UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

OR

OR

OR

Commission file number: 001-39415

Vasta Platform Limited
(Exact name of Registrant as specified in its charter)

Not applicable
(Translation of Registrant’s name into English)

Cayman Islands
(Jurisdiction of incorporation or organization)

Av. Paulista, 901, 5th Floor
Bela Vista
São Paulo – SP, 01310-100
Brazil
+55 11 3133-7311
(Address of principal executive offices)

Bruno Giardino Roschel de Araujo, Chief Financial Officer
Av. Paulista, 901, 5th Floor
Bela Vista
São Paulo – SP, 01310-100
Brazil
+55 11 3133-7311
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:
Manuel Garciadiaz
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4000
Fax: (212) 450-6858

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding shares as of December 31, 2020 was 18,575,492 Class A common shares and 64,436,093 Class B common shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐          Accelerated Filer ☐        Non-accelerated Filer ☒        Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report: ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☐ U.S. GAAP

☒ International Financial Reporting Standards as issued by the International Accounting Standards Board

☐ Other

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

VASTA PLATFORM LIMITED

table of contents

Page

Presentation of Financial and other Information

Unless otherwise indicated or the context otherwise requires, as used in this annual report, (i) the terms “we,” “our,” “us,” “Vasta” or the “Company,” when used in the context of (a) the period up to October 11, 2018, the date of the acquisition by Saber Serviços Educacionais S.A., or Saber, a subsidiary of Cogna (which we also refer herein as our “Parent Company”) (formerly known as Kroton Educacional S.A., and together with its subsidiaries, the Cogna Group) of Somos Educação S.A., or Somos, and together with its subsidiaries, the Somos Group, which we refer to herein as the “Acquisition,” refer to the Consolidated K-12 curriculum businesses held by each of Somos (which we refer to as “Somos – Anglo”) and the Carve-out K-12 curriculum business already held by Cogna, known as “Pitágoras” (and together with Somos – Anglo, which we refer to as the “Predecessors”); and (b) the period after the Acquisition, refer to Vasta’ Consolidated K-12 curriculum business under the Vasta brand (which we refer to in this annual report alternatively as “Vasta”).

Due to the change in the basis of accounting resulting from the acquisition by Cogna of the K-12 curriculum businesses held by the Somos Group, and because the K-12 business held by Cogna (Predecessor – Pitágoras) came into common control with such K-12 curriculum business previously held by the Somos Group only upon completion of the Acquisition, we are required to present separately (1) the financial information for the period beginning on October 11, 2018, and through and including December 31, 2019, which we refer to as the “Post-Acquisition Period,” and (2) the financial information for the periods prior to, and including, October 10, 2018, which we refer to as the “Pre-Acquisition Period.” Certain financial information of the Post-Acquisition Period is not comparable to that of the Pre-Acquisition Period. For a discussion of our Post-Acquisition and Pre-Acquisition Periods, see “—Financial Statements.”

The term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian government” refers to the federal government of Brazil. “Brazilian Central Bank” refers to the Brazilian Central Bank (Banco Central do Brasil). References in the annual report to “real,” “reais” or “R$” refer to the Brazilian real, the official currency of Brazil and references to “U.S. dollar,” “U.S. dollars” or “US$” refer to U.S. dollars, the official currency of the United States.

All references to the “Companies Act” are to the Cayman Islands’ Companies Act (As Revised) as the same may be amended from time to time, unless the context otherwise requires.

All references to “IFRS” are to International Financial Reporting Standards, as issued by the International Accounting Standards Board, or the IASB.

Financial Statements

Vasta was incorporated on October 16, 2019, as a Cayman Islands exempted company with limited liability duly registered with the Registrar of Companies of the Cayman Islands.

We maintain our books and records in Brazilian reais, the presentation currency for our financial statements and also the functional currency of our operations in Brazil. We prepare our annual consolidated financial statements in accordance with IFRS, as issued by the IASB. Unless otherwise noted, our financial information presented herein is stated in Brazilian reais, our reporting currency.

Due to the Acquisition and our corporate reorganization as described under “—Corporate Events—Our Incorporation and Corporate Reorganization,” the financial information contained in this annual report is derived from the following financial information, including the notes thereto:

All references herein to “the audited consolidated financial statements” are to the financial information described above as the case may be, included elsewhere in this annual report.

The Predecessors’ and our fiscal year end on December 31. References in this annual report to a fiscal year, such as “fiscal year 2020,” relate to our fiscal year ended on December 31 of that calendar year.

Corporate Events

Our Incorporation and Corporate Reorganization

We are a Cayman Islands exempted company incorporated with limited liability on October 16, 2019 for purposes of undertaking our initial public offering, or IPO, and, at the time, fully owned by Cogna on the date hereof.

On October 11, 2018, Saber, a subsidiary of Cogna (formerly known as Kroton Educacional S.A.), our parent company, and a Brazilian publicly-listed company in the Novo Mercado segment of B3 S.A. – Brasil, Bolsa, Balcão, or B3, with no controlling shareholder, acquired control over Somos Educação S.A., or Somos Educação, and together with its subsidiaries, the “Somos Group,” for R$6.3 billion, which we refer to herein as the “Acquisition.” Following the Acquisition, Cogna began managing Somos Group’s K-12 curriculum businesses and since October 2019 Cogna has adopted the Vasta brand for its B2B K-12 business, representing the combination of the K-12 curriculum businesses held by the Predecessors. Consequently, the Acquisition created a new basis of accounting for Somos Group, using the acquisition method of accounting to record assets acquired and liabilities purchased. This accounting treatment generally results in increased amortization and depreciation reported in future periods. Accordingly, the accompanying consolidated financial statements of the Predecessors and Vasta are not comparable in all material respects since those financials statements report financial position, results of operations, and cash flows of these separate businesses. Upon the Acquisition, the Somos Group, along with Pitágoras, came under the indirect common control of Cogna (and with the completion of the corporate reorganization (as defined below), came under the direct control of Vasta). 

In this annual report, we refer to the reorganization of our K-12 B2B business and the structuring of related subsidiaries (including the Contribution (as defined below)) under Vasta as the “corporate reorganization.”

At the time of our incorporation, Cogna indirectly held a 100% ownership interest in the Somos Group and, together with its wholly-owned subsidiary, EDE, a 100% ownership interest in Saber (7.44% held directly, with the other 92.56% held indirectly). Saber directly and indirectly held a 100% ownership interest in Somos Educação, which in turn held the Somos Group’s K-12 curriculum business. Also, Saber held the K-12 business operated as Pitágoras. In addition, before the implementation of the corporate reorganization, Somos Group carried out activities or owned assets or liabilities that were not within the scope of Vasta’s business. Such activities, assets or liabilities were segregated from Somos Group into Cogna prior to the consummation of our initial public offering, through corporate and contractual arrangements which included spin-offs, incorporations, capital reductions, purchase and sale of assets and assignment of liabilities, as well as capitalization of debts among the entities of the Somos Group, Saber, Cogna, EDE and other subsidiaries of Cogna.

On December 17, 2019, following a capital increase approved at Saber’s general shareholders meeting, Cogna increased its equity interest in Saber upon the capitalization into Saber of indebtedness due by Saber to it, in the amount of R$5.5 billion. As of December 17, 2019, Cogna directly held a 63.87% ownership interest in Saber and continued to hold the remaining 36.13% ownership interest indirectly, for a 100.0% direct and indirect ownership interest.

On December 31, 2019, following the spin-off of the Pitágoras K-12 business from Saber and the merger of the related assets and liabilities into Somos Sistemas de Ensino S.A., or Somos Sistemas, Cogna became the direct owner of a 100% ownership interest in Somos Sistemas. As of December 31, 2019, Cogna directly held a 62% ownership interest in Saber and continued to hold the remaining 38% ownership interest indirectly.

Prior to the consummation of our initial public offering, Cogna entered into a contribution agreement with us, by which 100% of the shares issued by Somos Sistemas held by Cogna was contributed into Vasta’s share capital, or the Contribution. The Contribution was accounted for at historical book value, in return for new Class B common shares that were issued by Vasta in a one-to-58 exchange for the shares of Somos Sistemas contributed to us. After the Contribution, Somos Sistemas became wholly owned by Vasta, which, in its turn, continued to be fully controlled by Cogna.

Until the Contribution of Somos Sistemas’ shares to us, we had not commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments. Following the Contribution, Saber continued to own and operate, directly or through other subsidiaries, certain K-12 businesses as a subsidiary of Cogna, including the operation of its own K-12 private schools and the sales of textbooks under the PNLD (Programa Nacional do Livro e do Material Didático), which were separate from Vasta’s business.

After accounting for the new Class A common shares that were issued and sold by us in our initial public offering, we had a total of 83,011,585 common shares issued and outstanding immediately following our initial public offering, 64,436,093 of these shares were Class B common shares beneficially owned by Cogna (which held 97.2% of the combined voting power of our outstanding Class A and Class B common shares), and 18,575,492 of these shares were Class A common shares beneficially owned by investors purchasing in our initial public offering (which held 2.8% of the combined voting power of our outstanding Class A and Class B common shares).

Initial Public Offering

On July 31, 2020, we carried out our initial public offering, consisting of 18,575,492 Class A common shares issued and sold by us. The public offering price was US$19.00 per Class A common share. We received net proceeds of US$333.5 million, after deducting R$19.4 million in underwriting discounts and commissions.

Financial Information in U.S. Dollars

Solely for the convenience of the reader, we have translated some of the real amounts included in this annual report from Reais into U.S. dollars. You should not construe these translations as representations by us that the amounts actually represent these U.S. dollar amounts or could be converted into U.S. dollars at the rates indicated. Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.197 to US$1.00, the commercial selling rate for U.S. dollars at December 31, 2020 as reported by the Brazilian Central Bank. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates” for more detailed information regarding translation of Reais into U.S. dollars and for historical exchange rates for the Brazilian real.

Special Note Regarding Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio

This annual report presents our EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio information for the convenience of investors. EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio are the key performance indicators used by us to measure financial operating performance. Our management believes that these Non-GAAP financial measures provide useful information to investors and shareholders. We also use these measures internally to establish budgets and operational goals to manage and monitor our business, evaluate our underlying historical performance and business strategies and to report our results to the board of directors.

We calculate EBITDA as Net profit (loss) for the period / year plus income taxes and social contribution plus/minus net finance result plus depreciation and amortization. The EBITDA measure provides useful information to assess our operational performance.

We calculate Adjusted EBITDA as EBITDA plus/minus: (a) share-based compensation expenses, mainly due to the grant of additional shares to Somos’ employees in connection with the change of control of Somos to Cogna (for further information refer to note 23 to the audited consolidated financial statements); (b) provision for risks of tax, civil and labor losses regarding penalties, related to income tax positions taken by the Predecessor Somos – Anglo and Vasta in connection with a corporate reorganization carried out by the Predecessor Somos – Anglo (for further information refer to note 20 to the audited consolidated financial statements of Somos – Anglo) and (c) Bonus IPO, which refers to bonus paid to certain executives and employees based on restricted share units. We understand that such adjustments are relevant and should be considered when calculating our Adjusted EBITDA, which is a practical measure to assess our operational performance that allows us to compare it with other companies that operates in the same segment.

We calculate Free Cash Flow as the net cash flows from operating activities as presented in the statement of cash flows of our financial statements less cash flows required for: (i) acquisition of property, plant and equipment; (ii) addition to intangible assets; and (iii) acquisition of subsidiaries. We consider Free Cash Flow to be a liquidity measure, therefore, we adjust our Free Cash Flow metric with amounts that directly impacted the cash flows in the period in addition to the operating activities. The Free Cash Flow measure provides useful information to management and investors about the amount of cash generated by our operations, deducting for investments in property and equipment to maintain and grow our business.

We calculate Adjusted Cash Conversion Ratio as the cash flows from operating activities divided by Adjusted EBITDA for the relevant period.

We understand that, although EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio are used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results of operations as reported under IFRS. Additionally, our calculations of Adjusted EBITDA, Free Cash Flow and Adjusted Cash Conversion Ratio may be different from the calculation used by other companies, including our competitors in the education services industry, and therefore, our measures may not be comparable to those of other companies.

For a reconciliation of our non-GAAP financial measures, see “Item 3. Key Information—A. Selected Financial Data —Reconciliations for Non-GAAP Financial Measures.”

Special Note Regarding ACV Bookings

This annual report presents our ACV Bookings for the convenience of investors. This operating metric is not prepared in accordance with IFRS. ACV Bookings is a non-accounting managerial metric and represents our partner schools’ commitment to pay for our solutions offerings. We believe it is a meaningful indicator of demand for our solutions. In particular, we believe ACV Bookings is a helpful metric because it is designed to show amounts that we expect to be recognized as revenue from subscription services for the 12-month period between October 1 of one fiscal year through September 30 of the following fiscal year. We generally deliver our educational materials to our schools for their convenience in the last calendar quarter of each year, so that our schools can prepare their classes in advance prior to the start of the following school year in January. As a result, our results of operations for the last quarter of a given fiscal year contain revenue relating to the following school year relating to the content that has been delivered prior to the start of the new fiscal year. Therefore, ACV Bookings conveys information that has predictive value for subsequent months, and which may not be as clearly conveyed or understood by simply analyzing our revenue in our statements of income, especially in view of our recent growth.

We define ACV Bookings as the revenue we would expect to recognize from a partner school in each school year, based on the number of students who have contracted our services, or “enrolled students,” that will access our content at such partner school in such school year. We calculate ACV Bookings by multiplying the number of enrolled students at each school with the average ticket per student per year; the related number of enrolled students and average ticket per student per year are each calculated in accordance with the terms of each contract with the related school. Although our contracts with our schools are typically for 4-year terms, we record one year of revenue under such contracts as ACV Bookings. For example, if a school enters into a 4-year contract with us to provide one of our Core & EdTech platform solutions (such as learning systems or PAR) to 100 students for a contractual fee of US$100 per student per year, we record US$10,000 as ACV Bookings, not US$40,000. ACV Bookings are calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. Since the actual rates of returned goods from sales during the period may be different from the historical average rates and the actual volume of merchandise ordered by our customers may be different from the contracted amount, the actual revenue recognized during each period of a sales cycle may be different from the ACV Bookings for the respective sales cycle.  Our reported ACV Bookings are subject to risks associated with, among other things, economic conditions and the markets in which we operate, including risks that our contracts may be canceled or adjusted (including as a result of the COVID-19 pandemic). See “Item 3. Key Information—D. Risk Factors—Certain Factors Relating to Our Business and Industry—Our operations and results may be negatively impacted by the COVID-19 pandemic.”

Market Share and Other Information

This annual report contains data related to economic conditions in the market in which we operate. The information contained in this annual report concerning economic conditions is based on publicly available information from third-party sources that we believe to be reasonable. Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission website) and industry publications. We obtained the information included in this annual report relating to the industry in which we operate, as well as the estimates concerning market shares, through internal research, public information and publications on the industry prepared by official public sources, such as the Brazilian Central Bank, the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE, the Brazilian Ministry of Education (Ministério da Educação), or MEC, the Anísio Teixeira National Institute of Educational Studies and Research (Instituto Nacional de Estudos e Pesquisas Educacionais Anísio Teixeira), or INEP, the School Census (Censo Escolar), the NCES, and the Brazilian Economic Institute of Fundação Getúlio Vargas (Instituto Brasileiro de Economia da Fundação Getúlio Vargas), or FGV/IBRE as well as private sources, such as the report by Oliver Wyman that was commissioned by us.

Industry publications, governmental publications and other market sources, including those referred to above, generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Except as disclosed in this annual report, none of the publications, reports or other published industry sources referred to in this annual report were commissioned by us or prepared at our request. Except as disclosed in this annual report, we have not sought or obtained the consent of any of these sources to include such market data in this annual report.

Rounding

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Forward-Looking Statements

This annual report on Form 20-F contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this annual report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “is designed to,” “may,” “predict,” “continue,” “estimate” and “potential,” or the negative of these words, among others.

Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified under the section entitled “Risk Factors” in this annual report. These risks and uncertainties include factors relating to:

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.       Directors and Senior Management

Not applicable.

B.       Advisers

Not applicable.

C.       Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A.       Offer Statistics

Not applicable.

B.       Method and Expected Timetable

Not applicable.

ITEM 3. KEY INFORMATION

A.       Selected Financial Data

You should read the following selected financial data together with “Item 5. Operating and Financial Review and Prospects” and our Consolidated Financial Statements and the related notes appearing elsewhere in this annual report.

We have derived the summary statement of profit or loss data (1) for the years ended December 31, 2020 and 2019 and for the period from October 11 to December 31, 2018 from the audited consolidated financial statements included elsewhere in this annual report; and (2) for the period from January 1 to October 10, 2018 from the Predecessors’ audited combined carve-out financial statements included elsewhere in this annual report. We have derived the statement of financial position data as of December 31, 2020 and 2019 from the audited consolidated financial statements included elsewhere in this annual report. We prepare our financial statements in accordance with IFRS, as issued by the IASB. Our historical results are not necessarily indicative of the results that should be expected in the future.

For convenience purposes only, amounts in reais, as of December 31, 2020, have been translated to U.S. dollars using an exchange rate of R$5.197 to US$1.00, the commercial selling rate for U.S. dollars, as of December 31, 2020, as reported by the Brazilian Central Bank. These translations should not be considered representations that any such amounts have been, could have been or could be converted at that or any other exchange rate. See “—Exchange Rates” for further information about recent fluctuations in exchange rates.

Operating Data

ACV Bookings

The tables below show ACV Bookings for the periods indicated. On January 23, 2020, we predicted the result of ACV Bookings for the 2020 sales cycle (from October 2019 to September 2020), which reached R$716.0 million based on contracted amounts as of such date. This volume represented a growth of 25% over the amount registered in the 2019 sales cycle, R$584.6 million. On September 30, 2020, the Company reached R$691.9 million in ACV bookings from 2020 sales cycle, or 18%

higher than compared with 2019. The number of enrolled students and average ticket per student per year for deriving results of ACV Bookings for the 2020 sales cycle were 1,311 thousand and R$546.07, respectively. Both the ACV Bookings and the average ticket are calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. The COVID-19 pandemic had an adverse effect on our ACV Bookings for the 2021 sales cycle (from October 2020 to September 2021), especially for schools that decided to postpone decisions regarding core content. Besides, while we have implemented certain measures to address the potential impact of COVID-19 on our ACV Bookings and business in general, our actual revenue recognized in the year 2020 to be derived from solutions we characterize as subscription arrangements was adversely affected by effects of declining enrollment at our partner schools in 2020, particularly in respect of childhood education. Due to the COVID-19 pandemic persistence in the beginning of 2021, our ACV Bookings for the 2021 sales cycle and our actual revenue recognized in the year of 2021 may also be affected. See “—D. Risk Factors—Certain Factors Relating to Our Business and Industry—Our operations and results may be negatively impacted by the COVID-19 pandemic,” “Item 4. Information On The Company—A. History and Development of the Company—Our History—Recent Developments—COVID-19” and “Item 5. Operating And Financial Review And Prospects—D. Trend Information.”

Reconciliations for Non-GAAP Financial Measures

The following tables set forth reconciliations of Adjusted EBITDA to net profit (loss) for the years ended December 31, 2020 and 2019, for the period from October 11 to December 31, 2018, and for the period from January 1 to October 10, 2018, our most recent directly comparable financial measures calculated and presented in accordance with IFRS, reconciliations of our free cash flow to net cash flows (used in) from operating activities for the years ended December 31, 2020 and 2019, for the period from October 11 to December 31, 2018, and for the period from January 1 to October 10, 2018, our most recent directly comparable financial measures calculated and presented in accordance with IFRS and reconciliations of our adjusted cash conversion ratio for the years ended December 31, 2020 and 2019, for the period from October 11 to December 31, 2018, and for the period from January 1 to October 10, 2018, our most recent directly comparable financial measures calculated and presented in accordance with IFRS. For further information on why our management chooses to use these non-GAAP financial measures, and on the limits of using these non-GAAP financial measures, please see “Presentation of Financial and Other Information—Special Note Regarding Non-GAAP Financial Measures—Adjusted EBITDA and Free Cash Flow.”

