Vitru Limited (VTRU) Q3 2021 Earnings Call Transcript

Vitru Limited (VTRU 1.14%)
Q3 2021 Earnings Call
Nov 17, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening, ladies and gentlemen, and welcome to Vitru's third quarter 2021 earnings conference call. All participants are in a listen-only mode now. Later on, we will conduct the question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded and will be available on Vitru's IR website.

Now, I would like to introduce your host for today's conference call, Mr. Carlos Freitas, Vitru's CFO. You may begin.

Carlos Freitas -- Chief Financial Officer

Thank you, operator. Good evening, everyone, and thanks for joining us. It's a real pleasure to be here with you all for the release of our third quarter '21 numbers, as well as the numbers for the first nine months of this year. Hope all of you are doing well and healthy.

And here with me, I have Pedro Graca, the CEO of Vitru; Maria Carolina Goncalves, the head of our investor relations department, as well as [Inaudible], all from our IR team. A slide presentation will be part of today's webcast, which is available in our Investor Relations website at investors.vitru.com.br. So, I'm sure you all have this presentation in front of view. But as usual, before we begin, I'd like to make note that as detailed in Page 2 and 3 of the presentation, safe harbor is in effect for this call.

So now I invite you to go to the Page 5, the first page of our presentation with the highlights for this quarter. So, the first highlight is not new. The announcement of our agreement with Unicesumar for the business combination with them that were announced three months ago. But we are never tired of reinforcing the beauty of this deal.

They are the leading institution in Brazil in terms of quality indicators for distance learning in the Brazilian segment besides having a sizable and growing business of medicine and other health-related courses. And later on, I'm going to go back to this information. I need to show you more figures about Unicesumar. We also had this quarter as expected in the past.

We launched new courses and specifically the course of Nursing, which started to be offered in August of this year. And in a couple of months, in two months, already became the No. 1 course in our current intaking cycle in our portfolio of -- on the grade courses. So, we had a huge success, and it reinforces our speech and our belief that the Digital Education segment is going to increase even further throughout the country.

We have reached almost 360,000 Digital Education students, with a 27% increase in intake in the current intaking cycle compared to the same cycle -- same period of last year with a relevant growth in the Southeast region, which is, as you know, our new growth frontier. The net revenue in our core Digital Education undergraduate segment increased by around 20% this quarter with a consolidated net revenue growth of around 17%. The EBITDA increased 26% in the first nine months of this year. It's always better to show the EBITDA numbers on a year-to-date basis because of certain seasonality we had in our business.

So, the nine months EBITDA growth is 26% with an adjusted EBITDA margin of 29% growing as well 1 point compared to the same period of last year. And finally, last but not least, cash flow from operations reaching 130 million reais in nine months with adjusted cash flow conversion from operations of 92%. So, we not only grew our revenue and EBITDA but also generated a lot of cash from our operations. So now, before we move forward to show what were the main figures of this quarter, let me show to you, on Page 6, a brief reminder or refresh of what we have been delivering over the last 12 months.

We have now the first -- we had the first anniversary of our IPO in September of this year. And at that time, one year ago, when we were going through the IPO discussion with you guys, we said that we would grow in four growth avenues, three of which organic and one inorganic. And we have been delivering what we promised over the last year. The first one was the ramp-up of our current hubs.

We said that this was going to be the main organic growth driver in our revenues, which is being delivered. We have now more than two-thirds of our students based in new hubs and expansion hubs, the hubs that were opened in the last four years. While one year ago, this number was 69%. Today, we have more than 90% of the hubs still in ramp-up phase, still maturing over time.

We increased our base offer by around 25% in these 12 months. We opened more than 240 hubs, of which 100 hubs in the Southeast, of which has 50 in Sao Paulo. So, we are growing in the Southeast as we were announcing before. And also, we expanded the course offering.

So, as I said, first, a new big course was Nursing. So, Nursing already, again, the No. 1 course in the current intaking cycle. It is a premium course is a course with a ticket that is 50% higher than our normal ticket.

