EX-99.2 3 tm2036473d1_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

 

  Vitru Limited
Unaudited interim condensed consolidated financial statements
   
  September 30, 2020

 

 

 

 

Vitru Limited

Unaudited interim condensed consolidated statements of financial position at

(In thousands of Brazilian Reais)

 

       September 30,   December 31, 
   Note   2020   2019 
ASSETS               
                
CURRENT ASSETS               
                
Cash and cash equivalents   5    176,877    2,457 
Short-term investments   5    565,848    72,321 
Trade receivables   6    112,847    88,130 
Income taxes recoverable   7    -    4,711 
Prepaid expenses        9,472    8,938 
Other current assets        3,113    1,858 
         868,157    178,415 
                
Assets classified as held for sale   8    -    36,433 
                
TOTAL CURRENT ASSETS        868,157    214,848 
                
NON-CURRENT ASSETS               
                
Trade receivables   6    6,721    3,786 
Indemnification assets        12,231    14,801 
Deferred tax assets   7    46,652    37,146 
Other non-current assets        2,791    1,359 
                
Right-of-use assets   9    121,829    88,534 
Property and equipment   10    96,285    70,033 
Intangible assets   10    662,132    658,170 
                
TOTAL NON-CURRENT ASSETS        948,641    873,829 
                
TOTAL ASSETS        1,816,798    1,088,677 

 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

1

 

 

Vitru Limited

Unaudited interim condensed consolidated statements of financial position at

(In thousands of Brazilian Reais)

 

       September 30,   December 31, 
   Note   2020   2019 
LIABILITIES               
                
CURRENT LIABILITIES               
                
Trade payables        27,371    29,978 
Loans and financing   11    1,812    - 
Lease liabilities   9    22,966    17,265 
Labor and social obligations   12    43,912    16,784 
Income taxes payable   7    6,308    - 
Taxes payable        2,819    1,657 
Prepayments from customers        9,335    3,186 
Accounts payable from acquisition of subsidiaries   13    134,564    128,888 
Other current liabilities        1,431    349 
         250,518    198,107 
                
Liabilities directly associated with assets classified as held for sale   8    -    23,284 
                
TOTAL CURRENT LIABILITIES        250,518    221,391 
                
NON-CURRENT LIABILITIES               
                
Loans and financing   11    150,000    - 
Lease liabilities   9    119,311    85,923 
Share-based compensation   4    35,528    34,950 
Accounts payable from acquisition of subsidiaries   13    261,323    250,652 
Provisions for contingencies        17,926    18,403 
Deferred tax liabilities   7    1,867    24,958 
Other non-current liabilities        851    1,067 
                
TOTAL NON-CURRENT LIABILITIES        586,806    415,953 
                
TOTAL LIABILITIES        837,324    637,344 
                
EQUITY   14           
                
Share capital        6    548,380 
Capital reserves        970,592    (1,248)
Revenue reserves        -    429 
Accumulated profit (losses)        8,876    (96,228)
                
TOTAL EQUITY        979,474    451,333 
                
TOTAL LIABILITIES AND EQUITY        1,816,798    1,088,677 

 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

2

 

 

Vitru Limited 

Unaudited interim condensed consolidated statements of profit or loss and other comprehensive income for the three and nine months periods ended September 30 

(In thousands of Brazilian Reais, except earnings per share)

 

      Three-month period ended
September 30
   Nine-month period ended
September 30
 
   Note  2020   2019   2020   2019 
NET REVENUE  18   126,142    109,409    382,792    343,869 
                        
Cost of services rendered  19   (58,861)   (56,248)   (164,897)   (161,400)
                        
GROSS PROFIT      67,281    53,161    217,895    182,469 
                        
General and administrative expenses  19   (17,493)   (16,328)   (41,848)   (77,579)
Selling expenses  19   (17,525)   (19,478)   (67,572)   (67,236)
Net impairment losses on financial assets  6   (21,294)   (6,531)   (56,190)   (31,804)
Other income (expenses), net  20   863    (709)   2,536    (1,153)
Operating expenses      (55,449)   (43,046)   (163,074)   (177,772)
                        
OPERATING PROFIT      11,832    10,115    54,821    4,697 
                        
Financial income  21   18,997    5,834    28,532    15,262 
Financial expenses  21   (15,635)   (12,639)   (36,414)   (42,548)
Financial results      3,362    (6,805)   (7,882)   (27,286)
                        
PROFIT (LOSS) BEFORE TAXES      15,194    3,310    46,939    (22,589)
                        
Current income taxes  7   (2,894)   (2,192)   (22,512)   (10,784)
Deferred income taxes  7   (10,520)   2,923    29,738    12,320 
Income taxes      (13,414)   731    7,226    1,536 
                        
NET INCOME (LOSS) FOR THE PERIOD      1,780    4,041    54,165    (21,053)
                        
Other comprehensive income      -    -    -    - 
                        
TOTAL COMPREHENSIVE INCOME (LOSS)      1,780    4,041    54,165    (21,053)
                        
                        
 Basic earnings (loss) per share (R$)  15   0.08    0.18    2.35    (0.91)
 Diluted earnings (loss) per share (R$)  15   0.08    0.17    2.30    (0.91)

 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

3

 

 

Vitru Limited 

Unaudited interim condensed consolidated statements of changes in equity for the nine months periods ended September 30, 2020 and 2019 

(In thousands of Brazilian Reais)

 

       Capital reserves             
   Share   Capital   Treasury   Share-based   Revenue   Accumulated     
   capital   Reserve   Shares   compensation   reserves   losses   Total 
DECEMBER 31, 2018   546,509    -    -    2,523    429    (30,068)   519,393 
                                    
Net loss for the period   -    -    -    -    -    (21,053)   (21,053)
Employee share program                                   
Value of employee services   -    -    -    4,022    -    -    4,022 
Issue of shares to employees   1,871    -    -    (1,844)   -    -    27 
Share repurchase   -    -    (2,238)   2,238    -    -    - 
                                    
