Vitru Ltd [VTRU] Filings

20-F 1 tmb-20221231x20f.htm 20-F

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

☐

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report

Commission file number: 001-39519

Vitru Limited

(Exact name of Registrant as specified in its charter)

Not applicable

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Rodovia José Carlos Daux, 5500, Torre Jurerê A, 2nd floor, Saco Grande,

Florianópolis, State of Santa Catarina,

Brazil

88032-005
(Address of principal executive offices)

Carlos Henrique Boquimpani de Freitas

Chief Financial and Investor Relations Officer
Rodovia José Carlos Daux, 5500, Torre Jurerê A, 2nd floor, Saco Grande,

Florianópolis, State of Santa Catarina, Brazil

88032-005

+55 (47) 3281-9500

ir@vitru.com.br

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:

Manuel Garciadiaz
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4000
Fax: (212) 450-6858

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, par value U.S.$0.00005 per share	VTRU	The NASDAQ Global Select Market

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Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares as of December 31, 2022 was 33,687,213 common shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐ Accelerated Filer ☒ Non-accelerated Filer ☐ Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report: ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☐U.S. GAAP

☒International Financial Reporting Standards as issued by the International Accounting Standards Board

☐Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐No ☒

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VITRU LIMITED

TABLE OF CONTENTS



		Page
Presentation of Financial and Other Information		1
Forward-Looking Statements		5

Part I		6

Item 1.	Identity of Directors, Senior Management and Advisers	6
A.	Directors and Senior Management	6
B.	Advisers	6
C.	Auditors	6
Item 2.	Offer Statistics and Expected Timetable	6
A.	Offer Statistics	6
B.	Method and Expected Timetable	6
Item 3.	Key Information	7
A.	Selected Financial Data	7
B.	Capitalization and Indebtedness	12
C.	Reasons for the Offer and Use of Proceeds	12
D.	Risk Factors	12
Item 4.	Information on the Company	65
A.	History and Development of the Company	65
B.	Business Overview	69
C.	Organizational Structure	102
D.	Property, Plant and Equipment.	104
Item 4A.	Unresolved Staff Comments	105
Item 5.	Operating and Financial Review and Prospects	105
A.	Operating Results	105
B.	Liquidity and Capital Resources	123
C.	Research and Development, Patents and Licenses, Etc.	127
D.	Trend Information	127
E.	Critical Accounting Estimates	127
Item 6.	Directors, Senior Management and Employees	128
A.	Directors and Senior Management	128
B.	Compensation	132
C.	Board Practices	134
D.	Employees	135
E.	Share Ownership	135
F.	Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation	136
Item 7.	Major Shareholders and Related Party Transactions	137
A.	Major Shareholders	137
B.	Related Party Transactions	139
C.	Interests of Experts and Counsel	141
Item 8.	Financial Information	141
A.	Consolidated Statements and Financial Statements	141
B.	Significant Changes	143
Item 9.	The Offer and Listing	143
A.	Offering and Listing Details	143
B.	Plan of Distribution	143
C.	Markets	143
D.	Selling Shareholders	143
E.	Dilution	143

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F.	Expenses of the Issue	143
Item 10.	Additional Information	144
A.	Share Capital	144
B.	Memorandum and Articles of Association	144
C.	Material Contracts	154
D.	Exchange Controls	155
E.	Taxation	155
F.	Dividends and Paying Agents	158
G.	Statement by Experts	158
H.	Documents on Display	158
I.	Subsidiary Information	158
J.	Annual Report to Security Holders	158
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	158
Item 12.	Description of Securities Other Than Equity Securities	160
A.	Debt Securities	160
B.	Warrants and Rights	160
C.	Other Securities	160
D.	American Depositary Shares	160

	Part II

Item 13.	Defaults, Dividend Arrearages and Delinquencies	161
A.	Defaults	161
B.	Arrearages and Delinquencies	161
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	161
A.	Material Modifications to Instruments	161
B.	Material Modifications to Rights	161
C.	Withdrawal or Substitution of Assets	161
D.	Change in Trustees or Paying Agents	161
E.	Use of Proceeds	161
Item 15.	Controls and Procedures	162
A.	Disclosure Controls and Procedures	162
B.	Management’s Annual Report on Internal Control over Financial Reporting	162
C.	Attestation Report of the Registered Public Accounting Firm	163
D.	Changes in Internal Control over Financial Reporting	163
Item 16.	Reserved	163
Item 16A.	Audit Committee Financial Expert	163
Item 16B.	Code of Ethics	163
Item 16C.	Principal Accountant Fees and Services	164
Item 16D.	Exemptions from the Listing Standards for Audit Committees	164
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	164
Item 16F.	Change in Registrant’s Certifying Accountant	164
Item 16G.	Corporate Governance	164
Item 16H.	Mine Safety Disclosure	170
Item 16I.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	170

	Part III

Item 17.	Financial Statements	171
Item 18.	Financial Statements	171
Item 19.	Exhibits	171
Index to Consolidated Financial Statements		F-1

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated or the context otherwise requires, all references in this annual report to “Vitru” or the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to (1) prior to the UniCesumar Business Combination (as defined below), Vitru Limited and its consolidated subsidiaries, and (2) after the UniCesumar Business Combination, Vitru Limited and its consolidated subsidiaries, including UniCesumar (as defined below).

All references to “Vitru Brasil” refer to Vitru Brasil Empreendimentos, Participações e Comércio S.A., our Brazilian principal operating subsidiary.

The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil. “Brazilian Central Bank” refers to the Brazilian Central Bank (Banco Central do Brasil). References in the annual report to “real,” “reais” or “R$” refer to the Brazilian real, the official currency of Brazil and references to “U.S. dollar,” “U.S. dollars” or “U.S.$” refer to U.S. dollars, the official currency of the United States.

All references to the “Companies Act” are to the Cayman Islands’ Companies Act (As Revised) as the same may be amended from time to time, unless the context otherwise requires.

All references to “IFRS” are to International Financial Reporting Standards, as issued by the International Accounting Standards Board, or IASB.

Financial Statements

Vitru was incorporated on March 5, 2020, as a Cayman Islands exempted company with limited liability, under incorporation number 360670, duly registered with the Cayman Islands Registrar of Companies. Vitru became the parent company of Vitru Brasil Empreendimentos, Participações e Comércio S.A., or Vitru Brasil, through the corporate reorganization described under “—Corporate Events,” “Item 4. Information on the Company—C. Organizational Structure” and in “Note 1. Corporate information” to our audited consolidated financial statements.

Until the contribution of Vitru Brasil’s shares to us, we had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments. Subsequent to the completion of the corporate reorganization, we began to consolidate financial information in order to reflect the operations of Vitru Brasil. As a result, the audited consolidated financial statements prepared by Vitru subsequent to the completion of the reorganization are presented “as if” Vitru Brasil is the predecessor of Vitru. Accordingly, our audited consolidated financial statements included elsewhere in this annual report reflect: (i) the historical operating results of Vitru Brasil prior to such reorganization; (ii) the consolidated results of Vitru and Vitru Brasil following the reorganization; and (iii) the assets and liabilities of Vitru Brasil at their historical cost.

