Institutional Presentation September/2012 Overview of Brazils - - PowerPoint PPT Presentation

Institutional Presentation

September/2012

Overview of Brazil’s education sector

• 6. Distance Learning students

are older 2

• 4. Less than half of students

graduate

• 2. Private institutions students

study at the night period (working adult)

27% Others 73% Night 46% Graduate 54% Leave the Course

• 5. Distance Learning is

gaining share 15% DL 85% On-Campus

DL Penetration rate: 17%

15% DL

DL Student On-Campus Student

29 years old 21 years old

1) Source: Censo MEC/INEP. 2)Source: UOL/MEC/INEP

26% Public 74% Private

• 1. Most of students are in

Private Institutions

• 3. Most of students are

women 43% Homem 57% Mulher

• 7. North and Northeast

regions increased more than the national average between 2001 and 2010 43% Men 57% Women

3

2,7 3,0 3,5 3,9 4,2 4,6 4,9 5,3 5,8 6,0 6,4 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Students in Postsecondary Education (in millions)

CAGR 11% CAGR 7%

Total projected for 2012(1) : 7.3 million students

2008/2009 Growth: 4% 2009/2010 Growth : 7%

FIES First Impacts

Students in Public Schools : 1,643,298 (26%) Students in Private Schools : 4,735,981 (74%) DL Students: 930,179 (15%) On-Campus Students: 5,449,120 (85%)

(1) Assuming 7% growth in 2011 and 2012

• Source: INEP-MEC

4

• Source: INEP-MEC

2 5 41 50 60 115 207 370 728 838 930 2,7 3,0 3,5 3,9 4,2 4,5 4,7 4,9 5,1 5,1 5,4

0,0 1,0 2,0 3,0 4,0 5,0 6,0

• 100

100 300 500 700 900 1.100 1.300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Distance Learning vs. On-Campus Students in Postsecondary Education (in '000 and million)

CAGR 06-10: 4%

On-Campus

CAGR 06-10: 46%

Distance Learning

On-Campus - 2008/2009 Growth: 0% On-Campus - 2009/2010 Growth: 6%

FIES First Impacts

5

1 Enrollment rate = (Students in postsecondary education / total population from the age of 18 to 22 years).

35%

Brazilian government set a target in its National Education Plan (PNE) of a total enrollment rate1 of 50% by 2020 Total enrollment rate: students in postsecondary education / population from 18 to 22 years

Source: Unesco. 6

Percentage of population holding a postsecondary degree

Brazil grew by only 3 percentage points (from 9% to 12%) the number of postsecondary degree holders, while South Korea managed to grow by 52 percentage points (from 13% to 65%) in the same period

Source: Education at a Glance 2012: OECD Indicators

7

Brazil has the highest index in relative earnings from employment among 25-64 year-olds, by level of educational attainment

Source: Education at a Glance 2012: OECD Indicators (Relative earnings from employment among 25-64 year-olds, by level of educational attainment)

8

Pent-up demand

31.8 million people 25 to 34 years old

(highest probability of returning to school) 16 million people concluded secondary education (50%) 3.5 million attained a post- secondary degree (11%) 12.5 million potential enrollments in postsecondary education Today there are 12.5 million people aged 25- 34 who concluded secondary education but did not enter postsecondary education

Each year 2 million students are in their last

year of secondary education(1) Focus: Distance Learning Focus: On-Campus Learning Recurring demand

(1)Source: Census MEC / INEP 2010.

Source: Professor Maurício Garcia’s analysis presented in the IV Brazilian Congress of Private Education (May 2011). 9

Student loans subsidized by federal government Over 0.5 million students Private institutions offer seats at discounted prices in exchange for tax subsidies Over 1 million students

Government strategies to expand Postsecondary Education

Public Institutions

Free for student  100% subsidized by state High quality High cost per student

Private Institutions

Paid by student Cost per student significantly

lower than at public institutions

Inaccessible for part of population

10

11

 Interest of 3.4% p.a. Economically viable for Class C 18-month grace period after graduation Payment term over 3x program duration, starting after grace

period

4 years (48 months) Program Length 11/2 years (18 months) Grace Period 13 years (156 months) Pay back

Product

Eligibility Criteria

Costs and PDA Kroton’s Base

R$ 14.41 per month R$ 16.67 per month R$ 204.89 per month

January 2011 Beginning August 2029 End July 2016 End of Grace Period January 2015 Graduation

Note: (1) Considering courses with an average ticket of R$ 500.00. The Law states that financed monthly tuition must be 20% higher than per capita family income. (2) Amount equivalent to 1.5 minimum wage. (3) To finance 50 to 100% - maximum gross family income between 10 to 20 minimum wage