SEPTEMBER 30, 2019   548,380    -    (2,238)   6,939    429    (51,121)   502,389 
                                    
DECEMBER 31, 2019   548,380    -    (2,238)   990    429    (96,228)   451,333 
                                    
Net income for the period   -    -    -    -    -    54,165    54,165 
Corporate reorganization (Note 1.1)   (548,376)   496,618    2,238    (990)   (429)   50,939    - 
Issuance of common shares in initial public offering (Note 1.1)   2    521,556    -    -    -    -    521,558 
Share issuance costs (Note 1.1)   -    (47,582)   -    -    -    -    (47,582)
                                    
SEPTEMBER 30, 2020   6    970,592    -    -    -    8,876    979,474 

 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

4

 

 

Vitru Limited 

Unaudited interim condensed consolidated statements of cash flows for the nine months period ended September 30 

(In thousands of Brazilian Reais)

 

   Note  2020   2019 
Cash flows from operating activities             
Income (loss) before taxes      46,939    (22,589)
Adjustments to reconcile income before taxes to cash provided by operating activities             
Depreciation and amortization  9 / 10   37,403    46,054 
Impairment of non-current assets      -    31,431 
Net impairment losses on financial assets  6   56,190    31,804 
Provision for revenue cancellation  6   (1,387)   (443)
Provision for contingencies      2,372    3,087 
Accrued interest      17,072    29,131 
Share-based compensation  4   578    3,797 
Modification of lease contracts  9   (990)   - 
Lease discounts  1.2   (1,609)   - 
Changes in operating assets and liabilities:             
Trade receivables      (63,138)   (60,686)
Prepayments      (362)   (782)
Other assets      (2,370)   (4,506)
Trade payables      (3,586)   4,468 
Labor and social obligations      24,433    21,133 
Other taxes payable      1,162    689 
Prepayments from customers      6,037    622 
Other payables      866    181 
              
Cash from operations      119,610    83,391 
              
Income tax paid      (13,487)   (9,582)
Interest paid  9 / 11   (13,733)   (9,131)
Contingencies paid      (386)   (1,253)
              
Net cash provided by operating activities      92,004    63,425 
              
Cash flows from investing activities             
Purchase of property and equipment  10   (22,067)   (23,229)
Purchase and capitalization of intangible assets  10   (24,311)   (9,812)
Acquisition of short-term investments, net      (490,928)   (24,563)
              
Net cash used in investing activities      (537,306)   (57,604)
              
Cash flows from financing activities             
Payments of lease liabilities  9   (4,254)   (4,432)
Proceeds from loans and financing  11   150,000    - 
Proceeds from initial public offering  1.1   521,558    - 
Share issuance costs  1.1   (47,582)   - 
Capital contributions  14   -    1,871 
              
Share repurchase  14   -    (2,238)
              
Net cash provided by (used in) financing activities      619,722    (4,799)
              
Net increase in cash and cash equivalents      174,420    1,022 
              
Cash and cash equivalents at the beginning of the period      2,457    2,375 
Cash and cash equivalents at the end of the period      176,877    3,397 
       174,420    1,022 

 

See Note 22 for the main transactions in investing and financing activities not affecting cash.

 

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

 

5

 

  

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

1. Corporate information

  

Vitru Limited (“Vitru”) and its subsidiaries (collectively, the “Company”) is a holding company incorporated under the laws of the Cayman Islands on March 05, 2020. Vitru became the parent company of Vitru Brasil Empreendimentos, Participações e Comércio S.A. (hereafter referred to as “Vitru Brazil”) formerly denominated Treviso Empreendimentos, Participações e Comércio S.A., through the completion of the corporate reorganization described below.

 

Until the contribution of Vitru Brazil shares to Vitru Limited, in September 2019, Vitru Limited had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments. Accordingly, Vitru Limited’s consolidated financial information substantially reflects the operations of Vitru Brazil after the corporate reorganization.

 

The Company is principally engaged in providing educational services in Brazil, mainly undergraduate and continuing education courses, presentially through its eight campuses in two states, or via distance learning, through 784 (December 31, 2019 – 526) learning centers (“hubs”) across the country.

 

These unaudited interim condensed consolidated financial statements for the nine months period ended September 30, 2020 were authorized for issue by the Board of Directors on November 19, 2020.

 

1.1.Corporate reorganization and initial public offering

 

On March 05, 2020, Vitru was incorporated in the Cayman Islands, for the purposes of its initial public offering (“IPO”).

 

On September 02, 2020, each of Vitru Brazil ́s shareholders had agreed to contribute their respective shares of Vitru Brazil to Vitru Limited, exchanging thirty-one common shares into one common share of Vitru Limited.

 

On September 17, 2020, Vitru Limited priced its initial public offering (“IPO”) of 6,000,000 Class A common shares, which began trading on the Nasdaq Global Select Market (“NASDAQ”) on September 18, 2020 under the ticker symbol “VTRU”. The initial offering price was US$ 16.00 per Class A common share.

 

On September 22, 2020, the share capital of Vitru Limited was increased by 6,000,000 Class A shares through the proceeds received as a result of the IPO of US$ 96,000 thousand (or R$ 521,558). The net proceeds from the IPO were US$ 90,672 thousand (or R$ 492,612), after deducting US$ 5,328 thousand (or R$ 28,946) in underwriting discounts and commissions and other offering expenses totaled US$ 3,430 thousand (or R$ 18,636). The share issuance costs totaled R$ 47,582.

 

1.2.Significant events during the period

 

a)Operating events

 

Seasonality:

 

The distance learning undergraduate courses are structured around separate monthly modules. This enables students to enroll in distance learning courses at any time during a semester. Despite this flexibility, generally a higher number of enrollments in distance learning courses occurs in the first and third quarters of each year. These periods coincide with the beginning of academic semesters in Brazil. Furthermore, there is a higher number of enrollments at the beginning of the first semester of each year than at the beginning of the second semester of each year. In order to attract and encourage potential new students to enroll in undergraduate courses later in the semester, the Group often offers discounts, generally equivalent to the number of months that have gone by in the semester. As a result, given revenue from semiannual contracts is recorded over the time in a semester, revenue is generally higher in the second and fourth quarters of each year, as additional students enroll in later on in the semester. Revenue is also higher later on in the semester due to lower dropout rates during that same period.