Reconciliation of our Adjusted EBITDA to Net Loss for the Year

Reconciliation of Free Cash Flow to Net Cash Flows from Operating Activities for the Year

Calculation of Adjusted Cash Conversion Ratio for the Year

Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

The real depreciated against the U.S. dollar from mid-2011 to early 2016. In particular, during 2015, due to the poor economic conditions in Brazil, including as a result of political instability, the real depreciated at a rate that was much higher than in previous years. On September 24, 2015, the real fell to its lowest level since the introduction of the currency, at R$4.1945 per US$1.00. Overall in 2015, the real depreciated 47.0%, reaching R$3.9048 per US$1.00 on December 31, 2015. In 2016, the real fluctuated significantly, primarily as a result of Brazil’s political instability, appreciating 16.5% to R$3.2591 per US$1.00 on December 31, 2016. In 2017, the real depreciated 1.5% against the U.S. dollar, ending the year at an exchange rate of R$3.308 per U.S.$1.00. The real/U.S. dollar exchange rate reported by the Brazilian Central Bank was R$3.8748 per U.S.$1.00 on December 31, 2018, which reflected a 17.1% depreciation in the real against the U.S. dollar during 2018, primarily as a result of lower interest rates in Brazil, which reduced the volume of foreign currency deposited in Brazil in the “carry trade,” as well as uncertainty regarding the results of the Brazilian presidential elections held in October 2018. On December 31, 2019 and 2020, the period-end real/U.S. dollar exchange rate was R$4.031 and R$5.197, respectively, per U.S.$1.00, which represented depreciation of 4.0% and 28.9%, respectively, during the corresponding years. There can be no assurance that the real will not depreciate or appreciate further against the U.S. dollar.

The Brazilian Central Bank has intervened occasionally in the foreign exchange market to attempt to control instability in foreign exchange rates. We cannot predict whether the Brazilian Central Bank or the Brazilian government will continue to allow the real to float freely or will intervene in the exchange rate market by re-implementing a currency band system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar in the future. Furthermore, Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that the Brazilian government will not place restrictions on remittances of foreign capital abroad in the future.

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. dollars expressed in Brazilian reais per U.S. dollar. The average rate is calculated by using the average of reported exchange rates by the Brazilian Central Bank on each day during a monthly period and on the last day of each month during an annual period. As of April 28, 2021, the exchange rate for the selling real/dollar exchange rate was R$5.401] to U.S.$1.00, as reported by the Brazilian Central Bank. The real/dollar exchange rate fluctuates and, therefore, the selling rate at April 28, 2021 may not be indicative of future exchange rates.

Source: Brazilian Central Bank.

B.       Capitalization and Indebtedness

Not applicable.

C.       Reasons for the Offer and Use of Proceeds

Not applicable.

D.       Risk Factors

Certain Factors Relating to Our Business and Industry

Our operations and results may be negatively impacted by the COVID-19 pandemic.

Since December 2019, a novel strain of COVID-19 has spread in over 150 countries, including China, Italy, the U.S. and Brazil. In March 2020, the World Health Organization, revised the classification of COVID-19 from an epidemic (when a disease spreads through a specific community or region) to a pandemic, which according to the World Health Organization’s definition is when there is a worldwide spread of a new disease. The classification of the disease as a pandemic was motivated by the rapid increase in the number of cases and the number of affected countries on all continents, triggering measures by governments, companies and societies to contain the advances of COVID-19. The measures vary from country to country in quantity and degree of severity but basically involve, mandatory orders for social isolation and social distancing, restrictions on travel, closures of schools, restaurants, bars and shopping malls, restrictions on manufacturing and trade of non-essential goods and services, rationing of essential goods, cancellation of public events, and border closures, among other restrictive measures.

These measures have adversely impacted regional economies and have caused disruption of regional or global economic activity. In particular and in the interest of public health and safety, state and local governments in Brazil have required mandatory school closures, which may impact the number of schools and students that use our products, which could in turn adversely affect our operations and financial results. Additionally, these restrictive measures have resulted in a decrease in production of our learning materials, a temporary closure of our distribution centers (and reduced operations once re-opened), and the cessation of operation of certain transportation companies for undetermined periods, which materially and adversely affect our operation and financial results. Moreover, such restrictive measures have also generated high levels of unemployment and have resulted in a decrease in incomes, which may affect enrollment levels at our client schools due to families’ ability to pay for private education. Despite the measures adopted to contain the progress of COVID-19 and aid measures announced by governments around the world, including the Brazilian government, as of the date hereof, we cannot predict the extent, duration and impacts of such containment measures, or the results of aid measures in Brazil.

Although Brazil has experienced additional waves of the pandemic with new variants of the COVID-19 virus, which as a result postponed the opening of schools, our current ACV performance in the cycle 2019-2020 (from October 2019 to September 2020) increased through the number of students enrolled in our partner schools. The COVID-19 pandemic had an adverse effect on our ACV Bookings for the 2021 sales cycle (from October 2020 to September 2021), especially for schools that decided to postpone decisions regarding core content. We have implemented certain measures to address the potential impact of COVID-19 on our ACV Bookings and business in general. Our actual revenue recognized in the year 2020 to be derived from solutions we characterize as subscription arrangements was adversely affected by effects of reduced enrollment at our partner schools in 2020, particularly in respect of childhood education. Due to the COVID-19 pandemic persistence in

the beginning of 2021, our ACV Bookings for the 2021 sales cycle and our actual revenue recognized in the year of 2021 may also be affected.

The COVID-19 pandemic adversely affected our business, results of operations and financial condition. We have experienced a decline in sales volumes of our products and services, a decline in accounts receivable, and higher levels of impairment losses on trade receivables, and pressure from existing clients to reduce the prices of the solutions and materials we offered them. We have also experienced a higher reuse rate and higher return rate of our textbooks and other learning materials. In addition, we have been requested to renegotiate rates for our services with clients who were already under contract with us, which have adversely effected our ACV Bookings, and have been required to reconfigure the delivery method for our learning materials (such as on-line only as compared to direct instruction from teachers in the classroom), which have adversely affected our revenues and costs. Despite of such factors, we have maintained our plans to expand our operations through acquisitions and investments or pursue our plan to develop and/or acquire new services and products. Other direct and indirect effects of the COVID-19 pandemic and governments’ responses to it on our business, results of operations and financial condition. Our business continues to be adversely impacted even following a decrease in the spread of COVID-19 as a result of the lingering economic effects of the pandemic, including due to recession, a slowdown of the economy or increase in unemployment levels in Brazil, overall decrease of household income levels and bankruptcy of our partner schools. See “Item 4. Information On The Company—A. History and Development of the Company—Our History—Recent Developments—COVID-19.”

On January 23, 2021, we announced the result of ACV Bookings for the 2020 sales cycle (from October 2019 to September 2020), which reached R$716.0 million based on contracted amounts as of such date. This volume represented growth of 25% over the amount registered in the 2019 sales cycle. We observed an increase in the revenue in the year 2020 derived from solutions we characterize as subscription arrangements.

The extent to which COVID-19 impacts our financial results and operations will depend on future developments, which are uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the impact of the COVID-19 pandemic. Based on future developments of COVID-19, it is possible that we may, in the future, be required to take actions or steps in relation to our business that could have a disruptive or a material and adverse effect on our business. We cannot guarantee that other regional and/or global outbreaks will not occur or that we would be able to mitigate the potential effects of any such outbreaks.

We face significant competition, the possibility of new competitors and potential substitutes for every product or service we offer and in each geographic region in which we operate. If we fail to compete efficiently, we may lose market share and our profitability may be adversely affected.

We compete with other educational platforms and suppliers of educational content. Our existing competitors and potential new competitors may offer similar or better educational solutions or substitutes in comparison to those we offer. In addition, existing and potential competitors may have access to more resources, be more prestigious or enjoy a better reputation in the academic community or may charge lower prices. To compete effectively we may be required to reduce the prices of our educational products and solutions, increase our operating expenses or look for new market opportunities to retain and/or attract new customers. As a result, our revenue and profitability may decrease. We cannot guarantee that we will be able to compete successfully with our current or future competitors. In addition, we have observed a trend of increasing consolidation in certain segments of the primary and secondary education markets in Brazil. If this trend intensifies (as has occurred in the higher education market in Brazil) we may face increasing competition in the markets in which we operate. If we are unable to maintain our competitive position or otherwise respond to competitive pressures effectively, we may lose our market share, our profits may decrease, and we may be adversely affected.

We may not be able to update, improve or offer the content and products of our Core & EdTech Platform and Digital Platform efficiently, at an acceptable price and within the necessary timeframes.

Our Core & EdTech platform is intended to offer a complete package of educational solutions to address core curriculum requirements as well as complementary curricula such as English instruction and socio-emotional content, preparing students for entry into the most prestigious universities in Brazil and abroad, and offering a complete solution for personal and academic development. Our Digital Platform also offers our partner schools a suite of back office services. In order to differentiate ourselves from our competitors, we must constantly update our portfolio of products, services and solutions, including through the adoption of new technologies. We may not be able to adapt and update our products and services or develop new solutions quickly enough to provide our customers, their students and our students the solutions required by changing demands in the markets in which we operate. If we are unable to respond adequately to these demands due to financial restrictions, technological changes or other factors, our capacity to attract and retain customers and students may be adversely affected, damaging our reputation and our business.

We depend significantly on IT systems, and are subject to risks related to technological change. Any failure to maintain and support customer facing services, systems, and platforms, including addressing quality issues and executing timely release of new products and enhancements, could negatively impact our revenue and reputation.

IT systems are essential to our operations and growth as our content is available through an integrated online Content & EdTech platform and we depend on the uninterrupted function of our online platform to deliver our products and services. Our IT systems and tools may become obsolete or inadequate for delivering our Content & EdTech platform, whether due to rapidly evolving network protocols or new developments in network hardware, or we may face difficulty in staying abreast of and adapting to technological changes in the education sector.

We use complex proprietary IT systems and products, which our parent company shares with us, to support our business activities, including customer-facing systems, back-office processing and infrastructure. We also contract with datacenter service providers to host certain aspects of our platform and content. Our operations depend, in part, on the ability of our providers to protect their facilities against damage or interruption caused by natural disasters, power cuts, telecommunications breakdowns, criminal acts and similar events. Peak traffic, natural disasters, acts of terrorism, vandalism or sabotage, facility shutdowns on short notice, or other unforeseen problems relating to our service providers’ facilities, could result in prolonged interruptions in the availability of our platform, which could lead to customer dissatisfaction, damaging our reputation and our business.

Additionally, a failure to upgrade our technology, features, content, software systems, security infrastructure, network infrastructure, or other infrastructure associated with our platform could harm our business. Adverse consequences could include unanticipated disruptions, slower response times, bugs, degradation in levels of customer support, impaired quality of users’ experiences of our educational platform and delays in reporting accurate financial information.

In addition, we face risks associated with unauthorized access to our systems, including by hackers and due to failures of our electronic security measures. These unauthorized entries into our systems can result in the theft of proprietary or sensitive information or cause interruptions in the operation of our systems. As a result, we may be forced to incur considerable expenses to protect our systems from electronic security breaches and to mitigate our exposure to technological problems and interruptions. The theft of data from our customers may subject us to significant fines and penalties, adversely affecting our results of operations and damaging our reputation.

Our revenue depends on sales of educational content, products and services to our customers, and any setback in customer relations could cause us significant harm.

The success of our business depends on maintaining good customer relationship, developing new relationships and expanding our customer network, which includes private K-12 schools, their students and parents, among others. Any deterioration in customer relations, including due to early cancellation or non-renewal of agreements with our customers, could damage our reputation, adversely affect our ability to grow and significantly harm our business.

Our agreements with partner schools provide for fines and penalties in the event of early termination. However, there can be no assurance that such partner schools will pay such fines in the event of early termination and our customers may seek relief in court proceedings to contest the term of such agreements or the payment of such fines. We could also be forced to seek legal remedies in the event of early termination of our agreements in order to enforce the payment of such fines, though there can be no assurance that we would be successful in connection with any such legal proceedings, and we could incur significant costs attempting to enforce our rights. Such costs, considered in addition to the lost revenue from terminated contracts, could have an adverse effect on our results of operations.

We employ a customer support team to provide educational assistance and training for students and educators at our partner schools to help them maximize the results they obtain from using our Content & EdTech platform. Our customer support team must carry out frequent site visits in an effort to build positive relationships and strengthen our ties with our partner schools. In addition, our Livro Fácil e-commerce has its own customer service structure, which serves mostly families but is also integrated with the schools’ relationship centers. If we do not provide our customers with efficient and effective support, maintain appropriate customer satisfaction levels or hire personnel in number sufficient to address our customers’ needs, our ability to operate and expand our business could be adversely affected.

Our Content & EdTech Platform and Digital Platform are technologically complex, and potential defects in our platforms or in updates to our platforms can be difficult or even impossible to fix.

Our Content & EdTech Platform and Digital Platform are technically complex products, and, when first introduced to customers or when upgraded through new versions, may contain software or hardware defects that are difficult to be detected

and corrected. The existence of defects and delays in correcting them can have adverse effects, such as, cancellation of contracts, delays in the receipt of payment, poor functioning of our platforms and their content, failure to acquire new customers, or misuse of our platforms by third parties.

We test new versions and upgrades to our Content & EdTech Platform and Digital Platform, but we cannot assure that all defects related to platform updates can be identified before, or even after a new version of our platforms are made available. The correction of defects can be time-consuming, expensive and difficult. Errors and security breaches of our products could expose us to product liability claims and damage our reputation, which could have an adverse effect on our business, financial condition and results of operations.

Our growth may have a negative effect on the successful expansion of our business, on our people management, and on the increase in complexity of our software and platforms.

We are currently experiencing a period of expansion and are facing a number of expansion related issues, such as the acquisition and retention of experienced and talented personnel, cash flow management, corporate culture and internal controls, among others. These issues and the significant amount of time spent on addressing them may result in the diversion of our management’s attention from other business issues and opportunities. In addition, we believe that our corporate culture and values are critical to our success, and we have invested a significant amount of time and resources building them. If we fail to preserve our corporate culture and values, our ability to recruit, retain and develop personnel and to effectively implement our strategic plans may be harmed.

We must constantly update our software and platforms, enhance and improve our billing and transaction and other business systems, and add and train new software designers and engineers, as well as other personnel to help us with the increased use of our platforms and the new solutions and features we regularly introduce. This process is time intensive and expensive and may lead to higher costs in the future. Furthermore, we may need to enter into relationships with various strategic partners, such as online service providers and other third parties necessary to our business. The increased complexity of managing multiple commercial relationships could lead to execution problems that can affect current and future revenue, and operating margins.

We cannot assure you that our current and planned platforms, systems, products, procedures and controls, personnel and third-party relationships will be adequate to support our future operations. In addition, our current expansion has placed a significant strain on management and on our operational and financial resources, and this strain is expected to continue. Our failure to manage growth effectively could harm our business, results of operations and financial condition.

Our business depends on the success of our brands and our ability to attract and retain customers could be adversely affected due to events or conditions that damage our reputation or the image of our brands.

We believe that market awareness of our brands has contributed significantly to the success of our business. Maintaining and enhancing our brands is crucial to our efforts to maintain and grow our customer network. We also depend significantly on the efforts of our sales force and our marketing channels, including online advertising, marketing research tools, social media and word of mouth. Failure to maintain and enhance our brand recognition could have a material adverse effect on our business, operating results and financial condition. We have devoted significant resources to our brand promotion efforts and to training our sales team in recent years, but we cannot assure you that these efforts will be successful. Our ability to attract new customers and retain our existing customers depends on our investments in our brands, on our marketing efforts and the success of our sales team, and the perceived value of our services in comparison with our competitors. If customers fail to distinguish our brands and the content we offer from our competitors, this may lead to decreased sales and revenue, lower margins or a decline in the market share of our brands. If our marketing initiatives are unsuccessful or become less effective, if we are unable to further enhance our brand recognition, if we incur excessive marketing and promotion expenses, or if our brand image is negatively impacted by any negative publicity, or if our customers misuse our brands in a way that results in a poor general perception of our brands, our business and results of operations could be materially and adversely affected.

Our business is subject to seasonal fluctuations, which may cause our operating results to vary from quarter-to-quarter and adversely impact our working capital and liquidity throughout the year, adversely affecting our business, financial condition and results of operations.

Our main deliveries of printed and digital materials to our customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials we provide in the fourth quarter are used by our customers in the following school year and, therefore, our fourth quarter results reflect the growth in the number of our students from one school year to the next, leading to higher revenue in general in our fourth

quarter compared with the preceding quarters in each year. Consequently, in aggregate, the seasonality of our revenues generally produces higher revenues in the first and fourth quarters of our fiscal year. In addition, we generally bill our customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half.

A significant part of our expenses is also seasonal. Due to the nature of our business cycle, we need significant working capital, typically in September or October of each year, in order to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of our teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year.

Accordingly, due to the timing of sales and delivery of our educational products, services and content, and the timing of university entrance exams, we expect that our revenue and operating results will continue to exhibit quarterly fluctuations. These seasonal fluctuations could result in volatility and adversely affect our liquidity and cash flows. As our business grows, these seasonal fluctuations may become more pronounced. As a result, we believe that sequential quarterly comparisons of our financial results may not provide an accurate assessment of our financial situation.

In addition, our cash flows are affected by our customer conversion rate, which is measured from the moment of first contact with a customer or when a customer enters our target list (that is, when our commercial team identifies contracts nearing termination or when customers raise complaints or dissatisfaction with their service level) until formalizing an agreement, which generally takes three to four months. As part of our sales efforts, which was adversely impacted by COVID-19, we incurred in significant expenditures, including expenses related to revision of credit terms and collaterals with main customers, commercial efforts to maintain frequent and meaningful interactions with certain target customers, including through meetings dedicated to evaluating and testing our platform, promotional events for our target customers, distribution of product samples, guided tours of our business units, and exhibitions at industry fairs. These costs also generate quarterly fluctuations in our cash flows, which could result in annual volatility and have an adverse effect on our liquidity. As our business grows, or if our business were to stop growing or we lost customers, these fluctuations could become more pronounced.

Our working capital needs have increased and may well continue to increase as our business expands. If we do not increase our cash flow generation or gain access to additional capital, either through credit lines or other sources of capital, which may not be available on satisfactory terms or in adequate amounts, our cash and cash equivalents may decrease, which will have a negative impact on our liquidity and capital resources. In addition, if we do not have sufficient working capital, we may not be able to pursue our growth strategy, respond to competitive pressures or fund key strategic initiatives, which could harm our business, financial condition and results of operations.

We could be subject to risks related to inventory management.

We are exposed to significant inventory management risks, which could adversely affect our operating results due to COVID-19, among other things: (1) seasonality caused by schools closures; (2) launch of new products delayed as a result of schools closures; (3) rapid changes in product cycles; (4) changes in consumer demand and consumption patterns; and (5) changes in consumer tastes as a result of online learning. We may not forecast seasonality and product and consumer trends accurately in a manner to accurately manage our inventory needs, and demand for products could change significantly between the time we build our stock of inventory and the time we deliver our products, as well as such risks may be aggravated by the COVID-19 pandemic.

In addition, when we start selling new products, we may not be able to establish favorable relationships with new suppliers, develop the right products or accurately forecast demand. The acquisition of certain types of inventory can be time-consuming and may require significant prepayments, which may not be refundable. Finally, we have a broad selection and high volume of inventory of certain products and we may not be able to sell sufficient quantities of these products. Our failure to adequately manage our inventory for any of the reasons mentioned above could adversely affect business and results of operations.

While our businesses are managed and financed independently from our parent company, we are party to a cost-sharing agreement for certain administrative expenses, and an increase in the amounts we pay to our parent company might be disproportional to the benefits we receive and could affect our performance. In addition, we share certain logistics-related expenses with our parent company, and the reimbursement to us by our parent company for such shared expenses may not be sufficient to meet our actual costs.

We are party to a cost-sharing agreement with our parent company for certain administrative expenses, such as those related to corporate, legal and accounting activities, which we refer to as overhead expenses. Under this cost-sharing agreement, we are required to pay our proportional share of overhead expenses based on our revenue as a share of the Cogna group’s aggregate revenue. Our parent company may incur increased overhead expenses in the course of its operations that cannot be allocated directly in a unique operation within the Cogna group and may not be directly related to our operations, whether due to increased acquisition activities, as part of corporate restructurings, or for operations generally, which would result in an increase in the overhead expenses we would be required to pay under the cost sharing agreement, and a corresponding increase in our general and administrative expenses, without corresponding benefits to our operations, which could have an adverse effect on our results of operations.

Moreover, we share certain logistics-related expenses with our parent company, and there may be cases in the future in which the reimbursement of such shared expenses that may be paid to us by our parent company may not be sufficient to cover expenses actually incurred by us in respect of logistics services benefitting our parent company, which would cause us to bear a disproportionate share of such expenses, thereby having an adverse effect on our business and results of operations.

Misuse of our brands or other actions carried out by other companies controlled by our parent company may damage our business and our reputation due to certain of our brands being shared with other businesses controlled by our parent company.