The consolidated financial information of Vitru contained in this annual report is derived from our audited consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020, together with the notes thereto. All references herein to “our financial statements,” “our audited consolidated financial information,” “our consolidated financial statements” and “our audited consolidated financial statements” are to Vitru’s consolidated financial statements included elsewhere in this annual report.

The audited consolidated financial statements as of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020, together with the notes thereto, included in this annual report supersede any financial statements for the same years previously filed with or furnished to the United States Securities and Exchange Commission, or the SEC. The audited consolidated financial statements included in this annual report reflect corrections of immaterial errors in the “Measures of performance” tables under note “4. Segment reporting,” the “Other profit and loss disclosure” table under note “4. Segment reporting,” the “Liquidity risk” table under note “5. Financial assets and financial liabilities,” the “Reconciliation of income tax in the statement of profit or loss” table under note “10. Current and deferred income tax,” the “Basic” and “Diluted” tables under note “21. Earnings per share,” and the “Financial

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expenses” table under note “27. Financial results” of the consolidated financial statements included our Current Report on Form 6-K furnished to the SEC on March 16, 2023.

Vitru is a holding company, and as such, the primary source of revenue derives from its interest on its operational companies in Brazil. As a result, Vitru’s functional currency as well as of its subsidiaries is the Brazilian real. We prepare our annual consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the IASB.

This financial information should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements, including the notes thereto, included elsewhere in this annual report.

Our fiscal year ends on December 31. References in this annual report to a fiscal year, such as “fiscal year 2022,” relate to our fiscal year ended on December 31 of that calendar year.

Corporate Events

We are a Cayman Islands exempted company incorporated with limited liability on March 5, 2020 for purposes of effectuating our initial public offering. Prior to the consummation of our initial public offering, our shareholders, Mundi Holdings I, L.L.C. (which is controlled by The Carlyle Group), or Mundi I, Mundi Holdings II, L.L.C. (which is now controlled by SPX Capital), or Mundi II, funds and accounts advised by Vinci Partners, or Vinci Partners, and funds and accounts advised by Neuberger Berman, or Neuberger, held 522,315,196 shares of Vitru Brasil. Prior to the consummation of our initial public offering, our shareholders contributed all of their shares in Vitru Brasil to us. In return for this contribution, we issued new common shares to our shareholders in a one-to-31 exchange for the shares of Vitru Brasil contributed to us, or the Share Contribution. Until the contribution of Vitru Brasil shares to us, we had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments.

UniCesumar Business Combination

On May 20, 2022, we completed the UniCesumar Business Combination. As the UniCesumar Business Combination was only completed recently, it may be difficult for you to evaluate our business, financial condition, results of operations and prospects. Because the historical information included in our financial statements is not representative of our results as a consolidated company, investors may have limited financial information on which to evaluate us, their investment decision and our prior performance. Our results of operations for the year ended December 31, 2022, are not directly comparable to our results of operations for the years ended December 31, 2021 and 2020, due to the effects of the UniCesumar Business Combination.

Additional Information

For more details about our organizational structure and additional information on our subsidiaries, please see “Item 4. Information on the Company—C. Organizational Structure” and refer to Note 2.2 to our audited consolidated financial statements included elsewhere in this annual report.

Financial Information in U.S. Dollars

Solely for the convenience of the reader, we have translated some of the real amounts included in this annual report from reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated or any other rate. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.218 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2022 as reported by the Brazilian Central Bank. The rate at December 31, 2022, which is the rate used for currency translations of certain amounts in this annual report, may differ materially from the exchange rate as of the date of this annual report or any other date.

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Special Note Regarding Non-GAAP Financial Measures

This annual report presents our Adjusted EBITDA, Adjusted Net Income and Adjusted Cash Flow Conversion from Operations information for the convenience of investors, which are non-GAAP financial measures. A non-GAAP financial measure is generally defined as one that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure.

We calculate Adjusted EBITDA as net income (loss) for the year plus:

●

deferred and current income tax, which is calculated based on our income, adjusted based on certain additions and exclusions provided for in applicable legislation. The income taxes in Brazil consist of corporate income taxes (Imposto de Renda Pessoa Jurídica), or IRPJ, and, social contribution taxes (Contribuição Social sobre o Lucro Líquido), or CSLL;

●

financial results, which consists of interest expenses less interest income;

●

depreciation and amortization;

●

interest on tuition fees paid in arrears, which refers to interest received from students on late payments of monthly tuition fees and which is added back;

●

impairment of non-current assets, which consists of impairment charges associated with our on-campus undergraduate courses segment, given the deterioration in the prospects of this business;

●

share-based compensation plan, which consists of non-cash expenses related to the grant of share-based compensation, as well as fair value adjustments for share-based compensation expenses classified as a liability in our consolidated financial statements;

●

other income (expenses), net, which consists of other expenses such as contractual indemnities and deductible donations among others; and

●

M&A, pre-offering expenses and restructuring expenses, which consists of adjustments that we believe are appropriate to provide additional information to investors about certain material non-recurring items. Such M&A, pre-offering expenses and restructuring expenses comprise: (i) mergers and acquisitions, or M&A, and pre-offering expenses, which are expenses related to mergers, acquisitions and divestments (including due diligence, transaction and integration costs), as well as the expenses related to the preparation of offerings; and (ii) restructuring expenses, which refers to expenses related to employee severance costs in connection with organizational and academic restructurings.

We calculate Adjusted Net Income as net income (loss) for the year plus:

●

share-based compensation plan, as defined above;

●

M&A, pre-offering expenses and restructuring expenses, as defined above;

●

impairment of non-current assets, as defined above;

●

amortization of intangible assets recognized as a result of business combinations, which refers to the amortization of the following intangible assets from business combinations: software, trademark, digital education operation licenses, non-compete agreements, customer relationship and teaching-learning material. For more information, see Note 15 to our audited consolidated financial statements, each included elsewhere in this annual report;

●

interest accrued at the original effective interest rate (excluding restatement as a result of inflation) on the accounts payable from the acquisition of subsidiaries, related to the acquisition of our operating units from Kroton in 2016 and 2017. See Note 18 to our audited consolidated financial statements, each included elsewhere in this annual report; and

●

corresponding tax effects on adjustments, which represents the tax effect of pre-tax items excluded from adjusted net income (loss). The tax effect of pre-tax items excluded from adjusted net income (loss) is

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computed using the statutory rate related to the jurisdiction that was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances.

Adjusted EBITDA, Adjusted Net Income and Adjusted Cash Flow Conversion from Operations are the key performance indicators used by us to measure the financial performance of our core operations and we believe that these measures facilitate period-to-period comparisons on a consistent basis. As a result, our management believes that these Non-GAAP financial measures provide useful information to investors and shareholders. The non-GAAP financial measures described in this annual report are not a substitute for the IFRS measures of earnings. Additionally, our calculations of Adjusted EBITDA, Adjusted Net Income and Adjusted Cash Flow Conversion from Operations may be different from the calculations 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. For a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Cash Flow Conversion from Operations to the most directly comparable IFRS measure, see “Item 3. Key Information—A. Selected Financial Data—Non-GAAP Financial Measures—Reconciliations for Non-GAAP Financial Measures.”