 

Recognition of tax losses and temporary differences (Note 7):

 

Given the continuous growth in Continuing Education activities for the last two years and recent changes to the structure of its operations, the Group reviewed previously unrecognized tax losses and temporary differences, determining that it is now probable that taxable profits will be available against which the tax losses can be utilized and temporary differences will be realized. Accordingly, a deferred tax asset of R$ 10,632 and a deferred tax liability of R$ 12,549 were recognized in 2020.

 

 

 

   

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

Leases (Note 9):

 

With the opening of new hubs following the Group’s expansion strategy, new lease contracts were signed for the Group’s own hubs during the nine months period ended September 30, 2020. During this period, the Group has also concluded renegotiation of terms of a few lease contracts for the extension of lease period at reduced prices. Such new and amended lease contracts resulted in an increment of R$ 41,799 to both right-of-use assets and lease liabilities.

 

Loans and Financing (Note 11):

 

Seeking to guarantee the same rates and conditions that would be available in a scenario without the Coronavirus pandemic, on April 16, 2020, the Company entered into a loan agreement of R$ 150,000, with no financial covenants, anticipating a loan to settle the accounts payable from acquisition of subsidiaries due in December 2020.

 

b)Coronavirus pandemic

 

The Group is closely monitoring the situation of the 2019 novel coronavirus, or Covid-19, and taking the necessary measures for the safety and well-being of its employees, students, associates and partners. The global impact from the pandemic has been rapidly evolving, and, as such, it poses material uncertainty and risk with respect to the Group´s future performance and financial results. In particular and in the interest of public health and safety, state and local governments in Brazil have imposed mandatory measures, which has resulted in the closure of on-campus learning facilities and hubs.

 

In response to the virus pandemic, the Group has efficiently implemented several measures aimed at safeguarding the health of its employees, students and hub partners and the stability of operations, including: (1) creating a crisis management committee and a financial committee to discuss the action plan for the Group to address the challenges posed by the Covid-19 pandemic; (2) temporarily replacing in-person weekly meetings at the hubs by online meetings between students and tutors across all units, as a result of which since March 30, 2020 all students have had real-time meetings with their tutors; (3) training teachers and tutors to support students pursuant to this new format; (4) remote support to deliver high-quality content to students and maintain high levels of engagement and a superior learning experience; (5) making no changes to the course schedule or syllabus; (6) putting in place remote emotional and psychological support to students and employees, provided by the Group´s psychology department; and (7) making home office available for all the employees.

 

As of September 30, 2020, there has been no material impact on the Group’s operations, as most of the Group’s services are already delivered remotely (Distance learning undergraduate courses and most of continuing education courses) or capable of being delivered remotely (some of Continuing education courses and On-campus undergraduate courses). In addition, based on preliminary information available until the approval of these unaudited interim condensed consolidated financial statements:

 

·There was no relevant impact on revenue for the nine months period ended September 30, 2020, which was slightly below that expected for the period but presented growth of 11% when compared to the same period in prior year. Student defaults have remained within the expected levels and the engagement of students, compared to the same period in 2019, deteriorated very slightly.

 

·Expected credit losses were revised considering estimated increases in financial defaults, which resulted in an increase of R$ 3,303 in allowance for estimated credit losses as of September 30, 2020.

 

·The Group assessed the existence of potential impairment indicators and the possible impacts on the key assumptions and projections caused by the pandemic on the recoverability of long-lived assets (impairment tests) and concluded that no additional provision for impairment of long-lived assets needed to be recorded in the interim financial statements.

 

·The Group has obtained rent concessions on lease contracts due to the temporary suspension of classes in the on-campus learning facilities and hubs caused by the mandatory school closures during the pandemic. A gain of R$ 1,609 was recognized as Other income (expenses), net, in the statement of profit or loss. Except for these concessions and the modification mentioned in Note 1.2.a above, there were no changes to contractual obligations regarding leased buildings and there were no changes in the expected useful life and residual amount of properties and equipment as a result of Covid-19.

 

·No changes in the provision for contingencies against the Group were identified as a result of Covid-19.

 

·As an incentive for the students to keep the payment of tuition fees up to the due date, the Group has granted an additional discount of 5% to all the students that paid their tuitions fees up to the due date in April and May 2020. The amounts of additional discounts granted was R$ 4,005.

 

·The Group currently has sufficient working capital and other undrawn financing facilities to service its operating activities and ongoing investments.

 

·The Group has also taken benefit of measures made available by the federal government as follows:

 

 

 

   

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

i.Postponement of tax and social charges obligations due date: Certain federal taxes and social charges obligations in the total amount of R$ 10,805 that became due in the second quarter of 2020 have not been paid at their respective original maturity and will be paid until the end of the year, according to the schedule published by the government.

  

ii.Emergency employment and income preservation benefit program: The Brazilian federal government offered the option of either reducing workload and salary payment for up to three months or suspending employment contracts for up to two months in exchange for the guarantee of maintaining employees after the suspension for the same period as the contract is effectively suspended. The Group has suspended 195 employment contracts from May to September 2020 and had a corresponding expense reduction of R$ 639. No workload reduction was necessary until September and it is not expected for next months while the measures are in effect.

 

Due to uncertainties regarding the dynamics of Covid-19 spread, its effects on the economic activities, on customers and suppliers and the measures to be adopted in Brazil, it is impossible to predict the impact the pandemic will have on the global economy, as well as on the Group’s business. The extent of the impact from Covid-19 on the Group’s operational and financial performance will depend on certain developments, including the duration and spread of pandemic and its impact on students, hub partners and employees, all of which are uncertain and cannot be presently predicted.

 

2.Basis of preparation of the unaudited interim condensed consolidated financial statements

 

The unaudited interim condensed consolidated financial statements of the Group as of September 30, 2020 and for the nine months period ended September 30, 2020 have been prepared in accordance with IAS 34 – Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). These financial statements do not meet all disclosure requirements for the presentation of full annual financial statements and thus should be read in conjunction with the Group’s consolidated financial statements for the year ended December 31, 2019, prepared in accordance with International Financial Reporting Standards (“IFRS”).

 

The accounting policies adopted are consistent with those of the previous fiscal year and corresponding interim reporting period. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

The unaudited interim condensed consolidated financial statements are presented in Brazilian reais (“R$”), and all amounts disclosed in the financial statements and notes have been rounded off to the nearest thousand currency units unless otherwise stated.

