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Table of Contents

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

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021

OR

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

OR

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
+55 (47) 3281-9500
(Address of principal executive offices)

Carlos Henrique Boquimpani de Freitas, Chief Financial 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

(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

Table of Contents

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, 2021 was 23,329,324 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: 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

Table of Contents

VITRU LIMITED

TABLE OF CONTENTS

Page

Presentation of Financial and Other Information

1

Forward-Looking Statements

6

Part I

8

Item 1.

Identity of Directors, Senior Management and Advisers

8

A.

Directors and Senior Management

8

B.

Advisers

8

C.

Auditors

8

Item 2.

Offer Statistics and Expected Timetable

8

A.

Offer Statistics

8

B.

Method and Expected Timetable

8

Item 3.

Key Information

9

A.

Selected Financial Data

9

B.

Capitalization and Indebtedness

14

C.

Reasons for the Offer and Use of Proceeds

14

D.

Risk Factors

14

Item 4.

Information on the Company

61

A.

History and Development of the Company

61

B.

Business Overview

64

C.

Organizational Structure

113

D.

Property, Plant and Equipment.

114

Item 4A.

Unresolved Staff Comments

114

Item 5.

Operating and Financial Review and Prospects

115

A.

Operating Results

115

B.

Liquidity and Capital Resources

134

C.

Research and Development, Patents and Licenses, Etc.

136

D.

Trend Information

137

E.

Critical Accounting Estimates

138

Item 6.

Directors, Senior Management and Employees

138

A.

Directors and Senior Management

138

B.

Compensation

142

C.

Board Practices

144

D.

Employees

145

E.

Share Ownership

146

Item 7.

Major Shareholders and Related Party Transactions

146

A.

Major Shareholders

146

B.

Related Party Transactions

148

C.

Interests of Experts and Counsel

149

Item 8.

Financial Information

149

A.

Consolidated Statements and Financial Statements

149

B.

Significant Changes

151

Item 9.

The Offer and Listing

152

A.

Offering and Listing Details

152

B.

Plan of Distribution

152

C.

Markets

152

D.

Selling Shareholders

152

E.

Dilution

152

F.

Expenses of the Issue

152

i

Table of Contents

Item 10.

Additional Information

152

A.

Share Capital

152

B.

Memorandum and Articles of Association

152

C.

Material Contracts

163

D.

Exchange Controls

163

E.

Taxation

163

F.

Dividends and Paying Agents

166

G.

Statement by Experts

166

H.

Documents on Display

167

I.

Subsidiary Information

167

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

167

Item 12.

Description of Securities Other Than Equity Securities

169

A.

Debt Securities

169

B.

Warrants and Rights

169

C.

Other Securities

169

D.

American Depositary Shares

169

Part II

Item 13.

Defaults, Dividend Arrearages and Delinquencies

170

A.

Defaults

170

B.

Arrearages and Delinquencies

170

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

170

A.

Material Modifications to Instruments

170

B.

Material Modifications to Rights

170

C.

Withdrawal or Substitution of Assets

170

D.

Change in Trustees or Paying Agents

170

E.

Use of Proceeds

170

Item 15.

Controls and Procedures

171

A.

Disclosure Controls and Procedures

171

B.

Management’s Annual Report on Internal Control over Financial Reporting

171

C.

Attestation Report of the Registered Public Accounting Firm

172

D.

Changes in Internal Control over Financial Reporting

172

Item 16.

Reserved

172

Item 16A.

Audit Committee Financial Expert

172

Item 16B.

Code of Ethics

172

Item 16C.

Principal Accountant Fees and Services

173

Item 16D.

Exemptions from the Listing Standards for Audit Committees

173

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

173

Item 16F.

Change in Registrant’s Certifying Accountant

173

Item 16G.

Corporate Governance

173

Item 16H.

Mine Safety Disclosure

179

Item 16I.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

179

Part III

Item 17.