And hopefully soon, we will have offerings also in Law and Psychology. And for example, in Law, we have already the authorization -- the great authorization -- sorry, from different location with Grade 5, the higher grade possible and the possibility to offer 22,000 seats per year, and in the case of Nursing and Psychology is 11,000 seats per year. So, this will be an important growth avenue going forward as well and an important lever to sustain tickets as well. And finally, inorganically speaking, we announced, as I said, the deal with Unicesumar, which is the best deal we could ever consider.

We always consider them to be the reference -- the benchmark company in Brazil when we think about quality indicators in digital learning and Digital Education in the country. So, with this transaction, once it is allowed to be concluded and closed by the antitrust authority in Brazil, we will become the No. 2 -- the second-largest digital learning player in Brazil with the best quality indicators. So now on Page 7, some more information about Unicesumar before we come back to Vitru.

So, there's a business combination will create this disruptive player, a reference player when you think about a high-growth business in the higher education segment in Brazil. Unicesumar has a size, which is close to ours. So, as of June of this year -- before June, we had a bit less than 800 hubs. Today, they have about 900 hubs, such as us.

So, combined, we will have around today 1,800 hubs, more than 700,000 students combined with us. They had last year -- sorry, they had in the last four years, a CAGR of 49%. And last year, a net revenue of 610 million reais with a 40% adjusted EBITDA margin. So, it is higher than our margin with around 30%.

And the main driver for that, the main reason for that is the business of medicine. Here on the bottom-left part of the slide, you can see some information about their medical business. They are the fifth-best medical course in Brazil among private institutions, which is a high demand course, as you all know, that is a 11-to-1 ratio of applicants per seat with an average ticket of more than 9,000 reais per month. So, on top of that, here on the right, I show some quality indicators from Unicesumar.

They have an IDD of 3.75%, which is 43% above the average of the market, even above our IDD is 3.3% in the last cycle, which is the highest IDD in digital learning among all listed players in Brazil. We have -- we still have the highest IDD in digital learning among all leading players in Brazil and Cesumar has even higher IDD ratio. This is satisfaction. This is contribution.

This is value-added that you bring to the students when you compare the ENEM grade with another grade. And they are as ranked by the Ministry of Education. When you see the IGC courses rate, they are among the 2% best educational institutions in Brazil. That's really a reference player and together with them, we're going to be, I believe, a reference player.

So, on Page 8, we have more information about the profile of students and why we believe that we are going to keep growing hand in hand once the deal is approved. So, here on the left, you see that the student profile is slightly different. That's why we intend to maintain to keep both brands because they test different markets. The students that usually goes to UNIASSELVI has a lower income and someone who appreciates the local tutor, the human touch, and meet the local, say, presence of a person who is going to provide the handholding for the student.

So, this local support for a tutor is very important for these projects. And Unicesumar, on the other hand, it is -- they have a higher-average-income students, slightly higher and also a more tech-oriented and tech-savvy students because they are -- they have a lot of -- a much more, say, tech-oriented learning experience than the peers. So, it is a different product to attract different people. In the middle, we have a huge potential for commercial synergies.

Today, we have more than 600 cities today -- or sorry, in June, that has either a hub of UNIASSELVI but not Unicesumar or by person. So, here, we have a huge potential to quickly deploy and offer both brands throughout the country. And on the right part of the slide, the whole lot has been growing at around 19% in the last year. These are the information coming from the census made by the MEC, and together we have built Unicesumar, gained 8 points in market share between '16 and '19.

'19, as a reminder, is the last available -- latest available information we have. We went from 10.5% combined with them to 18.5% in index in '19. And why was that on Page 9, because we have intrinsic competitive advantages? On Page 9, we compare the models that we have in Brazil for digital learning, UNIASSELVI is the sole player to focus on the hybrid model with a local tutor, tutor-centered hybrid model with a weekly meeting selected by the local tutors someone who provides a handholding, someone who is also playing a role model for the class, and you have this a sense of belonging with our model. So, this is our competitive advantage.

It is the model, which is complex to create, but we know how to play it. Unicesumar, on the other hand, offer a 100% online product. But they are, as I mentioned before, they are their reference player in terms of quality. So, they have a much more tech-based methodology with nice hubs, as well as we have.

