ABRIL EDUCAÇÃO CONCLUDES MIGRATION TO NOVO MERCADO São Paulo, November 10, 2014 - Abril Educação S.A. (BM&FBOVESPA: ABRE3) announces its results for the third quarter of 2014 (3Q14) and first nine months of 2014 (9M14). The comments herein refer to the consolidated results in accordance with International Financial Reporting Standards (IFRS) and comparisons are with the same period in 2013, as indicated. KEY INDICATORS – CONSOLIDATED (R$ mm) QUARTER 3Q14 3Q13 Change(%) 3Q14/3Q13 YTD 9M14 9M13 Change(%) 9M14/9M13 Net Revenue 210.6 178.4 18% 753.7 568.0 33% (=) Adjusted EBITDA (current) 25.3 24.9 1% 160.8 134.8 19% (+) Provision for restructuring (non-recurring) 0.0 0.0 - 27.9 0.0 - (=) Adjusted EBITDA for restructuring provision 25.3 24.9 1% 188.7 134.8 40% EBITDA Margin (%) (=) Net Income (loss) before minority interest Operating Cash Generation 12% 14% -2 p.p. 25% 24% 1 p.p. (17.0) (13.6) -25% 2.5 15.6 -84% (3.1) (2.0) -55% 234.5 173.5 35% HIGHLIGHTS On October 23, the company completed its migration to the Novo Mercado, the listing segment of the BM&FBOVESPA with the highest corporate governance standards. As of this date, the stock of Abril Educação started its trading under the ticker "ABRE3," even though the Company has been trading common shares already since September 26, in accordance with the decision approved by the Extraordinary Shareholders’ Meeting. Created in 2000, the Novo Mercado segment has 134 companies that are distinguished by the transparency adopted in their management. In Learning Systems business, which comprises Traditional Learning Systems (Anglo, pH, SER, GEO, Maxi and Farias Brito), ETB Learning Systems and The Leader in Me (OLEM) program, we ended September with 865,000 students, up 52% over 3Q13. This increase is explained by the organic growth of 77,000 students (14%) in the Traditional Learning Systems; the growth of 176,000 students in the ETB Technical Learning System due to the recognition of second-semester students under the PRONATEC program; and the additional 42,000 students from the OLEM program, due to the signing of agreements in the public segment to serve 18,000 new students. Publishers received a total order of 32.0 million books for the 2015 National Textbook Program (PNLD), the results of which were announced on September 23. The amount of revenue expected from the program in 4Q14, assuming the invoicing of the full amount in the period, is R$245 million for physical books. Digital books, which are not included in this order, will be negotiated separately on a date to be announced by the National Education Development Fund (FNDE). Based on estimates from Abrelivros, the market share in purchases for High Schools achieved by the Publishing Houses in the 2015 PNLD was 25%. Operating cash generation in 3Q14 was negative R$3.1 million, compared to negative R$2.0 million in 3Q13. This result is due to: (i) the seasonality of the Publishing business, which increases inventory levels in the third quarter to meet the needs of the private market; and (ii) the non-recurring disbursements related to the restructuring provision announced in 2Q14. In 9M14, operating cash generation grew 35% to R$234.5 million, from R$173.5 million in 9M13. Net revenue advanced 18% from 3Q13 to R$210.6 million. On a comparable basis, after excluding the R$19.9 million from Colégio Sigma, which was consolidated in October 2013, net revenue advanced 7% from 3Q13. In 9M14, net revenue amounted to R$753.7 million, growing 33% over 9M13. On a comparable basis, excluding R$133.9 million from the acquisitions (Grupo Ometz, Sigma, Motivo) and the anticipation of orders for Learning Systems, net revenue posted organic growth of 10% compared to 9M13. In 2Q14, we recognized a restructuring provision in the amount of R$27.9 million involving non-recurring costs. Of this amount, R$18.2 million has already been realized, most of which was used for severance payments arising from adjustments to the new organizational structure. In 3Q14, adjusted EBITDA amounted to R$25.3 million, advancing 1% over 3Q13. Excluding the acquisition of Colégio Sigma in the amount of R$3.9 million, EBITDA decreased 16% to R$20.8 million. This result was primarily affected by the lower contribution from the Publishers business to revenue in the quarter, due to the nonrecognition of revenue from special sales in the private market and to the postponement of costs and expenses linked to the production of teacher’s books for distribution in the 2015 PNLD, due to the delay in the program's announcement from 2Q14 to 3Q14. In 9M14, EBITDA adjusted by the restructuring provision amounted to R$188.7 1 million, growing 40% over 9M13. Excluding the non-recurring effects related to the acquisitions and the anticipation of orders for Learning Systems of R$31.7 million, EBITDA recorded organic growth of 16% in 9M14. On September 17, we announced the hiring of two executives to join the team at Grupo Ometz (Wise Up, Wise Up Teens, You Move and You Move Teens): (i) Marcelo Bruzzi, who was appointed CEO of Grupo Ometz (and a VicePresident at Abril Educação); and (ii) Durval Antunes Filho, who was appointed Vice-President of the recently created Academic Opportunities area of Grupo Ometz, reporting to Marcelo Bruzzi. On September 24 and November 10, the Board of Directors (BoD) accepted the resignations of Paulo Roberto Nunes Guedes and Manoel Amorim from their positions on the BoD to which they had been elected in the Extraordinary Shareholders’ Meeting of August 25, 2014. On November 10, the Board of Directors elected Wolfgang Stephan Schwerdtle, Head of GIC Brazil Office; and Marcelo Vaz Bonini, Financial Director at Abrilpar, as the new sitting members to serve until the end