Financial Statements

180

Item 18.

Financial Statements

180

Item 19.

Exhibits

180

Index to Consolidated Financial Statements

F-1

ii

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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 Vitru Limited, together with its subsidiaries.

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 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 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, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, together with the notes thereto. All references herein to “our financial statements,” “our audited consolidated financial information,” and “our audited consolidated financial statements” are to Vitru’s consolidated financial statements included elsewhere in this annual report.

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 International Accounting Standards Board, or 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 2021,” relate to our fiscal year ended on December 31 of that calendar year

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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 principal 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 the NB Funds, or, collectively, the Principal Shareholders, held 522,315,196 shares of Vitru Brasil. Prior to the consummation of our initial public offering, our Principal Shareholders contributed all of their shares in Vitru Brasil to us. In return for this contribution, we issued new common shares to our Principal 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.

As of December 31, 2021, we had a total of 23,329,324 common shares issued and outstanding. 16,848,874 of these shares were common shares beneficially owned by our Principal Shareholders, 480,450 of these shares were common shares beneficially owned by members of our management and other shareholders who acquired shares prior to our initial public offering, and 6,000,000 of these shares were common shares beneficially owned by investors who acquired shares in our initial public offering or in the secondary market.

The diagram below depicts our organizational structure as of the date of this annual report:

Graphic

Below is a brief description of our subsidiaries:

Vitru Brasil (Vitru Brasil Empreendimentos, Participações e Comércio S.A.)

Vitru Brasil is an operating subsidiary and was incorporated on June 27, 2014 in Florianópolis, state of Santa Catarina. It is a primarily a holding company through which we hold our remaining subsidiaries listed below, and through which we provide our postgraduate courses.

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Sociedade Educacional Leonardo da Vinci S/S Ltda. (“Uniasselvi”)

Uniasselvi is our largest subsidiary and was incorporated on January 30, 2004 in Indaial, state of Santa Catarina. Vitru Brasil acquired sole control of Uniasselvi from Kroton on February 28, 2016. We conduct most of our digital education undergraduate courses through Uniasselvi. Its activities also include conducting on-campus undergraduate and continuing education courses in seven different cities.

Uniasselvi holds the following educational entities authorized by the MEC:

Centro Universitário Leonardo da Vinci – Uniasselvi;
Centro Universitário Dante – Unidante,
Faculdade do Vale do Itajaí Mirim – FAVIM;
Faculdade Metropolitana de Itajaí – FIMT; and
Faculdade Metropolitana de Palhoça – FAMEPALHOÇA.

Sociedade Educacional do Vale do Itapocu S/S Ltda. (“UNIVINCI”); FAIR Educacional Ltda. (“FAIR”) and FAC Educacional Ltda. (“FAC”)

UNIVINCI, FAIR and FAC are the subsidiaries through which we provide on-campus undergraduate and continuing education courses. These subsidiaries were incorporated on November 3, 2005, April 25, 2014, and June 24, 2014, respectively, and were also acquired by us from Kroton in 2016 and 2017.

UNIVINCI, FAIR and FAC hold the following educational entities authorized by the MEC:

Centro Universitário Leonardo da Vinci – UNIVINCI;
Faculdade Leonardo da Vinci – FAVINCI;
Faculdade Metropolitana de Florianópolis – FAMEFLORIPA;
Faculdade Metropolitana de Rio do Sul – FAMESUL;
Faculdade Metropolitana de Lages – FAMELAGES;
Faculdade Metropolitana de Joinville – FAMEVILLE;
Faculdades Integradas de Rondonópolis – FAIR;
Instituto de Ensino Superior de Cuiabá; and
Faculdade de Mato Grosso – FAMAT.

Additional Information

See note 2.2 to our audited consolidated financial statements included elsewhere in this annual report for additional information on our subsidiaries.

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$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 as reported by the Brazilian Central Bank. The rate at December 31, 2021, 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.