So, that's why they are the reference player when you think about digital learning value. That's why both companies with these intrinsic competitive advantages are growing faster than competition. On Page 10, I have here some public information to confirm the reputation and to confirm our, let's day, competitive dynamics. Here on the left, public commission coming from the Apple Store and Play Store.

If you go now actually with the cellphone at Apple Store, for example, you will see that the app of Unicesumar had highest ranking, highest rates among all players in Brazil, 4.7 out of 5. The second or highest rank is UNIASSELVI with 4.3. The other five retail players are between 2.7 and 1.8. So, this is product information to show to reinforce our tech-oriented approach.

Our culture -- actually our mindset much more -- oriented much more, I would say, concerned and much more delivering a much better technological experience for our customers, our students. On the right, you see Reclame Aqui also public information. Reclame Aqui, if you go now to Reclame Aqui to see UNIASSELVI, you'll see that we have a 7.6 rating, which is the highest score among all Brazilian listed players. Unicesumar has 8.2 ranking, even higher than ours.

They have the best in Brazil. So, this is public information. This is official information from Reclame Aqui and from Google and Apple Store. But this is why we are -- on which we are leveraging our reputation to build for the business to create value for shareholders and to grow faster than competition.

So, on Page 11, to -- now talk back to Vitru and UNIASSELVI. Again, we are offering new premium courses to expand the market and improve EBITDA. So, nursing already with 11,000 seats covered in three months, which represented 8% of the current ticket cycle. Our intake cycle was 138,000 students, of which 11,000 in nursing.

And hopefully, we will be allowed to offer soon Law and Psychology. Those three courses, as a reminder, represents around one-third of the public -- sorry, of the private on-campus market in Brazil. So, it's a huge opportunity for a player as us, which have a hybrid model. This was on Page 11, sorry.

On Page 12, the growth in our base was led by Digital Education segments. So, we grew 20% year-on-year [Inaudible]. And this growth was -- it was, I think, also important to highlight that it was coming from a very high comparable base. So, we grew last year -- in the second cycle of intake, we grew 40%.

And now we grew on top of this base, 27%. So, that important growth of 27% in the intake year over year, even though that the comparative base is higher and 138,600 new students in the second semester of this year, of which almost 113,000 only in the third quarter of this year. On Page 13, growth was spread throughout Brazil. So, even here in our original base, original region in the south of the country, we grew 13% year on year, again, even knowing that the comparison rate was high last year.

And in the Southeast, 50% here on the left. On the right, we expect our hubs, as I said, 242 new hubs in the last 12 months. On Page 14, the focus on the Southeast region of Brazil. We opened there almost 100 hubs in the last 12 months and increased the student base by 50%.

So, we opened very recently a lot of new hubs in the last, I'd say, three months, in fact. So, we are preparing the base to accelerate even further, the growth there in this region, which represents 40% of the total market in Brazil. On Page 15, the maturation of our hubs. Again, the most important organic driver for growth, which is growth with limited execution risk.

We keep expanding our maturation of hubs. If you see all the new hubs that we opened in the last four years, we are still around 31% of the potential of those hubs. And also, important to highlight here on the bottom left part of the slide, the share of newcomers and the share of intake in the overall student base. This is something that I mentioned already a few times in the past, but now we're showing here with numbers.

If you see that we reached now in the first half of this year, what we believe to be the peak ratio between intake and overall base. And why is that important? First, because this -- the slight decrease over time of this ratio as we mature more hubs as more and more hubs get fill up, and we increased faster the percentage of seniors compared to the percentage of newcomers, we are going to increase margins over time. We're going to decrease dropout ratio. We're going to decrease PDA ratios.

Why? Because as you know, newcomers, freshmen dilute margin. Most of our selling expenses is aimed at attracting new students. Newcomers, they drop more than seniors, and hence a PDA ratio also higher among newcomers. So, over the last four years, we have been increasing this ratio.

But now according to our forecast, as from the first half already of next year, we are going to slowly but steadily increase more the presentation of seniors compared to newcomers. This is an important driver of margin and going forward. So, on Page 16, before talking about margins, net revenue growing at around 20%, 25% -- 20% in the quarter, 25% in the nine-month period of this year, driven by the expansion of base, as I showed before, 20% year on year plus a 2% increase in ticket. This is also, OK, something that different -- that differentiates Vitru from the competition because we offer a different product because we differentiate ourselves from the competition, we have been able to more or less maintain tickets over time.