Several of our brands are shared between us, our parent company and other companies that are controlled by our parent company, which operate in different markets from ours (such as postsecondary education and the operation of certain other K-12 curriculum business separate from ours), and the misuse of these shared brands or actions taken by such companies could negatively affect our reputation, which could have an adverse effect on our business and results of operations. In November and December 2019, we entered into certain brand sharing agreements with our parent company, but these agreements may not assure uninterrupted and conflict-free use of our brands. If we lose the right to use these brands or become subject to restrictions in the use of our brands, our business and results of operations could be adversely affected. Some of the brands we will use in our business are owned by subsidiaries of our parent company, for which we were granted a license to use pursuant to certain agreements. Nevertheless, such agreements may not ensure uninterrupted use of these brands and do not guarantee that we will not be subject to future conflict related to the use of these brands. Any conflict that arises out of the use of our brands could adversely affect our business and results of operations.

Failure to protect or enforce our intellectual property and other proprietary rights could adversely affect our business and financial condition and results of operations.

We rely and expect to continue to rely on a combination of trademark, copyright, patent and trade secret protection laws, as well as confidentiality, intellectual property license and assignment agreements with our employees, consultants and third parties with whom we have relationships to protect our intellectual property and proprietary rights. As of the date of this annual report, we did not have issued patents or patent applications pending in or outside Brazil. We are party to approximately 4,500 agreements with third party authors with respect to educational content. We own approximately 465 trademark registrations, including the trademarks and logos of “Vasta,” “Somos Educação,” “Editora Atica,” “Editora Scipione,” “Atual Editora,” “Sistema Anglo de Ensino,” “Par Plataforma Educacional,” “Sistema Maxi de Ensino,” “English Stars,” “Rede Cristã de Educação” and “MindMakers,” among others. We also have approximately 40 pending trademark applications in Brazil and four in the United States for trademarks “Vasta,” “Vasta Educação” and “Somos Educação,” and unregistered trademarks that we use to promote our brands. We also have the right to use trademark registrations for “Pitágoras” (owned by a subsidiary of our parent company) and “Saraiva” (owned by Saraiva Gestão de Marcas S.A., a company jointly owned by our parent company and third parties who are not controlled by us nor by our parent company). As of the date of this annual report, we owned approximately 220 registered domain names in Brazil. From time to time, we expect to file additional copyright, trademark and domain names applications in Brazil and abroad. Nevertheless, these applications may not be approved or otherwise provide the full protection we seek. The dismissal of any of our trademark applications may impact our business. Third parties may challenge any copyrights, trademarks and other intellectual property and proprietary rights owned or held by us. Third parties may knowingly or unknowingly infringe, misappropriate or otherwise violate our copyrights, trademarks and other proprietary rights and we may not be able to prevent infringement, misappropriation or other violation without substantial expense to us.

Furthermore, we cannot guarantee that:

If we pursue litigation to assert our intellectual property or proprietary rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property or proprietary rights, limit the value of our intellectual property or proprietary rights or otherwise negatively impact our business, financial condition and results of operations. If the protection of our intellectual property and proprietary rights is inadequate to prevent use or misappropriation by third parties, the value of our brands and other intangible assets may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to customers and potential customers may become confused in the marketplace and our ability to attract and retain customers may be adversely affected.

We may in the future be subject to intellectual property claims, which are costly to defend and could harm our business, financial condition and operating results.

Because of the large number of authors that participate in our publications, from time to time, third parties may allege in the future that we or our business infringe, misappropriate or otherwise violate their intellectual property or proprietary rights, including with respect to our publications. We cannot guarantee that we are party to enforceable agreements with all the counterparties that have purportedly assigned copyrights or other intellectual property rights to us, in which case we could be subject to legal proceedings and the payment of significant fines for unauthorized use of intellectual property. In addition, many companies, including various “non-practicing entities” or “patent trolls,” are devoting significant resources to developing or acquiring patents that could potentially affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. We have not exhaustively searched patents related to our technology. In addition, the publishing industry has been, and we expect in the future will continue to be, the target of counterfeiting and piracy. We may implement measures in an effort to protect against these potential liabilities that could require us to spend substantial resources. Any costs incurred as a result of liability or asserted liability relating to sales of unauthorized or counterfeit educational materials could harm our business, reputation and financial condition.

Third parties may initiate litigation against us without warning. Others may send us letters or other communications that make allegations without initiating litigation. We may elect not to respond to the communication if we believe it is without merit or we may attempt to resolve disputes out of court by electing to pay royalties or other fees for licenses or out-of-court settlements in unforeseeable amounts. If we are forced to defend ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, we may face costly litigation, diversion of technical and management personnel, inability to use our current website or inability to market our service or merchandise our products. As a result of a dispute, we may have to develop non infringing technology, including partially or fully revise any publication that infringes intellectual property rights, enter into licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims. These actions, if required, may be unavailable on terms acceptable to us or may be costly or unavailable. If we are unable to obtain sufficient rights or develop non infringing intellectual property or otherwise alter our business practices, as appropriate, on a timely basis, our reputation or our brands, our business and our competitive

position may be affected adversely and we may be subject to an injunction or be required to pay or incur substantial damages and/or fees and/or royalties.

Most of our services are provided using proprietary software and our software is mainly developed by our employees, who do not specifically assign to us their copyrights over the software and we are unable to assure that we have adequate agreements with all of our employees to provide for the assignment of software rights. While applicable law establishes that employers shall have full title over rights relating to software developed by their employees, we could be subject to lawsuits by former employees claiming ownership of such software. As a result, we may be required to obtain licenses of such software, incurring costs relating to payments of royalties and/or damages and we may be forced to cease the use of such software. If we are unable to use certain of our proprietary software as a result of any of the foregoing or otherwise, this could have a material adverse effect on our business, financial condition and results of operations.

In addition, we use open source software in connection with certain of our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging the ownership of open source software and/or compliance with open source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Some open source software licenses require users who distribute or use open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. Any requirement to disclose our proprietary source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations.

The quality of the teaching content we deliver to our customers depends to a significant degree on the quality of our publishers and of the content we purchase. Any issues related to obtaining this content or regarding the quality of this content may have an adverse effect on our business.

The educational content and materials we provide are a combination of content developed by our in-house production team and content purchased from certain independent authors and publishers with whom we have contractual relationships. However, we may not be able to maintain our contractual relationships with independent authors or publishers if, for instance, (1) such authors leave us to join our competitors; (2) they no longer accept our contractual conditions, particularly those in relation to copyright; or (3) they choose to publish their content independently. If we are not able to replace such authors or publishers or if we are unable to renew the agreements that we currently have with them on terms that are favorable to us, our business could be adversely affected. In addition, delays in the delivery of content from authors may have an impact on our annual content creation schedule.

A lack of publishers, qualified employees, independent authors or satisfactory purchased content, or any decrease in the quality of the content produced or purchased, whether actual or perceived, or any significant increase in the cost of hiring or retaining qualified personnel or of acquiring content from independent authors or publishers, would have a material adverse effect on our business, financial condition and results of operations.

Additionally, our content production process requires significant coordination between different teams, as well as qualified personnel with appropriate training in order to ensure that we maintain the quality of our educational content and that we are able to successfully implement additional functions and technology delivery. We may not be able to retain, recruit or train qualified employees or obtain educational content that meets our standards, which could have an adverse effect on our business and results of operations.

If our partner schools are unable to maintain educational quality, we may be adversely affected.

Our partner schools and their students are regularly assessed and classified under the terms of applicable educational laws and regulations. If the schools, programs or students from our partner schools receive lower scores from year to year on any of their assessments, including on the Index for Development in Primary and Secondary Education (Índice de Desenvolvimento da Educação Básica), or IDEB, and on the ENEM or if there is any drop in the acceptance rates of the students from our partner schools into prestigious universities, we may be negatively affected by perceptions of a decline in the educational quality of our Content & EdTech platform, which could adversely affect our reputation and, as a result, our operating results and financial condition.

A significant increase in late payment and/or default in the payment of amounts due to us by our customers and a significant increase in attrition rates of students among our customers may adversely affect our revenue and cash flow.

Our customers may face financial difficulties and, in certain cases, insolvency or bankruptcy, especially during the COVID-19 pandemic. A decrease in our customers’ revenues (due to a decline in enrollment as a result of a decrease in

disposable income of families enrolled at our partner schools) could have an adverse effect on the ability of our existing and prospective customers to pay our tuition fees and/or trigger an increase in attrition rates. A significant increase in late payment or default by our customers could have a material adverse effect on our revenue and cash flow, thereby affecting our ability to meet our obligations. As of December 31, 2020, our impairment losses on trade receivables balance was R$32,055 thousand, an increase of R$9,531 thousand from R$22,524 thousand in December 31, 2019. Our impairment losses on trade receivables as of December 31, 2019 increased R$3,127 thousand from R$19,397 thousand as of December 31, 2018. Our impairment losses on trade receivables as of December 31, 2020, 2019 and 2018 represented 3.2%, 2.28% and 2.29% of our net revenue from sales and services as of each period-end, respectively. An increase in the rate of impairment losses, or other defaults by our customers, could have an adverse effect on our business and financial condition.

In addition, any increase in the student attrition rates among our customers could have an adverse effect on our operating results. We believe the attrition rate among our customers is affected by COVID-19, since it is mainly related to the educational quality, school environment, financial situation of their current and prospective students and socio-economic conditions in Brazil. However, any significant changes in our projected student attrition rate and/or in failure to re-enroll students may affect our partner schools’ enrollment figures, as well as their ability to recruit and enroll new students, could have a material adverse effect on our projected revenue and operating results.

In addition, part of our revenue has come from the sale of education solutions to municipal governments within several states of Brazil, and such public entities may delay payments or even default in payment. Any such payment delay or default would result in further delays in our receipt of payment, as we would be required to seek a special judicial order (precatórios) under Brazilian law to enforce our rights to receive payment. This special judicial order is a formalization of a payment due by the Brazilian Public Treasury issued as a consequence of a final or nonappealable judicial decision. Furthermore, enforcement for the collection of debts due by the Public Treasury are not processed by the attachment of assets owned by the public entities, but by the issuance of a payment order for the inclusion of the debt in the public budget, further delaying the timing of any payment. Late payments or defaults by such public entities could have a material adverse effect on our revenue and cash flow.

If our growth rate decelerates significantly, our future prospects and financial results would be adversely affected, preventing us from achieving profitability.

We believe that our growth depends on a number of factors, including, but not limited to, our ability to:

We may not be successful in achieving the above objectives. Any slowdown in the demand from students, partner schools or customers for our products and services caused by changes in customer preferences, failure to maintain our brands, inability to expand our portfolio of products or services, changes in the Brazilian or global economy, taxes, competition or other factors may lead to a decrease in revenue or growth and our financial results and future prospects could be negatively affected. We expect that we will continue to incur significant expenses as a result of our efforts to continue growing, and if we cannot increase our revenue at a faster rate than the increase in our expenses, we will not be able to achieve profitability.

We may be subject to penalties under Law 12.846/2013 or the Brazilian Anti-Corruption Law, the Federal Administrative Procedural Law, the Administrative Improbity Law and the U.S. Foreign Corrupt Practices Act, the FCPA, if our employees engage in any conduct prohibited by these laws.

We have in the past engaged in, and continue to maintain, relationships with a number of public entities, both through contracts and public tenders, including under the PNLD (in which Vasta no longer participates, as this operation is now carried out through another subsidiary of our parent company), through the provision of services and the sale of products, solutions and educational content to public entities (including in connection with the sale of educational content to public entities and to the Industry Social Service (Serviço Social da Indústria), or SESI, and for the purpose of obtaining licenses and permits required for our operations (such as operating permits, fire inspections and education sector regulatory licenses, among others). We train our employees to comply with the rules set forth in the code of conduct and anti-corruption manual of our parent company, which set out policies and rules for proper dealings with public officials for purposes of our compliance with the Brazilian Anti-Corruption Law, the Federal Administrative Procedural Law, the Administrative Improbity Law and the FCPA. However, there can be no assurance that all of our employees and agents acting on our behalf who may have contact with public officials will fully comply with our policies, or that our policies will be fully effective in preventing non-compliance with applicable law, which could lead to our failure to comply with the Brazilian Anti-Corruption Law, the Federal Administrative Procedural Law, the Administrative Improbity Law or the FCPA. Any conduct by our employees or agents with public officials in any manner that fails to comply with our parent company’s code of conduct, the anti-corruption manual, the Brazilian Anti-Corruption Law, the Federal Administrative Procedural Law, the Administrative Improbity Law and the FCPA could lead to government investigations, judicial and/or administrative proceedings, fines, penalties, loss of regulatory licenses, disgorgement of profits, loss of tax benefits and damage to our reputation and image, any of which would have an adverse effect on our business, financial condition and results of operations.

Certain students enrolled at our partner schools may not generate meaningful revenue because of the reutilization of printed teaching materials.

In recent years, we have seen a growing increase in the reuse of printed teaching materials by families who use the same printed material for more than one child, even though we update these materials annually, which has an adverse effect on our revenue. We call this phenomenon “sales drop” or “reuse.” Because the reuse of materials results from family behavior combined with the list of materials adopted by our partner schools, we are unable to control or mitigate the sales drop effect. We cannot predict any future sales drop or its potential impact on our revenue and operating results.

The Saraiva brand is owned by Saraiva Gestão de Marcas S.A., a company that is jointly owned by our parent company and third parties that are not part of the Cogna group. Any conflict with these parties could have a negative effect on our business.

We have the right to use the Saraiva brand until December 28, 2040 for some of Vasta’s textbooks and literary works, in the context of our publishing operations. The Saraiva brand accounted for 26%, 25% and 24% of the net revenue from sales and services of our textbook revenues in 2020, 2019 and 2018, respectively. In terms of net revenue from sales and services, the Saraiva brand accounted for 6% in 2020 and 7% in each of 2019 and 2018. Saraiva Gestão de Marcas S.A. is jointly owned by our parent company and third parties who are not controlled by us or our parent company. These parties may have interests that conflict with ours, which might lead to disputes that could adversely affect our ability to use the Saraiva brand. We cannot assure that these parties’ interests will align with ours or that our interests would prevail in any dispute regarding the use of the Saraiva brand. This potential conflict of interest could adversely affect the reputation or performance of the Saraiva brand, or our ability to use the Saraiva brand, which could have an adverse effect on our results of operations. In addition, the third party who jointly owns Saraiva Gestão de Marcas S.A., is currently subject to a bankruptcy proceeding in Brazilian courts. We cannot guarantee that there will not be any impact on the Saraiva brand in the course of this proceeding or if this party were subject to liquidation.

Changes in our or our customers’ current regulatory environment could have an adverse effect on us.

Currently, although we are subject to the requirements of the National Common Curriculum Base (Base Nacional Comum Curricular), or BNCC, we are not directly regulated by the Brazilian Ministry of Education (Ministério da Educação), or MEC, nor are we subject to any governmental regulations imposed by the National Education Council (Conselho Nacional de Educação), or CNE, or by the Board of Primary and Secondary Education (Conselho de Educação Básica), or CEB. We are also subject to certain regulations related to bidding processes in connection with the sale of educational content to public entities, such as the bidding law (Lei de Licitações) and the Federal Administrative Procedural Law (Lei de Processo Administrativo Federal). In addition, we are subject to bidding regulations enacted by SESI, in connection with the sale of educational content to the SESI. If we or our customers become subject to new laws and regulations, we may incur additional costs in order to comply with the new legislation and this may have an adverse impact

on our business. In addition, if we are required to comply with additional laws and regulations, there is a risk that we may not do so fully or satisfactorily, and this could result in possible legal or administrative proceedings against us, which could have a material adverse effect on our reputation, our business and results of operations.

We use third party service providers in our logistics services to ship all of our collections of printed teaching materials and a failure by our service providers to perform efficiently would have an adverse effect on our business, financial condition and results of operations.

Our delivery of printed books and other educational content to schools is a seasonal activity, with a cycle that usually begins with the creation and review of content from April to July, the purchase of printing services from August to October, and physical delivery of printed books from November to January. We have expanded our operations rapidly since we first began our activities. As our size increases, so does the size and complexity of our logistics operation.

We generally require a high volume of deliveries in November and December, which requires a significant degree of inventory, supply management and management of our relationship and coordination with printers. Our customers place key value on the timely delivery of printed materials. Consequently, failure to comply with deadlines, inadequate logistics planning, disruption at distribution centers, poor inventory management, and the failure to meet customer expectations, launch new products, or respond to rapidly changing customer preferences, could have an adverse effect on our reputation, increase returns of our materials or cause inventory losses and adversely affect our business, results of operations and financial condition.

Virtually our entire inventory of our printed teaching materials is stored in rented warehouse facilities operated by us and delivered by third party carriers that undertake the distribution of all physical teaching materials. If our logistics service providers do not fulfill their obligations to deliver teaching materials to our customers in a timely manner, or if a significant number of deliveries are incomplete or contain assembly errors, our business, operating results and operations could be adversely affected. In addition, natural disasters, fires, power outages, work stoppages or other unexpected catastrophic events, particularly during the period between August and October, when we expect to receive most of the instructional materials for the school year and we have not yet delivered these materials to our customers, could significantly disrupt our ability to deliver our products and operate our business. If we were to lose a significant portion of our inventory, or if our warehouse facilities or distribution centers suffer any significant damage, we could fail to meet our delivery obligations and our business, financial condition and results of operations would be adversely affected.

We have a significant amount of debt and may incur additional debt in the future. Our payment obligations under our debt may limit our available resources and the terms of debt instruments may limit our flexibility in operating our business.

As of December 31, 2020, we had total outstanding bonds and financing of R$793.4 million compared to R$1,640 million as of December 31, 2019, mostly comprised of private debentures issued by Somos Sistemas to Saber and Cogna (as creditors) bearing interest at an average annual rate of CDI plus 1.15%, with semi-annual coupon payments and a bullet repayment at maturity in August 2023. See “Item 5. Operating And Financial Review And Prospects—B. Liquidity and Capital Resources—Indebtedness.” As of the date of this annual report, we expect our debt service obligations for the remainder of 2021 to amount to R$793.3 million. Most of our indebtedness is linked to the CDI. Changes in Brazilian macroeconomic conditions can adversely affect the CDI. Fluctuations in the inflation rate and rate indices can increase the cost of our indebtedness that is linked to the CDI and may have a material adverse effect on our financial position and result of operations. Subject to the limitations under the terms of our existing debt, we may incur additional debt, secure existing or future debt or refinance our debt. In particular, we may need to incur additional debt to fund our activities, and the terms of this financing may not be attractive for us.

We may be required to use a substantial portion of our cash flows to pay the principal and interest on our indebtedness. These payments will reduce the funds available for working capital, capital expenditures and other corporate purposes and will limit our ability to obtain additional financing for working capital or making capital expenditures for expansion plans and other investments, which may in turn limit our ability to implement our business strategy. Our significant debt may also increase our vulnerability to downturns in our business, in our industry or in the economy as a whole and may limit our flexibility in terms of planning or reacting to changes in our business and in the industry and could prevent us from taking advantage of business opportunities as they arise. We cannot guarantee that our business will generate sufficient cash flow from operations or that future financing will be available in sufficient amounts or on favorable terms to enable us to make timely and necessary payments under the terms of our indebtedness or to fund our activities.

In addition, if we were to default on any of our debt, we could be required to make immediate repayment, other debt facilities may be cross-defaulted or accelerated, and we may be unable to refinance our debt on favorable terms or at all,

which would have a material adverse effect on our financial position. See “Item 5. Operating And Financial Review And Prospects—B. Liquidity and Capital Resources—Indebtedness” for a summary of the conditions that could result in an acceleration of our indebtedness.

Our ability to utilize certain tax credits may be limited.

As of December 31, 2020, we had accumulated tax losses of R$182.3 million which are available as offsetting credits against future taxable profits compared to R$31.3 million as of December 31, 2019. Our ability to use these accumulated tax losses as offsetting credits depends on our future taxable income, which could have a material adverse effect on our operating results. See “Item 5. Operating And Financial Review And Prospects—Critical Accounting Policies.”

PAR, or “Partnership” (Parceria), is part of our business model, and is focused on long-term agreements through the use of textbooks rather than learning systems. If we are not able to implement this product successfully, our business would be materially adversely affected.