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

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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;
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 14 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 17 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 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.

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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 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 United States Securities and Exchange Commission, or 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 Insights, Hoper Consultoria and Gismarket, 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:

the impact of 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 (see “Item 3. Key Information–D. Risk FactorsRisks Relating to Our Business and IndustryThe COVID-19 pandemic may cause an adverse effect in our operations, including the partial closure of our business. The extension of the COVID-19 pandemic, the perception of its effects, or the way in which such pandemic will impact our business, either on a microeconomic or on a macroeconomic level, 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,” “Item 4. Information on the Company—A. History and Development of the Company—Our History—COVID-19 Pandemic” and “Item 5. Operating and Financial Review and Prospects—D. Trend Information—Impact of COVID-19 on our Business”);
our ability to implement, in a timely and efficient manner, any measure necessary to respond to, or reduce the impacts of the COVID-19 pandemic on our business, operations, cash flow, prospects, liquidity and financial condition;
our ability to efficiently predict and react to temporary or long-lasting changes in consumer behavior resulting from the COVID-19 pandemic, including after the pandemic has been sufficiently controlled;
the downgrading of Brazil’s investment ratings;
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 military conflict between Russia and Ukraine;
the political climate leading up to and eventual outcome of the 2022 presidential elections in Brazil;
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;
our ability to adapt to technological changes in the educational sector;
the availability of government authorizations on terms and conditions and within periods acceptable to us;
our ability to continue attracting and retaining new students;
our ability to maintain the academic quality of our programs;
our ability to maintain the relationships with our hub partners;
our ability to collect tuition fees;
our ability to grow our business;
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;
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 complete the business combination with CESUMAR – Centro de Ensino Superior de Maringá Ltda., or “UniCesumar,” in a timely manner or at all;
our ability to realize the anticipated benefits of the business combination with UniCesumar, or the “UniCesumar Business Combination”;
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.

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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 and operating data as of December 31, 2021, 2020 and 2019 and statement of operations for the years ended December 31, 2021, 2020 and 2019. The summary consolidated statements of financial position as of December 31, 2021, 2020 and 2019 and the summary consolidated statements of profit or loss and other comprehensive income for the years ended December 31, 2021, 2020 and 2019 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, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

 

R$

(in millions)

Statement of Profit or Loss Data

    

  

    

  

    

  

    

  

Net revenue

 

113.1

 

631.1

 

519.2

 

461.1

Revenue from digital education undergraduate courses

 

95.3

 

531.7

 

423.0

 

336.3

Revenue from continuing education courses

 

9.4

 

52.4

 

40.6

 

47.1

Revenue from on-campus undergraduate courses

 

8.4

 

47.0

 

55.6

 

77.6

Cost of services rendered

 

(43.2)

 

(240.9)

 

(221.5)

 

(211.5)

Gross profit

 

69.9

 

390.2

 

297.7

 

249.5

Selling expenses

 

(20.0)

 

(111.5)

 

(86.6)

 

(100.9)

General and administrative expenses

 

(16.0)

 

(89.3)

 

(73.9)

 

(125.3)

Net impairment losses on financial assets

 

(19.8)

 

(110.7)

 

(76.8)

 

(58.2)

Other income (expenses), net

 

0.02

 

0.1

 

0.5

 

(0.9)

Operating expenses

 

(55.8)

 

(311.4)

 

(236.8)

 

(285.4)

Operating profit (loss)

 

14.1

 

78.8

 

60.9

 

(35.9)

Financial income

 

8.2

 

45.5

 

36.5

 

19.2

Financial expenses

 

(13.4)

 

(74.9)

 

(64.4)

 

(60.4)

Financial results

 

(5.3)

 

(29.4)

 

(27.9)

 

(41.2)

Profit (loss) before taxes

 

8.9

 

49.4

 

33.0

 

(77.1)

Current income taxes

 

(2.0)

 

(11.3)