11

Conditions

Example of a 4-year program and R$500 monthly tuition

FIES Structure

With Co-signer Without Co-signer Guarantor Fund Maximum monthly income of R$ 2,500¹

per family member

Maximum monthly income of R$ 8182

per family member

~2.0% of Net Revenues

Kroton shares 15% of collections losses

5.6% on Revenues

Contribution to Guarantor Fund

65% of Contracts 35% of Contracts

 Higher Net Ticket  Lower dropout  Lower PDA  Higher penetration x Higher turnover days

Higher value per student during the course…

+ R$/students received Duration

FIES Benefits Students without FIES ... and more students

12 11 10 09

+ Intake

2011

+183%

2012

+ Share in the current base

12

FIES Growth inside Kroton (thousands)

Number of students

13

Intakes Process - % FIES 5.5% 14.1% 27.6% 47.0% 65.8%

2H10 1H11 2H11 1H12 Aug/2012

4 14 20 43 53

1H10 1H11 2H11 1H12 Aug/12

23%

% Student Base 4.4% 18.2% 21.1% 33.9%

3%

97%

High Eligibility Quality

97% of all courses with satisfactory concepts are eligible to FIES

Why Kroton is the benchmark on FIES?

42.8%

Kroton’s position in Brazil’s education market

Kroton

496 cities

National Presence 3 Businesses Brands On-Campus

141,000 students

Distance Learning

271,000 students

K-12

289,000 students

Net Revenues 2012E

Uniasselvi

Campuses (#)

53

Distance Learning Centers(1) (#)

447

Nº of Students

(1)DLCs accredited by Ministry of Education

28% 61% 11% Distance Learning On-Campus K-12

15

Advent

Grupo IUNI R$ 420 M 45k students

Follow On Secondary Offering R$380 MM

FAMA R$ 24 M 5k students FAIS R$ 7 M 1,3k students UNOPAR R$1,300 M 162k students

(146k DL students)

Capital Increase Secondary Offering R$597 MM Debentures R$ 550 MM

UNIRONDON R$ 28 M 5,5k students

1 2 3 5 6

• 7 Acquisitions (3 transformational / 4 complementary)
• 98 new regions in Brazil (11 campi and 87 centers)
• 306 thousand new students - x9
• R$ 980 MM (equity) and R$ 550 MM (debt)

UNIASSELVI R$510 M 86 k students (76k DL students) UNIÃO R$ 8 M 1,5k students

7 4

May/2011 Mar/10 Jun/09 Jul//11 Nov/11 Dec/11 Apr/12 May/12

Market Consolidation Through Acquisitions

16

17

Jan/12

• 17 Work

Fronts

• 125 Projects
• 17 Work Fronts
• 89 Projects

Phase 1

Control, stability and enrollment

Phase 2

Organizational restructuring

Phase 3

Academic Model

Phase 4

Integration of systems and processes

Phase 1

Control, stability and enrollment

Phase 2

Organizational restructuring and systems

Phase 3

Academic Model

Phase 4

Integration of systems and processes

90-days Integration

Conclusion: March 2013 Conclusion: June 2013 Integration Concluded:

 ERP  Academic System and LMS  Academic Model Jun/12 Dec/12 Jun/13

Concluded Ongoing

Mar/12 Sep/12 Mar/13

18

34% 66%

On-Campus Distance Learning

Students – 1H12

(Only Postsecondary Education)

62% 24% 14%

On-Campus Distance Learning K-12

Net Revenues – 1H12

47% 38% 15%

On-Campus Distance Learning K-12

Gross Income – 1H12

44% 42% 14%

On-Campus Distance Learning K-12

Operating Results – 1H12

• Total Students: 6.4 milllion
• Kroton Students: 128 k

95%

5%

98%

2%

75%

25%

Market Kroton

On-Campus Students Distance Learning Students

• Total Students: 1.0 million
• Kroton Students: 248 k

Market Kroton

Postsecondary Students

• Total Students: 7.3 million1
• Kroton Students: 376k

Market Kroton

• Source: 2010 Postsecondary Census, with growth of 7% in 2011/2010 and 7% in 2012/2011

19

Strategies

Market Consolidation Through Acquisitions Technology in Education Student Organic Growth Management Efficiency

• Improve the level of digitalization of

education (On-Campus and Distance Learning)

• Technology assisting quality
• Increase profitability from

current 25% to 30% of EBITDA Margin in 2016

• Scale gains, productivity

improvement and management

• ptimization
• Highly fragmented market: more

than 2,300 institutions

• Low level of professionalization
• Inefficient competition
• Strengthening of the distribution

channels’ contents through technology

• Growth of 10% to 15% of

students base per year.