PAR, which is focused on long-term agreements using textbooks, is a product designed to bring the same level of profitability and loyalty as our learning systems. In 2020, 2019 and 2018, revenues from PAR contracts accounted for 15.6%, 13.4% and 9.8%, respectively, of our total ACV Bookings (subscription business). In order for us to increase PAR’s profitability in line with that of our learning systems, we must increase the number of contracts for textbook sales with schools and families by providing a product offering that is economically attractive to schools and families, seeking to reduce or eliminate the reuse of printed teaching materials. At present, around 90% of PAR contracts remain as adhesion contracts, in which sales are not made directly to partner schools and families, which means the schools and families purchase printed teaching materials through a number of channels, including distributors, bookstores and third-party e-commerce, as well as reuse materials in many cases. In case we are not able to establish a specific stock keeping unit and, therefore, not able to guarantee that our PAR-related materials are exclusively sold directly from our partner schools or from us, we may be exposed to partial revenue loss as a result of the reuse of printed materials sold in previous cycles (secondary market). Currently, our estimated revenue from PAR contracts already takes into account the average market reuse of printed materials, which assumes students can buy the material through other channels and the historical reuse of printed materials. An increase in the sales of reused printed materials may intensify the negative impacts on our revenues. We estimate that an inability to maintain exclusive control over PAR-related materials represents foregone revenue of approximately R$0.50 for every R$1.00 in PAR-related products expected to be sold, based on the contribution we estimate from Vasta’s publishing operations. Effectively, new sales are reduced due to the reuse of books such that, for each 100 students that adopt PAR-related material, 53 students purchase a new book and 47 students reuse old material. This effect has had, and is expected to continue to have, an adverse effect on our revenue and results of operations. We account for this effect in our estimates and forecasts for PAR-related revenues.

Our results may be negatively affected by the return rates on our textbooks.

To increase the availability of our textbooks for purchase by schools and students, our textbook sales (both through PAR and as spot sales) are carried out through numerous channels, such as bookstores, schools, large retailers, distributors and e-commerce sellers. Each of these distribution channels has a unique return policy, which can result in returns ranging from 10% to 50% of the total purchased amount during a given sales cycle. Our textbook sales are concentrated during the period from November to March. From April to June, the sales channels can return any unsold inventory to us. We are unable to assure that future return rates will be consistent with historical return rates. An increase in the volume of returns in excess of our expectations could have an adverse effect on our results of operation and financial condition.

We may not be successful in implementing our cross-selling and up-selling strategy with our current base of partner schools.

Part of our growth strategy consists of increasing the number of segments in which we operate in our partner schools, for example by expanding our services and educational solutions for elementary school and kindergarten to schools that only purchase our solutions for high school (up-sell). We also seek to expand the uptake by our partner schools of our supplementary courses, such as English language instruction or solutions for socio-emotional instruction (cross-sell). If we are unable to effectively sell these additional course offerings to our existing partner schools, for instance because of other competitors already entrenched with the school, we may not be able to grow our business at our projected rates, which could have an adverse effect on our business, financial condition and results of operations.

We may be unable to convert spot market book sales into long-term contracts, either through the adoption of our learning systems or PAR solutions, which could have an adverse effect on our future growth.

Traditionally, certain schools with which we have done business choose to buy only selected books from us in the “spot book market.” These schools do not have long term contracts with us, and we are unable to predict how their spot purchases will impact our revenue. Part of our growth strategy is based on converting spot book market sales into long-term contracts by having the relevant school adopt one of our learning systems or PAR. If we are unable to convert spot market sales into long-term contracts, we may not meet our growth targets, which could have an adverse effect on our prospects, our revenue and cash flow.

Part of our strategy is based on entering new markets and implementing new businesses, including solutions through our Digital Platform. We may not be successful in exploiting these opportunities, which may have an adverse effect on our business.

Many of the markets where we plan to operate, such as academic and financial ERP and student acquisition solutions, are new to us and our organizational skills in these markets have not yet been tested. In addition, we may have incorrectly estimated the total size of new markets or our ability to penetrate such markets or engage in new businesses, such as increased offering of solutions through our Digital Platform. In addition, we may face competition from existing participants or new entrants in the market in which our Digital Platform operates, including in the digital school office, digital marketing and family relations services, and our competitors may have greater resources than we do or may offer more attractive products or services. If we are unsuccessful in entering new markets or in implementing new businesses, we may incur costs that we are unable to recoup and our image and reputation may be adversely affected, which could have an adverse effect on our results of operation and financial position.

We may not be able to expand our complementary education portfolio in line with our business strategy.

We currently have educational solutions for English instruction and the teaching of socio-emotional skills, which can be offered during normal school hours or after school. We plan to develop and/or acquire new services and products to expand our portfolio of these complementary education solution. We may not be able to develop products and solutions in an effective way, they may not be accepted by our customers and by the market, or we may not develop the internal capabilities to produce such products and services. Additionally, we may not be able to acquire companies operating such new services and businesses on favorable terms, or we may incur risks of integrating acquired assets. If we are unable to expand our complementary education solution due to any of the foregoing factors, our business, financial condition and results of operations could be adversely affected.

Price increases and changing business conditions for the purchase of paper, a global commodity, may have a significant impact on us due to our reliance on a high volume of printed materials.

Paper prices and postage rates are difficult to predict and control. Paper is a commodity and its price may be influenced by fluctuations in exchange rates and commodity prices and may be subject to significant volatility. Our third-party printing service providers may adjust their rates to account for any changes in paper prices, and although historically we have been able to obtain favorable pricing as a result of volume discounts, particularly after our significant recent growth, there is no assurance that we will continue to obtain favorable prices in the future. We cannot predict with certainty the magnitude of future price changes for paper, postage and printing and publishing in general, and we may not be able to pass these increases on to our customers, which may have an adverse effect on our business and results of operations, given the importance of paper suppliers to our business. Additionally, we could be materially affected as a result of any contractual or legal issue with our paper suppliers or any delay in the delivery of our printed books and other educational content to partner schools, which could cause schools to delay payments due to us, or lead schools to terminate their contract with us, which would have an adverse effect on our business and results of operations.

There is no assurance that our partner schools will honor their contractual obligations, or that the number of students actually enrolled at partner schools corresponds to the number of students reported by the schools.

We generally enter into agreements with the schools that subscribe to our content and services, however, partner schools may try to avoid their obligations under their agreements with us, even with an effective contract in place, and we may be subject to additional costs and expenses in an effort to enforce our rights, which would have an adverse effect on our business and financial condition.

In addition, when partner schools enter into agreements with us, they report to us the number of students enrolled at their school who will use our products and services. However, we cannot assure you that the number of students reported by a

specific partner school in a specific segment is the actual number of students enrolled, as we do not audit this number, and our expected revenue may be adversely affected by inaccurate reporting, which could have a material adverse effect on us, our reputation and results of operation.

The printing market is heavily concentrated, and increases in rates, changes in business conditions, or any disruptions to the service of our third-party printing service providers could significantly affect us.

Our production of printed learning materials is outsourced to printers with whom we have contracts. We are subject to delays in the graphic production of our material, errors in production or even the bankruptcy of our partner printing companies, which could cause damage to our image with our customers and to our operating results.

In addition, increases in the rates of the third-party printing service providers that produce our printed educational materials could have a negative impact on our results if we are unable to fully pass on these cost increases to our customers. Finally, the printing market is a heavily concentrated one, which may reduce our bargaining power and result in less favorable rates, with an adverse effect on our business.

We depend on our subsidiaries’ financial results, and we may be adversely affected if the performance of our subsidiaries is not positive or if Brazil imposes legal restrictions on, or imposes taxes on, the distribution of dividends by subsidiaries.

We are a pure holding company and our activities are carried out by our subsidiaries. Our material assets are our direct and indirect equity interests in our subsidiaries. We are, therefore, dependent upon payments, dividends and distributions from our subsidiaries for funds to pay our holding company’s operating and other expenses, to comply with our financial obligations and to potentially pay future cash dividends or distributions, if any, to holders of our Class A common shares. The amount of any dividends or distributions which may be paid to us from time to time will depend on many factors including, for example, such subsidiaries’ results of operations and financial condition; limits on dividends under applicable law; their constitutional documents; documents governing any indebtedness; applicability of tax treaties; and other factors which may be outside our control. Furthermore, exchange rate fluctuation will affect the U.S. dollar value of any distributions our subsidiaries (which are mostly located in Brazil) make with respect to our equity interests in those subsidiaries. See “—Risks Relating to Brazil—Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares,” and “—The ongoing economic uncertainty and political instability in Brazil may harm us and the price of our Class A common shares.” There is no guarantee that the cash flow and profits of our controlled companies will be sufficient for us to comply with our financial obligations and pay dividends or interest on shareholders’ equity to our shareholders, or that the Brazilian federal government will not impose legal restrictions on, or impose taxes on, the distribution of dividends by our subsidiaries.

Any change in the tax treatment of our business or the loss or reduction in tax benefits on the sale of books (including digital books and e-readers) could materially adversely affect us.

We benefit from tax Law No. 10,865/04, as amended by Law No. 11,033/04, which provide that our tax rate on the sale of books is zero in respect of contributions to the social integration program tax (Programa de Integração Social, or PIS) and the social contributions on revenue tax (Contribuição para o Financiamento da Seguridade Social, or COFINS). The sale of books is also exempt by the Brazilian constitution from Brazilian municipal taxes, Brazilian services tax (Imposto Sobre Serviços, or ISS) and from the Brazilian tax on the circulation of goods, interstate and intercity transportation and communication services (Imposto sobre Operações relativas à Circulação de Mercadorias e sobre Prestações de Services de Transporte Interestadual e Intermunicipal e de Comunicação, or ICMS). If the Brazilian federal or state governments or any Brazilian municipality or tax authority decides to change or review the tax treatment of our activities, or cancel or reduce the tax benefits applicable to the sale of our products (including digital books and e-readers) and/or challenge such treatment, and we are unable to pass any corresponding cost increase onto our customers, our results of operations could be materially adversely affected. Tax exemptions available to physical books have been extended to digital books based on a decision by the Brazilian Supreme Court issued on March 8, 2017. However, there is no assurance that the Brazilian Supreme Court will not change its position in the future in regard to the taxation of digital books, which could have a material adverse effect on our business and results of operations.

We may pursue strategic acquisitions or investments. The failure of an acquisition or investment to be completed or to produce the anticipated results, or the inability to fully integrate an acquired company, could harm our business.

We may from time to time, as opportunities arise or economic conditions permit, acquire or invest in complementary companies or businesses as part of our strategy to expand our operations, including through acquisitions or investments that may be material in size and/or of strategic relevance. The success of an acquisition or investment will depend on our ability

to make accurate assumptions regarding the valuation, operations, growth potential, integration and other factors related to that business. We cannot assure you that our acquisitions or investments will produce the results that we expect at the time we enter into or complete a given transaction.

Any acquisition or investment involves a series of risks and challenges that could adversely affect our business, including due to a failure of such acquisition to contribute to our commercial strategy or improve our image. We may be unable to generate the expected returns and synergies on our investments. In addition, the amortization of acquired intangible assets could decrease our net profit and potential dividends. We may face challenges in integrating acquired companies, which may result in the diversion of our capital and our management’s attention from other business issues and opportunities. We may be unable to create and implement uniform and effective controls, procedures and policies, and we may incur increased costs for integrating systems, people, distribution methods or operating procedures. We may also be unable to integrate technologies of acquired businesses or retain key customers, executives and staff of the businesses acquired. In particular, we may face challenges in integrating staff working across different geographies and that may be accustomed to different corporate cultures, which would result in strained relations among existing and new personnel. We could also face challenges in negotiating favorable collective bargaining agreements with unions due to differences in the negotiating procedures used in different regions. Finally, we may pursue acquisitions where we acquire a majority stake in such acquisition, but with significant minority investors, or we may become minority investors in certain operations, wherein our ability to effectively control and manage the business may be limited. If we are unable to manage growth through acquisitions, our business and financial condition could be materially adversely affected.

We may also require approval from Brazil’s Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica), or CADE, or other regulatory authorities, in order to conduct certain acquisitions or investments for education companies exceeding or equivalent to annual gross revenue of R$75 million. CADE may not approve our future acquisitions or may condition approval of our acquisitions on our disposal of certain operations of our targeted acquisitions or could impose other restrictions on the operations and business of the target. Failure to obtain approval from CADE or other regulatory authorities for future acquisitions, or any conditional approvals of future acquisitions, may result in expenses that could adversely affect our results of operations and financial condition.

In addition, in connection with any future acquisition, we may face liabilities for contingencies related to, among others, (1) legal and/or administrative proceedings of the acquired company, including civil, regulatory, labor, tax, social security, environmental and intellectual property proceedings, and (2) financial, reputational and technical problems including those related to accounting practices, disclosures in financial statements and internal controls, as well as other regulatory issues. These contingencies may not have been identified prior to the acquisition and may not be sufficiently indemnifiable under the terms of the relevant acquisition agreement, which could have an adverse effect on our business and financial condition. Even if contingencies are indemnifiable under the relevant acquisition agreement, the agreed levels of indemnity may not be sufficient to cover actual contingencies as they materialize.

We may not be able to effectively implement our sales, marketing and advertising programs to attract and retain new customers.

In order to maintain and increase our revenue and margins, we need to continue to retain and attract new customers by means of the sales, marketing and advertising campaigns. A number of factors could adversely impact our ability to successfully implement our marketing campaigns, such as an inability of our sales team to effectively interact with potential clients, or potential clients do not find our products and services sufficient to meet their needs. If we are unable to successfully market our educational products and solutions, whether due to defects in our marketing tools and/or failure to adjust our strategy in order to meet the needs of current and potential customers, our ability to retain and attract new customers may be undermined, which would adversely affect our business and results of operations.

If we are unable to retain or replace our key personnel or are unable to attract, retain and develop other qualified employees, our business, financial situation and operating results may be adversely affected.

Part of our future success depends on the ability and efforts of a number of our key employees who have significant experience in our operations. Many of our key employees have been working for us over an extended period or have been specifically recruited by us on account of their experience and expertise in the sector. The loss of key personnel, including senior executives, members of the executive board, board members, key officers and managers, among others, and our inability to hire professionals with the same level of experience could have a material adverse effect on our business, financial condition and results of operations.

In addition, in order for us to successfully compete and increase the number of customers, we need to attract, recruit, retain and develop talented employees generally, who can provide the required expertise across the entire spectrum of our

needs for high quality products, services and educational content, including for sales and marketing. A number of our key employees have significant experience in our operations, and we must develop adequate succession plans to maintain continuity amidst the natural uncertainties of the labor force. The market for skilled staff is competitive, and we may not be successful in recruiting or retaining staff or we may not be able to effectively replace key employees who leave. We must also continue to hire additional staff to execute our strategic plans. Our efforts to retain and develop personnel may also result in significant additional expenses that could adversely affect our business and results of operations.

We cannot guarantee that qualified employees will remain in our employment or that we will be able to attract and retain qualified personnel in the future. In particular, we may not be able to achieve the anticipated revenue growth by expanding our sales and marketing teams if we are not able to attract, develop and retain qualified sales and marketing personnel in the future. Any failure to retain or hire key personnel could have a material adverse effect on our business, financial condition and results of operations.

Our management team’s interests may be focused on the short-term market price of our Class A common shares, which may not coincide with investors’ interests.

Our directors and executive officers, among others, may own shares in the company or be beneficiaries of our share-based compensation plans. We approved a restricted share unit plan in connection with our initial public offering. The maximum number shares that can be issued to beneficiaries under our restricted share unit plan may not exceed 3.0% of our share capital at any time.

Due to the issue of Class A common shares to members of our management team, a significant portion of these members’ compensation will be closely tied to our operating results and, more specifically, to the trading price of our Class A common shares, which may lead these individuals to run our business and manage our activities with an emphasis on generating short-term profits. As a result of these factors, our management team’s interests may not coincide with the interests of our other shareholders who have long-term investment objectives. Additionally, we cannot assure that Cogna’s and our management team’s interest will be aligned, or which party’s interest will prevail.

Moreover, our shareholders may experience dilution in their stakes in our capital stock and in the value of their investments if further shares are issued to honor share-based incentive plans for our management and employees.

In the case of further grants of stock options or restricted shares, our shareholders will be subject to further dilution. For additional information about our share option plan or restricted share plan, see “Item 6. Directors, Senior Management And Employees—B. Compensation—Share Incentive Plan.”

Failure to prevent or detect a malicious cyber-attack on our systems and databases could result in a misappropriation of confidential information or access to highly sensitive information.

Cyber-attacks are becoming more sophisticated and pervasive. Across our business we hold large volumes of personally identifiable information including that of employees, partner schools, students, parents and legal guardians. Individuals may try to gain unauthorized access to our data in order to misappropriate such information for potentially fraudulent purposes, and our security measures may fail to prevent such unauthorized access. Our board of directors, assisted by our Audit and Risk Committee, as part of its regular review of our risk management practices, performs periodic reviews of cyber-security threats and related controls, including reviews of periodic penetration tests performed by independent third parties. However, we cannot assure that these reviews will successfully prevent against all cyber-attacks. A breach could result in a devastating impact on our reputation, with significant adverse effects on customer confidence and loyalty that could adversely affect our financial condition and the student experience. In addition, if we were unable to prove that our systems are properly designed to detect an intrusion, we could be subject to severe penalties under applicable laws and loss of existing or future business.

Failure to comply with data privacy regulations could result in reputational damage to our brands and adversely affect our business, financial condition and results of operations.

The nature of our business exposes us to risks related to possible shortcomings in data protection. Any perceived or actual unauthorized disclosure of personally identifiable information, whether through breach of our network by an unauthorized party, employee theft, misuse or error or otherwise, could harm our reputation, impair our ability to attract and retain our customers, or subject us to claims or litigation arising from damages suffered by individuals.

On December 28, 2018, Provisional Measure No. 869/2018 was passed, amending certain provisions of the General Personal Data Protection Law (Lei Geral de Proteção de Dados), or LGPD, and setting up the National Data Protection Authority (Autoridade Nacional de Proteção de Dados), or ANPD. This measure also extended the deadline for companies to

comply with the LGPD to August 2020. Considering the effects of COVID-19, Brazilian Congress approved Bill No. 1179/20 that, inter alia, postpones the enforceability of the administrative sanctions provided for by the LGPD to August 1, 2021. This Bill has been forwarded to the Brazilian President for approval. In parallel, Provisional Measure No. 959, issued by the President in April 2020, postpones the date of entry into force of the LGPD to May 3, 2021. Note that, to remain valid, this Provisional Measure must be approved by Congress. If not, the LGPD will enter into force on August 16, 2020, as originally intended.

As a result of any failure to comply with the LGPD or occurrence of cybersecurity incidents, we may be subject to the following penalties: (1) legal notices and the required adoption of corrective measures, (2) fines of up to 2.0% of our company’s or our group’s revenue up to a limit of R$50.0 million per infraction, (3) disclosure of the violation after its occurrence is duly verified and confirmed, and (4) blocking and erasing the personal data involved in the violation.

Failure to comply with the rules for the protection of personally identifiable information, including the LGPD, could potentially lead to legal proceedings or could result in penalties, significant remediation costs, reputational damage, the cancellation of existing contracts and difficulty in competing for future business. In addition, we could incur significant costs in complying with relevant laws and regulations regarding the unauthorized disclosure of personal information, which may be affected by any changes to data privacy legislation at both the federal and state levels.

Material weaknesses in our internal control over financial reporting have been identified, and if we fail to establish and maintain proper and effective internal controls over financial reporting, our results of operations and our ability to operate our business may be harmed.

While part of our business has been operated in the past as part of publicly traded companies in Brazil (Cogna and Somos), our accounting personnel and other resources are not structured in a manner consistent with the requirements applicable to a public company listed in the United States. In connection with the audit of our financial statements, we and our independent registered public accounting firm identified certain material weaknesses in our internal controls. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified generally relate to our insufficient accounting processes necessary to comply with the reporting and compliance requirements of IFRS and the SEC. Specifically, the material weaknesses identified relate to the (1) ineffective design, implementation and operation of general information technology controls, or GITCs, in the areas of user access and program change-management and computational operation over information technology systems that support our financial reporting processes, which resulted in business process controls that are dependent on the affected GITCs; (2) ineffective design, implementation and operation of controls within the financial reporting process relating to preparation and review of the financial statements, including the technical application of generally accepted accounting principles and applicability of required disclosures; and (3) ineffective design, implementation and operation of controls over sales cut-off.

We are adopting several measures that will improve our internal control over financial reporting, including increasing the depth and experience within our accounting and finance team, designing and implementing improved processes and internal controls. However, we cannot assure you that our efforts will be effective or prevent any future material weakness or significant deficiency in our internal control over financial reporting.