 

(19.5)

 

(14.8)

Deferred income taxes

 

5.8

 

32.6

 

38.6

 

25.7

Income tax

 

3.8

 

21.3

 

19.1

 

10.9

Net income (loss) for the year

 

12.7

 

70.7

 

52.1

 

(66.2)

Basic earnings per share—R$ (unless otherwise indicated)(2)

 

 

  

 

  

 

  

Common Shares

 

0.54

 

3.04

 

2.79

 

(3.93)

Diluted earnings per share—R$ (unless otherwise indicated)(3)

 

 

  

 

  

 

  

Common Shares

 

0.51

 

2.87

 

2.68

 

(3.93)

(1)

For convenience purposes only, amounts in reais as of December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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 (loss) attributable to the shareholders by the weighted average number of common shares outstanding during the year.

(3)

Calculated by dividing the profit (loss) 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, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

 

R$

(in millions)

Statement of Financial Position Data

    

  

    

  

    

  

    

  

Assets

 

  

 

  

 

  

 

  

Current assets

 

  

 

  

 

  

 

  

Cash and cash equivalents

 

13.5

 

75.6

 

85.9

 

2.5

Short-term investments

 

45.3

 

253.0

 

515.2

 

72.3

Trade receivables

 

25.2

 

140.6

 

115.1

 

88.1

Income taxes recoverable

 

1.4

 

7.7

 

2.2

 

4.7

Prepaid expenses

 

6.3

 

35.0

 

10.2

 

8.9

Other current assets

 

0.5

 

2.9

 

3.1

 

1.9

 

92.2

 

514.8

 

731.7

 

178.4

Assets classified as held for sale(2)

 

 

 

 

36.5

Total current assets

 

92.2

 

514.8

 

731.7

 

214.9

Non-current assets

 

 

  

 

  

 

  

Trade receivables

 

1.1

 

5.9

 

6.9

 

3.8

Indemnification assets

 

1.5

 

8.6

 

9.2

 

14.8

Deferred tax assets

 

14.9

 

83.4

 

50.8

 

37.1

Other non-current assets

 

0.3

 

1.6

 

3.6

 

1.4

Right-of-use assets

 

24.4

 

136.1

 

127.9

 

88.5

Property and equipment

 

19.1

 

106.8

 

96.7

 

70.0

Intangible assets

 

120.1

 

670.2

 

661.0

 

658.2

Total non-current assets

 

181.4

 

1,012.6

 

956.1

 

873.8

Total assets

 

273.7

 

1,527.4

 

1,687.8

 

1,088.7

Liabilities and Equity

 

 

  

 

  

 

  

Current liabilities

 

 

  

 

  

 

  

Trade payables

 

7.5

 

41.7

 

32.2

 

30.0

Loans and financing

 

 

 

151.8

 

Lease liabilities

 

4.9

 

27.2

 

23.4

 

17.3

Labor and social obligations

 

4.5

 

25.0

 

26.7

 

16.8

Taxes payable

 

0.6

 

3.3

 

2.4

 

1.6

Prepayments from customers

 

1.8

 

10.3

 

9.7

 

3.2

Accounts payable from acquisition of subsidiaries

 

26.8

 

149.8

 

135.0

 

128.9

Other current liabilities

 

0.4

 

2.1

 

1.4

 

0.3

 

46.5

 

259.4

 

382.6

 

198.1

Liabilities directly associated with assets classified as held for sale(2)

 

 

 

 

23.3

Total current liabilities

 

46.5

 

259.4

 

382.6

 

221.4

Non-current liabilities

 

 

  

 

  

 

  

Lease liabilities

 

24.1

 

134.3

 

126.0

 

85.9

Share-based compensation

 

9.4

 

52.3

 

46.2

 

35.0

Accounts payable from acquisition of subsidiaries

 

 

 

139.9

 

250.7

Provisions for contingencies

 

2.7

 