of the current term of office. The nomination of the new directors must be ratified at the next Shareholders' Meeting of the Company to be held. MESSAGE FROM MANAGEMENT In 9M14, we posted growth of 33% in net revenue, 40% in Adjusted EBITDA and 35% in operating cash generation compared to the year-ago period. The acquisitions of Grupo Ometz, Colégio Motivo and Colégio Sigma contributed to these results, as also did our existing businesses, namely Learning Systems, Publishing and Preparatory Schools and Courses, which continue on their growth path. Two important advances marked the management of Abril Educação in 3Q14. The first was the consolidation of the process to integrate the Learning System and Publishing segments, which began to work more closely together on publishing and sales activities, in accordance with the project to capture synergies proposed by the mapping process conducted by the consulting firm Galeazzi that has already been concluded. This integration, which strengthens the Company's focus on operational efficiency and better allocation of capital, has already identified quality gains in the sales and editorial areas to support reductions in CAPEX in the editorial area. Another major achievement was the migration of Abril Educação to the Novo Mercado listing segment of the BM&FBovespa, which is formed by publicly traded companies with recognized governance practices rooted in transparency. Joining the Novo Mercado represents a valuable accreditation of an ethical nature in the corporate world and was made possible by the conversion of all the Company's preferred shares into common shares on September 26, in accordance with the decision made by the shareholders at the Extraordinary Shareholders' Meeting and the Special Shareholders' Meeting. Although typically a period with few events, the third quarter was marked by the strengthening of the Learning Systems business with the signing of agreements with two municipal governments to include 18,000 students from the public segment in The Leader in Me (OLEM) program. The Company also inaugurated three new units in the Schools and Preparatory Courses business (two under the pH brand in Rio de Janeiro and one under the Colégio Motivo brand in Caruaru, Pernambuco) and installed five in-school projects under the Red Balloon brand in the Language Schools business. At Grupo Ometz (Wise Up, Wise Up Teens, You Move and You Move Teens), we announced the hiring of the executives Marcelo Bruzzi, as Language Vice-President, and Durval Antunes Filho, in the recently created position of Vice-President of Academic Operations. Supported by the diversified experience of these two new executives at the helm of Grupo Ometz, we expect to capture higher value from this asset and to structure the business to increase sales, expand margins, improve the academic quality of franchised units and consequently leverage its results. In the Publishing business, the results of the 2015 National Textbook Program (PNLD), announced in September 23, determined the sale of 32.0 million books, which was in line with our expectations and represents projected revenue of R$245 million in 4Q14 and market share of 25% in the PNLD, based on estimates from Abrelivros. Digital books, which are not included in this amount, will be negotiated separately on a date to be announced by the National Education Development Fund (FNDE). As such, we ended September better prepared to face the challenges of capturing value at Grupo Ometz, maintaining organic growth in our existing businesses and integrating the new acquisitions that we planned to make in 2015. The results achieved to date are extremely positive, which leaves us comfortable with achieving the growth we targeted for this year and with starting 2015 on a good note with even more aggressive targets. With our management 2 strengthened by the continuous performance monitoring and by meritocracy, we have every reason to believe in growing student loyalty in our Learning Systems and Schools, in the attraction of new partners and in growing sales of our products and services already as of the end of this year. OPERATING PERFORMANCE ANALYSIS I) Educational Products and Services Learning Systems We ended September 2014 with 865,000 students, representing growth of 52% from a year earlier. The highlights were: (i) Traditional Learning Systems (Anglo, pH, SER, GEO, Maxi and Farias Brito), which maintained its growth trajectory, with the student base expanding 14% to 635,000 at the close of September 2014. Net revenue per student on a comparable basis advanced 3% to R$106.5/student, from R$103.2/student in 3Q13, despite the passthrough of inflation; the average ticket was also impacted by strong growth in the public segment, which has lower average tickets than the private market, and by the growth of the Maxi brand, which also has lower average tickets; (ii) The ETB Technical Learning System with 183,000 students at 129 postsecondary institutions and technical schools, including the openings for PRONATEC students awarded for the second semester of the year; and (iii) The Leader in Me (OLEM) with 48,000 students enrolled at 119 schools, representing growth of 42,000 students compared to 3Q13, due to the signing of new agreements in the public segment. Number of Students 3Q14 3Q13 Learning Systems (%) 635 558 14% Technical Learning System (ETB) 183 7 2515% The Leader in Me (OLEM) 48 6 721% Total Students 865 571 52% Publishers In the private segment, Publishers registered a decrease in book sales volume of 1.7 million books in 3Q14 and 2.2 million books in 9M14. This decrease is explained by the non-recurring sale of 1.7 million books to the Foundation for Educational Development (FDE-SP) not being repeated this year. Excluding this effect, volume was stable in 3Q14 and decreased by 0.4 million in 9M14. In the public segment, Publishers registered increases of 1.2 million in 3Q14 and 0.5 million in 9M14 in the number of books sold, which amounted to 1.3 million and 1.9 million respectively. The volume growth registered in the period was due to the recognition of certain sales to the government, such as those under the National School Library Program - PNBE (1.1 million) and additions to the 2014 PNLD. II) Schools and Preparatory Courses The Schools and Preparatory Courses business (Anglo, pH, Motivo and Sigma) ended 3Q14 with 24,800 students enrolled at 19 units, representing growth of 23% from 2013. On a comparable basis, including in 3Q13 Colégio Sigma, which was acquired in October 2013, the number of students in the segment fell 2% from 25,200 in 3Q13 to 24,800 in 3Q14, due to the lower number of students in Anglo's semi-intensive preparatory courses. In the Schools segment (excluding preparatory courses), growth on a comparable basis remains the same as the rate in 2Q14, of 3%, increasing from 12,800 to 13,200 students. On a comparable basis, the average ticket in the Schools segment increased 9%. In the Preparatory Courses segment, which has a different dynamic than the Schools segment, the student base fell by 6%, which was offset by a 6% increase in the average ticket due to the price increases implemented and the effects from the mix of courses offered. 3 III) Language Courses The language schools (Red Balloon and Grupo Ometz) ended September with 86,600 students enrolled at 401 units. Red Balloon had 14,800 students at 8 own units and 40 franchisees, which already includes the opening of 15 new units in 2014. Compared to 3Q13, the number of students and franchises in the quarter grew by 9% and 45%, respectively. At the close of 3Q14, Grupo Ometz had 71,800 students enrolled, an increase of 3% compared to 2013, and 353 franchisees, a decrease of 8% in the total number of franchise units. As a result, the number of students per franchise unit grew by 12% in 3Q14 compared to 3Q13. The Grupo Ometz brands sold 12,000 teaching material kits in 3Q14, or 2% more than the 11,800 registered in 3Q13. In 3Q14, enrollments amounted to 16,900, increasing 3% from the year-ago period (16,400). Chain expansion – Language Schools In 9M14, a total of 91 new agreements were signed for the opening of franchises, of which: (i) 46 were signed in 1Q14; (ii) 35 were signed in 2Q14; and (iii) 10 were signed in 3Q14; Of these 10 more-recent new agreements: (i) 2 are for the Red Balloon brand; and (ii) 8 are for the Wise Up and You Move brands. Of the 91 new agreements signed in 9M14, 22 have already resulted in the opening of new franchises, 15 of which under the Red Balloon brand and 7 under the brands of Grupo Ometz. FINANCIAL PERFORMANCE ANALYSIS I) Abril Educação Consolidated Financial Information QUARTER 3Q14 3Q13 Change(%) 3Q14/3Q13 YTD 9M14 9M13 Change(%) 9M14/9M13 33% Net Revenue 210.6 178.4 18% 753.7 568.0 (-) Cost of goods sold (COGS) (68.7) (43.5) 58% (204.9) (154.7) 32% (=) Gross Profit 141.9 134.9 5% 548.8 413.2 33% Gross margin (%) (-) Selling, general and administrative expenses (=) Operating income (loss) Operating Margin(%) 67% 76% -9 p.p. 73% 73% 0 p.p. (139.5) (126.4) 10% (460.3) (328.9) 40% 2.4 8.5 -72% 88.5 84.3 5% 1% 5% -4 p.p. 12% 15% -3 p.p. (-) Financial Result (25.1) (19.4) 29% (71.0) (39.0) 82% (=) Net Income (loss) before shareholding (22.7) (10.9) -309% 17.5 45.3 -61% (-) Equity income (=) Net Income (loss) before income tax and social contribution (-) Income tax and social contribution (=) Net Income (loss) before minority interest (+) Non-controlling interest (=) Net Income (loss) after minority interest Net Margin (%) 0.6 0.0 0% (0.2) 0.0 0% (22.1) (10.9) -303% 17.3 45.3 -62% 5.1 (2.7) 89% (14.8) (29.7) 50% (17.0) (13.6) -25% 2.5 15.6 -84% (1.7) (1.6) 7% (8.3) (3.3) 151% (18.7) (15.1) -23% (5.8) 12.3 -147% -3 p.p. -9% -8% -1 p.p. -1% 2% (=) Operating income (loss) 2.4 8.5 -72% 88.5 84.3 5% (+) Depreciation and Amortization 19.9 14.0 42% 57.2 36.0 59% (+) Amortization of publishing investment 3.0 2.4 26% 15.1 14.5 4% (=) Adjusted EBITDA (current) 25.3 24.9 1% 160.8 134.8 19% (+) Provision for restructuring (non-recurring) 0.0 0.0 ... 27.9 0.0 0% (=) Adjusted EBITDA by restructuring provision 25.3 24.9 1% 188.7 134.8 40% EBITDA Margin (%) 12% 14% -2 p.p. 25% 24% 1 p.p. Net Revenue Net revenue advanced 18% from 3Q13 to R$210.6 million. On a comparable basis, after excluding the R$19.9 million from Colégio Sigma, which was consolidated in October 2013, net revenue advanced 7% from 3Q13. In 9M14, net revenue amounted to R$753.7 million, growing 33% over 9M13. On a comparable basis, excluding R$133.9 million from the acquisitions (Grupo Ometz, Sigma, Motivo) and the anticipation of orders for Learning Systems, net revenue posted organic growth of 10% compared to 9M13. 