This program was wholly settled with the delivery of the shares. The amount provisioned and paid was R$ 3,303 (net of withholding taxes), being R$ 2,772 in Shareholder’s the Equity and a credit of R$ 531 as labor charges in liabilities.

 

23.4.

Vasta’s share Repurchase Program

 

In 2021 the Company announced that its Board of Directors has approved its first share repurchase program, or the Repurchase Program. Under the Repurchase Program, the Company may repurchase up to 1,000,000 in Class A common shares in the open market, based on prevailing market prices, or in privately negotiated transactions, over a period beginning on August 17, 2021, continuing until the earlier of the completion of the repurchase or February 17, 2022, depending upon market conditions. The Company concluded the Repurchase Program on December 10, 2021, using its existing funds to finance the repurchase.

 

On September 30, 2023, the Company announced that its Board of Directors has approved a share repurchase program or Repurchase Program. Under the Repurchase Program, Vasta may repurchase up to US$12.500 of shares of Class A common stock in the open market, based on prevailing market prices, or in privately negotiated transactions, during a period beginning 18 September 2023, continuing until the earlier of the repurchase completion or September 30, 2024, depending on market conditions.

 

Considering the above information, on September 30, 2023 the Company had in balance of R$24,792 or 800,027 shares in its possession.

 

24.

Net Revenue from sales and Services

 

The breakdown of net sales of the Company for the nine-months periods ended September 30, 2023, and 2022 is shown below, revenue is broken down into the categories that, according to the Company the nature, amount, timing and uncertainty of revenue through provisions as follows:

 

		July 01 to September 30, 2023				September 30, 2023				July 01 to September 30, 2022				September 30,2022
Learning Systems
Gross revenue			238,062				790,827				143,843				583,748
Discounts			(1,060	)			(1,804	)			(906	)			(7,599	)
Returns			(41,552	)			(128,365	)			(7,860	)			(72,153	)
Taxes			(1,459	)			(1,621	)			(43	)			(256	)
Net revenue			193,991				659,037				135,034				503,740
Textbooks
Gross revenue			30,831				110,681				31,934				109,358
Discounts			-				(188	)			-				(441	)
Returns			(13,499	)			(36,447	)			(8,695	)			(21,541	)
Taxes			(156	)			(158	)			-				(267	)
Net revenue			17,176				73,888				23,239				87,109
Complementary Education Services
Gross revenue			7,817				93,389				4,894				63,454
Discounts			-				(226	)			(1	)			(1	)
Returns			(4,290	)			(32,150	)			(1,642	)			(14,957	)
Taxes			(676	)			(830	)			(8	)			(195	)
Net revenue			2,851				60,183				3,243				48,301
Other services
Gross revenue			15,711				39,418				9,307				32,138
Taxes			(20	)			(3,389	)			(1,025	)			(4,933	)
Net revenue			15,691				36,029				8,282				27,205
E-commerce
Gross revenue			31,555				107,549				19,572				99,750
Returns			(2,702	)			(3,430	)			(737	)			(5,418	)
Taxes			(629	)			(1,092	)			91				(1,426	)
Net revenue			28,224				103,027				18,926				92,906
Total
Gross revenue			323,976				1,141,864				209,550				888,448
Discounts			(1,060	)			(2,218	)			(907	)			(8,041	)
Returns			(62,043	)			(200,392	)			(18,934	)			(114,069	)
Taxes			(2,940	)			(7,090	)			(985	)			(7,077	)
Net revenue			257,933				932,164				188,724				759,261
Sales			242,242				896,135				180,422				732,647
Service			15,691				36,029				8,302				26,614
Net revenue			257,933				932,164				188,724				759,261

 

a.

Seasonality

 

The Company’s revenue is subject to seasonality since the main deliveries of printed materials and digital materials to customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials delivered in the fourth quarter are used by customers in the following school year and, therefore, fourth quarter results reflect the growth in the number of students from one school year to the next, leading to higher revenue in general in the fourth quarter compared with the preceding quarters in each year. Consequently, on aggregate, the seasonality of revenue generally produces higher revenue in the first and fourth quarters of our fiscal year.

 

In addition, the Company generally bills its customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half. A significant part of the Company’s expenses is also seasonal. Due to the nature of the business cycle, the Company needs significant working capital, typically in September or October of each year, in order to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of the teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year. Purchases through the Livro Fácil e-commerce platform are also very intense during the back-to-school period, between November, when school enrollment takes place and families plan to anticipate the purchase of products and services, and February of the following year, when classes are about to start. Thus, e-commerce revenue is mainly concentrated in the first and fourth quarters of the year.