14.9

 

14.4

 

18.4

Deferred tax liabilities

 

 

 

 

25.0

Other non-current liabilities

 

0.1

 

0.4

 

0.7

 

1.1

Total non-current liabilities

 

36.2

 

201.9

 

327.2

 

416.0

Total liabilities

 

82.7

 

461.3

 

709.8

 

637.4

Equity

 

 

  

 

  

 

  

Share capital

 

 

 

 

548.4

Capital reserves

 

186.3

 

1,039.6

 

1,022.1

 

(1.3)

Revenue reserves

 

 

 

 

0.4

Retained earnings (accumulated losses)

 

4.7

 

26.5

 

(44.1)

 

(96.2)

Total equity

 

191.0

 

1,066.1

 

978.0

 

451.3

Total liabilities and equity

 

273.7

 

1,527.4

 

1,687.8

 

1,088.7

(1)

For convenience purposes only, amounts in reais as of December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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)

In December 2019, we decided to sell our subsidiaries FAC and FAIR and the undergraduate operations on the campuses of Assevim and Famesul, which account for a portion of our on-campus undergraduate courses segment. As a result of this decision we classified the related assets and liabilities as “held for sale” in 2019, since we understood that these assets available for immediate sale in their present condition subject only to terms that are usual and customary for these types of transactions, that this sale was likely to occur given then existing plans and was expected to occur within the next six months, and that an active program to locate a buyer and complete the plan had been initiated. However, in September 2020, as a result of our receipt of the proceeds from our initial public offering and the course of events during 2020, we came to the conclusion that there was no further reason to sell these assets immediately.

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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. See also “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures.”

 

For the Year Ended December 31, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

R$

(in millions, except percentages)

Net Revenue

    

113.1

    

631.1

    

519.2

    

461.1

Net Income (Loss) for the Year

 

12.7

 

70.7

 

52.1

 

(66.2)

Adjusted EBITDA(2)

 

32.7

 

182.4

 

146.7

 

117.6

Adjusted Net Income(3)

 

16.4

 

91.5

 

98.2

 

57.7

Cash Flow from Operations

 

27.9

 

155.5

 

141.6

 

98.0

Adjusted Cash Flow Conversion from Operations(4)

 

82.9

%  

82.9

%  

88.1

%  

75.4

%

(1)

For convenience purposes only, amounts in reais as of December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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)

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 (loss) for the years ended December 31, 2021, 2020 and 2019, as well as a reconciliation of Adjusted Cash Flow Conversion from Operations to our cash flow from operations for the years ended December 31, 2021, 2020 and 2019, 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 (Loss) 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, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

 

R$

(in millions)

Net Income (Loss) for the Year

    

12.7

    

70.7

    

52.1

    

(66.2)

(+) Deferred and current income tax

 

(3.8)

 

(21.3)

 

(19.1)

 

(10.9)

(+) Financial results

 

5.3

 

29.4

 

27.9

 

41.2

(+) Depreciation and amortization

 

9.8

 

54.5

 

51.5

 

62.4

(+) Interest on tuition fees paid in arrears

 

3.1

 

17.4

 

15.7

 

8.3

(+) Impairment of non-current assets

 

 

 

 

51.0

(+) Share-based compensation plan

 

2.6

 

14.7

 

11.9

 

26.4

(+) Other income (expenses), net

 

(0.0)

 

(0.1)

 

(0.5)

 

0.9

(+) M&A, pre-offering expenses and restructuring expenses

 

3.1

 

17.1

 

7.2

 

4.5

Adjusted EBITDA(2)

 

32.7

 

182.4

 

146.7

 

117.6

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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 (loss) 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 (Loss) for the Year

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

 

For the Year Ended December 31, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

 

R$

(in millions)

Net Income (Loss) for the Year

    

12.7

    

70.7

    

52.1

    

(66.2)

(+) M&A, pre-offering expenses and restructuring expenses

 