 

There have been no changes since December 31, 2019 in the accounting practices adopted for consolidation and in the direct and indirect interests of the Company in its subsidiaries for the purposes of these unaudited interim condensed consolidated financial statements.

 

2.1.Significant accounting estimates and assumptions

 

The preparation of unaudited interim condensed consolidated financial statements of the Group requires management to make judgments and estimates and to adopt assumptions that affect the amounts presented referring to revenues, expenses, assets and liabilities at the reporting date. Actual results may differ from these estimates.

 

In preparing these unaudited interim condensed consolidated financial statements, the significant judgments and estimates made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that are set forth in the consolidated financial statements for the year ended December 31, 2019.

 

2.2.Financial instruments risk management objectives and policies

 

The unaudited interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group’s annual financial statements as of December 31, 2019. There have been no changes in the risk management department or in any risk management policies since the year-end.

 

3.Segment reporting

 

Segment information is presented consistently with the internal reports provided to the Senior management team, consisting of the chief executive officer, the chief financial officer and other executives, and which is the Chief Operating Decision Maker (CODM) and is responsible for allocating resources, assessing the performance of the Group's operating segments, and making the Group’s strategic decisions.

 

 

 

    

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

In reviewing the operational performance of the Group and allocating resources, the CODM reviews selected items of the statement of profit or loss and of comprehensive income, based on relevant financial data for each of the Group’s operating segments, represented by the Group’s main lines of service from which it generates revenue, as follows:

 

• Distance learning undergraduate courses 

• Continuing education courses 

• On-campus undergraduate courses

 

Segment performance is primarily evaluated based on net revenue and on adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA). The Adjusted EBITDA is calculated as operating profit plus depreciation and amortization plus interest received on late payments of monthly tuition fees and adjusted by the elimination of effects from share-based compensation plus/minus exceptional expenses. General and administrative expenses (except for intangible assets’ amortization and impairment expenses), finance results (other than interest on tuition fees paid in arrears) and income taxes are managed on a Group’s consolidated basis and are not allocated to operating segments.

 

There were no inter-segment revenues in the nine months period ended September 30, 2020 and 2019. There were no adjustments or eliminations in the profit or loss between segments.

 

The CODM does not make strategic decisions or evaluate performance based on geographic regions. Currently, the Group operates solely in Brazil and all the assets, liabilities and results are allocated in Brazil.

 

a)Measures of performance

 

Three months period ended September 30,  Distance
learning
undergraduate
courses
   Continuing
education
courses
   On-campus
undergraduate
courses
   Total allocated 
2020                    
Net revenue   105,604    8,715    11,823    126,142 
Adjusted EBITDA   37,225    5,702    4,889    47,816 
% Adjusted EBITDA margin   35.25%   65.43%   41.35%   37.91%
                     
2019                    
Net revenue   80,059    10,732    18,618    109,409 
Adjusted EBITDA   33,183    6,801    5,694    45,678 
% Adjusted EBITDA margin   41.45%   63.37%   30.58%   41.75%

 

Nine months period ended September 30,  Distance
learning
undergraduate
courses
   Continuing
education
courses
   On-campus
undergraduate
courses
   Total allocated 
2020                    
Net revenue   309,331    29,995    43,466    382,792 
Adjusted EBITDA   107,894    21,835    14,840    144,569 
% Adjusted EBITDA margin   34.88%   72.80%   34.14%   37.77%
                     
2019                    
Net revenue   250,884    33,688    59,297    343,869 
Adjusted EBITDA   92,779    23,762    18,651    135,192 
% Adjusted EBITDA margin   36.98%   70.54%   31.45%   39.31%

  

 

 

  

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

The total of the reportable segments’ net revenues represents the Group’s net revenue. A reconciliation of the Group’s loss before taxes to the allocated Adjusted EBITDA is shown below:

 

   Three months period ended
September 30,
   Nine months period ended
September 30,
 
   2020   2019   2020   2019 
Income (loss) before taxes   15,194    3,310    46,939    (22,589)
(+) Financial result   (3,362)   6,805    7,882    27,286 
(+) Depreciation and amortization   13,134    15,606    37,403    46,054 
(+) Interest on tuition fees paid in arrears   4,983    2,658    12,221    6,578 
(+) Impairment of non-current assets   -    -    -    31,431 
(+) Share-based compensation plan   1,140    686    574    3,798 
(+) Other income (expenses), net   (863)   709    (2,536)   1,153 
(+) Restructuring expenses   2,227    2,128    5,121    4,269 
(+) Other operating expenses unallocated   15,363    13,776    36,965    37,212 
Adjusted EBITDA allocated to segments   47,816    45,678    144,569    135,192 

 

b)Other profit and loss disclosure

 

Three months period ended September 30,  Distance
learning
undergraduate
courses
   Continuing
education
courses
   On-campus
undergraduate
courses
   Unallocated   Total 
2020                         
Net impairment losses on financial assets   18,086    716    2,493    -    21,295 
Depreciation and amortization   9,388    563    2,340    843    13,134 
Interest on tuition fees paid in arrears   3,719    178    1,086    -    4,983 
                          
2019                         
Net impairment losses on financial assets   3,509    1,228    1,794    -    6,531 
Depreciation and amortization   9,672    927    3,527    1,425    15,551 
Impairment of non-current assets   -    -    -    -    - 
Interest on tuition fees paid in arrears   2,279    4    374    -    2,657 

 

Nine months period ended September 30,  Distance
learning
undergraduate
courses
   Continuing
education
courses
   On-campus
undergraduate
courses
   Unallocated   Total 
2020                         
Net impairment losses on financial assets   47,547    2,331    6,312    -    56,190 
Depreciation and amortization   25,332    1,546    6,984    3,541    37,403 
Interest on tuition fees paid in arrears   9,129    414    2,678    -    12,221 
                          
2019                         
Net impairment losses on financial assets   24,044    2,563    5,197    -    31,804 
Depreciation and amortization   28,109    2,739    11,017    4,189    46,054 
Impairment of non-current assets   -    -    31,431    -    31,431 
Interest on tuition fees paid in arrears   5,629    13    936    -    6,578 

 

4.Fair Value Measurement

 

As of September 30, 2020, the Group have only Share-based compensation liabilities measured at fair value, in the amount of R$ 34,384, which are classified in Level 3 of the fair value measurement hierarchy given that significant unobservable inputs are used.