4 On a comparable basis: (*) Excludes the effects from acquisitions: (3Q14: R$19.9 million), Grupo Ometz, Motivo and Sigma (9M14: R$133.9 million) and the anticipation of Learning Systems (3Q14: R$0.6 million) and (9M14 R$2.2 million); Cost of Goods Sold (COGS) Consolidated COGS in 3Q14 advanced 58% to R$68.7 million, with gross margin of 67%, with this figure including R$12.7 million related to the acquisition of Colégio Sigma. Excluding this effect, COGS in 3Q14 increased 30% and gross margin decreased 5 p.p. to 71%. The increase in COGS in the period is primarily explained by the recognition of costs related to the delay in the announcement of the 2015 PNLD, with no offsetting amounts in revenue. In 9M14, COGS increased 32% from 9M13 to R$204.9 million. Excluding the effects of acquisitions (Grupo Ometz, Sigma and Motivo) and the anticipation of costs in Learning Systems of R$42.2 million, COGS grew 6% in 9M14 compared to 9M13, lagging the revenue growth of 10% in the period on the same basis. On a comparable basis: (*) Excludes the effects from acquisitions: Sigma (3Q14: R$12.7 million), Grupo Ometz, Motivo and Sigma (9M14: R$42 million); anticipation of Learning Systems (3Q14: R$0.1 million) and (9M14: R$0.2 million). Selling, General and Administrative (SG&A) Expenses Total expenses in 3Q14 amounted to R$139.5 million, increasing 10% from 3Q13, due to the higher expenses related to Colégio Sigma (R$5.2 million). Excluding this effect, total expenses increased 6% in the quarter, in line with inflation. In 9M14, expenses amounted to R$460.3 million, 40% higher than in 9M13. This increase was due to the recognition of the restructuring provision announced in 2Q14 (R$27.9 million), the expenses related to the acquired companies (R$65.3 million), the expenses related to moving the Company’s head office (R$5.2 million) and the expenses related to consulting services (R$7.2 million). Excluding these effects, expenses in 9M14 increased 8%. 5 EBITDA In 3Q14, adjusted EBITDA amounted to R$25.3 million, advancing 1% over 3Q13. Excluding the acquisition of Colégio Sigma in the amount of R$3.9 million, EBITDA decreased 16% to R$20.8 million. This result was primarily affected by the lower contribution from the Publishers business to revenue in the quarter, due to the non-recognition of revenue from special sales in the private market and to the postponement of costs and expenses linked to the production of teacher’s books for distribution in the 2015 PNLD, due to the delay in the program's announcement from 2Q14 to 3Q14. In 9M14, EBITDA adjusted by the restructuring provision amounted to R$188.7 million, growing 40% over 9M13. Excluding the non-recurring effects related to the acquisitions and the anticipation of orders for Learning Systems of R$31.7 million, EBITDA recorded organic growth of 16% in 9M14. On a comparable basis (EBITDA adjusted by restructuring): (*) Excludes the effects from acquisitions: Sigma (3Q14: R$3.9 million) Grupo Ometz, Motivo and Sigma (9M14: R$29.9 million) Net effect of FIFA marketing (R$5.0 million); anticipation of Learning Systems (3Q14: R$0.5 million) and (9M14: R$1.8 million). Financial Result The net financial expense amounted to R$25.1 million in the quarter, compared to the expense of R$19.4 million in 3Q13. This increase is explained by the growth in the Company’s debt resulting from its investment strategy and by higher interest rates than in the year–ago period. 3Q14 3Q13 9M14 9M13 Financial Results (25.1) (19.4) (71.0) (39.0) Finance income 13.1 8.6 40.0 26.2 Finance costs (38.1) (28.0) (111.0) (65.2) Cash + Investments (287.5) (255.7) (287.5) (255.7) Gross Debt 1,148.3 1,034.5 1,148.3 1,034.5 860.8 778.8 860.8 778.8 Net Debt Investments As of September 2014, investments amounted to R$75.7 million, allocated as follows: (i) R$43.2 million to acquisitions of property and equipment and intangible assets; and (ii) R$32.5 million to the production of digital content for the PNLD process, new collections and the reformulation and updating of collections and materials of the publishers and learning systems. Total investments in the period were 32% higher than the R$57.3 million invested in 2013, mainly due to the new assets acquired in 2013, the production of own collections by Red Balloon and the one-time investments related to moving the Company’s head office in the amount of R$13.7 million. Excluding this nonrecurring effect, investments in 9M14 amounted to R$62.0 million. Operating Cash Generation Operating cash generation in 3Q14 was negative R$3.1 million, compared to negative R$2.0 million in 3Q13. This result is due to: (i) the seasonality of the Publishing business, which typically has lower revenue in the third quarter of the year; and (ii) the non-recurring disbursements related to the restructuring provision announced in 2Q14. In 9M14, operating cash generation increased 35% to R$234.5 million, from R$173.5 million in 9M13. In 9M14, the R$61 million increase in operating cash is explained: (i) the growth in existing businesses, which accounted for 84% of this surplus, with the highlight the performance of Learning Systems, Publishers and Complementary Products; and (ii) the full contribution from the acquired assets (Grupo Ometz, Colégio Sigma and Colégio Motivo), which accounted for 16% of the increase, despite the payment of installments of the FIFA agreement with Grupo Ometz, as previously disclosed. 6 Cash generation net of interest and tax payments was negative R$48.5 million in 3Q14, compared to negative R$26.5 million in 3Q13. In 9M14, cash generation net of interest and tax payments decreased 3% on the prior year to R$115.5 million. These variations were primarily impacted by semiannual interest payments on the bonds of the publishers Ática and Scipione issued in September 2013 and by the interest related to the last installment of the Anglo acquisition. Capital Structure Abril Educação ended September 2014 with consolidated net debt of R$860.8 million, which corresponds to gross debt of R$1,148.3 million net of cash and cash equivalents of R$287.5 million. Total gross debt was formed by R$758.6 million in financial debt and R$389.7 million in debt with the sellers of the acquired companies. Of this amount, 83% corresponded to long-term debt. The increase of R$55.7 million in net debt in the quarter was due to a period of operating cash consumption that is typical to the third quarter of the year. Net Debt Net Debt / EBITDA* 1,400 1,200 