Market Share and Other Information

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the SEC website) and industry publications. We obtained the information included in this annual report relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, reports published in November 2019 and February 2020 by Educa Estudos de Mercado S.A., or Educa Insights, commissioned by us, public information and publications on the industry prepared by official public sources, such as the Brazilian Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or the IBGE, the United Nations Educational, Scientific and Cultural Organization, or UNESCO, the Organisation for Economic Cooperation and Development, or OECD, the Brazilian Ministry of Education (Ministério da Educação), or the MEC, the Anísio Teixeira National Institute of Educational Studies and Research (Instituto Nacional de Estudos e Pesquisas Educacionais Anísio Teixeira), or the INEP, the Secretariat of Specialized Modalities in Education (Secretaria de Modalidades Especializadas de Educação), or Semesp, as well as private sources, such as Educa Insight, consulting and research companies in the Brazilian education industry, the Brazilian Economic Institute of Fundação Getúlio Vargas (Instituto Brasileiro de Economia da Fundação Getúlio Vargas), or FGV/IBRE, among others.

Industry publications generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, we have not independently verified it. Governmental publications and other market sources, including those referred to above, generally state that their information was obtained from recognized and reliable sources, but the accuracy and completeness of that information is not guaranteed. In addition, the data that we compile internally and our estimates have not been verified by an independent source. Except as disclosed in this annual report, none of the publications, reports or other published industry sources referred to in this annual report were commissioned by us or prepared at our request. Except as disclosed in this annual report, we have not sought or obtained the consent of any of these sources to include such market data in this annual report.

Rounding

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this annual report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “is designed to,” “may,” “predict,” “continue,” “estimate” and “potential,” or the negative of these words, among others.

Forward-looking statements appear in a number of places in this annual report 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 various factors, including, but not limited to, those identified under the section entitled “Risk Factors” in this annual report. These risks and uncertainties include factors relating to:

●

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, including the impact of the ongoing war between Russia and Ukraine;

●

the political instability related to the new mandate of the new President of Brazil which commenced on January 1, 2023, including uncertainties in relation to the implementation by the new administration of monetary, fiscal and social security policies and the political climate following the result of the election, which resulted in massive demonstrations and/or strikes, including riots in Brazil’s capital city, Brasília, on January 8, 2023;

●

the impact of any health crisis, pandemic, epidemic or outbreak, including the 2019 novel coronavirus, or COVID-19, pandemic on general economic and business conditions in Brazil and globally and any restrictive measures imposed by governmental authorities in response to the pandemic;

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the downgrading of Brazil’s investment ratings;

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fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future;

●

our ability to implement our business strategy;

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our ability to adapt to technological changes in the educational sector;

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the availability of government authorizations on terms and conditions and within periods acceptable to us;

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our ability to continue attracting and retaining new students;

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our ability to maintain the academic quality of our programs;

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our ability to maintain the relationships with our hub partners;

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our ability to collect tuition fees;

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our ability to grow our business;

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the availability of qualified personnel and the ability to retain such personnel;

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changes in the financial condition of the students enrolling in our schools in general and in the competitive conditions in the education industry, or changes in the financial condition of our schools;

●

our capitalization and level of indebtedness;

●

changes in government regulations applicable to the education industry in Brazil;

●

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;

●

a decline in the number of students enrolled in our programs or the amount of tuition we can charge;

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●

our ability to compete and conduct our business in the future;

●

the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors;

●

changes in consumer demands and preferences and technological advances, and our ability to innovate to respond to such changes;

●

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;

●

our ability to realize the anticipated benefits of our UniCesumar Business Combination;

●

our ability to realize the anticipated benefits of the issuance of shares in connection with our rights offering (see “Item 4. Information on the Company—A. History and Development of the Company—Rights Offering”), or the Rights Offering and private placement of shares to entities controlled by Crescera Capital, or Crescera, in the fourth quarter of 2022, or the Crescera Investment;

●

other factors that may affect our financial condition, liquidity and results of operations; and

●

risk factors discussed under “Item 3. Key Information—D. 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.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.Directors and Senior Management

Not applicable.

B.Advisers

Not applicable.

C.Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A.Offer Statistics

Not applicable.

B.Method and Expected Timetable

Not applicable.

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ITEM 3. KEY INFORMATION

A.Selected Financial Data

You should read the following selected financial data together with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and the related notes appearing elsewhere in this annual report.

The following tables set forth our summary financial data as of December 31, 2022, 2021 and 2020 and statement of operations for the years ended December 31, 2022, 2021 and 2020. The summary consolidated statements of financial position as of December 31, 2022, 2021 and 2020 and the summary consolidated statements of profit or loss and other comprehensive income for the years ended December 31, 2022, 2021 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this annual report, prepared in accordance with IFRS, as issued by the IASB.


	For the Year Ended December 31,
	2022	2022	2021	2020

	U.S.$⁽¹⁾	R$
	(in millions)
Statement of Profit or Loss Data
Net revenue	252.5	1,317.3	631.1	519.2
Revenue from digital education undergraduate courses	191.3	998.2	531.7	423.0
Revenue from on-campus undergraduate courses	48.1	251.1	47.0	55.6
Revenue from continuing education courses	13.0	68.1	52.4	40.6
Cost of services rendered	(96.3)	(502.3)	(240.9)	(221.5)
Gross profit	156.2	815.0	390.2	297.7

Selling expenses	(46.9)	(244.9)	(111.5)	(86.6)
General and administrative expenses	(34.4)	(179.3)	(89.3)	(73.9)
Net impairment losses on financial assets	(35.9)	(187.5)	(110.7)	(76.8)
Other income (expenses), net	(0.4)	(2.3)	0.1	0.5
Operating expenses	(117.7)	(614.0)	(311.4)	(236.8)
Operating profit	38.5	201.0	78.8	60.9

Financial income	12.4	64.6	45.5	36.5
Financial expenses	(50.7)	(264.4)	(74.9)	(64.4)
Financial results	(38.3)	(199.9)	(29.4)	(27.9)
Profit before taxes	0.2	1.1	49.4	33.0

Current income taxes	(3.4)	(18.0)	(11.3)	(19.5)
Deferred income taxes	21.1	110.2	32.6	38.6
Income tax	17.7	92.2	21.3	19.1
Net income for the year	17.9	93.3	70.7	52.1
Basic earnings per share—R$ (unless otherwise indicated)⁽²⁾
Common Shares	0.67	3.52	3.04	2.79
Diluted earnings per share—R$ (unless otherwise indicated)⁽³⁾
Common Shares	0.62	3.23	2.87	2.68

(1)

For convenience purposes only, amounts in reais as of December 31, 2022 have been translated to U.S. dollars using an exchange rate of R$5.218 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2022 as reported by the Brazilian Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate.

(2)	Calculated by dividing the profit attributable to the shareholders by the weighted average number of common shares outstanding during the year.

(3)	Calculated by dividing the profit attributable to the shareholders by the weighted average number of common shares outstanding during the year plus the weighted average number of common shares that would be issued on conversion of all potential common shares with dilutive effects.