• Main Drivers:

i) Funding (FIES) ii) Distance Learning

21

Market Consolidation Through Acquisitions Technology in Education Student Organic Growth Management Efficiency

• Improve the level of digitalization of

education (On-Campus and Distance Learning)

• Technology assisting quality
• Increase profitability from

current 25% to 30% of EBITDA Margin in 2016

• Scale gains, productivity

improvement and management

• ptimization
• Highly fragmented market: more

than 2,300 institutions

• Low level of professionalization
• Inefficient competition
• Strengthening of the distribution

channels’ contents through technology

• Growth of 10% to 15% of

students base per year.

• Main Drivers:

i) Funding (FIES) ii) Distance Learning

22

On-Campus 100% On-Campus with complementary activities via DL

121 thousand Students

On-Campus with 20% DL Minimum of 80% On-Campus and up to 20% DL

20 thousand Students

Uniasselvi DL (“Semi- presence”) 20% Telepresence and 80% DL Web Based

48 Centers

74 thousand Students Unopar DL (“Telepresence”) 20% Telepresence and 80% DL Web Based

399 Centers

172 thousand Students

* Data as of June/2012

Highly Complementary Business Models

100% DL Web Based 100% DL Web Based

600 Centers

22 thousand Students

( + ) Digital

On-Campus 100% On-Campus with On-Campus complementary activities

“Zero” Students

2009 2012

Regulatory: On-Campus Regulatory: Distance Learning

Technology in Education

23

2010 2011

...

• Turnaround
• Focus on Short Term

Results

• Budget
• Scope: 1 - 2 years

2012

2013 2020 2019 2018 2017 2016 2015 2014

• Quinquenials Plans
• Planning
• Strategic Decision of

Teaching Digitalization

• Scope: 5 years
• Building the future
• Technology impacts in

the final activity

• Long term planning

24

25

Structure, Organization and Delivery Certification Content Socialization

With free content available, the value is how it is organized, structured and delivered. Trend to increase the free content

• available. The "value“ migrates

from the offering of content, to how the content is structured and the way is provided. The socialization experience generates value. This socialization

• ccurs in the classroom and in the

digital communication networks. Regulated markets have additional value.

KLS

1) Same product/service 2) Different deliveries: On-campus Semi-presence Tele-presence 100% web 3) Extensive use of technology

SP Semi-presence disciplines GRID Standard curricular structure PPI/PPC Standard educational projects SGP Test Management System BV Virtual Library MD KROTON Educational Material

Kroton Learning System project construction, with deliveries and interim reviews UNOPAR Academic Model KROTON Academic Model UNIASSELVI Academic Model

MARKET

Trends Best Practices

INOVATION

Blended learning Adaptative learning

PARTNERS

26

Market Consolidation Through Acquisitions Technology in Education Student Organic Growth Management Efficiency

• Improve the level of digitalization of

education (On-Campus and Distance Learning)

• Technology assisting quality
• Increase profitability from

current 25% to 30% of EBITDA Margin in 2016

• Scale gains, productivity

improvement and management

• ptimization
• Highly fragmented market: more

than 2,300 institutions

• Low level of professionalization
• Inefficient competition
• Strengthening of the distribution

channels’ contents through technology

• Growth of 10% to 15% of

students base per year.

• Main Drivers:

i) Funding (FIES) ii) Distance Learning

27

% EBITDA Margin Bridge

9.8% 14.7% 26.0% 30.0%

2010 2011 2012E 2016E

Cost and Expense Management Dilution of the Corporate Structure

...

Management Efficiency

Synergies – Unopar and Uniasselvi Impacts from the New FIES

Scale Gains, Productivity Improvement and Management Optimization

28

Market Consolidation Through Acquisitions Technology in Education Student Organic Growth Management Efficiency

• Improve the level of digitalization of

education (On-Campus and Distance Learning)

• Technology assisting quality
• Increase profitability from

current 25% to 30% of EBITDA Margin in 2016

• Scale gains, productivity

improvement and management

• ptimization
• Highly fragmented market: more

than 2,300 institutions

• Low level of professionalization
• Inefficient competition
• Strengthening of the distribution

channels’ contents through technology

• Growth of 10% to 15% of

students base per year.