 

There were no transfers between Levels during the nine months period ended in September 30, 2020.

  

 

 

 

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

The following table presents the changes in level 3 items for the nine months period ended in September 30, 2020, for recurring fair value measurements:

 

   Share-based
compensation
 
Opening balance at December 31, 2019   34,950 
Expenses recognized – general and administrative   578 
Balance at September 30, 2020   35,528 

 

The Group has assessed that the fair values of financial instruments at amortized cost such as cash and cash equivalents, short-term investments, current trade receivables, trade payables and prepayments from customers approximate their carrying amounts largely due to the short-term maturities of these instruments. Non-current trade receivables, lease liabilities, accounts payable from acquisition of subsidiaries and loans and financing have their carrying amounts adjusted by their respective effective interest rate in order to be presented as close as possible to their fair value.

 

The following table summarizes the quantitative information about the significant inputs used in level 3 fair value measurements:

 

Unobservable inputs  Weighted
average inputs
  Relationship of unobservable inputs with fair value
Net operating revenue growth rate (i)  19.3% Increased growth rate (+200 basis points (bps)) and lower discount rate (-100 bps) would increase FV by R$ 553; lower growth rate (-200 bps) and higher discount rate (+100 bps) would decrease FV by R$ 548.
Pre-tax discount rate (ii)  13.7%  Increasing/decreasing the growth rate and the discount rate by +/- 50bps and 100 bps, respectively, would change the FV by +R$ 153 / -R$ 305.

 

(i) The growth rate of net operating revenue is based on the historical growth of the student base and management’s expectations of market development.

 

(ii) Pre-tax discount rate reflects specific risks relating to the segment and country in which the Group operates.

 

5.Cash and cash equivalents and short-term investments

 

   September 30,
2020
   December 31,
2019
 
Cash and cash equivalents (i)   176,877    2,457 
Investment funds (ii)   565,848    72,321 
    742,725    74,778 

 

(i) Cash and cash equivalents are comprised of short-term deposits maturing within three months or less, which are subject to an insignificant risk of change in value and readily convertible into a known cash amount.

 

(ii) Short-term investments correspond to financial investments in Investment Funds, with highly rated financial institutions. As of September 30, 2020, the average interest rate on these Investment Funds is 1.86%, corresponding to 81.66% of CDI (December 31, 2019 – 5.81% – 99.10% of CDI). Despite the fact these investments have high liquidity and have insignificant risk of change in value, they do not qualify as cash equivalents given the nature of investment portfolio and their maturity.

 

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019. 

(In thousands of Brazilian Reais, except as otherwise indicated) 

 

6.Trade receivables

 

   September 30,
2020
   December 31,
2019
 
Tuition fees   202,328    161,049 
FIES and UNIEDU Guaranteed Credits   11,324    7,196 
PEP - Special Installment Payment (i)   11,735    8,542 
Provision for revenue cancellation   (3,825)   (5,212)
Allowance for expected credit losses on trade receivables   (101,994)   (79,659)
Total trade receivables   119,568    91,916 
           
Current   112,847    88,130 
Non-current   6,721    3,786 

 

(i) In 2015, a special private installment payment program (PEP) was introduced to facilitate the entry of students who could not qualify for FIES, due to changes occurred to the program at the time. These receivables bear interests of 1.34% and, given the long term nature of the installments, they have been discounted at an interbank rate of 3.54%.

 

The aging list of trade receivables is as follows:

 

   September 30,
2020
   December 31,
2019
 
Receivables falling due   67,537    72,647 
           
 Receivables past due          
 From 1 to 30 days   22,820    22,322 
 From 31 to 60 days   12,818    15,135 
 From 61 to 90 days   10,478    13,473 
 From 91 to 180 days   53,755    27,968 
 From 181 to 365 days   57,979    25,242 
 Provision for revenue cancellation   (3,825)   (5,212)
 Allowance for estimated credit losses   (101,994)   (79,659)
    119,568    91,916 

 

Cancellations consist of deductions from revenue to adjust it to the extension it is probable that it will not be reversed, generally related to students that have not attended classes and do not recognize the service provided or are dissatisfied with the services being provided. A provision for cancellation is estimated using the expected value method, which considers accumulated experience and is updated at the end of each period for changes in expectations.

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements
September 30, 2020 and 2019. 

(In thousands of Brazilian Reais, except as otherwise indicated)

 

Changes in the Group’s revenue cancellation provision are as follows:

 

   September 30,
2020
   September 30,
2019
 
At the beginning of the period   (5,212)   (5,655)
Additions   (4,282)   (10,676)
Write-off   5,669    11,119 
           
At the end of the period   (3,825)   (5,212)

 

The Group records the allowance for expected credit losses on trade receivables on a monthly basis by analyzing the amounts invoiced in the month, the monthly volume of receivables and the respective outstanding amounts by late payment range, calculating the recovery performance. Under this methodology, the monthly billed amount and each late payment range is assigned a percentage of probability of loss that is accrued for on a recurring basis.

 

When the delay exceeds 365 days, the receivable is written off. Even for written-off receivables, collection efforts continue, and their receipt is recognized directly in the statement of profit or loss, when incurred, as recovery of losses.

 

Changes in the Group’s allowance for expected credit losses are as follows:

 

   September 30,
2020
   September 30,
2019
 
At the beginning of the period   (79,659)   (66,199)
Write-off of uncollectible receivables   39,195    23,731 
Reversal   27,013    19,657 
Reclassified from held for sale   (5,331)   - 
Allowance for expected credit losses   (83,212)   (51,461)
           
At the end of the period   (101,994)   (74,272)

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements 

September 30, 2020 and 2019. 