3.1

 

17.1

 

7.2

 

4.5

(+) Impairment of non-current assets

 

 

 

 

51.0

(+) Share-based compensation plan

 

2.6

 

14.7

 

11.9

 

26.4

(+) Amortization of intangible assets from business combinations

 

0.9

 

4.8

 

14.6

 

37.3

(+) Interest accrued on accounts payable from the acquisition of subsidiaries

 

2.3

 

12.9

 

18.0

 

23.4

(+) Corresponding tax effects on adjustments

 

(5.1)

 

(28.7)

 

(5.6)

 

(18.7)

Adjusted Net Income(2)

 

16.4

 

91.5

 

98.2

 

57.7

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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 Net Income as net income (loss) 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 the accounts payable 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, 

    

2021

    

2021

    

2020

    

2019

 

U.S.$(1)

 

R$

 

(in millions, except percentages)

Cash Flow from Operations

    

27.9

    

155.5

    

141.6

    

98.0

(+) Income tax paid

 

(3.3)

 

(18.5)

 

(18.7)

 

(12.7)

Adjusted Cash Flow from Operations

 

24.5

 

137.0

 

122.9

 

85.3

Adjusted EBITDA(2)

 

32.7

 

182.4

 

146.7

 

117.6

(-) M&A, pre-offering expenses and restructuring expenses

 

(3.1)

 

(17.1)

 

(7.2)

 

(4.5)

Adjusted EBITDA excluding M&A, pre-offering expenses and restructuring expenses

 

29.6

 

165.3

 

139.5

 

113.1

Adjusted Cash Flow Conversion from Operations(2)(3)

 

82.9

%  

82.9

%  

88.1

%  

75.4

%

(1)

For convenience purposes only, amounts in reais for the year ended December 31, 2021 have been translated to U.S. dollars using an exchange rate of R$5.581 to U.S.$1.00, the commercial selling rate for U.S. dollars as of December 31, 2021 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)

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 (loss) for the year, see “—Reconciliation of Adjusted EBITDA from Net Income (Loss) 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

The COVID-19 pandemic may cause an adverse effect on our operations, including the partial closure of our business. The extension of the COVID-19 pandemic, the perception of its effects, or the way in which such pandemic will impact our business, either on a microeconomic or on a macroeconomic level, 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.
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 agreements with them, 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 them ceasing to view their relationships with us as advantageous.
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 brand “Uniasselvi,” and if we fail to maintain and enhance recognition of our brand, 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.

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.

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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 military conflict 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

If we are unable to complete the UniCesumar Business Combination in a timely manner or at all, our business and the price of our common shares may be adversely affected, including consequences that could adversely affect our business, results of operations and share price, such as costs relating to the UniCesumar Business Combination, legal proceedings, fines and penalties, negative publicity and a negative impression of us in the investment community.
We may not realize the benefits anticipated from the UniCesumar Business Combination, which could adversely affect the price of our common shares. We may face challenges with successfully integrating and recognizing the anticipated benefits of the UniCesumar Business Combination once completed, such as potential disruption of, or reduced growth in, our historical core businesses; coordinating and integrating research and development teams across technologies and products; consolidating and integrating corporate, information technology, finance and administrative infrastructures, and integrating and harmonizing business and other back-office systems; coordinating sales and marketing efforts difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospect; among others.
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 our acquisition of UniCesumar, 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 regulatory approvals required in connection with the UniCesumar Business Combination may not be obtained or may contain materially burdensome conditions. We cannot provide assurance that these approvals, especially approval by Brazil’s Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica), or CADE, will be obtained or that, if obtained, such approvals will not be subject to materially burdensome conditions (including behavioral remedies or structural measures imposed by CADE).

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

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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

The COVID-19 pandemic may cause an adverse effect in our operations, including the partial closure of our business. The extension of the COVID-19 pandemic, the perception of its effects, or the way in which such pandemic will impact our business, either on a microeconomic or on a macroeconomic level, 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.