 

25.

Costs and Expenses by Nature

 

		July 01, to September 30, 2023				September 30, 2023				July 01, to September 30, 2022				September 30, 2022
Salaries and payroll charges			(78,118	)			(224,043	)			(69,519	)			(216,692	)
Depreciation and amortization			(74,308	)			(214,916	)			(66,949	)			(198,841	)
Raw materials and productions costs			(43,501	)			(196,116	)			(16,667	)			(113,876	)
Advertising and publicity			(21,211	)			(65,633	)			(11,715	)			(51,950	)
Copyright			(10,803	)			(51,025	)			(8,311	)			(41,877	)
Editorial cost			(7,852	)			(37,474	)			(8,369	)			(28,743	)
Other general, administrative, and commercial expenses, net			(7,282	)			(27,713	)			(12,263	)			(28,399	)
Impairment losses on trade receivables			(15,369	)			(26,777	)			(4,692	)			(17,131	)
Net adjustment of price in accounts payable for business combination (note 18)			-				(23,562	)			-				-
Third-party services			(7,280	)			(21,694	)			(1,626	)			(20,419	)
Travel			(8,569	)			(21,425	)			(5,934	)			(18,078	)
Consulting and advisory services			(7,171	)			(21,302	)			(10,302	)			(26,255	)
Provision for obsolete inventories			(12,264	)			(19,504	)			(21,786	)			(27,896	)
Rent and condominium fees			(908	)			(18,613	)			(2,756	)			(16,413	)
Utilities, cleaning, and security			(4,555	)			(12,751	)			(5,267	)			(16,972	)
Material			(1,019	)			(2,159	)			(1,407	)			(4,164	)
Taxes and contributions			(485	)			(872	)			(546	)			(1,076	)
Income from lease and sublease agreements with related parties			3,130				9,355				3,145				8,807
Reversal for tax, civil and labor losses, net			1,025				10,190				2,290				9,151
			(296,540	)			(966,034	)			(242,674	)			(810,824	)
Cost of sales and services			(101,161	)			(375,464	)			(91,855	)			(301,058	)
Commercial expenses			(63,044	)			(178,968	)			(48,917	)			(143,838	)
General and administrative expenses			(124,500	)			(369,872	)			(98,511	)			(351,738	)
Impairment loss on accounts receivable			(15,369	)			(26,777	)			(4,692	)			(17,131	)
Other operating income			7,534				18,015				1,301				2,941
Other operating expenses			-				(32,968	)			-				-
			(296,540	)			(966,034	)			(242,674	)			(810,824	)

 

26.

Finance result

 

		July 01, to September 30, 2023				September 30, 2023				July 01, to September 30, 2022				September 30, 2022
Finance income
Income from financial investments and marketable securities			11,432				31,065				12,905				39,709
Income finance from contingencies			6,323				18,067				5,641				14,399
Other finance income			1,756				4,480				628				2,231
			19,511				53,612				19,174				56,339
Finance costs
Interest on bonds			(30,507	)			(91,361	)			(25,997	)			(77,636	)
Interest acquisition			(17,113	)			(52,100	)			(17,720	)			(47,511	)
Imputed interest on suppliers			(11,016	)			(26,196	)			(5,327	)			(13,730	)
Bank and collection fees			(855	)			(6,053	)			(446	)			(6,056	)
Interest on provision for tax, civil and labor losses (note 21.a)			(10,199	)			(41,313	)			(14,052	)			(39,639	)
Interest on lease liabilities			(3,884	)			(10,144	)			(3,535	)			(10,799	)
Other finance costs			(1,392	)			(6,369	)			(1,349	)			(920	)
			(74,966	)			(233,536	)			(68,426	)			(196,291	)
Financial result (net)			(55,455	)			(179,924	)			(49,252	)			(139,952	)

 

27.

Non-cash transactions

 

Non-cash transactions for the nine-months period ended September 30, 2023 are: (i) Additions of right of use assets and lease liabilities in the amount of R$ 21,408 (note 16), (ii) Disposals of contracts of right of use assets and lease liabilities in the amount of R$ 16,162 (note 16), and (iii) Accounts payable assumed in the acquisition of Escola Start, during year 2023, in the amount of R$ 1,698, net of the percentage acquired (note 5.1). 

 

 

* * * * * * * * * * * * * * * * * * *

 

Guilherme Melega 

Chief Executive Officer

 

Cesar Augusto Silva 

Chief Financial Officer

 

Marcelo Vieira Werneck 

Accountant - CRC: RJ – 091570/0-1

 

 

 

---