2.7 2.8 2.5 2.4 2.4 891.5 844.1 805.1 860.8 4Q13 1Q14 2Q14 3Q14 1,000 2.0 800 600 400 779.6 0.6 590.6 200 0 161.2 1Q13 2Q13 3Q13 (*) EBITDA “As Is” in the last 12 months + Wise Up pro-forma, as described in the covenants of the debentures. II) Highlights of Educational Products and Services in the Quarter Learning Systems Learning Systems -R$ mm Net Revenue (-) Cost of goods sold (COGS) (=) Gross Profit Gross margin (%) (-) Selling, general and administrative expenses (=) Operating income (loss) (+) Depreciation and Amortization (+) Amortization of publishing investment EBITDA EBITDA Margin (%) 3Q14 75.9 (15.0) 60.9 80% (25.3) 35.6 0.7 2.4 38.7 51% 3Q13 58.1 (10.3) 47.9 82% (17.6) 30.2 0.4 1.8 32.5 56% 3Q14/3Q13 31% 46% 27% -2 p.p. 44% 18% 60% 34% 19% -5 p.p. 9M14 261.8 (48.0) 213.8 82% (68.3) 145.5 1.6 7.9 155.0 59% 9M13 201.6 (37.9) 163.8 81% (48.4) 115.3 1.3 5.2 121.8 60% 9M14/9M13 30% 27% 31% 1 p.p. 41% 26% 22% 53% 27% -1 p.p. Note: Figures for 3Q14 and 3Q13 were adjusted for the effects from brand eliminations. ETB and OLEM included as from 1Q13. The Learning Systems benefitted in the quarter by: (i) the organic growth in Traditional Learning Systems (Anglo, pH, SER, GEO, Maxi and Farias Brito) driven by the growth of 77,000 students (+14%); (ii) the recognition of the contribution from the ETB Technical Learning System to serve students under PRONATEC, which did not occur in 3Q13; (iii) the significant expansion in the student base of the OLEM program; and (iv) the anticipation of orders from 4Q14 to 3Q14. The increases registered in the quarter in COGS and in selling, general and administrative expenses (46%) are mainly explained by: (i) the recognition of costs and expenses linked to the ETB Technical Learning System and OLEM; (ii) the effects from the anticipations of orders, carrying the respective costs and expenses; (iii) the expenses with royalties for the partnership with the Farias Brito Learning System, which varies in accordance with the revenue earned; and (iv) the expenses with the expansion of the sales team to strengthen the Learning Systems business. These advances in costs and expenses contributed to a 5 p.p. contraction in EBITDA margin in the quarter, from 56% in 3Q13 to 51% in 3Q14. 7 Publishers Publishers -R$ mm Net Revenue (-) Cost of goods sold (COGS) (=) Gross Profit Gross margin (%) (-) Selling, general and administrative expenses (=) Operating income (loss) (+) Depreciation and Amortization (+) Amortization of publishing investment EBITDA EBITDA Margin (%) 3Q14 12.4 (16.7) (4.2) -34% (31.5) (35.7) 1.4 0.6 (33.7) -271% 3Q13 16.6 (7.9) 8.7 52% (36.6) (27.9) 1.9 0.6 (25.4) -153% 3Q14/3Q13 -25% 111% -148% -86 p.p. -14% 28% -24% 1% 33% -118 p.p. 9M14 115.9 (44.2) 71.6 62% (98.1) (26.4) 3.8 7.1 (15.5) -13% 9M13 140.4 (45.3) 95.1 68% (111.2) (16.0) 5.6 9.4 (1.0) -1% 9M14/9M13 -17% -2% -25% -6 p.p. -12% 66% -31% -24% 1485% -12 p.p. In 3Q14, revenue from the Publishing was impacted by the 25% decrease in the number of books sold, especially in the private segment due to the non-recurring sale of 1.7 million books to FDESP in 3Q13. As mentioned in last quarter's earnings release, the 111% increase in COGS in 3Q14 was due to the shifting of costs related to the distribution of teacher’s books for the announcement of the 2015 PNLD. The lower revenue combined with the higher COGS contributed to a reduction in the EBITDA of the Publishing business compared to 3Q13. III) Highlights of Schools and Preparatory Courses in the Quarter Schools and Prep. Courses -R$ mm Net Revenue (-) Cost of goods sold (COGS) (=) Gross Profit Gross margin (%) (-) Selling, general and administrative expenses (=) Operating income (loss) (+) Depreciation and Amortization (+) Amortization of publishing investment EBITDA EBITDA Margin (%) 3Q14 79.7 (36.7) 43.0 54% (25.4) 17.6 1.3 0.0 18.9 24% 3Q13 59.5 (22.5) 37.0 62% (19.4) 17.6 1.3 0.0 18.9 32% 3Q14/3Q13 34% 63% 16% -8 p.p. 31% 0% 2% 0% 0% -8 p.p. 9M14 224.6 (102.2) 122.4 55% (72.1) 50.3 3.8 0.0 54.1 24% 9M13 142.2 (59.6) 82.6 58% (51.9) 30.7 2.5 0.0 33.3 23% 9M14/9M13 58% 72% 48% -3 p.p. 39% 64% 49% 0% 62% 1 p.p. In the Schools and Preparatory Courses, the Company recognized in the quarter R$19.9 million in revenue from Colégio Sigma, which was consolidated in October 2013. Excluding the effect of this acquisition, net revenue was virtually flat at around R$60 million. The increases in COGS (63%) and expenses (31%) in 3Q14 are explained by the recognition of R$12.7 million related to Colégio Sigma. Excluding this effect, costs and expenses increased 8%. The increase in costs and expenses, which outpaced revenue growth, led to EBITDA margin contraction in the quarter. Another factor contributing to margin contraction in 3Q14 was the segregation of amounts related to teaching materials, which previously were incorporated into the monthly tuition payments at Cursinho Anglo, in line with the standard practice adopted for the Company's other schools. Due to this adjustment, there was a shift from 3Q14 to 4Q14 of R$4.0 million in revenue and of R$1.4 million in EBITDA that had no impact on the growth trajectory of this business line in the year. 8 IV) Highlights of Language in the Quarter Languages -R$ mm Net Revenue (-) Cost of goods sold (COGS) (=) Gross Profit Gross margin (%) (-) Selling, general and administrative expenses (=) Operating income (loss) (+) Depreciation and Amortization (+) Amortization of publishing investment EBITDA EBITDA Margin (%) 3Q14 40.9 (3.7) 37.2 91% 3Q13 39.9 (3.3) 36.6 92% 3Q14/3Q13 2% 12% 1% -1 p.p. 9M14 134.7 (13.0) 121.7 90% 9M13 75.5 (12.1) 63.4 84% 9M14/9M13 78% 8% 92% 6 p.p. (24.5) (25.2) -3% (89.9) (40.3) 123% 12.6 0.6 0.0 13.2 32% 11.4 0.6 0.0 12.1 30% 10% -9% 0% 10% 2 p.p. 31.8 1.4 0.0 33.2 25% 23.1 0.9 0.0 24.0 32% 38% 61% 0% 38% -7 p.p. The highlights of the Language business in the quarter were: (i) revenue at the Grupo Ometz in 3Q14 remaining stable at R$33.9 million, due to the discounts for credit card payments, which already account for 36% of total payments; (ii) the 11% increase in COGS due to the wage increases under collective bargaining agreements at the owned schools of Red Balloon; and (iii) the 3% decrease in expenses due to the review of headcount. These factors combined contributed to a 2 p.p. increase in EBITDA margin in the quarter, from 30% in 3Q13 to 32% in 3Q14. In 3Q14, EBITDA in the Language business adjusted by the present value of receivables of R$1.6 million and the FIFA expense of R$1.3 million at Grupo Ometz amounted to R$16.1 million with adjusted margin of 39%. 