COVID-19 is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The disease was first identified in 2019 in Wuhan, the capital of Hubei province in central China, and has since spread globally. On March 11, 2020, the World Health Organization revised the classification of COVID-19 from an epidemic (when a disease spreads through a specific community or region) to a pandemic, which according to the World Health Organization’s definition is when there is a worldwide spread of a new disease. By that time, COVID-19 had already reached Brazil.

The classification of the disease as a pandemic was motivated by the rapid increase in the number of cases and the number of affected countries on all continents, triggering measures by governments, companies and societies to contain the advances of COVID-19. The measures vary from country to country in quantity and degree of severity but basically involve: (1) vaccination programs; (2) recommendations to adopt voluntary isolation (avoid going out on the streets, avoiding crowds, avoiding physical contact with other people, etc.); (3) internal restrictions regarding the movement of people; (4) closing of schools and other public places, such as parks and leisure centers, as well as closures of shopping malls, bars and restaurants; (5) adoption of remote working practices (home office) by companies, whenever possible and permitted by their activities; (6) closing borders between countries; (7) restriction and/or suspension of trade in non-essential goods and services in the context of COVID-19 (while supermarkets, drugstores, gas stations and other essential services remain available); (8) purchase restrictions for certain essential items to avoid scarcity; (9) interruption of production activities of consumer items not essential to combat the pandemic; (10) restriction on the delivery of products to homes other than essentials; (11) compulsory reduction of working hours; (12) cancellation of public events; and (13) other restrictive measures.

On March 20, 2020 the Brazilian federal government declared a national emergency with respect to COVID-19. Throughout 2020 and 2021, Brazilian federal, state and local authorities imposed closure of academic facilities, shelter-in-place, capacity restrictions, social distancing and the other abovementioned measures across Brazil as the number of COVID-19 cases and COVID-19-related deaths continued to increase. In 2022 these measures have begun to be lifted following a decrease in COVID-19 cases and deaths partially due to Brazil’s vaccination campaign. Nevertheless, uncertainty remains as to the efficacy of vaccines against existing and future strains of COVID-19.

Such events have adversely impacted the global economy as well as national and regional economies (including the Brazilian economy) and have caused disruption of regional or global economic activity. In particular and in the interest of public health and safety, state and local governments in Brazil have required mandatory closures of academic institutions in certain cities in 2020, 2021 and to a lesser extent in early 2022, which has resulted in the closure of our on-campus learning facilities and hubs. The COVID-19 pandemic is still evolving in Brazil, and authorities may reinstate closures of academic institutions for a longer or undefined extended of period of time, restrict class sizes or otherwise impose limitations on the number of people who may gather in one place, impose lockdowns, among other

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measures, all of which are outside of our control and may adversely affect our business, financial condition, operating results and cash flow.

We cannot predict when the COVID-19 pandemic will subside, and consequently we cannot predict how it will affect the Brazilian and global economies going forward. The COVID-19 pandemic has resulted in a number of adverse effects on the Brazilian and global economies, which are ongoing: (1) an increase in mortality rates; (2) an initial demand shock followed by a rise in inflation; (3) overloading healthcare systems in many countries, especially in less developed areas; (4) large-scale human and economic impact; (5) layoffs and bankruptcies in the most affected sectors rising sharply; (6) severe global economic impact, with significant gross domestic product contraction in most major economies in 2020 and early 2021 and a slow-moving recovery in late 2021 and early 2022; (7) infrastructure collapse and lack of basic services, particularly in less developed countries; and (8) compromised government planning, coordination and reaction capacity according to the speed that the disease progresses.