So, there was an increase last year. There was a decrease in the first half of this year, now an increase again. So, more or less, we are maintaining our ticket, and in fact, increasing 2% year on year on year if you see the third quarter numbers, and this is confirming the resilience of our model. Now Page 17, some more financials.

So, the consolidated net revenue growing at around 22% on a nine-month period, EBITDA growing 26% and gross margin growing 31%. I'm going to show each of them now in detail. So, on Page 18, if you see the cumulative number for nine months, for example, the growth of 22% driven by the Digital Education business undergraduation and graduation, namely, continuing education, both segments growing quite a lot in the last -- over the last year as was the case with last year. And on-campus segment, decreasing over time, 17%, which is here on Page 19.

On Page 19, you have more details about the Continuing Education segment and on-campus segment. So, in Continuing Education, the growth was driven by our digital graduation courses, which expanded a lot this year with more offerings and also levered on digital marketing. On the other hand, on-campus segment is declining over time, in line with our view for the sector because slowly but steadily, there is this decline in the interest of on-campus education and a corresponding increase in the interest of Digital Education, which we don't believe will reverse once the pandemic is over. We have a lot of questions about it, whether there will be a decline in interest in Digital Education once the pandemic is over hopefully next year.

We don't believe in that. We do believe that there was a shift in mindset in [Inaudible] about buying from home, working from home, and also studying from home. Nobody believes that e-commerce will go down once pandemic is over because people now have experimented this type of the experience. And the mindset, the interest of Digital Education has also grown a lot, and we'll continue to grow in the future.

So, margins, EBITDA, on Page 20. Again, let's talk here on the nine-month period, an increase of 21 -- 28% to 29% of margin, 1 point. That was -- this increase was mostly driven by a reduction in the cost of services as a percentage of revenues, which I'm going to show in the following slides. So, Page 21.

Cost of service, there was an important increase in efficiency over time, a 4-point increase -- so 35% to 31% decrease in the cost of service as a percentage of net revenue. This was driven mostly by Vitru's first, the overall optimization of personnel costs as we optimize the ratio between student per tutor and the overall growth of the business. As we go further, it is easier for us to optimize also the ratio of students per ratio and besides the implementation of the flex courses that we mentioned in the beginning of this year that we created this also this new concept of flex courses through which we gathered nonoptimized classes that we're offering in small cities, for example. We have a bit much more optimized ratio now with students per tutor.

And hence, this is driven -- driving as well the expansion in margin, gross margin. On the right, you see G&A also an increased efficiency, reflecting our focus in maintaining to be a lean company, a digital-oriented company. We have less than 8% of our net revenue in G&A. This is a reflection of how we operate.

This is a consequence of how we drive the business. We're much more, I'll say, agile and lean than competition. That's why we react faster to change in the market, and that's why we have been growing faster than competition as well. On Page 22, selling expenses and PDA, so net impairment losses on financial assets is the, what we call here, the PDA.

So, selling expenses increased. So, if you see, again, the nine-month period, there was an increase of 36% this year and a gain of 2 points from 16.8% to 18.8% of net revenue. This was caused by first, as we said before, overall throughout the year, an increase in online media as a result of the pandemic. So, last year, a big chunk of our intake in the first semester of last year was made before the pandemic.

So, when our hubs were opened, and the hubs are an important piece in our selling machine. Because we have this hybrid model, we still sometimes -- not sometimes, it usually goes to the hub to understand how it would be his or her experience. And then there in the hub, he or she decides to really to enroll. So, now, hub closure, so we had to do that more in online media.

The second reason was the strong intake cycle, which is natural, and also the commercial efforts in new premium courses such as nursing. So, there's still a ramp-up now in the efficiency curve for new courses such as nursing. So, there was this increase of 30%. But you can see the CAC, the customer acquisition costs is increased only 3.6% in nine months of this year compared to the first nine months of last year.