After our initial public offering, we became subject to the Sarbanes-Oxley Act, which requires, among other things, that we establish and maintain effective internal controls over financial reporting and disclosure controls and procedures. Under the current rules of the SEC, we are required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to assess the effectiveness of our internal controls over financial reporting as well as our disclosure controls and procedures starting on December 31, 2022. Our testing may reveal additional deficiencies in our internal controls that are deemed to be material weaknesses or significant deficiencies and render our internal controls over financial reporting ineffective. We may also identify deficiencies in our disclosure controls and procedures. We expect to incur additional accounting and auditing expenses and to spend significant management time in complying with these requirements. If we are not able to comply with these requirements in a timely manner, or if we or our management identifies additional material weaknesses or significant deficiencies in our internal controls over financial reporting or in our disclosure controls and procedures, the market price of our Class A common shares may decline and we may be subject to investigations or sanctions by the SEC, the Financial Industry Regulatory Authority, Inc., or FINRA, or other regulatory authorities.

In addition, these new obligations will also require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business. These cost increases and the diversion of management’s attention could materially and adversely affect our business, financial condition and operating results.

We may lose bargaining power with our customers if they organize themselves into negotiating blocs, which could have an adverse effect on our business.

Although the education market in Brazil is extremely fragmented, which reduces the bargaining power of individual schools, groups of schools could organize as blocs or syndicates in an attempt to negotiate lower prices for our services or greater benefits, products and services at the same price. If our schools organized as blocs in an attempt to negotiate lower prices, we would be required to devote additional resources to contract negotiations and could face additional challenges in providing cross-selling or up-selling opportunities to these schools. We could be forced to offer lower prices in connection with any such negotiations or provide bundled services at a discount in an effort to maintain and expand our market share. If we lose bargaining power with our customers, we cannot guarantee that we will be able to sell our products and services at profitable prices, which would adversely affect our business, financial condition and results of operations.

Certain of our revenue depends on intermediaries such as large retailers and other distribution channels, and financial difficulties or poor service by these providers could adversely affect our revenue, reputation and results of operations.

We rely on certain intermediaries, such as large retailers and other distribution channels, to make our educational content and products and services available to parents and students. Consequently, a portion of our revenue depends on the level of service offered by these providers, which could depend on their financial and operational health, and their ability to provide adequate service to end consumers. If any of these intermediaries face solvency problems or are unable to provide services or fail to honor their financial commitments to us, our revenue, reputation and results of operations could be adversely affected.

We cannot assure that we have enforceable written contracts in place with all of our suppliers and other third parties with which we conduct business.

We have many suppliers and maintain business relations with a number of third parties. However, not all of our commercial relationships with third parties are formalized through written contracts. The absence of a written contract formalizing our commercial relationships could have an adverse effect on our business, as we may need the existence of written contracts to, among other things, substantiate our commercial relationship with the third party in court, defend ourselves against any litigation by the third party or enforce our rights against the third party in the event of a dispute. If we are subject to any conflicts with third parties with whom we do not maintain written contracts in force, our business, financial condition and results of operations could be materially adversely affected.

We may face restrictions and penalties under the Consumer Defense Code in the future.

Brazil has a series of strict consumer defense laws, known as the Consumer Defense Code. These laws apply to every company in Brazil that provides products or services to Brazilian consumers. They include protection against misleading and specious advertising, protection against coercive or unfair commercial practices and protection in drafting and interpreting agreements, normally in the form of civil responsibilities and administrative penalties for violations. We may infringe or be accused of infringing the Consumer Defense Code, and incur penalties, and we may be unable to contest such penalties.

Penalties may be imposed by the branches of the Consumer Protection and Defense Foundation (Programa de Proteção e Defesa do Consumidor), or PROCON, or by the National Consumer Department (Secretaria Nacional do Consumidor), or SENACON. Companies can reach agreements for complaints submitted by consumers to PROCON branches by paying an indemnity directly to the consumers or through a mechanism that allows them to adjust their conduct, called a Conduct Adjustment Agreement (Termo de Ajuste de Coduta), or TAC. Any indemnities or TACs could adversely affect our reputation and financial situation.

The public prosecutor’s office and public defenders in Brazil can also initiate investigations of alleged violations of consumer rights and demand that companies sign a TAC. Companies that fail to comply with TACs face potential enforcement procedures and other penalties such as fines, as provided for in each TAC. The public prosecutor’s office and public defenders in Brazil can also file public civil proceedings against companies that violate consumer rights or the rules of competition, to ensure strict compliance with the consumer defense laws and indemnities for any damage to consumers. In certain cases, we may also face investigations and/or sanctions by CADE, in the event that our commercial practices are accused of affecting competition in the markets where we operate or the consumers in these markets.

Other methods of entry of students into universities, other than university entrance exams or ENEM, could put our preparatory course business at risk.

Our preparatory courses are focused on preparing students to enter universities by means of specific entrance exams or through ENEM and are powerful lead-generation tools for our go-to-market strategy. These preparatory courses are

specifically tailored in an effort to help students achieve success in entrance exams that are focused on specific criteria and aptitudes and are administered according to known methodologies. If universities were to change their admissions criteria to focus primarily on grades achieved in secondary school, demand for our preparatory courses could decline. Likewise, if universities used new or alternative entrance exams based on different content or testing methodologies, our existing preparatory courses may not be adequate in preparing students for any such new alternative entrance exams or alternative testing methodologies, and we may not be successful in adapting our existing courses (either in-person or long distance classes) at the pace needed to respond to such changes in exams or testing methodologies, or at all, which could impact the reputation of our preparatory courses and lead to a decrease in enrollment in our courses. We could also face challenges in adapting our courses in a cost-efficient manner, which could have an adverse impact on our business and results of operations. Any change in admissions practices for which we are unable to successfully adapt our current preparatory courses could cause a decline in enrollment in our courses, force us to lower our prices and/or result in increased costs, and would have a material adverse effect on our business, financial condition and results of operations.

We are susceptible to the illegal or improper use of our Content & EdTech and Digital Platforms, which could expose us to liability and damage our business.

Our Content & EdTech and Digital Platforms are susceptible to unauthorized use, software license violations, copyright violations and unauthorized copying and distribution (whether by students, schools or others), theft, employee fraud and other similar infractions and violations. Such occurrences can harm our business and consequently negatively affect our operating results. We could be required to expend significant resources to police against and combat improper use of our Content & EdTech and Digital Platforms, and still may be unsuccessful in preventing against such occurrences or identifying those responsible for any such misuse. Any failure to adequately protect against any such illegal or improper use of our platforms could expose us to liability or reputational harm and could have a material adverse effect on our business, financial condition and results of operations.

Unfavorable decisions in our legal or administrative proceedings may adversely affect us.

We are, and may be in the future, party to legal and administrative proceedings arising from the ordinary course of our business or from nonrecurring corporate, tax or regulatory events, involving our suppliers, students and faculty members, as well as from environmental events, competition and tax authorities, especially with respect to civil, tax and labor claims. For instance, Somos Educação, which used to operate our K-12 business under the Anglo brand, is currently party to an administrative proceeding with the sellers of the Anglo business due to a dispute with the sellers regarding indemnities for certain contractual contingencies, for which we have classified the risk of losses as probable, possible and remote, in the amount of R$13.8 million that we understand to be their responsibility, and which are disputed by the sellers. At the time of the business combination an indemnification asset was recorded. The book value of the asset at December 31, 2020 is R$3.0 million. However, we cannot assure that our position will prevail, and we could be subject to an adverse outcome in this proceeding, that, considered in the aggregate with other proceedings both known and unknown to us, could have an adverse effect on our financial condition and results of operations. We cannot guarantee that the results of these proceedings will be favorable to us or that we have made sufficient provisions for liabilities that may arise as a result of these or other proceedings. Adverse decisions in material legal proceedings may adversely affect our results of operations, reputation and the price of our Class A common shares. See “Item 8. Financial Information—A. Consolidated statements and other financial information—Legal Proceedings.”

We may not be sufficiently protected by our parent company against potential liabilities arising from past business practices related to Somos Sistemas that could materialize in the future.

In connection with our corporate reorganization, on December 5, 2019, our subsidiary Somos Sistemas entered into an indemnification agreement with our parent company, Cogna, whereby the latter agreed to indemnify us for cash outflows related to contingencies that may arise due to events occurring prior to the corporate reorganization process that is being held by Cogna Group, for up to R$153.7 million, including for contingencies or lawsuits that may materialize after January 1, 2020 so long as the events for which such contingency arises occurred prior to January 1, 2020. However, this indemnity agreement does not prevent our assets being subject to certain legal restrictions, such as the freezing of our bank accounts, which could require additional reimbursements or further legal action to release our assets, and we cannot guarantee that the indemnifying party will take such actions on a timely basis, or at all, which could have an adverse effect on our business and financial condition.

We outsource certain labor, which may create an obligation on our part to pay certain labor and social security obligations.

We outsource certain labor, primarily for cleaning services, building renovations and surveillance, and contract with third party companies who provide the employees for these services. Because we benefit from the services provided by these outsourced workers, we may become liable under Brazilian law to pay certain labor and social security obligations for the benefit of these workers if the service provider companies providing such outsourced labor fail to comply with their labor and social security obligations on behalf of these workers, and may also be fined by the relevant authorities. We may not have any recourse against the employers of these workers if they fail to meet their labor and social security obligations. We are unable to predict the potential size of any such liability. Any requirement to pay the labor and social obligations related to outsourced workers could have a material adverse effect on our financial condition and results of operations.

We currently sell products and services to government agencies, which subjects us to certain penalties if we do not satisfactorily fulfill our agreements with government agencies or if the agreements are terminated early and we may be subject to liability for prior sales to government agencies in connection with activities undertaken in the past by our affiliates or subsidiaries of our parent company.

We may be held responsible in the future for past business operations that we no longer undertake, such as the sale of teaching material to the federal government under the PNLD. We no longer do business under the PNLD, but we may be subject to certain liabilities, including in connection with applicable anti-corruption laws, for past dealings. While our parent company agreed to indemnify us against certain contingent liabilities, including certain past dealings with government agencies, as part of our corporate reorganization, there can be no assurance that the indemnification agreement with our parent company will fully protect us against potential legal proceedings or government actions, which could have an adverse effect on our business, our reputation, our financial condition and results of operations.

We have recorded provisions for tax, civil and labor losses for past business practices and acquired businesses that could materialize in the future, which could have an adverse effect on our business and financial condition.

As of December 31, 2020, in connection with our past business practices and acquired businesses, we have recorded provisions for tax, civil and labor losses on our statement of financial position in an amount of R$613.9 million primarily related to litigation assumed in connection with acquired businesses, including Somos-Anglo, A&R Comércio e Serviços de Informática Ltda. (Pluri Educacional) and MindMakers. While the sellers of such businesses provided contractual indemnities against eventual contingent liabilities associated with these businesses, depending on the eventual outcome of potential claims or proceedings related to these contingencies, the contractual indemnities offered by the sellers, and the amounts we have recorded as provisions on our statement of financial position, may not be sufficient to cover the financial liabilities that we may face in connection with such contingencies, which could have a material adverse effect on our business and financial condition. In addition, on December 5, 2019, our subsidiary Somos Sistemas entered into an indemnification agreement with our parent company, Cogna, whereby the latter agreed to indemnify us for cash outflows related to contingencies that may arise due to events occurring prior to the corporate reorganization process that was held by Cogna Group, for up to R$153.7 million. However, depending on the final results of eventual legal proceedings and the volume of contingencies up to the date of this annual report, such indemnity may not be sufficient to cover all of our losses, which would have an adverse effect on our financial condition and results of operations. For example, Somos Educação, which used to operate our K-12 business under the Anglo brand, is currently party to an administrative proceeding with the sellers of the Anglo business due to a dispute with the sellers regarding indemnities for certain labor contingencies, for which we have classified the risk of losses as probable, possible and remote, in the aggregate amount of R$7.8 million as of December 31, 2020, that we understand to be their responsibility, and which are disputed by the sellers. At the time of the business combination an indemnification asset was recorded. The book value of the asset at December 31, 2020 is R$ 2.0 million. However, we cannot assure that our position will prevail, and we could be subject to an adverse outcome in this proceeding, that, considered in the aggregate with other proceedings both known and unknown to us, could have an adverse effect on our financial condition and results of operations. We cannot guarantee that the results of these proceedings will be favorable to us or that the indemnity granted to us by our parent company would be sufficient to cover liabilities that may arise as a result of these or other proceedings. If losses that arise in the future exceed the indemnity granted by our parent company, our business and results of operations will be negatively affected.

We may be held responsible for events that occur on the premises of our customers or at the sites where we offer our preparatory courses, which could adversely affect our business.

We could be held responsible for actions made by students, staff or third parties on the premises of our partner schools or at the sites where we offer our preparatory courses. In the event of accidents, injuries, harassment or other illegal acts or if anyone is harmed on the premises of our partner schools or at the sites where we offer our preparatory courses, we could be

involved in legal proceedings claiming that we are directly or indirectly responsible for the relevant harm, whether due to allegations of negligence or lack of adequate supervision. If we are unsuccessful in defending ourselves against any such proceedings, an adverse decision against us could have a material adverse effect on our business and reputation, and on our financial condition and results of operations.

We could be adversely affected if we are unable to renegotiate collective labor agreements with the unions representing our staff, or by strikes or other union action. In addition, we may be adversely affected by negotiations made by the unions that represent our employees if such negotiations are not in line with our business plan and financial condition and we may not be able to pass on our cost increases by means of adjusting the contractual rates we charge our customers, which may affect our operating results.

Salaries and payroll charges account for a significant component of our total expenses (which are comprised of the sum of costs of goods sold and services, general and administrative, commercial and other expenses). Salaries and payroll charges for the year ended December 31, 2020 were R$279.5 million, or 28.8%, of our total expenses of R$970.3 million. For the year ended December 31, 2019, salaries and payroll charges of Vasta were R$200.6 million, representing 22.1% of the total expenses of R$907.2 million. The salaries and payroll charges for the period from October 11 to December 31, 2018 was R$62.4 million, or 30.4% of our total expenses, which was R$205.4 million.  The salaries and payroll charges of the sum of the Predecessors for the period from January 1 to October 10, 2018 was R$185.9 million, or 26.1% of the Predecessors’ total expenses, which was R$711.9 million. Our employees are represented by unions with a strong presence in the K-12 education sector and are covered by collective bargaining agreements or similar arrangements that determine how many hours they work, their minimum compensation and salary adjustments (which are generally linked to inflation), vacation time and additional benefits, among other terms. These agreements are renegotiated annually and may be modified to our disadvantage in the course of these negotiations. We might also be adversely affected if we are unable to establish and maintain cooperative relations with the unions representing our staff, or we might face strikes, stoppages or other labor disturbances by our employees.

Our negotiations with the unions that represent our employees are not always in line with our business plan and such unions may not always consider our current financial condition in when they take certain negotiating positions. Consequently, these unions may pursue terms and conditions under collective bargaining agreements that may be beneficial to our employees but would adversely affect us.

Additionally, we might not be able to pass on cost increases due to the renegotiation of collective bargaining agreements to the fees we charge our customers, and this could have a material adverse effect on our business.

Our educational content might not meet all the requirements of the National Common Curriculum Base, and this could adversely affect our revenue from the sale of educational products and content.

The National Education Plan (Plano Nacional de Educação) passed pursuant to Law No. 13,005/2014 created a National Common Curriculum Base (Base Nacional Comum Curricular or BNCC). The BNCC is a series of guidelines defining a curriculum that specifies the key abilities and knowledge that must be taught as part of primary and secondary education in Brazil, and each institution has discretion to design or adapt its curriculum and teaching projects in line with the BNCC guidelines. The standards set by the BNCC may influence the decisions taken by teaching professionals in private schools. If we are unable to successfully incorporate all the BNCC standards into our educational products and content, our sales of teaching products and solutions could be adversely affected, which could have a material adverse effect on our business, financial condition and results of operations.

We may be adversely affected by legal proceedings involving our parent company or members of its management.

Our parent company is party to legal proceedings that could subject it to financial liability. If our parent company fails to pay fines or penalties assessed in any such proceedings when due, its equity interest in subsidiaries, including us, could be seized in satisfaction of such obligations. Any condemnation of other companies controlled by our parent company could also adversely affect the price of our shares. Moreover, management of our operations could be adversely affected if any member of management of our parent company is subjected to imprisonment or restriction on liberty pursuant to any court order, which could have an adverse effect on our business, results of operations and financial condition.

We may not have sufficient insurance to protect ourselves against substantial losses.

We have insurance policies to provide coverage against certain potential risks, such as property damage and personal injury, as well as D&O insurance for our management team. However, we cannot guarantee that our insurance coverage will always be available or will be sufficient to cover possible claims for these risks. In addition, there are certain types of risk

that might not be covered by our policies, such as war, acts of nature, force majeure or interruption of certain activities. Moreover, we might be obliged to pay fines and other penalties in the event of delays in product delivery, and such penalties are not covered by our insurance policies. Additionally, we may not be able to renew our current insurance policies under the same terms or at all. Risks not covered by our insurance policies or the inability to renew policies on favorable terms or at all could adversely affect our business and financial condition.

If we are not able to obtain, renew or register our lease agreements on favorable terms, our results of operations may be adversely affected.

According to Brazilian law, a lessee has the right to renew existing leases for subsequent terms equal to the original term of the lease. In order for a lessee to enforce this right, the following criteria must be met (1) the non-residential lease agreement must have a fixed term equal to or greater than five consecutive years, or, in the event there is more than one agreement or amendments thereto regarding the same real estate, the aggregate term in all such agreement and amendments must be greater than five consecutive years, (2) the lessee must have been using the property for the same purpose for a minimum period of three years and (3) the lessee must claim the right of renewal at the most one year and at least six months prior to the end of the term of the lease agreement.

The lease agreements for a few some of our facilities are for periods of less than five years, and therefore are not entitled to renewal rights, and so the lessor might refuse to renew when the lease expires. In addition, a few of our leases have indeterminate terms and are subject to termination at any time by the lessor so long as the lessor provides notice to the lessee at least 30 days from the date the lessor wants the lessee to vacate the property. If we are forced to close any of our educational facilities or have to find other properties due to the termination of a lease agreement and our inability to renew the lease, our business and results of operations may be adversely affected.

The lease agreements for some of the properties we use are not registered with the corresponding property registry. Registering and obtaining a certificate of registration for our lease agreements with the appropriate registries may take longer than expected or may not be successfully completed due to obstacles that are unknown to us and are outside of our control. Registering the lease agreements and obtaining the appropriate certificate of registration is important, especially should the property be transferred to a third party, because the third party who acquires the property will be bound by the lease agreement, provided it was (1) entered into for a specified term, (2) has a duration clause and (3) is registered in and approved by the competent real estate registry office. Should a duly registered leased property be put up for sale, the lessee will have a right of first refusal However, if the lease agreement is not registered, the lessee may not contest an infringement of its right of first refusal. If we do not have a right of first refusal our business may be adversely affected.

We are currently in the process of obtaining or renewing local licenses and permits, including licenses from the fire department, for some of the real estate we use and the businesses we operate. Failure to obtain renewals of these licenses and permits on a timely manner may result in penalties, including closures of some of our educational facilities, which could adversely affect us.

The use of all of our buildings is subject to the successful acquisition of an occupancy permit (Habite-se), or equivalent certificate, issued by the municipality where the property is located, certifying that the building has no deficiencies. In addition, nonresidential properties are required to have a use and operations license and/or permit, issued by the competent municipality, and a fire department inspection certificate and other licenses and registrations necessary for their regular use.

We are currently in the process of obtaining or renewing these licenses for some of the properties we use and the businesses we operate. The absence of such licenses may result in penalties ranging from fines to forced demolition of the areas that were not built in compliance with applicable codes or, in the worst scenario, closure of the educational facility lacking the licenses and permits. Failure to register with municipal, state or federal bodies may damage us because we shall not be able to collect charges from our customers due to our inability to issue proper tax receipts.

Any penalties imposed, and in particular the forced closure of any of our units, may result in a material adverse effect on our business. Moreover, in the event of any accident at our educational facilities, the lack of such licenses may result in civil and criminal liability, as well as cause the cancellation of eventual insurance policies for the respective facility and may damage our reputation.

Any liquidation proceedings involving a company of our group may be conducted on a consolidated basis.

In the event of liquidation proceedings involving a company of the Cogna group, Brazilian courts may consider our assets and liabilities to be unified within the scope of such liquidation proceedings as if they belonged to a single company on

a consolidated basis (Teoria da Consolidação Substancial), allocating our parent net investments to pay creditors of our parent company or other companies in our group. If this happens, the value of our shares may be adversely affected.