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	As of December 31,
	2022	2022	2021	2020

	U.S.$⁽¹⁾	R$
	(in millions)
Statement of Financial Position Data
Assets
Current assets
Cash and cash equivalents	9.0	47.2	75.6	85.9
Short-term investments	5.1	26.4	253.0	515.2
Trade receivables	43.0	224.1	140.6	115.1
Income taxes recoverable	1.3	7.0	7.7	2.2
Prepaid expenses	3.8	20.0	35.0	10.2
Receivables from hub partners	6.1	32.0	—	—
Other current assets	2.8	14.9	2.9	3.1
Total current assets	71.2	371.5	514.8	731.7

Non-current assets
Trade receivables	9.0	47.0	5.9	6.9
Indemnification assets	1.9	9.9	8.6	9.2
Deferred tax assets	38.9	203.0	—	—
Receivables from hub partners	9.2	48.1	83.4	50.8
Other non-current assets	1.3	6.9	1.6	3.6
Right-of-use assets	67.2	350.4	136.1	127.9
Property and equipment	37.3	194.6	106.8	96.7
Intangible assets	848.5	4,427.6	670.2	661.0
Total non-current assets	1,013.3	5,287.5	1,012.6	956.1
Total assets	1,084.5	5,659.1	1,527.4	1,687.8

Liabilities and Equity
Current liabilities
Trade payables	19.1	99.7	41.7	32.2
Loans and financing	25.1	131.2	—	151.8
Lease liabilities	9.8	51.3	27.2	23.4
Labor and social obligations	8.3	43.1	25.0	26.7
Taxes payable	3.1	16.0	3.3	2.4
Prepayments from customers	8.4	43.6	10.3	9.7
Payables from acquisition of subsidiaries	—	—	149.8	135.0
Other current liabilities	1.4	7.5	2.1	1.4
Total current liabilities	75.2	392.4	259.4	382.6

Non-current liabilities
Lease liabilities	52.1	272.0	134.3	126.0
Loans and financing	285.4	1,489.1	—	—
Share-based compensation	3.8	19.8	52.3	46.2
Payables from acquisition of subsidiaries	97.2	507.4	—	139.9
Provisions for contingencies	5.6	29.2	14.9	14.4
Deferred tax liabilities	148.2	773.4	—	—
Other non-current liabilities	0.3	1.5	0.4	0.7
Total non-current liabilities	592.6	3,092.3	201.9	327.2
Total liabilities	667.8	3,484.7	461.3	709.8

Equity
Share capital	0.0	0.008	—	—
Capital reserves	393.7	2,054.5	1,039.6	1,022.1
Retained earnings (accumulated losses)	23.0	119.9	26.5	(44.1)
Total equity	416.7	2,174.4	1,066.1	978.0
Total liabilities and equity	1,084.5	5,659.1	1,527.4	1,687.8

(1)

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Non-GAAP Financial Measures


	For the Year Ended December 31,
	2022		2022		2021		2020

	U.S.$⁽¹⁾		R$
	(in millions, except percentages)
Net Revenue	252.5		1,317.3		631.1		519.2
Net Income for the Year	17.9		93.3		70.7		52.1
Adjusted EBITDA⁽²⁾	85.7		447.1		182.4		146.7
Adjusted Net Income⁽³⁾	41.1		214.5		91.5		98.2
Adjusted Cash Flow from Operations	68.7		358.7		155.5		141.6
Adjusted Cash Flow Conversion from Operations⁽⁴⁾	96.0	%	96.0	%	82.9	%	88.1	%

(1)

(2)

For information on how we define Adjusted EBITDA, see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.” For a reconciliation of Adjusted EBITDA to our loss for the year, see “—Reconciliations for Non-GAAP Financial Measures—Reconciliation of Adjusted EBITDA from Net Income (Loss) for the Year.”

(3)

For information on how we define Adjusted Net Income, see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.” For a reconciliation of Adjusted Net Income from Net Income (Loss) for the Year, see “—Reconciliations for Non-GAAP Financial Measures—Reconciliation of Adjusted Net Income from Net Income (Loss) for the Year.”

(4)

For information on how we define Adjusted Cash Flow Conversion from Operations, see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.” For a reconciliation of Adjusted Cash Flow Conversion from Operations, see “—Reconciliations for Non-GAAP Financial Measures—Reconciliation of Adjusted Cash Flow Conversion from Operations.”

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Reconciliations for Non-GAAP Financial Measures

The following tables set forth reconciliations of Adjusted EBITDA and Adjusted Net Income to our net income for the years ended December 31, 2022, 2021 and 2020, as well as a reconciliation of Adjusted Cash Flow Conversion from Operations to our cash flow from operations for the years ended December 31, 2022, 2021 and 2020, our most recent directly comparable financial measures calculated and presented in accordance with IFRS.

For further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures, please see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures.”

Reconciliation of Adjusted EBITDA from Net Income for the Year

The following table below sets forth a reconciliation of our Adjusted EBITDA to our Net Income (Loss) for each of the years indicated:


	For the Year Ended December 31,
	2022	2022	2021	2020

	U.S.$⁽¹⁾	R$
	(in millions)
Net Income for the Year	17.9	93.3	70.7	52.1
(+) Deferred and current income tax	(17.7)	(92.2)	(21.3)	(19.1)
(+) Financial results	38.3	199.9	29.4	27.9
(+) Depreciation and amortization	28.7	150.0	54.5	51.5
(+) Interest on tuition fees paid in arrears	5.1	26.5	17.4	15.7
(+) Share-based compensation plan	(1.1)	(6.0)	14.7	11.9
(+) Other income (expenses), net	0.4	2.3	(0.1)	(0.5)
(+) M&A, pre-offering expenses and restructuring expenses	14.0	73.3	17.1	7.2
Adjusted EBITDA⁽²⁾	85.7	447.1	182.4	146.7

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2022 have been translated to U.S. dollars using an exchange rate of R$5.218 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2022 as reported by the Brazilian Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate.

(2)

We calculate Adjusted EBITDA as net income for the year plus deferred and current income tax plus financial results plus depreciation and amortization plus interest on tuition fees paid in arrears plus impairment of non-current assets plus share-based compensation plan plus other income (expenses), net, plus M&A, pre-offering expenses and restructuring expenses. Adjusted EBITDA is a non-GAAP measure. Our calculation of Adjusted EBITDA may be different from the calculation used by other companies, including our competitors in the industry, and therefore, our measures may not be comparable to those of other companies. For further information see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.”