PDA on the right. There was a decrease EBITDA this quarter if you compare it to the third quarter of last year of 0.9 points. Despite the mix of students, despite the strong presence of freshmen and newcomers as I said before, again, we have reached the peak in the duration now in the first half of this year and also despite the current crisis in Brazil, which does not help at all the delinquency ratios. Now on Page 23, just to finish.

Net income, we have an increase when you see the quarterly numbers and a decrease when you see the nine-month numbers. So, this was due to two things. The first one was a number -- a couple of nonrecurring items we had last year. So, the first one was -- in the first quarter of last year, we had -- we recognized for the first time before tax assets.

So, this was an amount of around 18 million reais that was the first time we recognized deferred tax assets last year, which improved our net results last year. And also, in the third quarter of last year, we had as well, FX gains related to the IPO. So, we raised funds in dollars last year, and we brought dollars to Brazil, so that's reals at a higher rate. So, we gained 13 million reais last year.

So, these two events represent 31 million reais. And together with the increase in financial expenses this year due to the increase of the PDA and IPC, we have a reduction on a yearly basis of our net results. So, if you can on Page 24, cash flow here also a bit, let's say, impacted by extraordinary events of last year. So, first one was, again, the 13 million reais FX gain.

And for accounting reasons, this FX gain is accounted as part of, of course, of our net results and as well as part of our cash flow from operations. Don't ask me why, but it is the way the rules are. So, we have -- we recognized last year, this 13 million reais FX gain as part of our cash flow from operations. And on top of that, we have as well in the third quarter of last year, a reclassification of some prepaid expenses, 6 million reais that we had already prepaid and in preparation of our IPO that when we executed the IPO in September, this were reclassified to transaction cost of the IPO.

So, when you see the cash flow from operations, the increase, as well as improved the cash flow from operations last year in 6 million reais. So, here on the right, we put a table trying to reconcile this number. So, when you reconcile, when you normalize this -- adjust cash flow from operations, you see that we have when you see, for example, the third quarter numbers, an increase of 28% in cash flow from operations and 31% increase in cash flow from operations in the nine months. When you see the cash flow from a conversion, we went from 98% last year to 112% this year in the quarter and from 66% to 92% in the nine-month period of this year.

So, a very important, I'd say, result as well from a cash flow generation perspective. So, that was it on Page 25. Let's wrap up. We are the leading pure player in Digital Education in Brazil.

Before Unicesumar -- Unicesumar, we are going to consolidate, I'd say, the reference player in Digital Education in the country, delivering what we had promised in the IPO, which was expansion of margins, continued organic growth and now with the best M&A deal we could ever dream of, which is the transaction with Unicesumar. So, thank you very much, and now I'd like to open for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question is from Vitor Tomita of Goldman Sachs. Your line is open.

Vitor Tomita -- Goldman Sachs -- Analyst

Hello. Good evening, all, and thanks for taking our questions. Two questions from our side. The first if you could give an update on how you see your strategy for medical and healthcare programs, following the Unicesumar combination and following the approval of the digital nursing program.

And if this strategy could include potentially further acquisitions on the medical front? Second question from our side is if you could give us some more detail on how you saw dropouts in nonrenewal rates evolve in the third quarter and on how you expect those metrics to trend going forward? Thank you very much.

Carlos Freitas -- Chief Financial Officer

Hi, Vitor. Thanks for the question. So, the first one about medicine with Unicesumar. We're going to wait for the closing of the transaction so that we can further have -- have further conversations with them about how to deploy this business in the future.

Because right now, as you can imagine, we cannot have the start of conversations with them. What we know now is that they have this, I would say, a very healthy and growing and high-margin business which is medicine. And we're not a player today in medical indication, but they are, and they know quite well how to play this segment. That's why they are the best medicine school in Brazil among the private institutions.

So, this is still open for discussions. We are going to have these definitions together with them but only after the deal is closed. On your second question about dropout, in fact, we had a slight increase in dropout this quarter when we compare to our expected numbers. And the reason for that -- we have two reasons for that, in fact.