Certain Factors Relating to Brazil

The Brazilian federal government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement as well as Brazil’s political, regulatory, legal and economic conditions could harm us and the price of our Class A common shares.

The Brazilian federal government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases or decreases in interest rates, changes in fiscal policies, wage and price controls, foreign exchange rate controls, blocking access to bank accounts, currency devaluations, capital controls and import and export restrictions. We have no control over and cannot predict what measures or policies the Brazilian government may take in the future, and how these can impact us and our business. We and the market price of our securities may be harmed by changes in Brazilian government policies, as well as general economic factors, including, without limitation:

Uncertainty over whether the Brazilian federal government will implement reforms or changes in policy or regulation affecting these or other factors in the future may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on our activities and consequently our operating results and may also adversely affect the trading price of our Class A common shares. Recent economic and political instability has led to a negative perception of the Brazilian economy and higher volatility in the Brazilian securities markets, which also may adversely affect us and our Class A common shares. See “Item 5. Operating And Financial Review And Prospects—Brazilian Macroeconomic Environment.”

The ongoing economic uncertainty and political instability in Brazil, including as a result of ongoing corruption investigations, may harm us and the price of our Class A common shares.

Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.

The recent economic instability in Brazil have contributed to a decline in market confidence in the Brazilian economy. Various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Brazilian Federal Prosecutor, including the largest of such investigations, known as “Operação Lava Jato,” have negatively impacted the Brazilian economy and political environment. The potential outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. We cannot predict whether the ongoing investigations will result in further political and economic instability, or if new allegations against government officials and/or executives of private companies will arise in the future. A number of senior politicians, including current and former members of Congress and the Executive Branch, and high-ranking executive officers of major corporations and state-owned companies in Brazil were arrested, convicted of various charges relating to corruption, entered into plea agreements with federal prosecutors and/or have resigned or been removed from their positions as a result of these Lava Jato investigations. These individuals are alleged to have accepted bribes by means of kickbacks on contracts granted by the government to several infrastructure, oil and gas and construction companies. The profits of these kickbacks allegedly financed the political campaigns of political parties, for which funds were unaccounted or not publicly disclosed. These funds were also allegedly directed toward the personal enrichment of certain individuals. The effects of Lava Jato as well as other ongoing corruption-related investigations resulted in an adverse impact on the image and reputation of the companies that have been implicated as well as on the general market perception of the Brazilian economy, political environment and capital markets. We have no control over, and cannot predict, whether such investigations or allegations will lead to further political and economic instability or whether new allegations against government officials will arise in the future.

It is expected that the current Brazilian federal government may propose the general terms of fiscal reform to stimulate the economy and reduce the forecasted budget deficit for 2020 and following years, but it is uncertain whether the Brazilian government will be able to gather the required support in the Brazilian Congress to pass additional specific reforms. We cannot predict which policies the Brazilian federal government may adopt or change or the effect that any such policies might have on our business and on the Brazilian economy. In addition, the Brazilian government is incurring significant levels of debt to finance measures to combat the COVID-19 pandemic which is expected to increase the Brazilian budget deficit. Any such new policies or changes to current policies, including measures to combat the COVID-19 pandemic, may have a material adverse impact on our business, results of operations, financial condition and prospects.

Any of the above factors may create additional political uncertainty, which could harm the Brazilian economy and, consequently, our business and the price of our Class A common shares.

Inflation and certain measures by the Brazilian government to curb inflation have historically harmed the Brazilian economy and Brazilian capital markets, and high levels of inflation in the future would harm our business and the price of our Class A common shares.

In the past, Brazil has experienced extremely high rates of inflation. Inflation and some of the measures taken by the Brazilian government in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Inflation, policies adopted to curb inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty and heightened volatility in the Brazilian capital markets.

According to the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo), or IPCA, which is published by the Brazilian Institute for Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE, Brazilian inflation rates were 4.5%, 4.3% and 3.8% for the years ended December 31, 2020, 2019 and 2018, respectively. Brazil may experience high levels of inflation in the future and inflationary pressures may lead to the Brazilian government’s intervening in the economy and introducing policies that could harm our business and the price of our Class A common shares. One of the tools used by the Brazilian government to control inflation levels is its monetary policy, specifically in regard to the official Brazilian interest rate. An increase in the interest rate restricts the availability of credit and reduces economic growth, and vice versa. During recent years there has been significant volatility in the official Brazilian interest rate, which ranged from 14.25%, on December 31, 2015, to 2.00% on December 31, 2020. As of the date hereof, the official Brazilian interest rate is 2.75%. This rate is set by the Monetary Policy Committee of the Brazilian Central Bank (Comitê de

Política Monetária), or COPOM. Any change in interest rate, in particular any volatile swings, can adversely affect our growth, indebtedness and financial condition.

Exchange rate instability may have adverse effects on the Brazilian economy, our business and the trading price of our Class A common shares.

The Brazilian currency has been historically volatile and has been devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies. In 2014, the real depreciated by 11.8% against the U.S. dollar, while in 2015 it further depreciated by 32%. The real/U.S. dollar exchange rate reported by the Brazilian Central Bank was R$3.259 per US$1.00 on December 31, 2016, an appreciation of 16.5% against the rate of R$3.905 per US$1.00 reported on December 31, 2015. In 2017, the real depreciated by 1.5%, with the exchange rate reaching R$3.308 per US$1.00 on December 31, 2017. In 2018, the real depreciated an additional 17.1%, to R$3.875 per US$1.00 on December 31, 2018. The real/U.S. dollar exchange rate reported by the Brazilian Central Bank was R$4.031 per US$1.00 on December 31, 2019, which reflected a 4.0% depreciation of the real against the U.S. dollar for the year. The real/U.S. dollar exchange rate reported by the Brazilian Central Bank was R$5.197 per US$1.00 on December 31, 2020, which reflected a 28.9% depreciation of the real against the U.S. dollar for the year. Due to the COVID-19 and the economic and political instability, the real depreciated 47.2% against the U.S. dollar since December 31, 2019, and reached R$5.937 per US$1.00 as of May 14, 2020, its lowest level since the introduction of the currency in 1994. The exchange rate reported by the Brazilian Central Bank was R$5.401 per US$1.00 on April 28, 2021. There can be no assurance that the real will not appreciate or further depreciate against the U.S. dollar or other currencies in the future.

A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian government to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and harm our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy. These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of the real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.

On the other hand, an appreciation of the real relative to the U.S. dollar and other foreign currencies may deteriorate the Brazilian foreign exchange current accounts. Depending on the circumstances, either devaluation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as affecting our business, results of operations and profitability.

Infrastructure and workforce deficiency in Brazil may impact economic growth and have a material adverse effect on us.

Our performance depends on the overall health and growth of the Brazilian economy. Brazilian GDP growth has fluctuated over the past few years, with contractions of 3.5% and 3.3% in 2015 and 2016, respectively, followed by growth of 1.3% in both 2017 and 2018, and 1.1% in the year ended December 31, 2019. Brazilian GDP contracted 4.1% in the year ended December 31, 2020. Growth is limited by COVID-19 effects in relevant economy sectors, such as services and industry, which have been highly impacted by the lack of government effective measures in health and economy in general, respectively, among others: (1) lack of central coordination of COVID-19 vaccines and safety measures alongside municipalities and states, and (2) lack of consistent social contributions from the Brazilian government. All of such factors are aggravated by infrastructure, including potential energy shortages and deficient transportation, logistics and telecommunication sectors, general strikes, the lack of a qualified labor force, and the lack of private and public investments in these areas, which limit productivity and efficiency. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth and ultimately have a material adverse effect on us.

Developments and the perceptions of risks in other countries, including other emerging markets, the United States and Europe, may harm the Brazilian economy and the price of our Class A common shares.

The market for securities offered by companies with significant operations in Brazil is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging markets, as well as the United States, Europe and other countries. To the extent the conditions of the global markets or economy deteriorate, the business of companies with significant operations in Brazil may be harmed. The weakness in the global economy has been marked by, among other adverse factors, lower levels of consumer and corporate confidence, decreased business investment and consumer spending, increased unemployment, reduced income and asset values in many areas, reduction of China’s growth rate, currency volatility and limited availability of credit and access to capital. Developments or economic conditions in other countries may significantly affect the availability of credit to companies with significant operations in Brazil and result in considerable outflows of funds from Brazil, decreasing the amount of foreign investments in Brazil.

Crises and political instability in other emerging countries, the United States, Europe or other countries could decrease investor demand for securities offered by companies with significant operations in Brazil, such as our Class A common shares. Investor sentiment in one country may cause capital markets in other countries to fluctuate, affecting the value of our Class A common shares, even if indirectly. The economic, political and social instability in the United States, the trade war between the United States and China, crises in Europe and other countries, the consequences of United Kingdom’s exit from the European Union, and global tensions, as well as economic or political crises in Latin America or other emerging markets, including as a result of the COVID-19 pandemic, can significantly affect the perception of the risks inherent in investment in Brazil. In addition, growing economic uncertainty and news of a potentially recessive economy in the United States may also create uncertainty in the Brazilian economy. These developments, as well as potential crises and forms of political instability arising therefrom or any other as of yet unforeseen development, may harm our business and the price of our Class A common shares.

Any further downgrading of Brazil’s credit rating could reduce the trading price of our Class A common shares.

We may be harmed by investors’ perceptions of risks related to Brazil’s sovereign debt credit rating. Rating agencies regularly evaluate Brazil and its sovereign ratings, which are based on a number of factors including macroeconomic trends, fiscal and budgetary conditions, indebtedness metrics and the perspective of changes in any of these factors.

The rating agencies began to review Brazil’s sovereign credit rating in September 2015. Subsequently, the three major rating agencies downgraded Brazil’s investment-grade status:

Brazil’s sovereign credit rating is currently rated below investment grade by the three credit rating agencies. Consequently, the prices of securities offered by companies with significant operations in Brazil have been negatively affected. A prolongation or worsening of the current Brazilian recession and continued political uncertainty, among other

factors, could lead to further ratings downgrades. Any further downgrade of Brazil’s sovereign credit ratings could heighten investors’ perception of risk and, as a result, cause the trading price of our Class A common shares to decline.

Certain Factors Relating to Our Class A Common Shares

Our parent company owns 100% of our outstanding Class B common shares, which represent approximately 97.2% of the voting power of our issued share capital and 77.6% of our total equity ownership, will control all matters requiring shareholder approval. Our parent company’s ownership and voting power limits your ability to influence corporate matters.

As of December 31, 2020, our parent company controls our company, owning 77.6% of our issued share capital, through its beneficial ownership of all of our outstanding Class B common shares, and consequently, 97.2% of the combined voting power of our issued share capital. Our Class B common shares are entitled to 10 votes per share and our Class A common shares, which are publicly traded, are entitled to one vote per share. Our Class B common shares are convertible into an equivalent number of Class A common shares and generally convert into Class A common shares upon transfer, subject to limited exceptions. As a result, our parent company will control the outcome of all decisions at our shareholders’ meetings and will be able to elect a majority of the members of our board of directors. Our parent company will also be able to direct our actions in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses. For example, our parent company may cause us to make acquisitions that increase the amount of our indebtedness or outstanding Class A common shares, sell revenue generating assets or inhibit change of control transactions that benefit other shareholders. Our parent company’s decisions on these matters may be contrary to your expectations or preferences, and our parent company may take actions that could be contrary to your interests. Our parent company will be able to prevent any other shareholders, including you, from blocking these actions. For further information regarding shareholdings in our company, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

So long as our parent company continue to beneficially own a sufficient number of Class B common shares, even if our parent company beneficially owns significantly less than 50% of our outstanding share capital, our parent company will be able to effectively control our decisions. If our parent company sells or transfers any of its Class B common shares, such shares will generally convert automatically into Class A common shares, subject to limited exceptions, such as transfers to affiliates, to trustees for the holder or its affiliates and certain transfers to U.S. tax exempt organizations. The fact that any Class B common shares convert into Class A common shares if our parent company sells or transfers them means that our parent company will in many situations continue to control a majority of the combined voting power of our outstanding share capital, due to the voting rights of any Class B common shares that it retains. However, if our Class B common shares at any time represent less than 10% of the total number of shares in the capital of the company outstanding, the Class B common shares then outstanding will automatically convert into Class A common shares. For a description of the dual class structure, see “Item 10. Additional Information—B. Memorandum and articles of association.”

Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the Nasdaq, limiting the protections afforded to investors.

We are a “controlled company” and a “foreign private issuer” within the meaning of the Nasdaq corporate governance standards. Under the Nasdaq rules, a controlled company is exempt from certain Nasdaq corporate governance requirements. In addition, a foreign private issuer may elect to comply with the practice of its home country and not to comply with certain Nasdaq corporate governance requirements, including the requirements that (i) a majority of the board of directors consists of independent directors, (ii) a nominating and corporate governance committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, (iii) a compensation committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, and (iv) an annual performance evaluation of the nominating and corporate governance and compensation committees be undertaken. Although we have similar practices, they do not entirely conform to the Nasdaq requirements; therefore, we currently use these exemptions and intend to continue using them. Accordingly, you will not have the same protections provided to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

Our Articles of Association contain anti-takeover provisions that may discourage a third party from acquiring us and adversely affect the rights of holders of our Class A common shares.

Our Articles of Association contain certain provisions that could limit the ability of others to acquire our control, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders of the opportunity to sell

their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain our control in a tender offer or similar transactions.

The price of our Class A common shares may be subject to changes in the price of the shares of our parent company.

Our parent company is a public company and listed in Brazil on the B3. Accordingly, investors may choose to value our Class A common shares considering the business group as a whole, and not just our business on its own. Consequently, any change in the price of the shares of our parent company, whether due to factors such as business decisions, the macroeconomic situation in Brazil, the publication of financial results, or otherwise, may negatively affect its market value and, therefore, have an adverse effect on the price of our Class A common shares.

If securities or industry analysts do not publish reports, or publish inaccurate or unfavorable reports about our business, the price of our Class A common shares and our trading volume could decline.

The trading market for our Class A common shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts currently cover our parent company, but they do not, and may never, publish research on our company. If no or too few securities or industry analysts commence coverage of our company, the trading price for our Class A common shares would likely be negatively affected. If one or more of the analysts who cover us downgrade their target price for our Class A common shares or publish inaccurate or unfavorable reports about our business, the price of our Class A common shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our Class A common shares could decrease, which might cause the price of our Class A common shares and trading volume to decline.

We may not pay any cash dividends in the foreseeable future.

We may retain our future earnings, if any, for the foreseeable future, to fund the operation of our business and future growth. As a result, capital appreciation in the price of our Class A common shares, if any, will be your only source of gain on an investment in our Class A common shares.

Our dual class capital structure means our shares will not be included in certain indices, and this could affect the market price of our Class A shares.

In 2017, FTSE Russell, S&P Dow Jones and MSCI announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices to exclude companies with multiple classes of shares of common stock from being added to such indices. FTSE Russell announced plans to require new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders, whereas S&P Dow Jones announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. MSCI also opened public consultations on their treatment of no vote and multi class structures and has temporarily barred new multi class listings from its ACWI Investable Market Index and U.S. Investable Market 2500 Index. We cannot assure you that other stock indices will not take a similar approach to FTSE Russell, S&P Dow Jones and MSCI in the future. Under the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange traded funds and other investment vehicles that attempt to passively track these indices will not invest in our stock. Exclusion from indices could make our Class A common shares less attractive to investors and, as a result, the market price of our Class A common shares could be adversely affected.

The dual class structure of our common stock has the effect of concentrating voting control with our parent company; this will limit or preclude your ability to influence corporate matters.

Each Class A common share entitles its holder to one vote per share, and each Class B common share entitles its holder to ten votes per share, so long as the total number of the issued and outstanding Class B common shares is at least 10% of the total number of shares outstanding. Due to the ten to one voting ratio between our Class B and Class A common shares, the beneficial owner of our Class B common shares collectively will continue to control the voting power of our common shares and therefore be able to control all matters submitted to our shareholders.

In addition, our Articles of Association provide that at any time when there are Class A common shares in issue, additional Class B common shares may only be issued pursuant to (1) a share split, subdivision of shares or similar transaction or where a dividend or other distribution is paid by the issue of shares or rights to acquire shares or following capitalization of profits, (2) a merger, consolidation, or other business combination involving the issuance of Class B common shares as full or partial consideration, or (3) an issuance of Class A common shares, whereby holders of the Class B

common shares are entitled to purchase a number of Class B common shares that would allow them to maintain their proportional ownership interests in Vasta (following an offer by us to each holder of Class B common shares to issue to such holder, upon the same economic terms and at the same price, such number of Class B common shares as would ensure such holder may maintain a proportional ownership interest in Vasta pursuant to our Articles of Association).

Future transfers by holders of Class B common shares will generally result in those shares converting to Class A common shares, subject to limited exceptions, such as certain transfers effected to permitted transferees or for estate planning or charitable purposes. The conversion of Class B common shares to Class A common shares will have the effect, over time, of increasing the relative voting power of those holders of Class B common shares who retain their shares in the long term.

This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future. For a description of our dual class structure, see “Item 10. Additional Information—B. Memorandum and articles of association—Voting Rights.”

We are a Cayman Islands exempted company with limited liability. The rights of our shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.

We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Articles of Association and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (1) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (2) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (3) directors should not properly fetter the exercise of future discretion; (4) duty to exercise powers fairly as between different sections of shareholders; (5) duty to exercise independent judgment; and (6) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure and subject to any separate requirement under applicable law or the listing rules of the Nasdaq, and unless disqualified by the chairman of the relevant meeting, such director may vote in respect of any transaction or arrangement in which he or she is interested and may be counted in the quorum at the meeting. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders and the director’s duties prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. For more information, see “Item 16G. Corporate governance—Principal Differences between Cayman Islands and U.S. Corporate Law.”

We may need to raise additional capital in the future by issuing securities, use our Class A common shares as acquisition consideration, or may enter into corporate transactions with an effect similar to a merger, which may dilute your interest in our share capital, change the nature of our business, and/or affect the trading price of our Class A common shares.

We may need to raise additional funds to grow our business, including through acquisitions, and implement our growth strategy going forward by engaging in public or private issuances of common shares or securities convertible into, or exchangeable for, our common shares, which may dilute your interest in our share capital or result in a decrease in the market price of our common shares. Any fundraising through the issuance of shares or securities convertible into or exchangeable for shares, the use of our Class A common shares as acquisition consideration, or the participation in corporate transactions with an effect similar to a merger, may dilute your interest in our capital stock, change the nature of our business from the business that you originally invested in (including as a result of merger or acquisition transactions), and/or result in a decrease in the market price of our Class A common shares.

As a foreign private issuer and an “emerging growth company” (as defined in the JOBS Act), we have different disclosure and other requirements from U.S. domestic registrants and non-emerging growth companies. We may take advantage of exemptions from certain corporate governance regulations of the Nasdaq, and this may result in less protection for the holders of our Class A common shares.

As a foreign private issuer and emerging growth company, we may be subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange

Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on exemptions from certain U.S. rules which will permit us to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.

We follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.

Furthermore, foreign private issuers are required to file their annual report on Form 20 F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we are be subject to Cayman Islands laws and regulations having substantially the same effect as Regulation Fair Disclosure. As a result of the above, even though we are required to furnish reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.

In addition, according to Section 303A of the Section 5605 of the Nasdaq equity rules listed companies are required, among other things, to have a majority of independent board members, and to have independent director oversight of executive compensation, nomination of directors and corporate governance matters. As a foreign private issuer, however, we are permitted to, and we do, follow home country practice in lieu of the above requirements. For more information, see the section “Item 16G. Corporate governance—Principal Differences between Cayman Islands and U.S. Corporate Law.”

The JOBS Act contains provisions that, among other things, relax certain reporting requirements for emerging growth companies. Under this act, as an emerging growth company, we are not subject to the same disclosure and financial reporting requirements as non-emerging growth companies. For example, as an emerging growth company we are permitted to, and intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Also, we do not have to comply with future audit rules promulgated by the U.S. Public Company Accounting Oversight Board, or PCAOB (unless the SEC determines otherwise), and our auditors will not need to attest to our internal controls under Section 404(b) of the Sarbanes Oxley Act. We may follow these reporting exemptions until we are no longer an emerging growth company. As a result, our shareholders may not have access to certain information that they deem important. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual revenue of at least US$1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common shares that is held by non-affiliates exceeds US$700.0 million as of the prior June 30, and (2) the date on which we have issued more than US$1.07 billion in non-convertible debt during the prior three year period. Accordingly, the information about us available to you will not be the same as, and may be more limited than, the information available to shareholders of a non-emerging growth company. We could be an “emerging growth company” for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common shares held by non-affiliates exceeds US$700 million as of any June 30 (the end of our second fiscal quarter) before that time, in which case we would no longer be an “emerging growth company” as of the following December 31 (our fiscal year end). We cannot predict if investors will find our Class A common shares less attractive because we may rely on these exemptions. If some investors find our Class A common shares less attractive as a result, there may be a less active trading market for our Class A common shares and the price of our Class A common shares may be more volatile.