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Reconciliation of Adjusted Net Income from Net Income for the Year

The following table below sets forth a reconciliation of our Net Income from Adjusted Net Income for each of the years indicated:


	For the Year Ended December 31,
	2022	2022	2021	2020

	U.S.$⁽¹⁾	R$
	(in millions)
Net Income for the Year	17.9	93.3	70.7	52.1
(+) M&A, pre-offering expenses and restructuring expenses	14.0	73.3	17.1	7.2
(+) Impairment of non-current assets	—	—	—	—
(+) Share-based compensation plan	(1.1)	(6.0)	14.7	11.9
(+) Amortization of intangible assets from business combinations	14.9	77.8	4.8	14.6
(+) Interest accrued on payables from the acquisition of subsidiaries	3.6	18.6	12.9	18.0
(+) Corresponding tax effects on adjustments	(8.1)	(42.5)	(28.7)	(5.6)
Adjusted Net Income⁽²⁾	41.1	214.5	91.5	98.2

(1)

(2)

We calculate Adjusted Net Income as net income for the year plus share-based compensation plan plus M&A, pre-offering expenses and restructuring expenses, plus impairment of non-current assets plus amortization of intangible assets recognized as a result of business combinations plus interest accrued at the original effective interest rate (excluding restatement as a result of inflation) on payables from the acquisition of subsidiaries plus corresponding tax effects on adjustments. Adjusted Net Income is a non-GAAP measure. Our calculation of Adjusted Net Income may be different from the calculation used by other companies, including our competitors in the industry, and therefore, our measures may not be comparable to those of other companies. For further information see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.”

Reconciliation of Adjusted Cash Flow Conversion from Operations

The following table below sets forth a reconciliation of our Adjusted Cash Flow Conversion from Operations for each of the years indicated:


	For the Year Ended December 31,
	2022		2022		2021		2020

	U.S.$⁽¹⁾		R$
	(in millions, except percentages)
Cash Flow from Operations	72.1		376.0		155.5		141.6
(+) Income tax paid	(3.3)		(17.3)		(18.5)		(18.7)
Adjusted Cash Flow from Operations	68.7		358.7		137.0		122.9
Adjusted EBITDA⁽²⁾	85.7		447.1		182.4		146.7
(-) M&A, pre-offering expenses and restructuring expenses	(14.0)		(73.3)		(17.1)		(7.2)
Adjusted EBITDA excluding M&A, pre-offering expenses and restructuring expenses	71.6		373.8		165.3		139.5
Adjusted Cash Flow Conversion from Operations⁽²⁾⁽³⁾	96.0	%	96.0	%	82.9	%	88.1	%

(1)

(2)	For information on how we define Adjusted EBITDA, see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.” For a reconciliation of Adjusted EBITDA to our net income for the year, see “—Reconciliation of Adjusted EBITDA from Net Income for the Year.”

(3)

We calculate Adjusted Cash Flow Conversion from Operations as adjusted cash flow from operations (which we calculate as cash from operations plus income tax paid) divided by Adjusted EBITDA (as defined above but without taking M&A, pre-offering expenses and restructuring expenses into consideration). Adjusted Cash Flow Conversion from Operations is a non-GAAP measure. Our calculation of Adjusted Cash Flow Conversion from Operations may be different from the calculation used by other companies, including our competitors in the industry, and therefore, our measures may not be comparable to those of other companies. For further information see “Presentation of Financial and Other Information —Special Note Regarding Non-GAAP Financial Measures.”

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B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

This section is intended to be a summary of more detailed discussions contained elsewhere in this registration statement. The risks described below are not the only ones we face. Our business, results of operations or financial condition could be harmed if any of these risks materializes and, as a result, the trading price of our common shares could decline.

Summary of Risk Factors

Summary of Risks Relating to Our Business and Industry

●

If we are unable to enter into agreements and maintain good relationships with, and/or increase the number of, our hub partners, our business and growth may be adversely affected. We derive a significant portion of our revenue from partnerships with education centers. We enter into these partnerships through contracts with hub partners who provide centers with infrastructure for our students, which may include private schools, and to whom we provide teachers and materials, teaching methodologies, as well as pedagogical, administrative and marketing advice. Failure by our hub partners to comply with the terms of those agreements, and any failure by us to enforce such terms, may also adversely affect us. In addition, failure by our hub partners to maintain their existing levels of profitability may result in changes in their view about the advantages of continuing their relationships with us.

●

We are subject to various federal laws and extensive government regulation, and changes in such laws and regulation, including tax laws, could have a material adverse effect on our business and our growth strategy. Any significant changes to the regulatory framework within which we currently operate could have a material adverse effect on us. Furthermore, any change or review of the tax treatment of our activities, or the loss or reduction in tax benefits on the sale of books (including digital content) may materially adversely affect us.

●

We face significant competition in each program we offer and each geographic region in which we operate. If we fail to compete effectively, we may lose market share and our profitability may be adversely affected. To compete effectively, we may be required to reduce our tuition or increase our operating expenses in order to retain or attract students or to pursue new market opportunities. As a result, our revenue and profitability may decrease. We cannot assure you that we will be able to compete successfully against our current or future competitors.

●

Our business depends on the continued success of our brands “Uniasselvi” and “UniCesumar,” and if we fail to maintain and enhance recognition of our brands, we may face difficulty enrolling new students, and our reputation and operating results may be harmed. Failure to maintain and enhance our brand recognition could have a material and adverse effect on our business, operating results and financial condition.

●

The COVID-19 pandemic, or any health crisis, epidemic, pandemic or outbreak may cause an adverse effect on our operations, including the partial closure of our business. The extension of such event, including the COVID-19 pandemic, and the perception of its effects are subject to uncertain and unforeseeable future developments, which may have a material adverse effect on our business, financial condition, operating results and cash flow.

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Summary of Risks Relating to Brazil

●

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political and economic conditions could harm us and the price of our common shares. Uncertainty over whether the Brazilian federal government will implement certain reforms or changes in policy or regulation in the future may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on our activities and consequently our operating results.

●

Economic uncertainty and political instability in Brazil may harm us and the price of our common shares. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.

●

Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our common shares.

●

Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, as well as the recent ongoing war between Russia and Ukraine, may harm the Brazilian economy and the price of our common shares. Crises and political instability in other emerging market countries, the United States, Europe or other countries, including increased international trade tensions and protectionist policies, could decrease investor demand for securities offered by companies with significant operations in Brazil, such as our common shares. These developments, as well as potential crises and forms of political instability arising therefrom or any other yet unforeseen development, may harm our business and the price of our common shares.

Risks Relating to the UniCesumar Business Combination

●

We may not realize the benefits anticipated from the UniCesumar Business Combination, which could adversely affect the price of our common shares. The UniCesumar Business Combination is our first acquisition after our initial public offering. The anticipated benefits from the UniCesumar Business Combination are, necessarily, based on projections and assumptions of expert advisors hired by us about the combined businesses of Vitru and UniCesumar, which may not materialize as expected or which may prove to be inaccurate, which could adversely affect the price of our common shares. Our ability to achieve the anticipated benefits will depend on our ability to successfully and efficiently integrate the business and operations of UniCesumar with our business and achieve the expected synergies.

●

The UniCesumar Business Combination may result in significant charges or other liabilities that could adversely affect the financial results of the combined company. The financial results of the combined company, following the UniCesumar Business Combination, may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our integration of the business and operations of UniCesumar.