The first one was the intake profile of the first half of this year. So, because the intake in the first half of this year was much more back-ended, a big part of our new students joined us in the second quarter of this year instead of the fourth quarter of this year. And that's why by rated wise, our dropout rate in the second quarter of this year was much better than the dropout rate in the second half -- second quarter of last year because both of them arrived late in the intake cycle. So, those guys that dropout, instead of dropping out during the semester, during the second quarter, for example, some of them dropped now only in the third quarter.

So, the intake profile improved the dropout ratio in the second quarter but deteriorated the dropout rate in the third quarter. That's the first reason. And the second one was, as I mentioned before, the ratio between intake and seniors, the intake in students as a whole. So, as I showed before, now in the presentation, we have reached -- we believe that we have reached the peak in the ratio between intake and base.

So, we have a lot of newcomers, a lot of students that are joining us for first time this -- first half of this year. So, this translates into a slight higher of dropout because, as you know, freshmen or newcomers drop more than seniors. 

Vitor Tomita -- Goldman Sachs -- Analyst

Very clear. Thank you very much.

Carlos Freitas -- Chief Financial Officer

So, going forward -- so we expect a normalization of this ratio first because we expect to have a more normal intake curve in the next year. Second one, also, just important to bear in mind that part of our user experience is built around the presence in hub. So, because we -- today, we are still not in our full capacity in terms of user experience, I won't say. Once we are allowed to have again live classes in our hubs, we believe we are going also to improve the retention rate because the user experience will be fulfilled.

Vitor Tomita -- Goldman Sachs -- Analyst

Thank you for the opportunity.

Operator

[Operator Instructions] Your next question is from Mauricio Cepeda of Credit Suisse. Your line is open.

Mauricio Cepeda -- Credit Suisse -- Analyst

Hello, guys. Thank you for the space for the questions. I have just one question. It's motivated by one of the statements in the release that says the cost has improved because the penetration of the Flex courses.

And it caused attention to the point that if it's not -- if you consider this as a way going forward exactly to, let's say, optimize costs, right? So, if you consider this as a way to do so. And if the Flex course itself was able apart from the cost to also increase the demand, so increase the student base for this model specifically? Thank you.

Carlos Freitas -- Chief Financial Officer

Hi. So, about Flex course, just as a reminder, I invite you to go to Page 31 of our presentation. So, just as a reminder, the Flex course was stopped after the pandemic. So, the idea of the Flex course appear to us after the pandemic because we realized that we had the opportunity to optimize this -- the ratio and to offer new courses for new students in Brazil with the Flex course.

And why was that? Before -- I mean, until -- I'd say, until last year, one and a half ago, we had a group of students, a number of students that were not the optimized in terms of students per tutor because it was either in a small or middle city in a course that we didn't have enough demand. So instead of having, let's say, 40 people per tutor, they had 20, for example. And now once we started to have the weekly meeting in a virtual way because of pandemic, we had the idea of why not offer -- instead of offering these Flex courses that are not optimized and sometimes either not -- even not with the tutor that is specialized in your own field because sometimes we didn't have enough say, scale to have a tutor, for example, that teaches in accounting for, in particular. I have a general tutor that was teaching for people who are from different courses.

So, it was not ideal. So, the idea of the Flex course was to optimize it. So, those classes that were not optimized with a tutor for that was not someone specialized in your field. Instead of offering this configuration, why not offering them in a Flex course with a tutor that was giving a class to 40 people, but online.

But still an online class with a live class from someone from your region instead of being from York City from a region, for example. So, this was an optimization that we made in the first quarter of this year, which had two effects. The first immediate effect was improvement in efficiency, which is here to stay. So, the fact that we reorganized those nonoptimized classes around some Flex courses efficiently that is here to stay.

So, there's something that's going to change after the pandemic. So, once the pandemic is over, the normal UNIASSELVI class will return to weekly live meetings in hub, but the Flex course will continue to be provided in virtual meetings, but with a tutor from the region. So, that was the first immediate consequence. It was improvement of efficiency through the optimization in the duration between students and tutor.

The second competent of Flex course, and this is a bit more medium term, is the possibility to enter into the smaller cities. The cities that did not have the scale for a full-fledged normal UNIASSELVI hub. But you can have there a smaller hub basically for you to go there to have your weekly -- your monthly exams, for example. So, it is a possibility to accelerate penetration throughout Brazil within smaller cities.