We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

In order to maintain our current status as a foreign private issuer, either (a) more than 50% of our Class A common shares must be either directly or indirectly owned of record by nonresidents of the United States or (b)(1) a majority of our executive officers or directors may not be U.S. citizens or residents, (2) more than 50% of our assets cannot be located in the United States and (3) our business must be administered principally outside the United States. If we lose this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs

to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the costs we will incur as a foreign private issuer.

Our shareholders may face difficulties in protecting their interests because we are a Cayman Islands exempted company.

Our corporate affairs are governed by our Articles of Association, by the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under the laws of the Cayman Islands are not as clearly defined as under statutes or judicial precedent in existence in jurisdictions in the United States. Therefore, you may have more difficulty protecting your interests than would shareholders of a corporation incorporated in a jurisdiction in the United States, due to the comparatively less formal nature of Cayman Islands law in this area.

While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company that takes place by way of a scheme of arrangement. This may make it more difficult for you to assess the value of any consideration you may receive in such a merger or consolidation or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation that does not take place by way of a scheme of arrangement to apply to the Grand Court for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.

Shareholders of Cayman Islands exempted companies have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Our directors have discretion under our Articles of Association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Subject to limited exceptions, under Cayman Islands’ law, a minority shareholder may not bring a derivative action against the board of directors. Class actions are not recognized in the Cayman Islands, but groups of shareholders with identical interests may bring representative proceedings, which are similar.

United States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.

We have been advised by our Cayman Islands legal counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us predicated upon the civil liability provisions of the securities laws of the United States or any State, to the extent that the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in reais. The exchange rate in force at the time may not offer non-Brazilian investors full compensation for any claim arising from our obligations.

Most of our assets are located in Brazil. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our Class A common shares, we may not be required to discharge our obligations in a currency other than the real. Under Brazilian exchange control laws, an obligation in Brazil to pay amounts denominated in a currency other than the real may only be satisfied in Brazilian currency at the exchange rate, as determined by the Brazilian Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the Class A common shares.

Our Class A common shares may not be a suitable investment for all investors, as investment in our Class A common shares presents risks and the possibility of financial losses.

The investment in our Class A common shares is subject to risks. Investors who wish to invest in our Class A common shares are thus subject to asset losses, including loss of the entire value of their investment, as well as other risks, including those related to our Class A common shares, us, the sector in which we operate, our shareholder structure and the general macroeconomic environment in Brazil, among other risks.

Each potential investor in our Class A common shares must therefore determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:

The Cayman Islands Economic Substance Law may affect our operations.

The Cayman Islands has recently enacted the International Tax Co-operation (Economic Substance) Act (As Revised), or the Cayman Economic Substance Act. We are required to comply with the Cayman Economic Substance Law. As we are a Cayman Islands company, compliance obligations include filing annual notifications for us, which need to state whether we are carrying out any relevant activities and, if so, whether we have satisfied economic substance tests to the extent required under the Cayman Economic Substance Act. As it is a relatively new regime, it is anticipated that the Cayman Economic Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Cayman Economic Substance Act. Failure to satisfy these requirements may subject us to penalties under the Cayman Economic Substance Act.

The Cayman Islands Tax Information Authority shall impose a penalty of CI$10,000 (or US$12,500) on a relevant entity for failing to satisfy the economic substance test or CI$100,000 (or US$125,000) if it is not satisfied in the subsequent financial year after the initial notice of failure. Following failure after two consecutive years the Grand Court of the Cayman Islands may make an order requiring the relevant entity to take specified action to satisfy the economic substance test or ordering it that it is defunct or be struck off.

ITEM 4. INFORMATION ON THE COMPANY

A.       History and Development of the Company

Our History

Our business is the result of several value-added acquisitions and in-house development of solutions throughout the years, and we have a solid track record in the educational market that traces back to the beginning of the century. The solutions presented below were integrated one by one in a thorough process, resulting in what is now a one-stop-partner provider to schools with an unmatchable market offering. Based on our extensive knowledge of private schools given our parent company’s own schools operations, additions to Vasta’s platform have enforced cross-knowledge and improvements to take our solutions to the next level.

We set forth below the dates our businesses commenced operations, detailing key events in our history.

The roots of our parent company trace back to 1966 with the creation of the Grupo Pitágoras, a preparatory course for university admission exams. In the 1990s, our parent company developed the Pitágoras educational platform, a replicable teaching and management model, rolling out its educational strategy across Brazil. Starting in 2010, the Cogna group (formerly known as Kroton) began to make significant investments in the postsecondary education segment, always ahead of transformational trends, starting with the acquisition of IUNI Educational S.A., an institution that offered undergraduate and postgraduate programs and that doubled the group’s activities, providing national scale.

Two other relevant acquisitions were UNOPAR in 2011, which was the result of a digitalization effort and made the group the leader in the distance learning sector in Brazil, and Anhanguera in 2014, which had both on-campus and distance learning courses and initiated the concept of scale as a value creation mechanism. Recognized as one of the largest and most successful education companies in the world, Cogna brings vast knowledge and industry track record to Vasta’s operations, along with the Pitágoras and Rede Cristã de Ensino learning systems.

Vasta’s history is also based on the unification of several other renowned brands, and dates back to 1914, with the opening of a small, second-hand bookshop in São Paulo with the brand Saraiva, one of the most traditional names in Brazil. In the same decade, Saraiva published its first book, therefore inaugurating the publishing phase of the company. Pioneer in publishing and bookselling markets, Saraiva acquired Editora Atual in 1998, and began selling its products electronically through its website, one of the first e-commerce sites in the country.

The 1970s marked an important landmark in another of our brands, Anglo, with the launch of its workbook, disrupting the delivery of educational content across the country. As a pioneer in the offering of learning systems, Anglo started by offering preparatory course materials and expanded from its already well-recognized high-quality standards in Exact Sciences to a complete content solution to partner schools. In the 2000s, Anglo already had several partner schools throughout the country associating the experience of founding educators to the next generation of educators and market standards. Anglo is one of the longest-standing educational brands in the country and is founded on encouraging the autonomy and empowerment of its students.

In 1986, another educational platform that would comprise our portfolio, Sistema Maxi de Ensino, was born through the expertise of Colégio Maxi, a widely recognized school in Londrina, offering content to elementary and middle schools throughout the country.

Our first Digital Platform solution, Livro Fácil, was founded in 1991. Livro Fácil is an e-commerce for the sale of teaching materials, stationery and literature, among others.

In 2004, Ético educational platform was founded, encompassing a repertoire of integrated solutions through digital and printed content for the complete development of students.

The combination of our individual brands started in 1999, when the Abril Group (the former name of Somos Educação, which is now Vasta) acquired the publishing companies Ática and Scipione, well-established leaders in the Brazilian printed content market and pioneers in the creation of educational content. In 2010, Vasta acquired the Anglo educational platform and Anglo preparatory course for university admission exams, positioning us as the second largest player in Brazil.

One year later, in 2011, we acquired the pH schools and courses, one of the most traditional brands in the state of Rio de Janeiro, which led to the creation of the pH educational platform in 2012. Sistema de Ensino pH leverages over 25 years of expertise from Curso pH, offering structured and elaborated material to partner schools, as well as standardized after-school content to support educators, guide education practices and strengthen learning techniques. In this context, we were already the best positioned player to consolidate the K-12 education market, and other relevant acquisitions succeeded in the following years such as Maxi, in October 2011, making our Company the largest learning systems provider in Brazil.

In 2012, we expanded our scope through “O Líder em Mim,” a pioneering initiative in Brazil designed to promote behavioral change in educators, children and teenagers through the development of socio-emotional skills, helping students take control of their own lives and be a part of social transformation. This program was developed by Franklin Covey Co., in the United States, based on the book “The 7 Habits of Highly Effective People” and adapted for Brazilian children from kindergarten age to ninth grade. O Líder em Mim focuses on using the “7 Habits” system and works on overcoming constrictive paradigms to help students and educators to see situations differently, change their behavior and achieve new and consistent results.

Plurall was the opening wedge into digital content offering, developed in 2013 and rolled out in February 2014, with continuous improvement ever since. Our solution is a practical, organized and innovative platform, which was conceived for mobile phone use and is also available online. Using Plurall, students can access content seen in the classroom, teaching materials, exercise lists, ENEM exams and Brazil’s main university entrance exams, instructional videos, frequently asked questions, and can access tutors even during weekends and holidays. For highly skilled students, Plurall also offers tasks with a greater complexity in order to challenge and motivate them, helping develop their full potential. Schools and parents can also access performance reports that show the results of each student, demonstrating strengths, weaknesses, as well as benchmarks with other schools across Brazil. For educators, we developed the Plurall Maestro platform in 2014, which allows educators to create their own activities and exercises and produce new content and exams, resulting in a personalization of teaching strategies. In 2015, Plurall was recognized for the innovation it brings to the education market globally and won the Global Mobile Awards as the best mobile innovation for education and learning.

Saraiva was added to Vasta’s core content portfolio in June 2015, including Saraiva’s publishing operations and the Ético educational platform. This acquisition reinforced our commitment to be increasingly present in schools, through close ties with educators, students, families and school owners. As a result, Vasta became the largest publisher in Brazil and one of the 50 largest publishers in the world.

The PROFS core solution was created in 2016 as a continuous teacher training program. By developing skills and abilities, educators are able to improve teaching and learning processes while having the opportunity to get to know our platform, therefore increasing adoption of other products.

In 2017, Somos acquired Livro Fácil, which contributes to the success of the PAR solution, as schools can choose to promote this e-commerce among parents and receive commission for material sold through the platform as opposed to buying and reselling with a markup. As well as selling teaching materials, stationery and literature, Livro Fácil functions as a distribution hub that resells materials from other suppliers that are chosen by our partner schools, placing us as a one-stop-partner for schools.

As a relevant addition to our existing core content solutions, PAR was created in 2017 to engage schools through long-term contracts using digital and printed content based on textbooks. This model benefits educators, that are able to preserve their pedagogical preferences, but at the same time enables them to receive the same level of service and support that is provided through our educational platform. Full flexibility to choose from a variety of books increases loyalty and is a first step for a potential educational platform adoption, if desired by the schools.

In 2018, we developed English Stars, an educational platform for English instruction, purchasing content from Macmillan, thereby complementing our complementary content portfolio. English Stars focuses not only on language instruction, but on English as a means of communication, exploring content that goes beyond vocabulary and grammar, such as science, humanities and art.

In October 2018, our parent company announced the acquisition of Somos as an expansion of its K-12 business and B2B business model, integrating a high-quality full-service provider, with a comprehensive portfolio of solutions and brands serving all segments of the private K-12 education market, broadening our knowledge on core and complementary content solutions.

Vasta is a result of the combination of Cogna’s strong operational and financial excellence track record and Somos, the most relevant K-12 player in the country. This new company and its brand helped ensure a new focus on K-12 education activities, as well as the construction of differentiated services and a unique offering as a one-stop partner to schools. Our aim is to disseminate values and goals in the K-12 education segment, including the delivery of high-quality education to children and teenagers through our well-renowned brands, resulting in a relevant presence in the premium market.

On January 7, 2020, we concluded the acquisition of the entire ownership interest of Pluri Educacional A&R Comércio e Serviços de Informática Ltda., or Pluri, for R$26.0 million. Pluri is an entity based in the State of Pernambuco specialized in solutions such as consulting and technologies for education systems. This acquisition is in line with our strategy of focusing on the distribution of our operations to another region. The purchase agreement is subject to certain additional earn-outs, associated with achievements defined in the agreement, such as revenue and profit, that could increase the purchase price by and additional R$1.7 million over the life of the earn-out period.

On February 13, 2020, we entered into a purchase agreement to purchase the entire ownership interest of Mind Makers Editora Educacional Ltda., or MindMakers, a company that offers computer programming and robotics courses and helps students develop skills relevant to their educational progress, such as coding and product development, as well as entrepreneurial and socio-emotional skills including teamwork, leadership and perseverance. The total purchase price was R$18.2 million, R$10.0 million of which was payable upon signing the agreement, with half of the remaining balance payable in 2021 and the other half of the remaining balance payable in 2022, with the 2021 and 2022 payments subject to certain adjustments. The agreement is also subject to certain additional earn-outs that could increase the purchase price by and additional R$5.4 million over the life of the earn-out period.

On November 20, 2020, we concluded the acquisition of Meritt, a cutting-edge Brazilian digital assessment platform. The purchase price was R$3,500 thousand, of which R$3,200 thousand was paid in cash and R$300 thousand is to be paid in installments that are currently outstanding and accrue interest based on the CDI rate. The agreement is also subject to certain earn-outs, that could increase the purchase price by an additional R$4,030 thousand over the life of the earn-out period. Meritt had 153 active clients as of December 31, 2020, an increase of 40% compared to 2019, and finished the year with R$1.5 million of revenues. In addition to aggregating a digital solution to the platform, bringing in new clients, and contributing with its experience in data analysis, Meritt will also provide relevant cost synergies with the streamlining of tests and mock exams for the Vasta brands. Meritt's experience and methodology will help Vasta make new strides in its investments in online and adaptive testing, gaining new ground in assessment customization, as well as allowing for results comparison between all students enrolled in the platform. This methodology will make it possible to more quickly identify each student's strengths and areas for improvement, with the goal guaranteeing a continuous evolution of their academic results, both in traditional exams and selection processes.

Our Pre-IPO Corporate Reorganization

Prior to our initial public offering we undertook a corporate reorganization as described under “Presentation of Financial and Certain Other Information—Corporate Events.”

Recent Developments

Acquisition of Sociedade Educacional da Lagoa Ltda.

On March 2, 2021, we acquired, through our wholly owned subsidiary, Somos Sistemas, 100.0% of the outstanding shares and voting rights of Sociedade Educacional da Lagoa Ltda., or SEL for a purchase price of R$65.0 million. SEL provides technical and pedagogic services to education platforms, including maintenance of such platforms, development and improvement of contents and trainings to professionals. Founded in 1997, SEL as of the date of the acquisition serves, direct or indirectly, 441 schools, 272 thousand K-12 students and approximately 503 thousand students in the secondary and continuing education segment.

Acquisition of Editora Eleva S.A.

On February 22, 2021, our wholly-owned subsidiary, Somos Sistemas, entered into a sale and purchase agreement to acquire, subject to certain conditions precedent, Editora Eleva S.A., or Editora Eleva, a K-12 education platform provider, from Eleva Educação S.A., or Eleva Educação. As consideration for such acquisition, we will pay a purchase price amounting to R$580 million, subject to certain price adjustments, in installments over a 5-year period (each installment adjusted by the positive variation of the CDI index).

Additionally, Saber, an affiliate of Cogna, agreed to sell, subject to certain conditions precedent (including, but not limited to, the satisfaction of all conditions precedent for closing of the acquisition of Editora Eleva), up to all of its K-12 schools to Eleva. Upon closing of the acquisition of Editora Eleva, Somos Sistemas and Eleva Educação will enter into a commercial agreement setting forth the main terms that will guide a long-term partnership with Eleva Educação, including the sales of learning systems materials to approximately 90% of the students of the schools currently owned by Eleva Educação, as well as any greenfield or newly-acquired schools with the same business profile and all schools that are acquired from Saber, during a 10-year period. The commercial agreement also provides for a commercial discount amounting to R$15 million per year, valid for the first 4 years after the execution of the commercial agreement.

The consummation of the acquisition of Editora Eleva is subject to certain customary conditions precedent, including the approval from the CADE and the closing of the sale of the schools by Saber as described above.

COVID-19 Pandemic

As a result of the global outbreak of a novel strain of coronavirus, or COVID-19, unprecedented economic uncertainties have arisen that continue to have an adverse impact on global economic and market conditions, including in Brazil. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the Brazilian federal government declared a national emergency with respect to COVID-19. In addition, state and municipal authorities in Brazil ordered suspensions of a variety of economic activities as part of measures taken to mitigate the dissemination of the virus. During 2020, the Brazilian government adopted several measures in order to reduce the impact of COVID-19 to the economy, including employment and economic stimulus, as follows: (1) creation of the program Citizen Income (Renda Cidadã), a new version of a planned social welfare programme; (2) extension of the Emergency Employment and Income Preservation Benefit (Benefício Emergencial de Preservação do Emprego e da Renda (BEm)) for up to 180 days, which relates to the proportional reduction of hours and wages and the temporary suspension of the employment contract; and (3) approval of the Complementary Law No. 173/2020, which will allow the granting of federal aid of approximately R$60.15 billion to Brazilian states, municipalities and the Federal District in order to strengthen the actions to fight the COVID-19. The new law sets forth the “Federative Program to Fight the Pandemic caused by COVID-19” and changes the law of fiscal responsibility.

The global impact of the outbreak has been rapidly evolving and the outbreak presents material uncertainty and risk with respect to our future performance and financial results. In response to the outbreak, we have implemented several measures aimed at safeguarding the health of our employees and the stability of our operations, including: (1) the implementation of a work from home policy; (2) the reduction in the work hours and wages by 25% of our administrative and corporate employees for the months of May, June and July; (3) on-line campaigns to promote our products to potential new customers; and (4) the implementation in our distribution centers of health and safety measures recommended by government authorities. In addition, we have accelerated the expansion of our digital education solutions to help keep the private school system operating during the COVID-19 pandemic, seeking to maintain the continuity in our operations and minimize the impacts of the pandemic on students enrolled at our partner schools. Through the integration of our Plurall and Plurall Maestro platforms with Google Hangouts, we have allowed students to access live classroom instruction remotely along with the instructional content already available through Plurall, such as ongoing homework and learning exercises, access to tutors, and an online library with a variety of content in different formats. We continue to monitor the availability and use of these solutions and engaged students for their feedback, which has been very positive during the pandemic. From March 23, 2020 (when the integration of Plurall platform with Google Meet was completed) to the date of this annual report, we have conducted more than 3 million digital class sessions. Additionally, as of the date of this annual report, we had more than 1.3 million students using our platforms, participating in more than 50,000 classes daily during week days.

We cannot predict the extent the extent of the impact of COVID-19 on our business or that any of the measures we have taken in response to the pandemic will be effective in mitigating the impact of COVID-19 on our business.

In connection with social distancing and social isolation measures implemented by state and local governments in Brazil in response to the COVID-19 pandemic, and considering the effect of such measures on the education sector, certain of our partner schools experienced a decline in enrollment during the first half of the year, particularly in respect of early childhood

education. Certain of our partner schools requested to decrease their level of purchases of educational materials and solutions we characterize as subscription arrangements for the second half of our 2020 sales cycle (which comprises the period between October 1, 2019 and September 30, 2020). On January 23, 2021 we had announced the result of ACV Bookings for the 2020 cycle (from October 2019 to September 2020), which reached R$716.0 million based on contracted amounts as of such date. This volume represented growth of 25% over the amount registered in the 2019 sales cycle. Such assessment on revenues derived from solutions we characterize as subscription arrangements is not a guarantee of future performance or outcomes and should not be relied on as guidance. Moreover, ACV Bookings is a non-accounting managerial metric designed to show amounts that we expect to be recognized as revenue from subscription services during our commercial sales cycle and not for the fiscal year, ACV Bookings is only one metric in measuring the components of our revenues, and ACV Bookings in isolation is not indicative of our total revenues. ACV Bookings amounts refer only to amounts contracted by us and should not be considered as a forecast or estimate of our revenues. See “Presentation of Financial and Other Information—Special Note Regarding ACV Bookings” and “Cautionary Statement Regarding Forward-Looking Statements.”

For further information, please see “Item 3. Key Information—D. Risk Factors—Certain Factors Relating to Our Business and Industry—Our operations and results may be negatively impacted by the COVID-19 pandemic” and “Item 5. Operating And Financial Review And Prospects—D. Trend Information.”

Corporate Information

Our principal executive offices are located at Av. Paulista, 901, 5th Floor, Bela Vista, São Paulo – SP, CEP 01310-100, Brazil. Our telephone number at this address is +55-11-3133-7311. Our email address is ri@somoseducacao.com.br.

Investors should contact us for any inquiries through the address, telephone number and email listed above. Our principal website is http://www.vastaedu.com.br. The information contained in, or accessible through, our website is not incorporated into this annual report. You should not consider information contained on our website to be part of this annual report or in deciding whether to invest in our Class A common shares.