●

The use of cash and short-term investments and the incurrence of significant indebtedness in connection with the financing of the UniCesumar Business Combination may have an adverse impact on our liquidity, limit our flexibility in responding to other business opportunities and increase our vulnerability to adverse economic and industry conditions. We have funded the UniCesumar Business Combination using our cash and cash equivalents, short-term investments and new indebtedness consisting of the issuance of two series of secured, non-convertible debentures, including Series 1 debentures in an amount of R$500.0 million and Series 2 debentures in an amount of R$1,450.0 million maturing on May 15, 2024, and May 15, 2027, respectively, or the Debentures. As of December 31, 2021, we had indebtedness of R$311.3 million, cash and cash equivalents of R$75.6 million and short-term investments of R$253.0 million. As of December 31, 2022, we had indebtedness of R$2,450.9 million, cash and cash equivalents of R$47.2 million and short-term investments of R$26.4 million. The increase in our indebtedness and decrease in our cash and cash equivalents and short-term investments is due to our funding of the UniCesumar Business Combination.

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Summary of Risks Relating to Our Common Shares

●

Our Articles of Association contain anti-takeover provisions that may discourage a third party from acquiring us and adversely affect the rights of holders of our common shares. These provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain our control in a tender offer or similar transactions.

●

As a foreign private issuer and an “emerging growth company” (as defined in the JOBS Act), we have different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies. If some investors find our common shares less attractive as a result of our reliance on exemptions applicable to foreign private issuers or emerging growth companies, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.

●

Our common shares may not be a suitable investment for all investors, as investment in our common shares presents risks and the possibility of financial losses. Each potential investor in our common shares must therefore determine the suitability of that investment in light of its own circumstances, for instance, evaluating if such investor has sufficient knowledge and experience to make a meaningful evaluation of our common shares; has access to, and knowledge of, appropriate analytical tools to evaluate an investment in our common shares; and have sufficient financial resources and liquidity to bear all of the risks of an investment in our common shares.

Risks Relating to Our Business and Industry

We are subject to several federal laws and to comprehensive government regulation enacted by the MEC. The most relevant legislation is the following: Federal Law No. 9,131/1995 (The National Education Council Act), Federal Law No. 9,394/1996 (The National Education Directives and Bases Act), Federal Law No. 9,870/1999 (The Tuition Act) and Federal Law No.10,861/2004 (National System for Higher Education Quality Evaluation – SINAES Act). Additionally, there are a series of further laws and regulations which establish a framework for the provision of educational services, in particular relating to (i) undergraduate education and related regulatory proceedings; (ii) online education; (iii) post-graduation; (iv) quality assurance and evaluation; and (v) penalties.

The Brazilian government may review and change the laws and regulations to which we are subject at any time. In addition, the MEC may also promulgate additional rules and regulations applicable to postsecondary education institutions, particularly with respect to digital education programs. Any significant changes to the regulatory framework within which we currently operate could have a material adverse effect on us, in particular changes relating to:

●

any revocation of accreditation of private educational institutions;

●

the imposition of controls on monthly tuition payments or restrictions on profitability of private educational institutions;

●

faculty credentials;

●

academic requirements for courses and curricula, including bans on offering certain subjects in a digital education format;

●

changes to the situations in which digital education is authorized, requirements to be met to open new digital education educational hubs or in the accreditation requirements to operate digital education educational hubs;

●

changes to the evaluation criteria of private educational institutions; and

●

infrastructure requirements applicable to campuses and/or hubs, such as libraries, laboratories and administrative support.

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The postsecondary education sector is highly regulated, and our failure to comply with existing or future laws and regulations could have a material adverse effect on our business.

The offer of postsecondary education is subject to the prior issuance of an authorization by the MEC. The authorizing acts issued by the MEC for postsecondary education are: accreditation and re-accreditation, authorization, recognition and renewal of recognition. Accreditation and re-accreditation refer to the educational institution; while authorization, recognition and renewal of recognition refer to the courses offered by the institution.

Brazilian education regulations define three types of postsecondary education institutions: (i) colleges; (ii) university centers; and (iii) universities. Each of these requires prior accreditation from the MEC to operate. Courses offered by colleges depend on prior authorizations from the MEC to be implemented, while courses offered by university centers and universities are not subject to such requirements, except for courses in law, medicine, psychology, nursing and dentistry, which do require the prior authorization from the MEC. For courses in law and medicine, prior to the authorization from the MEC, it is necessary to obtain a formal opinion issued by Federal Council of the Brazilian Bar Association or the National Health Council, respectively.

In addition to the authorization, courses must be recognized by the MEC. Pursuant to article 101 of Ordinance No. 23/2017, issued by the MEC, courses may be considered valid even if the recognition request is not formally recognized by the MEC until the date that the first class has concluded the course and as long as the educational institution has filed a request for accreditation within the established legal deadline. Lastly, all postsecondary education institutions must be accredited by the MEC.

The MEC must authorize our campuses located outside our headquarters before they can start operating and providing programs. Any authorization to open new digital education educational hubs is contingent on our Institutional Concept (Conceito Institucional), or CI. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulatory Overview.” Digital education programs, as well as on-campus learning programs, are also subject to strict accreditation requirements for their implementation and operation. We must comply with all such requirements in order to obtain and renew all authorizations.

We cannot assure you we will be able to comply with these regulations and maintain the validity of our authorizations, recognition and accreditations in the future. If we fail to comply with these regulatory requirements, the MEC could place limitations on our operations, including cancellation of programs, restrictions on the number of enrollments we offer to students, termination of our ability to issue degrees and certificates and revocation of our accreditation, any of which could adversely affect our reputation, financial condition and results of operations. We cannot assure you that we will obtain accreditation or re-accreditation of our postsecondary education institutions, or that our courses will receive authorization or recognition and renewal of recognition as scheduled, or that such courses will have all of the accreditations, re-accreditations, authorizations, recognition and renewal of recognition required by the MEC. The absence of such authorizations and recognitions or any delays in obtaining them could adversely affect our financial condition and results of operations. We may be materially adversely affected if we are unable to obtain authorizations, accreditations and course recognitions in a timely manner, if we cannot introduce new courses as quickly as our competitors or if we are not able to or do not comply with any new rules or regulations promulgated by the MEC.

Changes to the rules or delays or suspension of tuition payments made through government programs such as FIES, PROMUBE, UNIEDU and others, may adversely affect UniCesumar’s, and as a result, our, business, financial condition and results of operations.

We completed the UniCesumar Business Combination on May 20, 2022. UniCesumar benefits from certain governmental programs to fund students’ education, the discontinuation of which could adversely affect us.

For example, some of UniCesumar’s students finance their tuition fees through the Student Financing Program (Programa de Financiamento Estudantil), or FIES, created by the Brazilian federal government, and operated through the National Fund for Educational Development (Fundo Nacional de Desenvolvimento da Educação), or FNDE, which offers financing to low-income students enrolled in undergraduate programs in private higher education institutions. Recent changes to the rules to renew FIES contracts, as well as the substantial downsizing of the system to enter into

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new student financing agreements, may negatively affect the number of students enrolled in our courses, causing a reduction in our revenues.