• Main Drivers:

i) Funding (FIES) ii) Distance Learning

29

FIES Students per semester – June/2012

43.7% 16.1% 14.4% 5.2%

1 2 3 4 5 6 7 8 9 10 11 12

Student Organic Growth

20.6%

30

FIES Growth in Brazil (thousands)

Kroton has 53k FIES students Kroton’s FIES Market share: 10%

Number of students

76 154

483

2011 June 12

536

2010

 Freshman represent 43.7% (17,100 students) of the total Kroton FIES students  The first two years (first to fourth semester) account for 31,053 students, or 79.4% of

FIES students

Channel Expansion

DL Undergraduate

Offering Expansion

DL Undergraduate DL Graduate Free Courses

1) DL Graduate Offering Expansion: 2012/2 2) Free Courses: 2013 1) Activations of 40 centers from Unopar already accredited 2) 260 new centers accreditation from Unopar/Uniasselvi

Technology in Education

31

Expand the DL Distribution Channel Network



40 new DL centers already accredited to be activated



New DL Centers to be in operation as of 2013/1

32

447 487 747

Current After Activation Additional 260 Centers

+53% +9%

Capture an Additional 260 DL centers



Event at Unopar, for 500 guests, with presentations and visits to the distance learning structure



Preliminary contracts at the end of the event and final contracts signed after inspection



Filing with MEC to occur in October/2012, and expectation to be in operation as of 2014/1 Number of DL Centers

447 40 487

Current Centers accredited to be activated Total

Number of DL Centers

Market Consolidation Through Acquisitions Technology in Education Student Organic Growth Management Efficiency

• Improve the level of digitalization of

education (On-Campus and Distance Learning)

• Technology assisting quality
• Increase profitability from

current 25% to 30% of EBITDA Margin in 2016

• Scale gains, productivity

improvement and management

• ptimization
• Highly fragmented market: more

than 2,300 institutions

• Low level of professionalization
• Inefficient competition
• Strengthening of the distribution

channels’ contents through technology

• Growth of 10% to 15% of

students base per year.

• Main Drivers:

i) Funding (FIES) ii) Distance Learning

33

Strategic Focus

+2,300 Institutions in Brazil 645 targets

• Brand Strength
• Good courses offering
• Good infrastucture
• Good academic evaluation

Target Priorization Rationale

Kroton’s Priority Targets

 Strategy 1: Large-scale acquisitions  Lower quantity of quality assets available  Valuation discipline  Strategy 2: Medium-Scale Acquisitions  Institutions of up to 7,000 students  Capacity to complete the merger within 90

days, with important gains in scale

 Strategy 3: Semi-organic Growth  Institutions with less than 2,000 students,

but with a wide ranging offer of courses and seats

 Agility in the course

accreditation/authorization process

13 6 3 12 10 4 3 1 18 4 20 14 2 5 41 4 7 12 12 12 20 11 26 83 2

 130 municipalities  347 targets  1.4 million target students (4.2k average

students)

 4.2mm students in secondary education

Among the 645 potential targets, 347 are tier 1

34

Operating Results

325,599 321,124 412,835 6,675 86,241 5,470 ( 802) (10,348)

1Q12 Students New Students Graduates Dropouts 2Q12 Students Uniasselvi acquisition ¹ Unirondon acquisition ¹ 2Q12 final base

+27%

Students Total Undergraduate Total Graduate Total 1Q12 Base 305,378 20,221 325,599 New Students 2,491 4,184 6,675 Graduates (223) (579) (802) Dropouts (9,471) (877) (10,348) 2Q12 Base ex-acquisitions 298,175 22,949 321,124 % Change 2Q12 (ex-acquisitions) / 1Q12

• 2.4%

13.5%

• 1.4%

Uniasselvi acquisition ¹ 72,707 13,534 86,241 Unirondon acquisition ¹ 4,959 511 5,470 2Q12 Base post-acquisitions 375,841 36,994 412,835 % Change 2Q12 (post-acquisitions) / 1Q12 23.1% 82.9% 26.8%

• 1%

¹ Figures for Uniasselvi are as of March 31, 2012, and for Unirondon are as of April 20, 2012

Postsecondary Students

36

37

+14%

Students On-Campus Undergraduate On-Campus Graduate On-Campus Total 1Q12 Base 112,923 10,360 123,283 New Students 2,172 1,965 4,137 Graduates (123) (303) (426) Dropouts (3,330) (543) (3,873) 2Q12 Base ex-acquisitions 111,642 11,479 123,121 % Change 2Q12 (ex-acquisitions) / 1Q12

• 1.1%

10.8%

• 0.1%

Uniasselvi acquisition¹ 11,276 1,267 12,543 Unirondon acquisition¹ 4,959 511 5,470 2Q12 Base post-acquisitions 127,877 13,257 141,134 % Change 2Q12 (post-acquisitions) / 1Q12 13.2% 28.0% 14.5%