9 INCOME STATEMENT – BY BUSINESS LINE 3Q14 – Corporate* (R$ million) Per Business Line -R$ mm 3Q14 Results Publishers Learning Systems Schools and Prep. Language Others Courses Net Revenue 12.4 75.9 79.7 (-) Cost of goods sold (COGS) (16.7) (15.0) (=) Gross Profit (4.2) 60.9 Corporate Expenses Elimination Amortization (3.9) 0.0 Consolidated AE 40.9 5.6 0.0 210.6 (36.7) (3.7) (0.1) 0.0 3.4 0.0 (68.7) 43.0 37.2 5.5 0.0 (0.5) 0.0 141.9 Gross m argin (%) -34% 80% 54% 91% 99% ... 13% ... 67% (-) Selling, general and administrativ e expenses (31.5) (25.3) (25.4) (24.5) (5.5) (13.5) 0.5 (14.3) (139.5) (=) Operating income (loss) (35.7) 35.6 17.6 12.6 (0.0) (13.5) 0.0 (14.3) 2.4 1.4 0.7 1.3 0.6 0.7 0.8 0.0 14.3 19.9 (+) Depreciation and Amortization (+) Amortization of publishing inv estment (=) Adjusted EBITDA 0.6 2.4 0.0 0.0 0.0 0.0 0.0 0.0 3.0 (33.7) 38.7 18.9 13.2 0.7 (12.6) 0.0 0.0 25.3 (+) Prov ision for restructuring (non-recurring) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (=) Adjusted EBITDAby restructuring provision (33.7) 38.7 18.9 13.2 0.7 (12.6) 0.0 0.0 25.3 EBITDA Margin (%) -271% 51% 24% 32% 12% ... 0% ... 12% 3Q13 – Corporate* (R$ million) Per Business Line -R$ mm 3Q13 Results Publishers Learning Systems Schools and Prep. Language Net Revenue 16.6 58.1 59.5 (-) Cost of goods sold (COGS) (7.9) (10.3) (=) Gross Profit 8.7 47.9 Gross m argin (%) Others Courses Corporate Expenses Elimination Amortization (1.6) 0.0 Consolidated AE 39.9 5.8 0.0 178.4 (22.5) (3.3) (1.4) 0.0 1.9 0.0 (43.5) 37.0 36.6 4.4 0.0 0.3 0.0 134.9 52% 82% 62% 92% 76% ... -20% ... 76% (-) Selling, general and administrativ e expenses (36.6) (17.6) (19.4) (25.2) (2.7) (15.0) (0.3) (9.6) (126.4) (=) Operating income (loss) (27.9) 30.2 17.6 11.4 1.7 (15.0) 0.0 (9.6) 8.5 1.9 0.4 1.3 0.6 0.1 0.0 0.0 9.6 14.0 (+) Depreciation and Amortization (+) Amortization of publishing inv estment (=) Adjusted EBITDA 0.6 1.8 0.0 0.0 0.0 0.0 0.0 0.0 2.4 (25.4) 32.5 18.9 12.1 1.9 (15.0) 0.0 0.0 24.9 (+) Prov ision for restructuring (non-recurring) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (=) Adjusted EBITDAby restructuring provision (25.4) 32.5 18.9 12.1 1.9 (15.0) 0.0 0.0 24.9 EBITDA Margin (%) -153% 56% 32% 30% 32% ... -2% ... 14% Elimination Amortization 143% ... 18% 58% 3Q14 vs. 3Q13 – Change (%) Per Business Line -R$ mm - Changes % 3Q14 vs 3Q13 Net Revenue Publishers Learning Systems -25% 31% (-) Cost of goods sold (COGS) 111% (=) Gross Profit -148% Schools and Prep. Language Others Courses Corporate Expenses Consolidated AE 34% 2% -4% ... 46% 63% 12% -95% ... 77% ... 27% 16% 1% 25% ... -254% ... 5% -86 p.p. -2 p.p. -8 p.p. -1 p.p. 23 p.p. ... 33 p.p. ... -9 p.p. (-) Selling, general and administrativ e expenses -14% 44% 31% -3% 107% -10% -267% 49% 10% (=) Operating income (loss) 28% 18% 0% 10% 101% -10% -100% 49% -72% (+) Depreciation and Amortization -24% 60% 2% -9% 416% ... ... 49% 42% 1% 34% 0% 0% ... ... ... ... 27% 33% 19% 0% 10% 65% -16% -100% ... 1% (+) Prov ision for restructuring (non-recurring) ... ... ... ... ... ... ... ... ... (=) Adjusted EBITDAby restructuring provision 33% 19% 0% 10% 65% -16% -100% ... 0% -118 p.p. -5 p.p. -8 p.p. 2 p.p. 45 p.p. ... ... ... -2 p.p. Gross m argin (%) (+) Amortization of publishing inv estment (=) Adjusted EBITDA EBITDA Margin (%) (*) Consolidated data on a corporate basis and data by business on a managerial basis. Consolidated EBITDA is adjusted by amortization of the publishing investment. In accordance with CVM Instruction 527/12, EBITDA is defined as Earnings Before Interest, Tax (Income and Social Contribution Taxes), Depreciation and Amortization. On this basis, in accordance with this Instruction, EBITDA amounted to R$22.5 million in 3Q13 and R$22.3 million in 3Q14. EBITDA was R$120.3 million in 9M13 and R$145.7 million in 9M14. Adjusted EBITDA is calculated based on operating income including the amounts related to depreciation and amortization and including amortization of publishing investments. Pursuant to CVM Instruction 527/12, the company may opt to report EBITDA excluding the net amounts related to discontinued operations, as per Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, and adjusted for other items that contribute to information on the potential gross cash generation. 10 INCOME STATEMENT – BY BUSINESS LINE 9M14 – Corporate* (R$ million) Per Business Line -R$ mm 9M14 Results Publishers Net Revenue 115.9 (-) Cost of goods sold (COGS) (=) Gross Profit Gross m argin (%) Learning Systems Schools and Prep. Language Others Courses 261.8 224.6 (44.2) (48.0) (102.2) 71.6 213.8 122.4 62% 82% 55% (-) Selling, general and administrativ e expenses (98.1) (68.3) (=) Operating income (loss) 134.7 Corporate Expenses Consolidated Elimination Amortization (5.6) 0.0 753.7 AE 22.4 0.0 (13.0) (2.0) 0.0 4.5 0.0 (204.9) 121.7 20.4 0.0 (1.1) 0.0 548.8 90% 91% ... 20% ... 