Furthermore, as a result of UniCesumar’s participation in the Municipal Scholarship Program (Programa Municipal de Bolsas de Estudo), or PROMUBE, it benefited from tax exemptions until April 2021. PROMUBE’s purpose is to provide full and partial scholarships in undergraduate courses and sequential courses (cursos sequenciais) in private educational institutions located in Maringá, in the State of Paraná, to students who meet certain socio-economic criteria and that have lived in Maringá for at least two years. It has been suspended since April 2021, pending an update to the legislation and regulations of the program. If PROMUBE is not reinstated, UniCesumar may experience a decline in its revenues and a decline in the number of students at its campuses. In addition, the current Governor of the state of Santa Catarina has put forward proposals to substitute UNIEDU for a new public policy known as “Free University” (Faculdade gratuita). According to the outline that has already been released, this policy would involve the payment, by the state of Santa Catarina, of the amount corresponding to all seats currently offered by Community Higher Education Institutions (Instituições Comunitárias de Ensino Superior) – a type of nonprofit institution with a special involvement in local communities. If the proposal is submitted as a bill and approved by Santa Catarina’s Legislative Assembly it may exclude all private universities from state public funds which could have a material adverse effect on our business in Santa Catarina. We also participate from time to time in other government programs.

Should (i) the operators of these government programs terminate or reduce the payment of monthly tuition fees to our institutions that participate in those programs, (ii) the students benefiting from these government programs fail to meet the requirements for enrollment in the programs, (iii) the operators of these government programs extend the term to make reimbursements under the programs or adversely change their rules, or (iv) UniCesumar becomes ineligible to participate in these government programs, including as a result of breaching its contractual commitments or as a result of criminal proceedings, our and UniCesumar’s results of operations, cash flow, financial conditions and results may be materially adversely affected. No assurance can be given that UniCesumar will benefit from these or any other government programs going forward.

If we are unable to enter into agreements and maintain good relationships with, and/or increase the number of, our hub partners, our business and growth may be adversely affected. Failure by our hub partners to comply with the terms of those agreements, and any failure by us to enforce such terms, may also adversely affect us. In addition, failure by our hub partners to maintain their existing levels of profitability may result in changes in their view about the advantages of continuing their relationships with us.

A significant portion of our revenue is derived from partnerships with education centers. Our net revenue was R$1,317.3 million for the year ended December 31, 2022 and R$631.1 million for the year ended December 31, 2021, and R$519.2 million for the year ended December 31, 2020, most of which was derived from students who study in hubs managed by our hub partners. We enter into these partnerships through contracts with hub partners who provide centers with infrastructure for our students, which may include private schools, and to whom we provide teachers and materials, teaching methodologies, as well as pedagogical, administrative and marketing advice. As of December 31, 2022, 93.6% of our hubs are partner hubs. We typically enter into contracts with our hub partners for indefinite terms. In the event of termination, in order to minimize the impact of early termination of these contracts on our students, hub partners are required to carry out their obligations under the applicable contract until the end of the semester during which the termination of the contract is initiated.

We also rely in part on existing partner referrals to attract new hub partners. Accordingly, maintaining a good relationship with our hub partners and developing new relationships and expanding our network of hub partners are essential to the success of our business. As of December 31, 2022 and December 31, 2021, we had 675 and 275 hub partners, respectively. Additionally, we may not be able to renew our contracts with our hub partners, due to, among others, changes in the leadership composition of our hub partners and their decisions to discontinue existing relationships with us. In addition, our hub partners are independent entities, and we cannot guarantee that our hub partners will be able to maintain their existing levels of profitability and, therefore, that they will continue to view their relationships with us as valuable.

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Our hub partners are remunerated by their respective share represented by a given percentage over the tuition fee collected by us from students. The total amount to be transferred to the hub partners on a monthly basis is derived from the pricing terms agreed upon with each student on the service contract. This percentage is similar across all our partnership agreements and varies in accordance with the type of course the student is enrolled in, which are higher for continuing education courses and lower for undergraduate courses. In addition, this percentage is higher in the beginning of the hubs’ operations and decreases throughout their life cycle, thus reducing their payback period and increasing the attractiveness of their investment.

However, we cannot assure you that our hub partners will continue to work with us if their profitability declines as the hubs mature. Any deterioration in our relationship with our hub partners, and any early termination of, or a failure to renew, our contracts with our hub partners (including as a result of our hub partners no longer viewing those relationships as advantageous, as a result of a decrease in their profitability or otherwise) may harm our image, impair our ability to pursue our growth strategy, and materially adversely affect our business, our operating and financial results and our cash flows. Given that our existing hub partners usually also open new hubs, any deterioration in our relationship with our hub partners, or any failure to renew such relationships, could also affect our ability to expand further.

Furthermore, we cannot guarantee that our hub partners will always comply with the terms of our agreements with them. Failure to abide by such terms may include breaches of obligations not to solicit students, misuse of our brand, creation of unsanctioned classes, default in payment obligations under the applicable agreements and other matters, which may result in the applications of fines and/or penalties and, in certain circumstances, trigger our right to terminate the agreement. We may not always be able to enforce our agreements with hub partners effectively or at all. Any such breaches of agreements by our hub partners, and any failure on our part to enforce such agreements, may result in negative publicity, tarnish our reputation, deter prospective students from enrolling in our courses and deter prospective hub partners from entering into relationships with us, which may have a material adverse effect on our reputation as well as on our business, financial condition and results of operations.

If we are not able to attract and retain students, or are unable to do so without decreasing our tuition fees or increasing tuition discounts, our revenues may decline. Any increase in the drop-out rates of students in our education programs may adversely affect our results of operations.

The success of our business depends primarily on the number of students enrolled in our programs and the tuition fees that they pay. Our ability to attract and retain students depends mainly on the tuition fees we charge, the convenience of the locations of our facilities, the infrastructure of our hubs and campuses, the quality of our programs as perceived by our existing and potential students and our sales and marketing strategies. These factors are affected by, among other things, our ability to (i) respond to increasing competitive pressures; (ii) develop our educational systems to address changing market trends and demands from schools and students; (iii) develop new programs and enhance existing programs to respond to changes in market trends and student demands; (iv) adequately prepare our students for careers in their chosen professional occupations; (v) successfully implement our expansion strategy; (vi) manage our growth while maintaining our teaching quality; and (vii) effectively market our programs to a broader base of prospective students. If we are unable to continue to attract new students to enroll in our programs and to retain our current students without significantly decreasing tuition or increasing tuition discounts, our revenues and our business may decline and we may be adversely affected.

We believe that our drop-out rates are primarily related to the personal motivation and financial situation of our current and potential students, as well as to socioeconomic conditions in Brazil. Significant changes in projected drop-out rates and/or failure to re-enroll students once the semester is over may affect our enrollment numbers, as well as our ability to recruit and enroll new students, each of which may have a material adverse effect on our projected revenues and our results of operations.

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An increase in delays and/or defaults in the payment of tuition fees, as well as students canceling their course registration, may adversely affect our income and cash flow.

We depend on the full and timely payment of the tuition we charge our students, including tuition payments we receive through Student Financing Program (Programa de Financiamento Estudantil), or FIES, the University Scholarships Program of the State of Santa Catarina (Programa de Bolsas Universitárias de Santa Catarina), or UNIEDU, and other funded scholarships. An increase in payment delinquency or default by our students, or an increase in the proportion of students canceling their course registration, may have a material adverse effect on our cash flows and our business, including our ability to meet our obligations. Student delays and/or defaults in the payment of tuition fees and student cancellations of their course registrations may occur for a variety of reasons over which we have no control, including a student’s personal, financial and academic situation. Any increase in payment delinquency or default by our students, or an increase in the proportion of students canceling their course registration may have a material adverse effect on us.