(In thousands of Brazilian Reais, except as otherwise indicated)

 

7.Current and deferred income tax

 

a)Reconciliation of income tax in the statement of profit or loss

 

Income tax differs from the theoretical amount that would have been obtained by using the nominal income tax rates applicable to the income of the Group entities, as follows:

 

   Nine months period ended September 30, 
   2020   2019 
Earnings before taxes   46,939    (22,589)
Statutory combined income tax rate - %   34%   34%
Income tax at statutory rates   (15,959)   7,680 
           
Income exempt from taxation - ProUni benefit (i)   13,142    14,213 
Unrecognized deferred tax asset on tax losses (ii)   -    (20,054)
Previously unrecognized tax losses used to reduce deferred tax (ii)   6,723    - 
Previously unrecognized temporary differences (ii)   11,320    - 
Difference on tax rates from offshore companies   (7,851)   - 
Non-deductible expenses   (325)   (228)
Other   176    (75)
           
Total income tax and social contribution   7,226    1,536 
Effective tax rate - %   -15%   7%
           
Current income tax expense   (22,512)   (10,784)
Deferred income tax income   29,738    12,320 

 

(i) The University for All Program - ProUni, establishes, through Law 11,096, dated January 13, 2005, exemption from certain federal taxes for higher education institutions that provide full and partial scholarships to low-income students enrolled in traditional undergraduate and technological undergraduate programs. The Group's higher education companies are included in this program.

 

(ii) As mentioned in Note 1.2.a, the Group has unused tax loss carryforwards and temporary differences previously unrecognized, that are now expected to be used and realized until 2021. During the nine months period ended September 30, 2020, the Group has already used R$ 4,620 of tax loss carryforwards.

 

 

 

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

b)Current income tax

 

As of September 30, 2020, the Group has income tax payable of R$ 6,308 as a result of current period taxation. As of December 31, 2019, given higher monthly tax prepayments, the Group presented income tax recoverable of R$ 4,711, which has already been offset against current income tax at the beginning of 2020.

 

c)Deferred income tax

 

   Statement of financial position   Profit or loss 
   September 30,
2020
   December 31,
2019
   September 30,
2020
   September 30,
2019
 
Tax loss carryforward   6,009    -    6,009    - 
Intangible assets on business combinations   (20,966)   (24,958)   3,992    3,167 
Allowance for expected credit losses   47,688    27,362    20,326    10,813 
Share-based compensation   -    -    -    - 
Lease contracts   7,030    8,902    (1,872)   (972)
Provision for revenue cancellation   1,300    1,772    (472)   856 
Provision for contingencies   1,937    1,225    712    (462)
Other provisions   1,787    744    1,043    (1,082)
Total   44,785    15,047    29,738    12,320 
                     
Deferred tax assets   46,652    37,146           
Deferred tax liabilities   (1,867)   (24,958)          

 

The above deferred taxes were recorded at the nominal rate of 34%. Under Brazilian tax law, temporary differences and tax losses can be carried forward indefinitely, however tax loss carryforwards can only be used to offset up to 30% of taxable profit for the year.

 

8.Assets and liabilities held for sale

 

In December 2019, the Group decided to sell its subsidiaries FAC/FAMAT and FAIR, and the UNIASSELVI's undergraduate operation in the campuses Assevim and Famesul. The transaction consists of (i) the sale of the operations from the following campuses located in Brazil in the cities of Brusque and Rio do Sul, as well as all related assets and liabilities, including the "ASSEVIM" and "FAMESUL" trademarks and (ii) the sale of 100% of the shares issued by the entities "FAC/FAMAT" and "FAIR", their campuses and trademarks.

 

The Group decided to sell these specific assets, that are a portion of the on-campus undergraduate courses segment, in order to raise funds to invest in the distance learning undergraduate courses segment expansion.

 

In September 2020, the Group understood that the Coronavirus pandemic has changed the market and that to locate a buyer and complete the selling plan that has been initiated on December 2019 is not highly probable within the next three months and so decided to return the assets reclassified to assets held for sale and liabilities as directly associated with assets held for sale back to their original classification as presented below.

 

 

 

 

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

   December 31,
2019
 
Assets classified as held for sale     
      
Trade receivables   7,935 
Income taxes recoverable   207 
Prepaid expenses   172 
Other taxes recoverable   195 
Other assets   122 
Right-of-use assets   16,090 
Property and equipment   11,704 
Intangible assets   8 
      
Total of assets disposal group held for sale   36,433 
      
Liabilities directly associated with assets classified as held for sale     
      
Trade payables   979 
Lease liabilities   19,210 
Taxes payable   181 
Labor and social obligations   2,695 
Prepayments from customers   112 
Provisions for contingencies   107 
      
Total liabilities of disposal group held for sale   23,284 

 

9.Leases

 

Set out below, are the carrying amounts of the Group’s right-of-use assets related to buildings used as offices and hubs and lease liabilities and the movements during the period:

 

   Right-of-use
assets
   Lease
liabilities
 
As of December 31, 2019   88,534    103,188 
New contracts   41,799    41,799 
Re-measurement by index (i)   3,109    3,109 
Lease modification (ii)   (18,176)   (19,166)
Depreciation expense   (9,527)   - 
Reclassification from assets held for sale   16,090    19,210 
Accrued interest   -    11,301 
Payment of principal   -    (5,863)
Payment of interest   -    (11,301)
           
As of September 30, 2020   121,829    142,277 
           
Current   -    22,966 
Non-current   121,829    119,311 

 

(i) Lease liabilities and right-of-use assets were incremented with respect to variable lease payments that depend on an index or a rate, as a result of annual rental prices contractually adjusted by market inflation index General Market Price Index (Índice Geral de Preços do Mercado), or IGP-M.

 

(ii) During the nine months period ended September 30, 2020, the Group partially reduced the scope of a lease contract with a corresponding liability in the amount of R$ 1,967, and early terminated other seven lease contracts with a corresponding liability in the amount of R$ 17,199. As a result, a gain of R$ 990 was recognized as Other income (expenses), net, in the statement of profit or loss.

 

 

 

 

Vitru Limited

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

(iii) The Group has received Covid-19 related rent concessions and has applied the practical expedient introduced by the amendments made to IFRS 16 in May 2020, applied to all qualifying rent concessions. As a result, gains of R$ 1,609 arising from rent concessions were recognized as Other income (expenses), net, in the statement of profit or loss.

 

The Group has recognized rent expense from short-term leases and low-value assets of R$ 1,561 for the nine months period ended September 30, 2020, mainly represented by leased equipment.

 

10.Property and equipment and intangible assets

 

Changes between December 31, 2019 and September 30, 2020.