123.283 123.121 141.134 4.137 12.543 5.470 ( 426) (3,873)

1Q12 Students New Students Graduates Dropouts 2Q12 Students Uniasselvi acquisition Unirondon acquisition 2Q12 Final Base

202.316 198.003 271.701 2.538 73.698 ( 376) (6,475)

1Q12 Students New Students Graduates Dropouts 2Q12 Students Uniasselvi acquisition 2Q12 Final Base

+34%

¹ Figures for Uniasselvi are as of March 31, 2012, and for Unirondon are as of April 20, 2012 Students DL Undergraduate DL Graduate DL Total 1Q12 Base 192,445 9,861 202,316 New Students 319 2,219 2,538 Graduates (100) (276) (376) Dropouts (6,141) (334) (6,475) 2Q12 Base ex-acquisitions 186,533 11,470 198,003 % Change 2Q12 (ex-acquisitions) / 1Q12

• 3.1%

16.3%

• 2.1%

Uniasselvi acquisition¹ 61,431 12,267 73,698 Unirondon acquisition¹

• 2Q12 Base post-acquisitions

247,964 23,737 271,701 % Change 2Q12 (post-acquisitions) / 1Q12 28.8% 140.7% 34.3%

On-Campus Postsecondary Students Distance Learning Postsecondary Students

38

Intake 2011/2 % Growth Total (On-Campus) 17,677 37% Total (DL) 43,408 15% Total (On-Campus + DL) 61,085 21% Intake 2012/2

2011/2 Intakes 2012/2 Intakes

Intakes - Distance Learning 2012/2 Intakes – Undergraduate Students

2011/2 Intakes 2012/2 Intakes

Intakes – On-Campus 24,266 49,916 74,182 15% 37%

Kroton Standalone On-Campus Same Units - Growth of 36%

39

Re-enrollments 2011/2 Re-enrollments 2012/2 % Growth Total (On-Campus) 82,324 99,754 21% Total (DL) 161,183 192,028 19% Total (On-Campus + DL) 243,507 291,782 20%

2011/2 Enrollments 2012/2 Enrollments

Re-enrollments - Distance Learning 2012/2 Re-enrollments – Undergraduate Students

2011/2 Enrollments 2012/2 Enrollments

Re-enrollments – On-Campus 21% 19%

Kroton Standalone On-Campus Same Units - Growth of 19%

40

Total Students 2011/2 Total Students 2012/2 % Growth Total (On-Campus) 100,001 124,020 24% Total (DL) 204,591 241,944 18% Total (On-Campus + DL) 304,592 365,964 20%

2011/2 Enrollments 2012/2 Enrollments

Total Students - Distance Learning 2012/2 Students Base – Undergraduate Students

2011/2 Enrollments 2012/2 Enrollments

Total Students – On-Campus 24% 18%

Kroton Standalone On-Campus Same Units - Growth of 22%

Financial Performance

26.5 40.8

18.6% 20.6% 2Q11 2Q12

% Operating Margin

45.9 69.0

32.3% 34.9% 2Q11 2Q12

% Gross Margin

+39%

142.1 197.8

2Q11 2Q12 +50% +54%

Net Revenue (NR)

Quarterly - R$ million

Gross Income (GI)

Quarterly - R$ million

Operating Result (OR)

Quarterly - R$ million

% Business GI / Total GI

93% 49%

% Business NR / Total NR

88% 66%

% Business OR / Total OR

111% 46%

61.7 103.6

22.3% 25.9% 1H11 1H12

% Operating Margin

96.6 159.1

34.9% 39.8% 1H11 1H12

% Gross Margin

+44%

276.9 399.8

1H11 1H12 +65% +68%

Net Revenue (NR)

6 Months - R$ million

Gross Income (GI)

6 Months- R$ million

Operating Results (OR)

6 Months - R$ million

% Business GI / Total GI

70% 47%

% Business NR / Total NR

77% 62%

% Business OR / Total OR

69% 44% 42

43

+5%

73.4 76.9 1Q12 2Q12

+1% +2%

49.2 50.0

67.0% 65.0%

1Q12 2Q12

% Operating Margin

62.9 63.4

85.7% 82.5%

1Q12 2Q12

% Gross Margin

Net Revenue (NR)

Quarterly - R$ million

Gross Income (GI)

Quarterly - R$ million

Operating Result (OR)

Quarterly - R$ million

% Business GI / Total GI

32% 45%

% Business NR / Total NR

22% 26%

% Business OR / Total OR

34% 56%

+5% 150.3

1H12 126.4

84.1%

1H12

% Gross Margin

99.2

66.0%

1H12

% Operating Margin

Net Revenue (NR)