Changes in tax laws, tax incentives, benefits or differing interpretations of tax laws may harm our results of operations.

Changes in tax laws, regulations, related legal interpretations applicable to our activities and accounting standards in Brazil may result in a higher effective tax rate on our earnings, which may significantly reduce our profits and cash flows from operations. In addition, our results of operations and financial condition may decline if certain tax incentives are not retained or renewed. If the taxes applicable to our business increase or any tax benefits are revoked and we cannot alter our cost structure to pass our tax increases on to customers, our financial condition, results of operations and cash flows could be seriously harmed. Our digital education activities are also subject to a Municipal Tax on Services (Imposto Sobre Serviços), or ISS. Any increases in ISS rates or differing legal interpretations applicable to our activities would also harm our profitability.

In addition, tax rules in Brazil, particularly at the local level, change regularly, and it is common for taxpayers to challenge such changes, which may result in additional tax assessments and penalties for our company. The Brazilian federal government is currently seeking to reform Brazil’s tax system to improve Brazil’s economic performance. We cannot assure you that these proposed reforms will be successful or, if they are successful, that they will not result in an increase in our overall tax burden.

We are involved in tax proceedings based on differences of interpretation between us and the Brazilian tax authorities regarding tax laws and regulations. For further information, see “Item 10. Additional Information—E. Taxation.”

Recently the Supreme Court of Brazil, or the STF, reversed an earlier position in relation to the treatment of taxes collected on an ongoing basis that have been subject to a legal determination by the court. The court determined that an earlier final decision (res judicata) dealing with taxes collected on ongoing basis, for example, the CSLL, will lose its effects if the STF later determines otherwise in a contrary decision. As a result, companies will need to evaluate and, when necessary, adjust the amounts recognized in their financial statements. This could include in the recognition of expenses and provisions related to taxes collected on an ongoing basis. This new determination may impact our results if new decisions on taxes collected on an ongoing basis are determined which are contrary to those that we have previously adopted, including, as an example, in relation to the CSLL exemption for joining PROUNI. For more information, see “Item 4. Information on the Company—B. Business Overview—Financing Alternatives for Students: Incentive Programs—University for All Program (PROUNI)”.

Any changes in tax laws, incentives, benefits or in the interpretation of tax laws, or decisions adverse to us in tax proceedings could have a material adverse effect on our business, financial condition and our results of operations.

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Any change or review of the tax treatment of our activities, or the loss or reduction in federal tax exemptions provided under the PROUNI program, may materially adversely affect our business, financial condition and results of operations.

If the Brazilian government or any Brazilian municipality or tax authority decides to change or review the tax treatment of our activities, including tax exemptions available to us as a result of our participation in certain governmental programs relating to education, and we are unable to pass on any cost increase to our hub partners and/or to our students, our business, financial condition, as well as our results of operations may be materially adversely affected.

In particular, some of our students participate in the University for All Program (Programa Universidade para Todos), or the PROUNI program. PROUNI was created in 2005, through Law No. 11,096, of January 13, 2005. Its purpose is to provide full and partial scholarships to low-income students in undergraduate courses and sequential courses (cursos sequenciais), in private educational institutions. In return, the Brazilian federal government offers tax exemptions to educational institutions that participate in PROUNI. Private institutions may join PROUNI by executing a “commitment term,” with a 10-year term (renewable for another 10 years), setting the number of scholarships to be offered in each program, campus and course. Through the PROUNI program, the Brazilian federal government grants a number of full and partial scholarships to low-income postsecondary education students. As a result of our participation in the PROUNI program, we benefit from certain federal tax exemptions relating to bachelor’s and associate’s degree programs, such as (i) IRPJ, (ii) Social Contribution Tax on Gross Revenue (Programa de Integração Social), or PIS; (iii) Social Security Financing Tax on Gross Revenue (Contribuição para o Financiamento da Seguridade Social), or COFINS; and (iv) CSLL regarding our revenues from undergraduate and associate programs.

We may be disqualified from the PROUNI program and lose the benefit of any related tax exemptions if we do not comply with certain requirements, such as providing total or partial scholarships for a percentage of students who paid their tuition in the previous year, granting partial scholarships, submitting to the MEC semi-annual records of attendance, achievement and drop-out of students receiving scholarships, among others. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulatory Overview.” If we lose the benefit of these tax exemptions or are unable to comply with other, more stringent requirements that may be introduced in the future, our business, financial condition and results of operations could be materially adversely affected.

Additional changes in tax legislation may result in a risk related to the prohibition, interruption, or even modification in invoking pre-existing tax exemptions. As such, we cannot assure you that we would be able to maintain the standard taxes and other benefits related to PROUNI in case of further amendments to tax legislation. Any suspension, accelerated default, repayment, or inability to renew our tax exemptions may have an adverse effect on our results of operations. Furthermore, our business, financial condition, and the operation results may be significantly affected in a scenario where (i) we lose our tax exemptions and/or benefits, (ii) we are unable to comply with future requirements or even (iii) in case of amendments to legislation which limit our ability to maintain these tax benefits.

Any change or review of the tax treatment of our activities, or the loss or reduction in tax benefits on the sale of educational materials may materially adversely affect us.

We started selling educational materials in March 2020. Accordingly, we expect to benefit from tax Law No. 10,865/04, as amended by Law No. 11,033/04, which currently establishes a zero rate for PIS and COFINS on the sale of books. The Brazilian constitution exempts the sale of books from the Brazilian tax on the circulation of goods, interstate and intercity transportation and communication services (Imposto sobre Operações relativas à Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação), or ICMS. If the Brazilian tax authorities decide to reduce the scope or discontinue this tax exemption, the resulting increase in the tax rate applicable to sales of books may adversely impact our business and results of operations.

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Our competitors may offer programs or courses similar to or better than those offered by us, have access to more funds, be more prestigious or well-regarded within the academic community, have more conveniently located hubs with better infrastructure or charge lower tuition (or no tuition, in the case of public institutions). To compete effectively, we may be required to reduce our tuition or increase our operating expenses in order to retain or attract students or to pursue new market opportunities. As a result, our revenues and profitability may decrease. We cannot assure you that we will be able to compete successfully against our current or future competitors.

We compete with various public and private postsecondary education institutions, some of which are nonprofit organizations and exempt from various taxes. Additionally, we may become subject to greater competition in the digital education market due to the implementation of Decree No. 9,057/2017 and MEC Ordinance No. 11/2017, which now permits the accreditation of postsecondary education institutions exclusively for digital education in lato sensu undergraduate and postgraduate courses. If we are unable to maintain our competitive position or otherwise respond to competitive pressures effectively, we may lose our market share, our profits may decrease and we may be adversely affected.

Our success depends on our ability to monitor and adapt to technological changes in the education sector and maintain a technological infrastructure that works adequately and without interruption.

Information technology is an essential factor of our growth, especially in the digital education business line. Our information technology systems and tools may become obsolete or insufficient, or we may have difficulties in following and adapti