 

   Carrying
amount at
December
31,2019
   Purchase
and
capitalization
   Depreciation
and
amortization
   Reclassification
from assets
held for sale
   Carrying
amount at
September
30,2020
 
Leasehold improvements   34,389    14,421    (1,601)   7,293    54,502 
Furniture, equipment and facilities   20,173    5,600    (2,530)   3,254    26,497 
Other property and equipment   15,471    2,046    (3,388)   1,157    15,286 
Property and equipment   70,033    22,067    (7,519)   11,704    96,285 
                          
Software   20,044    14,368    (7,075)   8    27,345 
Internal project development   19,667    9,943    (5,067)   -    24,543 
Other intangible assets   618,459    -    (8,215)   -    610,244 
Intangible assets   658,170    24,311    (20,357)   8    662,132 

 

The Group performs its annual impairment test in December and when circumstances indicate that the carrying value may be impaired. The Group’s impairment tests are based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the cash generating units were disclosed in the annual consolidated financial statements for the year ended December 31, 2019.

 

As of September 30, 2020, there were no indicators of a potential impairment of goodwill. Additionally, there are no significant changes to the assumptions in the annual consolidated financial statements for the year ended December 31, 2019. Also, there has been no evidence that the carrying amounts of property and equipment and finite-life intangible assets exceed their recoverable amounts as of September 30, 2020.

 

11.Loans and financing

 

a) Breakdown

 

Type  Interest rate  Maturity   June 30,
2020
   December 31,
2019
 
Standby Letter of Credit  CDI + 3.6% p.a.   2021    151,812    - 
                   
Current           1,812    - 
Non-current           150,000    - 

 

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

b) Variation

 

   Loans and
financing
 
As of December 31, 2019   - 
Proceeds from loans and financing (i)   150,000 
Accrued interest   4,244 
Payment of interest   (2,432)
As of September 30, 2020   151,812 

 

(i) On April 16, 2020, the Company entered into a loan agreement of R$ 150,000, with no financial covenants or guarantees. The loan bears interest at the Brazilian interbank deposit (Certificado de Depósito Interbancário), or CDI rate +3.6% per annum. Interest is repayable in five quarterly installments starting on July 16, 2020 and principal in one installment on October 18, 2021.

 

12.Labor and social obligations

 

   September 30,
2020
   December 31,
2019
 
Salaries payable   8,888    4,235 
Social charges payable (i)   11,505    5,906 
Accrued vacation   20,662    1,972 
Accrual for bonus   2,857    4,668 
Other   -    3 
Total   43,912    16,784 

 

(i) Comprised of contributions to Social Security (“INSS”) and to Government Severance Indemnity Fund for Employees (“FGTS”) as well as withholding income tax (“IRRF”) on salaries. As described in Note 1.2.a, social charges that became due during the second quarter of 2020 were postponed for the end of the year as per government measures of tax relief during the Covid-19 pandemic.

 

13.Accounts payable from acquisition of subsidiaries

 

On February 28, 2016, the Company completed the acquisition of 100% of Uniasselvi, FAC and FAIR. The payable amount regarding this acquisition is R$ 395,887 at September 30, 2020 (December 31, 2019 - R$ 379,540). Interest in the amount of R$ 16,347 were accrued during the nine months period ended September 30,2020.

 

14.Equity

 

a)Share capital

 

As of September 30, 2020, the Company’s share capital is represented by 23,058,053 common shares with par value of US$ 0.00005 each.

 

In September 2020, the Company did a reverse stock split reducing its capital from 522,315 thousand shares to 17,058 thousand shares. Additionally, the Company issued 6,000 thousand common shares through the public offering. Both transactions are described in Note 1.1.

 

b)Capital reserve

 

Capital reserve includes additional paid in capital amounts related to the difference between the subscription price that shareholders paid for the common shares and their nominal value.

 

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

15.Earnings per share

 

15.1.Basic

 

Basic earnings per share is calculated by dividing the net income attributable to the holders of Company’s common shares by the weighted average number of common shares held by stockholders during the period.

 

The following table contains the earnings (loss) per share of the Group for the three and nine months period ended in September 30, 2020 and 2019 (in thousands except per share amounts):

 

   Three months period ended in
September 30,
   Nine months period ended in
September 30,
 
Basic earnings per share  2020   2019   2020   2019 
Net income (loss) attributable to the shareholders of the Company   1,780    4,041    54,165    (21,053)
Weighted average number of outstanding common shares (thousands)   23,058    23,058    23,058    23,058 
                     
Basic earnings (loss) per common share (R$)   0.08    0.18    2.35    (0.91)

 

15.2.Diluted

 

As of September 30, 2020, the Group had outstanding and unexercised options to purchase 506 thousand common shares, which are included in the diluted earnings per share calculation.

 

   Three months period ended in
September 30,
   Nine months period ended in
September 30,
 
Diluted earnings per share  2020   2019   2020   2019 
Net income (loss) attributable to the shareholders of the Company   1,780    4,041    54,165    (21,053)
Weighted average number of outstanding common shares (thousands)   23,564    23,564    23,564    23,058 
                     
Diluted earnings (loss) per common share (R$)   0.08    0.17    2.30    (0.91)

 

The number of common shares outstanding was retrospectively adjusted due to the issuance of new shares as a result of the IPO and the corporate reorganization, described in Note 1.1.

 

16.Share-based compensation

 

Members of the Company’s management participate in Vitru Brazil share-based compensation plan (VB plan). As a result of Vitru’s IPO, the VB plan migrated to the Company. The Company recognized the new instruments granted as replacement instruments for the cancelled instruments.

 

The amount of options granted by the Company was reduced from 22,218 thousand in the VB plan to 715 thousand as a result of the reverse split of the corporate reorganization described in Note 1. The valuation of the instruments and the provision for the cash settlement have not changed.

 

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019.

(In thousands of Brazilian Reais, except as otherwise indicated)

 

17.Related parties

 

The Company holds quotas of investments funds managed by Vinci Partners, an insurance policy issued by Austral Seguradora S/A and uses the services of the lawyer firm Kloch Advocacia. All the companies are indirect related parties.

