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Our Strategy

Our goal is to maintain our leadership position in the Post-Secondary Education market in the North and Northeast regions and also become even more relevant in the other regions of the country. In order to achieve this, we have developed a growth strategy based on three main pillars: (i) organic growth in the on-campus segment through the creation of new undergraduate programs in existing units and the accreditation of new units; (ii) organic growth in the distance learning segment, which is still underexplored and combines great growth potential and higher margins; and (iii) growth through select acquisitions that complement our operating platform in two fronts: (a) acquisition of institutions with consolidated regional recognition; and (b) acquisition of accreditations, i.e. institutions or white label entities (onerous assignment of accreditation for the operation of courses maintained by a given institution, without the need to acquire assets or the company) that have satisfactory quality concepts from the MEC, enabling the Group to grow faster in certain cities.

Organic growth in the North, Northeast and Southeast regions

a) Investment and creation of new undergraduate courses and increase in the number of places in existing units

Our activities have expanded strongly over the last five years, with a focus on organic growth. In 2009, we received approval from the MEC for 21,300 annual places compared with 536,200 annual places on December 31, 2017, an annual average growth rate of 49.7%.

We will seek to expand our smaller units in order to increase the number of available places, enabling organic growth while requiring low investments and presenting low risk. In addition, the University Centers we operate have greater autonomy to create new courses and increase the number of places, potentially enabling the acceleration of our organic growth.

We will continue to create new courses in our units that offer growth opportunities, focusing on the most profitable and highest demand courses, such as those in the health (Medicine, Dentistry, Psychology, among others) and engineering areas, which have a higher average monthly ticket and lower dropout rates.

b) Accreditation of new units

The accreditation process of new on-campus units by the MEC takes an average of 36 months. Based on Ser Educacional’s market intelligence, as well as Management’s experience of opening new campuses, the Company has identified opportunities for inaugurating new units in locations where demand has not yet been met by the existing local educational institutions. These new units will be strategically located to maintain the current level of attractiveness of our courses in other cities.

We currently have 45 new accreditation applications filed with the MEC. Of this total, 37 have completed the accreditation process. We believe these new accreditations will enable resilient and sustainable growth over the coming years, allowing the opening of new places in markets and regions where we currently do not operate.

c) Expansion of distance learning

The New Regulatory Framework for the distance learning segment, established by MEC Ordinance 11 of June 20, 2017, introduced standards for the accreditation and offering of distance learning courses, in accordance with Presidential Decree 9,057 of May 25, 2017. The New Regulatory Framework, among other rules, ensures autonomy to educational institutions accredited by the MEC to expand their distance learning centers, as long as they follow certain educational quality standards.

We believe we can strongly benefit from this regulatory change that limits supply in the distance learning market. We believe that strong regional brands will prevail over brands without a strong local presence when potential students choose which institution to attend and that the recognition of the UNINASSAU, Maurício de Nassau, UNAMA and UNIVERITAS brands will enable the sustainable growth of our distance learning program. Distance learning will also generate higher returns, since the marginal cost of new students is low and its operating expenses will be largely assimilated by our existing administrative structure. The segment is growing strongly in Brazil thanks to its affordable prices and more convenience, thereby attracting students with lower purchasing power living in cities that are far from the major urban centers.

We began the distance learning intake process in the first quarter of 2014. In November 2015, Universidade de Guarulhos (UNG) was accredited by the MEC to offer distance learning in Brazil. After the accreditation, UNG initially offered 18 distance learning courses through six centers in the cities of Guarulhos, Atibaia, Bragança Paulista and Itaquaquecetuba, significantly increasing UNG’s competitive skills. In December 2015, UNINASSAU secured the recognition of its distance learning course and filed an application for the accreditation of 400 new distance learning centers. These applications are concentrated in Brazil’s Northeast and North regions and are part of the Company’s organic growth strategy. Ser has already identified partners and the location of all 400 centers. On December 31, 2016, we had 15 distance learning centers and 6,100 students in the distance learning segment. On December 31, 2017, we expanded to 118 distance learning centers with 9,500 students.

d) Strengthening of our marketing campaigns in order to maintain the high recognition of our brands and attract more students