The COVID-19 pandemic has caused and is expected to continue to cause a material and adverse effect on the general economic, financial, political, demographic and business conditions in Brazil, which has reduced the disposable income of our students and their families, and consequently (1) resulted in an adverse impact on the ability of our students (current and/or prospective) to pay our tuition fees and/or (2) triggered an increase in our attrition rates. In 2020, we experienced signs of a decline in new enrollments as a result of the COVID-19 pandemic and the related governmental restrictions but we were able to mitigate this trend by offering fully digital enrollments through a dedicated app called Leo App and other channels, which we believe makes it easier for prospective students to enroll. However, we cannot assure that the adopted measures will be sufficient to stem any future decline in enrollments and the increase in drop-outs.

The extent to which COVID-19 will impact our business, financial condition and results of operations going forward depends on a wide number of factors all of which are uncertain and cannot be predicted, including the emergence of new variants of the virus, the speed and efficacy of vaccine roll-outs, the measures to be adopted in Brazil and the effects on the economic activities on our customers and suppliers, among others. Accordingly, we cannot predict the direct and indirect effects of the COVID-19 pandemic and governments’ responses to it on our business, results of operations and financial condition, including: (1) the impact of COVID-19 on our financial condition and results of operations, including trends and the overall economic outlook, capital, investments and financial resources or liquidity position; (2) how future operations could be impacted; (3) the impact on our costs or access to capital and funding resources; (4) if we could incur any material COVID-19-related contingencies; (5) how COVID-19 could affect assets on our balance sheet and our ability to timely record those assets; (6) the anticipation of any material impairments, increases in allowances for credit losses, restructuring charges or other expenses; (7) any changes in accounting judgements that have had or are reasonably likely to have a material impact on our financial statements; (8) the decline in demand for our products; (9) the impact on our materials production chain; (10) the impact on the relationship between costs and revenues; (11) general economic and social uncertainty, including increases in interest rates, variations in foreign exchange rates, inflation and unemployment; and (12) other unforeseen impacts and consequences.

In addition, COVID-19 poses risks that our employees, contractors, suppliers, students, hub partners and other business partners may be prevented from conducting business activities for an indefinite period of time, including shutdowns that may be requested or mandated by governmental authorities and could have a material adverse effect on our results of operations, financial condition and liquidity. The mandatory closure of schools in 2020 and 2021 may result in delays in students enrollments in postsecondary education courses and, therefore, affect our future operations, financial condition and liquidity. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or mitigate its impact, among others.

We are not aware of comparable events that could provide us with guidance as to the effect of the spread of the COVID-19 pandemic and, as a result, the final impact of the COVID-19 pandemic is highly uncertain. Although as of the date of this annual report there has been no material impact on our operations, as most of our services are already delivered remotely or capable of being delivered remotely, we are not able to assure you if, and to what extent, in the future, our operations will be impacted by COVID-19.

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Furthermore, to the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and liquidity, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

See also “—Public health threats or outbreaks of communicable diseases could have an adverse effect on our operations and financial results,” “Item 4. Information on the Company—A. History and Development of the Company—Our History—COVID-19 Pandemic” and “Item 5. Operating and Financial Review and Prospects—D. Trend Information—Impact of COVID-19 on our Business.”

We are subject to various federal laws and extensive government regulation, and changes in such laws and regulation could have a material adverse effect on our business and our growth strategy.

We are subject to various federal laws and extensive government regulations by the MEC, the National Education Council (Conselho Nacional de Educação), or the CNE, the INEP, and the National Postsecondary Education Assessment Commission (Comissão Nacional de Avaliação da Educação Superior), or CONAES.

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.

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 formal opinion issued by Federal Council of the Brazilian Bar Association or the National Health Council, respectively.

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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.

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 agreements with them, 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 them ceasing to view their relationships with us as advantageous.

We derive a significant portion of our revenue from partnerships with education centers. Our net revenue was 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, 2021, 86.6% 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, 2021 and December 31, 2020, we had 275 and 188 hub partners, respectively. Additionally, we may not be able to renew our contracts with our hub partners, including as a result of 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.

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

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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.

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

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