 

     Statement of financial   Profit or loss  
    position   Three months period ended   Nine months period ended  
    September 30,   December 31,   September 30,   September 30,  
    2020   2019   2020   2019   2020   2019  
FI Vinci Renda Fixa Credito Privado                          
                           
Short-term investments   39,102   37,607                  
Financial income            82    568    717   1,672  
                           
Austral Seguradora S/A                          
                              
Prepaid expenses    532   8                  
General and administrative expenses            (75 )  (1 )  (226 )  (2 )
                           
Kloch Advocacia                          
                           
General and administrative expenses            (54 )  (54 )  (162 )  (160 )

 

18.Revenue

 

   Three months period ended
September 30,
   Nine months period ended
September 30,
 
   2020   2019   2020   2019 
Gross revenue   162,449    143,732    491,005    440,747 
(-) Cancellation   (701)   (5,323)   (4,282)   (10,676)
(-) Discounts   (7,620)   (5,073)   (18,804)   (14,233)
(-) ProUni scholarships (i)   (23,982)   (20,208)   (72,497)   (60,755)
(-) Taxes and contributions on revenue   (4,004)   (3,719)   (12,630)   (11,214)
                     
Net revenue   126,142    109,409    382,792    343,869 
                     
Timing of revenue recognition                    
Transferred over time   125,364    109,207    381,765    342,258 
Transferred at a point in time (ii)   778    202    1,030    1,611 
                     
Net revenue   126,142    109,409    382,792    343,869 

 

(i) Scholarships granted by the federal government to students under the ProUni program are based on a fixed percentage approved by the government upon each student’s request and deducted from tuition gross revenue during the entire duration of such students' undergraduate studies (regardless of the tuition fee set out in the service contract) and as long as the students continue to comply with the scholarship requirements imposed by the government for each semester during the undergraduate course. The Group recognizes the economic benefits from the ProUni scholarships as tax deductions, as applicable, following the policies described in Note 6.

 

(ii) Revenue recognized at a point in time relates to revenue from student fees and certain education-related activities.

 

All the Group`s revenues from contracts with customers arise in Brazil.

 

In the three and nine months periods ended September 30, 2020, the amounts billed to students for the portion to be transferred to the hub partner, in respect to the joint operation, are R$ 39,368 and R$ 112,793 respectively (2019 - R$ 28,106 and R$ 83,702). As of September 30, 2020, the balance payable to the hub partner is R$ 9,910 (December 31, 2019 - R$ 6,697).

 

 

 

  

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements 

September 30, 2020 and 2019. 

(In thousands of Brazilian Reais, except as otherwise indicated)

 

19.Costs and expenses by nature

 

   Three months period ended
September 30,
   Nine months period ended
September 30,
 
   2020   2019   2020   2019 
Payroll (i)   53,012    52,036    144,398    146,379 
Sales and marketing   13,307    9,920    52,441    38,650 
Depreciation and amortization (ii)   13,346    15,552    37,404    46,055 
Material   2,692    4,585    9,207    14,639 
Consulting and advisory services   4,012    3,127    9,736    8,540 
Maintenance   1,923    1,696    6,098    4,654 
Utilities, cleaning and security   1,531    1,650    4,381    5,196 
Contingencies   1,809    887    3,879    3,097 
Leases   (241)   678    1,561    2,684 
Taxes   341    499    1,354    1,262 
Impairment losses   -    -    -    31,431 
Other expenses   2,148    1,424    3,859    3,628 
Total   93,880    92,054    274,318    306,215 
                     
Costs of services   50,319    56,248    156,355    161,400 
General and administrative expenses   26,036    16,328    50,391    77,579 
Selling expenses   17,525    19,478    67,572    67,236 
Total   93,880    92,054    274,318    306,215 

 

(i) Payroll expenses include for the three and nine months periods ended September 30, 2020 R$ 51,868 and R$ 143,824 respectively (2019 – R$ 51,351 and R$ 142,581) related to salaries, bonuses, short-term benefits, related social charges and other employee related expenses, and R$ 1,144 and R$ 574 (2019 – R$ 685 and R$ 3,798) related to share-based compensation.

 

(ii) From the total depreciation and amortization, R$ 22,885 (2019 – R$ 17,963) relates to Cost of services, R$ 11,265 (2019 – R$ 9,442) relates to General and administrative expenses and R$ 3,254 (2019 - R$ 18,650) relates to Selling expenses.

 

20.Other income (expenses), net

 

   Three months period ended
September 30,
   Nine months period ended
September 30,
 
   2020   2019   2020   2019 
Deductible donations   (75)   (75)   (225)   (225)
Contractual indemnities   (20)   (275)   (20)   (648)
Modification of lease contracts   981    -    2,506    - 
Other revenues   430    184    750    371 
Other expenses   (453)   (543)   (475)   (651)
Total   863    (709)   2,536    (1,153)

 

 

 

 

Vitru Limited 

Notes to the unaudited interim condensed consolidated financial statements

September 30, 2020 and 2019. 

(In thousands of Brazilian Reais, except as otherwise indicated)

 

21.Financial results

 

   Three months period ended
September 30,
   Nine months period ended
September 30,
 
   2020   2019   2020   2019 
Financial income                    
Interest on tuition fees paid in arrears   4,983    2,657    12,221    6,578 
Financial investment yield   763    3,051    2,599    8,500 
Foreign exchange gain   12,978    -    12,978    - 
Other   273    126    734    184 
Total   18,997    5,834    28,532    15,262 
                     
Financial expenses                    
Interest on accounts payable from acquisition of subsidiaries   (8,122)   (8,211)   (16,347)   (31,089)
Interest on lease   (3,735)   (3,066)   (11,301)   (9,132)
Interest on loans and financing   (2,237)   -    (4,244)   - 
Foreign exchange loss   (373)   -    (373)   - 
Other   (1,168)   (1,362)   (4,149)   (2,327)
Total   (15,635)   (12,639)   (36,414)   (42,548)
                     
Financial results   3,362    (6,805)   (7,882)   (27,286)

 

22.Other disclosures on cash flows

 

Non-cash transactions

 

In the nine months period ended September 30, 2020:

 

·The amount of R$ 41,779 (2019 - R$ 26,309), regarding additions on right-of-use assets, was also added in the lease liabilities line item.

 

·The amount of R$ 2,570 (2019 – R$ 1,039), regarding provision for contingencies of responsibility of the sellers of subsidiaries acquired in prior years, was reversed to the indemnification assets line item in non-current assets.

 

***