6 Months - R$ million

Gross Income (GI)

6 Months- R$ million

Operating Results (OR)

6 Months - R$ million

% Business GI / Total GI

38%

% Business NR / Total NR

23%

% Business OR / Total OR

42%

44

3.2 8.3

15.9% 31.7%

2Q11 2Q12

% Gross Margin

• 2.6
• 1.1
• 12.7%
• 4.4%

2Q11 2Q12

% Operating Margin

+29% +157%

20.2 26.0 2Q11 2Q12

• 55%

Net Revenue (NR)

Quarterly - R$ million

Gross Income (GI)

Quarterly - R$ million

Operating Result (OR)

Quarterly - R$ million

% Business GI / Total GI

7% 6%

% Business NR / Total NR

12% 9%

% Business OR / Total OR

• 11%
• 1%

40.5 51.0

50.3% 55.9%

1H11 1H12

% Gross Margin

27.7 32.2

34.4% 35.3%

1H11 1H12

% Operating Margin

+13% +26%

80.4 91.2 1H11 1H12

16%

Net Revenue (NR)

6 Months - R$ million

Gross Income (GI)

6 Months- R$ million

Operating Results (OR)

6 Months - R$ million

% Business GI / Total GI

30% 15%

% Business NR / Total NR

23% 14%

% Business OR / Total OR

31% 14%

45

23.9 89.6

14.7% 29.8%

2Q11 2Q12

% Operating Margin

+85% +186% +275% 162.3 300.6 2Q11 2Q12 49.1 140.6

30.2% 46.8%

2Q11 2Q12

% Gross Margin

Net Revenue (NR)

Quarterly - R$ million

Gross Income (GI)

Quarterly - R$ million

Operating Result (OR)

Quarterly - R$ million

89.4 235.0

25.0% 36.7%

1H11 1H12

% Operating Margin

+79% +145% +163% 357.3 641.2 1H11 1H12 137.1 336.4

38.4% 52.5%

1H11 1H12

% Gross Margin

Net Revenue (NR)

6 Months - R$ million

Gross Income (GI)

6 Months- R$ million

Operating Results (OR)

6 Months - R$ million

46

62.9 198.7 17.6% 31.0% 1H11 1H12 % EBITDA Margin

EBITDA and EBITDA Margin

+216%

10.8 72.4 6.7% 24.1% 2Q11 2Q12 % EBITDA Margin

+569%

Quarterly - R$ million 6 Months - R$ million

• 3.6

49.2

• 2.2%

16.4% 2Q11 2Q12 % Net Margin

Net Income and Net Margin*

29.1 148.1 8.1% 23.1% 1H11 1H12 % Net Margin +409%

Quarterly - R$ million 6 Months - R$ million * Excludes amortization of intangible assets (acquisitions)

EBITDA

357.3 459.2

1H11 1H12

+29% Net Revenue

6 Months - R$ million

 Net revenue of R$459 million, growing 29% from 1H11

Analysis: excludes effects from Unopar and Uniasselvi acquisition

47

 Excluding the On-Campus Postsecondary Units acquired

(FAMA, FAIS, União), organic (same-unit) growth in Net Revenue was 26% in 1H12

¹ In 1H11, EBITDA was R$62.9 million with EBITDA Margin of 17.6%

Corporate Expenses allocated in accordance with Net Revenue

1 2 3

100% of Corporate Expenses at Kroton Corporate Expenses in 1H11 restated by IPCA 62.9 110.9

17.6% 24.1%

1H11 1H12

% EBITDA Margin

62.9 121.2

17.6% 26.4%

1H11 1H12

% EBITDA Margin

62.9 119.4

17.6% 26.0%

1H11 1H12

% EBITDA Margin

+76% +93% +90%

Provisioning and Receivables

49

0.2 0.4

1.2% 1.5% 2Q11 2Q12 7.2 9.7 6.6 7.8 5.1% 4.9% 5.7% 6.7% 2Q11 2Q12 2Q11 ex- FIES 2Q12 ex- FIES

5.1 4.9

6.9% 6.4% 1Q12 2Q12

On-Campus Postsecondary

Quarterly - R$ million and % NR of Business

DL Postsecondary

Quarterly - R$ million and % NR of Business

Primary and Secondary

Quarterly - R$ million and % NR of Business

0.5 1.5

0.7% 1.6% 1H11 1H12 14.1 19.4 13.0 15.7 5.1% 4.8% 5.7% 6.6% 1H11 1H12 1H11 ex- FIES 1H12 ex- FIES