73% (72.1) (89.9) (17.4) (72.3) 1.1 (43.3) (460.3) (26.4) 145.5 50.3 31.8 2.9 (72.3) 0.0 (43.3) 88.5 (+) Depreciation and Amortization 3.8 1.6 3.8 1.4 2.4 0.8 0.0 43.3 57.2 (+) Amortization of publishing inv estment 7.1 7.9 0.0 0.0 0.1 0.0 0.0 0.0 15.1 (15.5) 155.0 54.1 33.2 5.6 (71.5) 0.0 0.0 160.8 (=) Adjusted EBITDA (current) (+) Prov ision for restructuring (non-recurring) 0.0 0.0 0.0 0.0 0.0 27.9 0.0 0.0 27.9 (=) Adjusted EBITDAby restructuring provision (15.5) 155.0 54.1 33.2 5.6 (43.6) 0.0 0.0 188.7 EBITDA Margin (%) -13% 59% 24% 25% 25% ... 0% ... 25% 9M13 – Corporate* (R$ million) Per Business Line -R$ mm 9M13 Results Publishers Net Revenue 140.4 (-) Cost of goods sold (COGS) (=) Gross Profit Gross m argin (%) Learning Systems Schools and Prep. Language Others Courses Corporate Expenses Consolidated Elimination Amortization (5.0) 0.0 568.0 AE 201.6 142.2 75.5 13.3 0.0 (45.3) (37.9) (59.6) (12.1) (4.9) 0.0 4.9 0.0 (154.7) 95.1 163.8 82.6 63.4 8.4 0.0 (0.1) 0.0 413.2 68% 81% 58% 84% 63% ... 1% ... 73% (-) Selling, general and administrativ e expenses (111.2) (48.4) (51.9) (40.3) (8.6) (43.5) 0.1 (25.2) (328.9) (=) Operating income (loss) (16.0) 115.3 30.7 23.1 (0.2) (43.5) 0.0 (25.2) 84.3 (+) Depreciation and Amortization 5.6 1.3 2.5 0.9 0.4 0.0 0.0 25.2 36.0 (+) Amortization of publishing inv estment 9.4 5.2 0.0 0.0 (0.0) 0.0 0.0 0.0 14.5 (=) Adjusted EBITDA (current) (1.0) 121.8 33.3 24.0 0.2 (43.5) 0.0 0.0 134.8 (+) Prov ision for restructuring (non-recurring) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (=) Adjusted EBITDAby restructuring provision (1.0) 121.8 33.3 24.0 0.2 (43.5) 0.0 0.0 134.8 EBITDA Margin (%) -1% 60% 23% 32% 1% ... -1% ... 24% Elimination Amortization 9M14 vs. 9M13 – Change (%) Per Business Line -R$ mm - Changes % 9M14 vs 9M13 Net Revenue (-) Cost of goods sold (COGS) (=) Gross Profit Gross m argin (%) Publishers Learning Systems Schools and Prep. Language Others Courses Corporate Expenses Consolidated AE -17% 30% 58% 78% 69% ... 12% ... -2% 27% 72% 8% -59% ... -9% ... 33% 32% -25% 31% 48% 92% 144% ... 1844% ... 33% -6 p.p. 1 p.p. -3 p.p. 6 p.p. 28 p.p. ... 19 p.p. ... 0 p.p. (-) Selling, general and administrativ e expenses -12% 41% 39% 124% 103% 66% 1243% 72% 40% (=) Operating income (loss) 66% 26% 64% 39% 1508% 66% -100% 72% 5% (+) Depreciation and Amortization -31% 22% 49% 61% 507% ... ... 72% 59% -24% 53% 0% 0% -366% ... ... ... 4% 1485% 27% 62% 38% -3301% 64% -100% ... 19% (+) Amortization of publishing inv estment (=) Adjusted EBITDA (current) (+) Prov ision for restructuring (non-recurring) ... ... ... ... ... ... ... ... ... (=) Adjusted EBITDAby restructuring provision 1485% 27% 62% 38% -3301% 0% -100% ... 40% EBITDA Margin (%) -12 p.p. -1 p.p. 1 p.p. -7 p.p. 45 p.p. ... ... ... 1 p.p. (*) Consolidated data on a corporate basis and data by business on a managerial basis. Consolidated EBITDA is adjusted by amortization of the publishing investment. In accordance with CVM Instruction 527/12, EBITDA is defined as Earnings Before Interest, Tax (Income and Social Contribution Taxes), Depreciation and Amortization. On this basis, in accordance with this Instruction, EBITDA amounted to R$22.5 million in 3Q13 and R$22.3 million in 3Q14. EBITDA was R$120.3 million in 9M13 and R$145.7 million in 9M14. Adjusted EBITDA is calculated based on operating income including the amounts related to depreciation and amortization and including amortization of publishing investments. Pursuant to CVM Instruction 527/12, the company may opt to report EBITDA excluding the net amounts related to discontinued operations, as per Technical Pronouncement CPC 31 – Non-Current Assets Held for Sale and Discontinued Operations, and adjusted for other items that contribute to information on the potential gross cash generation. 11 APPENDIX I INCOME STATEMENTS PERIODS ENDED SEPTEMBER 30 (amounts in thousands of Brazilian real) Net revenue Cost of sales and services Gross profit Selling expenses General and administrative expenses Other income (expenses), net Operating profit (loss) Finance income Finance costs Foreign exchange variations, net Profit (loss) before equity in the results of subsidiaries Equity results Profit before income tax and Income tax and social contributions Profit for the year Profit attributable to: Owners of the Company Participation of Non-Controlling 07/01/2014 a 09/30/2014 01/01/2014 a 09/30/2014 07/01/2013 a 09/30/2013 Consolidated 01/01/2013 a 09/30/2013 210,594 (68,724) 141,870 (80,853) (58,917) 256 2,356 13,068 (39,942) 1,818 (22,700) 610 (22,090) 5,067 (17,023) 753,718 (204,906) 548,812 (246,470) (216,793) 2,965 88,514 40,035 (112,416) 1,385 17,518 (173) 17,345 (14,846) 2,499 178,398 (43,482) 134,916 (64,588) (62,245) 444 8,527 8,631 (28,378) 361 (10,859) (10,859) (2,705) (13,564) 567,962 (154,741) 413,221 (172,434) (157,632) 1,147 84,302 26,167 (66,351) 1,194 45,312 45,312 (29,746) 15,566 (18,707) (5,770) (15,143) 12,290 1,684 (17,023) 8,269 2,499 1,579 (13,564) 3,276 15,566 Basic earnings per share - R$ (0.02212) 0.05099 Diluted earnings per share - R$ (0.02204) 0.05086 12 APPENDIX II BALANCE SHEETS PERIODS ENDED SEPTEMBER 30 (amounts in thousands of Brazilian real) ASSETS Controladora Consolidado 09/30/2014 12/31/2013 09/30/2014 12/31/2013 7,624 2,928 14,500 15,432 666 100,271 2,504 12,984 15,432 825 287,524 159,457 245,085 48,366 1,019 21,565 360,420 325 318,343 176,004 33,689 25,714 41,150 132,016 763,016 914,495 373 - 373 - 373 8,635 4,360 373 10,150 4,739 6 - 5 - 121,035 6,903 3,823 1,803 7,647 58,440 6,362 2,780 - Investments Intangible assets Property and equipment 1,566,538 184 1,567,101 1,496,970 303 1,497,651 6,265 2,123,723 98,228 2,382,795 4,434 2,150,177 81,156 2,318,611 Total assets 1,608,251 1,629,667 