So, that was the [Inaudible]. Fourth one, immediate consequence in terms of courses -- and of courses, sorry and that was executed without any, I would say, impact in satisfaction. Because before that, you had a tutor that was not from your specific area, for example. So, if you're studying accounting, if you will have someone that was someone from business administration, for example, providing classes to people that were not from business administration.

So, here now with the Flex course, you have someone with your -- from your field. So, it is someone -- and we have made researches and studied on that to see whether the student is happier with this Flex course, and they are happier with this course. So, it's unfortunate to increase efficiency to penetrate further throughout Brazil and to improve the overall user experience.

Mauricio Cepeda -- Credit Suisse -- Analyst

OK. No, I see. So, it was something that was designed for the pandemic, right? But a part of it will continue, right? Part of it will continue, and this is allowing you to address the cities that are, let's say, subscale right, for the tutor model, right? So, it's both a cost and revenue combination if I understood correctly.

Carlos Freitas -- Chief Financial Officer

Exactly. Both are cost and revenue combination. So, after the pandemic, the normal UNIASSELVI product, which is a hybrid tutor center live in a hub will return to the live meetings. So, physical encounter in a hub, without any, let's say, any impact in terms of cost because now we already have the same tutor online.

Now next year, they will be again meeting students face to face. The same will be with the Flex course. So, today, they are for some [Inaudible] next year. They will continue to be working with the same tutor.

Mauricio Cepeda -- Credit Suisse -- Analyst

Is there a risk that the cost increases when you get back to the fiscal one -- to the fiscal model, the Q3 model?

Carlos Freitas -- Chief Financial Officer

Not in our case. So, in the Digital Education segment, you won't see this because, today, we don't have specific temporary savings when you think about tutor. We already have today the tutors that are meeting he or her students online instead of physically. But the ratio is the same.

What we will have next year, but it is a minor effect is in our on-campus segment, we as anybody else, once the class return, there will be an expected increase in costs there. But in our case, because a smaller piece of our overall results, it won't to be a major amount.

Mauricio Cepeda -- Credit Suisse -- Analyst

Very clear, Carlos. Thank you.

Carlos Freitas -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] Your next question is from Lucca Marquezini of Itau BBA. Your line is open.

Lucca Marquezini -- Itau BBA -- Analyst

Good evening, everyone. Thanks for taking our questions. So, we have two questions from our side. First is regarding the average ticket.

So, the average ticket increased 2% on the Digital Education Undergrad segment. Could you please comment on how the breakdown was for freshmen and veterans? And then the second question regarding the PDA. So, the PDA increased in the nine-month period due to the change in the mix of students. Could you please comment on how this should evolve going forward? Thank you.

Carlos Freitas -- Chief Financial Officer

Hello, Lucca. I'm going to answer your first question first. So, regarding tickets, we had this 2% increase in the overall average ticket. When you see the intake ticket and the ticket that we are now getting with newcomers, this is more or less in line with what we had last year.

So, on average the same number that we had last year when we see the apples-to-apples comparison. When you include nursing, for example, and then the ticket increases. So, when you see the overall intake in the current take cycle, we had a slight increase in ticket when you compare to the last year, and that was driven by new courses, which we expect in the future. So, in the future, we expect to increase over time the presentation of premium courses such as nursing.

Again, we have only today around 11,000 students enrolled in Nursing and which is today 80% of the intake. But when you see that we had 300,000 students in Digital Education, it is roughly -- it is 3%, 4%. So, it is natural that the percentage of premium courses such as Nursing and in the future, hopefully, Law and Psychology, for example, and others that we already offer today in health courses such as nutrition and biomedicine that start to be offered more weekly, those are going to be important drivers over time to sustain the ticket over time. I'm sorry, what was your second question? I didn't get it.

Lucca Marquezini -- Itau BBA -- Analyst

So, the second question is regarding PDA. The increase was due to the change in mix of students. Could you please comment on how this should evolve going forward? Should we see like an increase in PDA level?

Carlos Freitas -- Chief Financial Officer

OK. Great. Yes, the PDA is impacted by a number of things. Some will certainly change or hopefully, it can change next year, some will not.