10.0

6.7% 1H12

On-Campus Postsecondary

6 Months - R$ million and % NR of Business

DL Postsecondary

6 Months - R$ million and % NR of Business

Primary and Secondary

6 Months - R$ million and % NR of Business

50 On-Campus Postsecondary Education 2Q12 2Q11

• Chg. %

1Q12

• Chg. %

Values in R$ '000 Net Accounts Receivable 255,185 163,074 56.5% 247,149 3.3% Short Term - Tuition and Agreements Receivable 94,412 93,195 1.3% 89,101 6.0% Long Term Receivables 16,718 18,099

• 7.6%

16,921

• 1.2%

FIES 144,055 51,780 178.2% 141,127 2.1% Balance of certificates issued and blocked by CND 74,806 23,347 220.4% 55,924 33.8% Distance Leaning Postsecondary Education 2Q12 2Q11

• Chg. %

1Q12

• Chg. %

Values in R$ '000 Net Accounts Receivable 25,991 n.a n.a 16,257 59.9% Primary and Secondary Education 2Q12 2Q11

• Chg. %

1Q12

• Chg. %

Values in R$ '000 Net Accounts Receivable 31,042 33,607

• 7.6%

62,964

• 50.7%

 Issue of CND in July allowed Kroton to receive R$103.2 million through credit repurchases

during the month, of which R$79.6 million was related to CND-related blocked amounts

 Increase in accounts receivable in the Distance Learning business compared to 1Q12,

reflecting the seasonality inherent to the business

On-Campus Postsecondary - Accounts Receivable Average Term (days) 2Q12 2Q11

• Chg. (days)

1Q12

• Chg. (days)

Criterion (1) Net Accounts Receivable (ex-FIES) Net Revenues 47 59

• 12 days

47 0 days Criterion (2) Net Accounts Receivable (ex-FIES) Net Revenues (ex-FIES) 70 69 +1 day 65 +5 days Criterion (3) FIES Net Accounts Receivable ex-blocked CND FIES Net Revenues 101 126

• 25 days

160

• 59 days

DL Postsecondary - Accounts Receivable Average Term (days) 2Q12 2Q11

• Chg. (days)

1Q12

• Chg. (days)

Net Accounts Receivable Net Revenues 37 n.a n.a 24 +13 days Primary and Secondary Education – Accounts Receivable Average Term

(days)

2Q12 2Q11

• Chg. (days)

1Q12

• Chg. (days)

Net Accounts Receivable Net Revenues 76 98

• 22 days

160

• 84 days

 In the On-Campus Postsecondary business, accounts receivable ex-FIES (Criterion 1) remained stable

compared to 1Q12 and decreased from 2Q11, indicating a consistent provisioning policy

 In Criterion 3, the reduction of 25 days from 2Q11 reflects the good management of FIES receivables and the

improvements in the credit repurchase process

 As a result of the increase in accounts receivable, the average term in the Distance Learning business

increased 13 days, reflecting the seasonality of the second quarter

 In the Primary and Secondary business, the improvement of 22 days from 2Q11 was due to the stricter

collections policy

51

Capex and Debt

53

21.5 13.0 17.4

6.3% 8.0% 5.8%

1Q12 2Q11 2Q12

Capex 2Q12 Kroton’s Capex

Quarterly - R$ million

* Excludes amounts related to acquisitions of Education Institutions and Special Projects (acquisitions of properties and brownfield projects)

 Reduction in the balance of Cash and Financial Investments arising from the payment of

R$335 million related to the Uniasselvi acquisition

 Increase in Other short and long-term obligations due to the Seller’s Note for the Unopar

acquisition (due year-end 2012) and the outstanding amounts for the Uniasselvi acquisition

 Adequate debt level:

54 ¹ Net cash (debt) considering only bank obligations

2 Net cash (debt) considering all short- and long-term obligations related to tax liabilities and the acquisitions concluded up to

2Q12, including the Seller’s Note for the Unopar acquisition maturing in December 2012 and the amount to be paid over 6 years for the Uniasselvi acquisition

Financial Net Debt¹ / EBITDA* = 0.9x Total Net Debt² / EBITDA* = 1.9x

* Based on pro-forma EBITDA in the New Guidance for 2012

Consolidated 2Q12 1Q12 Chg.% Values in R$ ('000) Cash

56,984 28,607 99.2%

Securities

155,713 502,773

• 69.0%

Loans and Financing

553,298 578,373

• 4.3%

Short-term Debt

6,388 27,993

• 77.2%

Long-term Debt

546,910 550,380

• 0.6%

Net Cash (Debt)1

(340,601) (46,993) 624.8%

Other Short and Long Term Debt

401,605 197,172 103.7%

Net Cash (Debt)2

(742,206) (244,165) 204.0%

Cash Generation

 Strong increases in operating cash generation before capex, which reached 142% and 78% of