We believe that brands with a strong regional appeal and identification with the communities they serve will prevail in the post-secondary education market. We will thus continue to invest in communications initiatives with our surrounding communities, aiming to maintain or expand our brand recognition. We employ an integrated communications strategy that combines media insertions, social and environmental initiatives, support for sport and advertising campaigns to recruit students, not only to increase student intake in each period, but also to generate brand recognition and make our Group an integral part of its local communities. These initiatives are carried out jointly with our sales force, who works in coordination with our sales efforts at our units, directly contacting our target audiences. We also make use of other specific sales initiatives, such as partnerships with companies for internship and trainee programs, as well as with public agencies and schools. We also take part in college fairs and other important events in order to recruit potential students.

Since 2016, we have been making significant investments in marketing focused on the dissemination and recognition of its new brand, UNIVERITAS. In order to increase the Group’s presence nationwide, in 2016, we launched UNIVERITAS, whose operations are focused in Brazil’s Southeast, Midwest and South regions. As a result, we now operate in all the country’s regions, reinforcing its strategy of having recognized local brand with great appeal for students, professors, employers and society.

Acquisitions and sector consolidation

We intend to accelerate our growth through strategic and select acquisitions that complement our operating platform and our brand portfolio. Our inorganic growth strategy may be divided into two fronts: the acquisition of institutions with consolidated regional brand recognition, designed to expand our portfolios and achieve synergies with our distance learning platform; and the acquisition of accreditations, i.e. institutions with low brand recognition (known as white label), which have satisfactory concepts with the MEC and enable the Group to grow faster in certain cities, reducing both the operation’s maturation period and the investment risk compared with the term for approval of accreditation with the MEC and the high risk of launching a new unit in a new market.

The acquisition of institutions with regional recognition is intended to expand our brand portfolio and allow us to enter markets where we do not operate. In this strategy, we seek to acquire sizable institutions with regionally established brands that are more focused on health courses and preferably operate university centers.

The acquisition of accreditations, or white labels, allows accelerated growth using our already recognized brands. This strategy is similar to the organic opening of a unit, but takes substantially less time than the usual MEC accreditation process. This strategy is used to enter markets where our brands have great recall, but we still do not have any units or accreditations in progress.

We adopt strict criteria when acquiring new units, which include the suitability of the location and the facilities, their convenience for our students and the local competitive environment, all of which are verified through an extensive market analysis which includes variables, such as the size of the target market, the competitive dynamics, the post-secondary education penetration rate, number of high school graduates, the purchasing power of potential students and income stratification. Given the structure of the post-secondary market in the North and Northeast, where most of the possible acquisition targets are small and medium-sized colleges, university centers and universities, we conduct market surveys into the implementation of new programs that meet the needs of the acquired units.

Constant pursuit of increased efficiency and profitability

We invest constantly in the innovation of our academic model and will continue to develop and offer high-quality university and vocational programs that are continuously updated in order to meet the needs and profiles of our students and the market, administered by highly qualified professors, backed by up-to-date teaching methodologies and tools and appropriate and conveniently located campuses. We are aware that our students not only value receiving a first-class education that equips them for the job market, but they also value the Company’s high level of services. As a result, we will continue to invest heavily in infrastructure, especially digital infrastructure, seeking to improve our students’ experience. We also plan to improve our operating efficiency by (i) intelligently managing our course portfolio, focusing on programs with high demand and profitability; (ii) creating classes with a minimum number of students; and (iii) interconnecting our curricula. We regularly reassess our course portfolio based on market research, the economic development of each region where we operate, and the offerings of our competitors. The Company’s centralized academic team is always alert to the development of new programs, in addition to further developing those it already offers, if demand should so dictate.

Ongoing investments in technology

We intend to continue investing in technology in order to constantly improve the quality of our teaching and our relations with students and faculty. By doing so, we believe we will increase our operating efficiency, reduce costs, improve the comfort of our students and management and ensure more flexible product offerings, generating even more teaching quality control gains and further reducing campus costs. Finally, we will also be investing heavily in order to support our expected growth, ensuring an appropriate technological infrastructure for our students, faculty and administrative staff