So, the first thing that PDA is a mix of -- is a function of the mix of students. So, again, because we had in the first half of this year, when we see the overall intake we had in the first intake cycle this year and you compare it to the overall base we had in the first half of this year, we reached this peak in this region. So, we had, in the first half of this year, a higher-than-ever percentage of newcomers in our base. And in those newcomers, they have higher dropout rates and hence higher PDA.

So, they are contributing to higher PDA on a consolidated basis. Over time, as we mature the hubs, as we fill up the hubs, and hence, as we increase further and faster the percentage of seniors compared to newcomers, the weighted average PDA will tend to go down. That's the first thing. The second thing about PDA is the fact that we are still not in our full user experience mode, which is the fact that we have the hubs closed.

So, part of the user experience is the fact that you meet your colleagues, in a hub. And so, the fact that we have a -- hub closed, and hence, we are still not in full potential to exploit our model and to benefit actually with our full user experience is not helping in the PDAs. So, hopefully, next year, once we are allowed to open again the hubs, we shall have a decrease in PDA because the overall engagement will tend to increase because the satisfaction level and overall engagement will be increased, and this is -- has a high correlation with dropout enhanced PDA. And the third reason, and that's -- I mean, we are all on the same page here.

It is the current economic credit, which does not help at all about delinquency rates. Hopefully, it will be going to improve next year, but what we see throughout this year and last year was a clear impact of delinquency driven by the current crisis.

Lucca Marquezini -- Itau BBA -- Analyst

Very clear colors. Thank you.

Carlos Freitas -- Chief Financial Officer

Thank you, Lucca.

Operator

No questions at this time. I would like to turn the call back to Carlos.

Carlos Freitas -- Chief Financial Officer

Thank you, operator. I'm going to read now a couple of questions that came from -- through web. First one from [Inaudible] from BTIG. "Hello, everyone.

Just two quick questions here. Vitru posted a resilient average ticket in digital education undergrad courses this quarter. Should we expect this trend to continue over the next year?" That was the first question that we just answered that we expect to see a positive contribution of premium courses. So, we expect to see, let's say, a stable ticket as we have been delivering in the last years.

Second question from Pedro was the new PDA policy should continue to provide improvements as seen in this quarter, what should expect as an ideal PDA level when we relate to net revenue, considering the 16% in third quarter. And I mean, Pedro, ideal is a complicated word. What we see is that 16% is not a view that's clear because we're not in an ideal context. What we see is that going forward, we shall expect an improvement in PDA with the mixed students with improvement in the overall new experience and economic credit.

The second question is now from Javier from Morgan Stanley. "Quite consistent price growth one more time. Average undergrad ticket up 2% since last year. I guess that part of that was -- has to do with the mix and part with your credit model.

But on the other side, has maturation reduced, so in fact, mix was not a positive price driver." So, Javier, no, no, I think there's a confusion here about the maturation index. The maturation index is basically the ratio between the total number of students we have in the new hubs divided by the potential, the number of students in maturity. And this is for the overall portfolio of hubs. So, for example, if we open tomorrow, let's say, 1,000 hubs, the metrics on our hubs will drop a lot basically because we have a lot of new hubs.

And because we opened 240 hubs over the last 12 months and a big chunk of them in the last three or six months, our maturation index is more or less the same. It was 32%, 33% a few months ago. I said 1%, but not because we're not growing but because we are opening a lot of new hubs that way. And the final question, Javier, is how much have you increased net prices in intake and rerolling terms.

So, I just answered those. The intaking price, there was a slight increase as well this quarter compared to third quarter. When you see the overall intake, including nursing, for example. And for rerolling, what we applied was a minor increase in this quarter, but nothing meaningful.

The rerolling increase in price is usually executed in January of each year. So those were the questions we had from the web. I thank you all for your interest. But anyway, myself, Carlos Henrique, we are fully available for any further questions.

Thank you, and good night.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Carlos Freitas -- Chief Financial Officer

Vitor Tomita -- Goldman Sachs -- Analyst

Mauricio Cepeda -- Credit Suisse -- Analyst

Lucca Marquezini -- Itau BBA -- Analyst

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