“Actual” EBITDA in 2Q12 and 1H12

 After recurring capex, operating cash generation was R$73.8 million in 2Q12 and R$107 million

in 1H12

 Considering also the capex for special projects, cash generation was R$55.4 million in 2Q12 and

R$88.6 million in 1H12

56

Quarterly - R$ million and % “Actual” EBITDA

Operating Cash Generation

9.9 92.3

• 3.1

73.8 95% 142%

• 30%

114% 2Q11 2Q12 2Q11 after Capex - Recurring 2Q12 after Capex - Recurring 22.5 143.9 1.2 107.0 36% 78% 2% 58% 1H11 1H12 1H11 after Capex - Recurring 1H12 after Capex - Recurring 6 Months - R$ million and % “Actual” EBITDA

Guidance

 Guidance Kroton + Unopar:

58

R$336 million +10% R$305 million

 Guidance Kroton + Unopar + Uniasselvi ¹ + Unirondon¹:

Net Revenue EBITDA EBITDA Margin (%) R$1,351 million R$358 million 26%

 Pro Forma: considering 12 months of results from Uniasselvi and Unirondon leads to EBITDA

• f R$384 million

R$1,303 million² R$326 million 25% Capex Guidance unchanged

 6.5% of Net Revenue

EBITDA

+ R$60 million in Special Projects R$90 million R$60 million R$150 million

+ R$21 MM

from Uniasselvi¹ + R$1 MM from Unirondon¹

¹ Considers 7 months from Uniasselvi and 5 months from Unirondon ² Considers adjustment in Net Revenue from Uniasselvi due to the standardization of accounting criteria

New 2012 Guidance

Kroton: a company that reinvented itself

EBITDA (R$ MM)

CAGR 07-12: 62%

29 51 42 52 111 358

2007 2008 2009 2010 2011 2012E

Market Cap (R$ MM)

CAGR 07-12: 37%

148 280 343 642 734 1,351

2007 2008 2009 2010 2011 2012E

Net Revenues (R$ MM) Number of Students (‘000)1

CAGR 07-12: 87% CAGR 07-12: 56%

881 379 1,106 1,428 2,452 4,460

2007 2008 2009 2010 2011 2012*

18 38 44 85 253 413

2007 2008 2009 2010 2011 2012E

1 Postsecondary Students - 2007-2011 data: students at the end of period; 2012.1: students at june/12 * Market Cap at 08/14/2012

223% 63% 82% 84%

60

Relações com Investidores

www.kroton.com.br/ri

Carlos Lazar

carlos.lazar@kroton.com.br +55 11 3775-2288

Carolina Igi

carolina.igi@kroton.com.br +55 11 3775-2003

José Eduardo Szuster

jose.szuster@kroton.com.br +55 11 3775-2249

Backup

413 364 278

Player Campuses

DL Centers 53 447

Anhanguera

70 69

Estacio

47 44

271 87 57 53 50 49 45 28 27

Anhanguera Ulbra Fatec Internacional Estácio Unip Castelo Branco COC FTC

384 330 200

*Considering pro-forma results from Uniasselvi and Unirondon

Ranking of Postsecondary Students EBITDA 2012E* Ranking of Distance Learning Students Positioning

63

Founding Partners Advent International PAP + Direct Participation Treasury Stocks Free-Float

39.5% 1.0% 59.5%

Code of Conduct Transparency Dividends and Share Trade Policies 100% Tag along

4 Consulting Committees

Academic Auditing Financial HR

9 members – Board of Directors

(2 independents)

35.5%

New Capital Increase

0.9% 63.6% + 2 from Unopar

64

65

 Five vice presidencies were created, of which two as part of corporate activities and two as business activities  Variable compensation considering financial and operational performance  3-5 year stock option plan, aligning shareholder and management interest

65

President Rodrigo Galindo CEO VP of Finance (CFO) Frederico Abreu VP of Operations (COO) Igor Lima Postsecondary System Officer Orlando Junior VP of On-Campus Postsecondary Rodrigo Galindo* VP of Distance Learning Rui Fava Uniasselvi Officer Paulo de Tarso Primary and Secondary Officer Monica Ferreira IR and Planning Officer Carlos Lazar

• Inst. Development

Officer Gislaine Moreno

• Inst. Development

Officer Gislaine Moreno Projects and Process Officer Eberson Terra *Temporarily accumulate the position

Business Activities Corporate Activities