3,145,811 3,233,106 CURRENT Cash and cash equivalents Financial application Receivables from customers Inventories Taxes recoverable Dividends receivable Sale of shareholding participation Advances and prepaid expenses NON-CURRENT ASSETS Financial assets Receivables from customers Taxes recoverable Deferred income tax and social contributions Judicial deposits Sale of shareholding participation Advances and prepaid expenses Others Receivables 13 APPENDIX II (cont.) BALANCE SHEETS PERIODS ENDED SEPTEMBER 30 (amounts in thousands of Brazilian real) LIABILITIES AND SHAREHOLDERS’ EQUITY Parent Consolidated 09/30/2014 12/31/2013 09/30/2014 12/31/2013 25,612 11 - 30,781 10 17,268 218,335 155,262 12,531 6,179 - 232,280 92,194 7,304 15,859 19,032 - - 36,784 132,375 25,623 48,059 429,091 499,044 9,700 - 286 - 13,289 352,900 603,367 852 45,614 5,518 355,864 671,831 40,236 4,631 4,631 118,010 73,281 14,331 4,917 1,134,032 1,146,730 39,954 52,976 1,563,123 1,645,774 852,868 518,799 220,189 (13,228) (4,561) (5,770) 852,868 517,192 220,189 (13,228) (330) - 852,868 518,799 220,189 (13,228) (4,561) (5,770) 852,868 517,192 220,189 (13,228) (330) - Non-controlling interests Total Equity 1,568,297 1,568,297 1,576,691 1,576,691 1,568,297 14,391 1,582,688 1,576,691 10,641 1,587,332 Total Liabilities and Equity 1,608,251 1,629,667 3,145,811 3,233,106 CURRENT LIABILITIES Trade and other payables Loans and financing Taxes and contributions payable Income tax and social contributions payable Dividends payable Payables for acquisition of equity interests NON-CURRENT LIABILITIES Trade and other payables Payables for acquisition of equity interest Loans and other receivables Taxes and contributions payable Provision for contingencies Income tax and social contribution deferred Total Liabilities EQUITY Attributable to owners of the parent Share capital Capital reserves Revenue reserves Equity valuation adjustment Treasury shares Accrued Profits 14 APPENDIX III STATEMENTS OF CASH FLOW PERIODS ENDED SEPTEMBER 30 (amounts in thousands of Brazilian real) 09/30/2014 Parent 09/30/2013 09/30/2014 Consolidated 09/30/2013 (2,500) - (16,809) - 234,502 (91,450) (27,540) 173,506 (36,928) (17,203) (2,500) (16,809) 115,512 119,375 (52) (33,496) (35,100) - (308,071) 17,000 45,360 13,000 4 (28,103) (15,052) 325 (1,575) (97,862) 460 14 (6,975) (16,108) 8,583 (430,190) (438) (85,563) (616) 1,244 4 (68,648) (232,707) (141,793) (530,059) (4,231) (17,268) - 117,267 (23,783) - (16,760) (3,186) (908) (4,231) (17,268) (4,262) 283,468 (13,218) (3,320) 117,267 (23,783) (670) (21,499) 93,484 (46,615) 359,744 INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS (92,647) (156,032) (72,896) (50,940) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 100,271 7,624 181,661 25,629 360,420 287,524 305,892 254,952 NET CHANGES IN CASH AND CASH EQUIVALENTS (92,647) (156,032) (72,896) (50,940) CASH FLOWS FROM OPERATING ACTIVITIES Cash provided by operations Interest paid Income tax and social contribution paid NET CASH PROVIDED BY ( USED IN ) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchases of: Property and equipment Intangible assets Financial assets Acquisition of subsidiary in the year, net of acquired cash Decrease in cash due to disposal of subsidiary in the year Payment for acquisition of equity interest Capital increase in subsidiaries Capital decrease in subsidiaries Advance for future capital increase Dividends received Loans granted to related parties Loans received from related parties Loans granted to related parties Interest received NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES New loans and financing Payment of loans and financing Payments and taxes in PAES Capital Increase (decrease) Increase (decrease) in non-controlling equity Treasury stock Dividends paid Dividends paid in subsidiaries NET CASH PROVIDED BY ( USED IN ) ACTIVITIES FINANCING - With regard to the Cash Flow reported in the Quarterly Information (ITR) for 3Q13, there was a positive reclassification of R$35.0 million in operating cash generation, with an offsetting entry in cash flow from investments, which was related to the delay in the acquisition of Sigma. In accordance with accounting standards, this delay was recognized in operating cash flow on the ITR and its effects will be offset in the flow of the fourth quarter, once the company's acquisition is concluded. 15 EARNINGS CONFERENCE CALL The information will be available on our website at www.abrileducacao.com.br. Conference call in English: November 11, 2014 12:00 p.m. (Brasília time) 9:00 a.m. (U.S. ET) Dial-in: +1 (877) 317-6776 (USA only) +1 (412) 317-6776 (Other countries) Code: Abril Educação Webcast: click here Replay: +1 (877) 344-7529 (USA only) +1 (412) 317-0088 (other countries) Replay Code: 10053896 Participants should connect approximately 10 minutes prior to the start of the conference calls. Webcast: The audio of the conference calls will be webcast live and remain available after the event. Replay: The conference call replay will be available for 7 days. To access the replay, please call the numbers indicated above. Forward-looking Statements This document contains forward-looking statements. Such information is based not only on historical data, but also reflects the goals and expectations of the management of Abril Educação. Words such as "anticipate", "wish", "expect", "foresee", "intend", "plan", "predict", "project", "aim" and similar terms are intended to identify statements that necessarily involve known and/or unknown risks. Abril Educação undertakes no liability for any transactions or investment decisions made based on the information contained in this report. 16
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