B.       Business Overview

Overview

We are a leading, high-growth education company in Brazil powered by technology, providing end-to-end educational and digital solutions that cater to all needs of private schools operating in the K-12 educational segment, ultimately benefiting all of our stakeholders, including students, parents, educators, administrators and private school owners.

We have built a PaaS with two main modules. Our Content & EdTech Platform combines a multi-brand and tech-enabled array of high-quality core and complementary education solutions with digital and printed content through long-term contracts with partner schools. We characterize revenue associated with these arrangements as subscription revenue given the renewable and predictable nature of the revenue associated with these contracts. Our emerging Digital Platform will unify our partner schools’ entire administrative ecosystem, enabling them to aggregate multiple learning strategies, helping them to focus on education, and promoting client and revenue growth to allow them to become more profitable institutions.

Our integrated platform is designed to cater to the needs and preferences of every school. We provide a full suite of products, embedded in an ecosystem, that fulfills most of the school’s needs. This differs from single solution products, which can include hidden expenses and inefficiencies for schools. We are committed to constantly evolving our product and service offerings to provide the most complete end-to-end ecosystem for private K-12 schools, students and parents, educators and administrators, while maintaining the uniqueness of each school.

We believe our experience, high-quality education system and life-long learning solutions have helped us establish market-leading brands that are well-known both locally and nationally. This expertise has enabled continuous growth within the private K-12 market through long-term relationships and we believe it will be translated into a LTV/CAC ratio for the solutions that we characterize as subscription arrangements equal to 6.4x based on 2020 sales cycle (from October 1, 2019 to September 30, 2020). This is an important metric as it compares the estimated LTV (measured as a function of the gross margin we expect to derive from the additional ACV Bookings related to the contracts with our customers, divided by WACC, plus the customer churn rate, which is the expected turnover rate), divided by the CAC (which consists of sales and marketing costs for the revenue for the solutions we characterize as subscription arrangements). We consider only subscription arrangements in our calculation of our LTV/CAC ratio because such arrangements have recurring, generally predictable revenue, while the revenue that is not based on subscription arrangements may be non-recurring and less

predictable in nature. We believe the LTV/CAC ratio is an important metric for measuring how our sales efforts and costs related to acquiring subscription-based customers will provide value to us over time.

As of December 31, 2020, our network of B2B customers consisted of 4,167 partner schools, compared to 3,400 schools as of December 31, 2019, and 2,945 schools as of December 31, 2018, representing annual growth rates of 22.6% and 15.4%, respectively. As of December 31, 2020, we had 1,311 thousand enrolled students compared to 1,186 thousand enrolled students as of December 31, in 2019 and 1,011 thousand as of December 31, 2018, representing annual growth rates of 10.6% and 17.3%, respectively.

Following our corporate reorganization (as described under “Presentation of Financial and Other Information—Our Corporate Events—Our Incorporation and Corporate Reorganization”), we were able to rapidly structure our business as a PaaS, in which we have built complete and integrated platforms of K-12 products and services capable of promoting digital transformation in schools. The solutions we characterize as subscription arrangements are all those based on long-term partnerships with partner schools. These are service contracts in place for the offering of our learning systems or PAR (contained in our core content segment) and solutions for English instruction and socio-emotional skills (contained in our complementary education solutions segment). We characterize these solutions as subscription arrangements because they provide for recurring revenue and business stability, since they consist of long-term contracts with schools (four-year term on average), whereby schools pay an agreed price per student per year in order to access our solutions (whereby we recognize revenue when the customers gain control to the content available through our solutions). This business model, supported by technology, allows for fast growth, and given the “asset-light” nature of our business, we also benefit from favorable operating leverage and positive cash conversion.

Our revenue derived from the solutions we characterize as subscription arrangements is driven by the number of enrolled students in each partner school that adopts our solutions. The net revenue from sales and services for the solutions we characterize as subscription arrangements represented 76.2% of the total net revenue from sales and services of Vasta in the year ended December 31, 2020, 67.2% of the total net revenue from sales and services of Vasta in the year ended December 31, 2019 and 65.4% of the sum of the total net revenue from sales and services of Vasta and Predecessors in 2018.

Revenue from solutions other than the ones we characterize as subscription arrangements includes stand-alone textbook sales, university admission preparatory exam courses and sales from our Livro Fácil business, an e-commerce for the sale of educational content (textbooks, school materials, stationery, among others) directly to schools, parents and students. Net revenue from sales and services deriving from these solutions represented 23.8% of the total net revenue of our sales and services for the year ended December 31, 2020, 32.8% of the total net revenue from sales and services of Vasta in the year ended December 31, 2019 and 34.5% of the sum of the total net revenue from sales and services of Vasta and Predecessors in 2018.

We have been operating at a net loss over the last two years, primarily due to higher financial costs, as explained in the “Item 5. Operating and Financial Review and Prospects” section. Following the Somos acquisition, we implemented several strategic initiatives to increase our profitability, which are reflected in the 25% increase in our ACV Bookings for 2020. Our strategic initiatives include (1) a new go-to-market approach, leveraged by the restructuring of our commercial team, a higher number of commercial consultants, a new incentive plan which has aligned sales performance in terms of profitability with the Sales department compensation, and the creation of a product expert role; (2) the launch of new collections, increased investments in educational content and the establishment of Plurall, our online platform; and (3) streamlining and reducing administrative costs and overheads. However, there can be no assurance that such strategic initiatives will be successful and that we will not record a loss in the near future.

Our Mission

Our mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. Our goal is based on the premise that every solution and service offered through our multi-brand, technology-enabled platform has been designed to empower every stakeholder (students, parents, educators and administrators of private schools) to reach their full potential in their own way. We believe we are uniquely positioned to help schools in Brazil undergo the process of digital transformation and bring their education skill-set to the 21st century.

We promote the unified use of technology in K-12 education in a manner that generates a simple, seamless and transparent experience for schools, offering 360-degree views of student performance with enhanced data and actionable insight for educators, increased collaboration among support staff and significant improvement in production, efficiency and quality for schools.

We provide the following solutions for the empowerment of our stakeholders:

For students

Our pedagogical approach and educational solutions are designed to equip students with abilities that go beyond learning core and complementary knowledge. We encourage them to think critically and creatively, solve complex problems, make evidence-based decisions, and work collaboratively at their own individualized pace. We believe that providing these educational experiences in a way that is engaging, retainable and proven through research and academic performance leads to a high-quality environment that empowers students to contribute more effectively in the classroom today and in the workplace and society in the future.

For parents

Parents are primary decision-makers in the academic cycle, and we seek to improve their engagement and involvement, while also increasing student accountability. Through our solutions, parents can access real-time student performance data and have a direct communication channel with educators. We also optimize parents’ time and ease safety concerns by addressing all of their children’s developmental needs, including core education and complementary activities such as languages and socio-emotional skills. These benefits are all delivered in the same place – the school – which is the most trusted environment parents see for their children.

For educators

Discovering the pedagogical approach best suited to an individual student can be challenging. Understanding how to target learning, how to overcome disabilities and how to engage with each student effectively through the development of various cognitive processes is our core focus. We strive to provide immediate access to student data, which generates insight and analytics on student progress in order to target growth areas and develop teaching plans aimed at delivering personalized learning.

For private school owners and administrators

Leveraging our parent company’s substantial experience in operating schools, we believe we have gained a differentiated, in-depth understanding of school needs which go beyond best-in-class educational resources to encompass a variety of school management solutions. These include customer relationship management systems, marketplaces for the sale of educational content, digital student acquisition processes and financial and educational management tools. Currently, we offer our Livro Fácil e-commerce for the sale of educational content, but we are working on expanding our offering in this market as we believe a fully-integrated platform like we are developing will allow private school owners and administrators to maximize time, access a broader set of information more intelligently, develop new action plans, promote leadership and motivate their teams. As a result, this will allow private school owners to better manage their schools, focusing on improving educational content, solutions and services, while enhancing the school’s reputation and growing revenue.

For society

Our main responsibility to society is to help every student succeed. However, as part of our social responsibility initiatives, we also seek to make education available to all segments of society and we share many of the best practices in education that we acquire through our experience in the private K-12 with public schools and teachers in Brazil for free.

We believe that our reputation, excellent track record in education, brand awareness, personalization, flexibility, customer service, academic outcomes and innovation are attributes valued by all of our stakeholders. We believe we are the only player in the market to integrate a wide array of content formats from different brands in a unified, technology-powered platform that provides students with tutoring support and allows for the continuous tracking of their academic performance during the whole education cycle. Since 1959, publishers in our K-12 business have received 102 awards in the Jabuti Prize, which is widely recognized as the most prestigious literary honor in Brazil. In 2018, 504 of our partner schools were ranked in the top three in their respective municipalities in the Brazilian National High School Exam (Exame Nacional do Ensino Médio), or ENEM, the main national standardized test for university entrance in Brazil, which reinforces the reputation of the effectiveness of our platform.

Although the science underlying education and learning processes is still in its early stages, we aim at adopting a neuroscience-first approach in evolving our understanding of what directly impacts teaching and learning, which includes acquiring new knowledge and nurturing attention, concentration, memory and motivation. We have been investing intensively in research through our Learning Science Lab and partnering with highly-regarded data scientists and progressive tech-driven institutions to continuously strengthen our value proposition. As an example, we have partnered with BrainCo (a

company specializing in neurofeedback solutions) and the Brazilian National Scientists for Education network (Rede Nacional de Ciência para Educação), or CpE, to promote our continuous evolution.

Context

The Brazilian education sector is extremely fragmented, with the five largest school operators holding only 10% of the total enrollments, according to Censo Escolar. Government investments in primary and secondary education are low, which results in a substantial quality difference compared with private schools as measured by success on the ENEM exam. The ENEM exam is extremely important for students’ future opportunities as it is used as a standardized exam for entry to high-quality postsecondary education in Brazil and seen as a public seal of quality. In this scenario, the private K-12 education market generates high aggregate value for parents who want their children to have greater opportunities to enter a high-quality university. We offer high quality education for those customers, with brands recognized for their academic excellence and a solid track record in academic exams, with our students gaining access to Brazil’s most renowned universities, as well as top ranked universities in the United States such as Stanford, Harvard, Yale and Columbia. As of 2018, we had 504 partner schools ranked among the top 3 schools in their respective municipalities based on their scores on the ENEM.

Through our differentiated B2B and B2B2C solutions, we deliver a better learning experience, engaging students in the classroom and offering a unique platform for continuous learning experience after school. Partner schools can choose among our broad portfolio of core content solutions, opting between traditional learning systems or PAR, our book-based content solution. This enlarges our addressable market and positions us as a one-stop partner for all private K-12 schools across the country by offering a full stack of solutions through well-known brands with reputation for high quality. Regardless of partner school preferences and necessities, we are able to offer solutions in line with their requirements and reach all types of schools, including through stand-alone textbook sales and recurring content sales through adoption of our learning systems. The chart below shows a summary of product and service consumption preferences among private K-12 schools, highlighting our ability to penetrate the entire market as a consequence of our complete suite of product offerings, including our PAR and printed content solutions.

In addition to core content, our differentiated service offering comes from a combination of various digital and non-digital complementary content, including solutions for language instruction and socio-emotional skills, as well as school management and business solutions. Our platform seeks to offer and deliver content and services to our partner schools, including the engagement and maintenance of the students’ performance through our Digital Platform (Plurall and Plurall Maestro), and the identification of learning gaps and promotion of content improvement, teacher training (advisory and PROFS) and reinforcement for students’ adaptive teaching. We believe that schools that adopt our platform are able to increase academic quality and enhance their operating and financial performance through ancillary services that either are currently available at our platform, such as our e-commerce, or that we plan to acquire and/or develop, such as academic and financial ERP and student acquisition solutions, including online enrollment platform, digital marketing and scholarship marketplace.

We believe that schools are able to improve academic outcomes due to our comprehensive suite of educational solutions. This can be seen by our performance in the ENEM exams, with 177 schools rated in the top 1 of their cities (35% more than the second competitor) and 350 schools rated in the top 3 of their cities (42% more than the second competitor).

As a result of adopting our systems, we believe that partner schools are able to improve the learning and academic quality for their students, which leads to an improvement in the partner schools’ reputation. In addition, the better reputation helps them to attract more students, in addition to improving their operational and financial results - stimulating the virtuous cycle based on the Content & EdTech solutions and Digital services we provide. Our business model is supported by full alignment in the adoption of our solution by all of our partner schools’ participants in our K-12 business: parents receive the benefit of a high-quality education and actionable data regarding the performance of their children; students enjoy a digital, enhanced, engaging and complete learning experience, with supplementary tools and content that goes beyond the core curriculum; educators can optimize their time, use data reports to address each student’s unique needs and personalize their educational content and administrators benefit from improvements in test grades, which in turn increases their reputation and lead to higher student intake, while saving time and money using our school management solutions.

Our Competitive Strengths

True partner of choice for private K-12 schools in Brazil

We believe tradition, reputation, experience and innovation are imperative for success in K-12 education. We have been present in the lives of Brazilian students over the last five decades though our parent company. As of December 31, 2020, we served 6,939 schools in the K-12 private market, with almost 2.6 million enrolled students. We believe we are best positioned to cover all of our total addressable market as we cater to each private K-12 school’s unique profile and preferences. We believe our track record in Brazil is unique, as demonstrated by the following:

By becoming the schools’ partner of choice through our end-to-end offering of core and complementary content and the ramp-up of the solutions we will offer through our Digital Platform, we expect to continue to significantly increase our TAM while increasing school retention, as the school’s switching costs from an integrated service provider like us become much higher when compared to simply switching from a content supplier. The following chart shows the size and potential growth in TAM from 2018 to 2030 for Core Content and Complementary Solutions, comprising our Content & EdTech Platform (areas shaded in gray) and for school administrative and management solutions, which will be served by our Digital Platform (area shaded in pink).

Private K-12 TAM
in R$ billion, 2018

Source: Oliver Wyman

Strong combination of content and technology teams dedicated to enhancing our value proposition

We value intellectual agility and structure ourselves in small multidisciplinary groups that are focused on building product functionality. We believe we have the most resourceful division of business intelligence and analytics in content adoption in the Brazilian K-12 market. Our digital team consists of 211 product, technology, digital operations and content specialists. Our product and technology specialists are organized in 10 teams, each being responsible for end-to-end implementation of projects aimed at accomplishing long-term goals.

Our content production is deeply linked to technology, allowing us to update content in a more dynamic way using student and teacher feedback, which is continuously monitored through our platform powered by technology. To improve student engagement, we are the only education provider to overlay content production with what students consume on social media (interactive video, podcasts and quizzes), with a view to aesthetic and artistic quality through a simple and modern language that captures the conceptual rigor essential for educational content. Our partner schools benefit from the unique combination of our Plurall products (Plurall ID, Plurall Maestro and Plurall Studio, among others), a single platform that enables the delivery of a richer learning experience to both educators and students in an integrated and uniformed matter and combines in our content solutions in a 100% digital interface.

Our data science team employs a science in learning approach by leveraging our streaming data pipeline, allowing for rapid evolution of our solutions and services. Our data analytics educational team is focused on (1) tracking user behavior and creating dashboards to improve student and teacher engagement with Plurall and its many features; (2) allowing educators to take advantage of engagement and learning dashboards to improve student participation in the learning experience both inside and outside the classroom; (3) providing seamless integration of the Plurall platform with external products; and (4) gathering feedback and improving content generation in real time.

We also have a forward-leaning approach to applying neuroscience in education. We have been developing the Learning Science Lab, by partnering with highly regarded scientists in Brazil through Rede Nacional de Ciência para Educação and BrainCo, a startup born out of the Harvard Innovation Lab, to develop neuroscience technology products, and collaborate with scientists from the MIT Media Lab to test the effectiveness of their technology and develop new applications for brainwave technology. We are exclusive distributors of BrainCo technologies in Brazil, including for:

Robust salesforce, business intelligence team and customer-centric mindset lead to differentiated go-to-market strategy

Our relentless focus on understanding our customers has led us to assemble a robust salesforce and client support team. Our team is comprised of 219 educational specialists, or hunters, (divided among commercial teams and inside sales teams, responsible for general marketing strategy and targeted client sales, respectively) and 181 customer support experts, or farmers, who cover all Brazilian states through a differentiated go-to-market strategy where we target customers through multiple channels including online advertising, marketing research tools, on-site visits, social media, among others. Our sales force is fully integrated and is capable of selling our entire portfolio of products and services, allowing for agile, intelligent and efficient actions, placing the needs of the schools at the center of their actions. Our processes are optimized by data coming from our Business Intelligence and Inside Sales teams. We also have what we believe to be the largest business intelligence database and business intelligence team in the market. Our business intelligence team collects data from over 17,400 schools every year in order to have a comprehensive view of the total private K-12 market and to determine exactly what kind of products and services our salesforce should offer to each and every school. We offered to our staff over 18,000 hours per year of training activities and 70% of our staff has been with us for over 3 years.

Our sales strategy allows educational specialists and customer support experts to establish themselves as trusted advisors for our partner schools and nurture relationships in order to keep on adding value through higher revenue streams, penetration, retention and awareness.

We seek to motivate our salesforce through financially aligned incentives based on metrics tracking revenue and revenue retention rate, cross-selling capacity and average length of contracts, and provide ongoing training, shadowing opportunities and sales conferences. Our direct sales channel outreach and preparatory courses awareness contribute to the powerful lead-generation engine that continuously reinforces our go-to-market strategy.

Strong academic outcomes and recognition

The established tradition of our brands in the education sector, some of which have been developed over a period of more than 100 years, and our pioneering efforts in rolling out one of the first education subscription arrangement models in Brazil have contributed to our reputation for excellence. We believe our complete educational platform powered by technology and supported by well-renowned and long-standing brands offers a unique range of options to students, which translated into strong brand awareness and recognition levels, as demonstrated by the following points:

Finally, the satisfaction of our customers (including students, parents, educators and administrators of private schools operating in the K-12 educational segment) and their positive experience with our platform is evidenced by our high net promoter score, or NPS, among core learning systems and digital learning brands. As of October 31, 2020, we scored 79 out of 100 possible points for Anglo and pH learning systems, in a survey carried out by us with our partner schools, and 57 out of 100 possible points for our digital learning platform (Plurall), in a survey carried out by us with school coordinators.

The nature of our business model

Business model backed by solid fundamentals: we employ an asset-light business model centered on innovative and personalized content and user experience and focus on creating and maintaining long-standing relationships with partner schools. We are powered by technology and highly scalable, which allows for consistent high revenue growth. The solutions we characterize as subscription arrangements, encompassing our traditional learning systems, PAR and complementary content solutions, reinforce business stability, with recurring revenue and favorable operating leverage. Net revenue from sales and services derived from the solutions we characterize as subscription arrangements represented 76.2% of total net revenue from sales and services of Vasta in the year ended December 31, 2020, 67.2% of the aggregate total net revenue of Vasta in 2019 and 65.6% of the aggregate total net revenue of Vasta and the Predecessors in 2018.

End-to-end solutions provide meaningful unit economic gains: as we continue to strengthen our portfolio of full-service solutions, our potential to deepen relationships with schools increases through cross-sell and up-sell opportunities, generally at low incremental costs to us and to schools. We believe this leads to lifetime value at low customer acquisition cost (insofar as our up-sell and cross-sell efforts are successful) while simultaneously increasing customer switching costs.

Self-reinforcing network effects of our virtuous cycle: we have created and have been nurturing an education cycle that entails scale, science in learning, high-quality and retainable learning, differentiated academic outcomes and recognition. Our company is based on information, using a robust team of business intelligence and analytics and source of big data with respect to the K-12 Brazilian industry, which is the start of a virtuous cycle for our partner schools. We help start the cycle by providing important data and key tools for schools to engage their students in a way that is meaningful for each student, providing enhancing learning opportunities, which we believe leads to better academic results and enhanced therefore improves schools’ reputations, which attracts more students to more schools. The cycle is reinforced as more students lead to more big data, which is the start of the cycle we continue to provide the data needed to continue to engage our partner schools’ students.

Experienced and focused management, with an innovation mindset

Our senior management is recognized in the industry for its experience, reputation, working knowledge and close relationship with our partner schools, and strong track record in terms of the educational business and innovation.

We share the same operational culture as our parent company, and our senior management team has over 100 years of combined experience dedicated to education. As one of the largest education groups in the world, we believe our parent company brings expertise in school operations, a long track record of carrying out mergers and acquisitions and integrating new businesses and technologies, a history of constant evolution and high total shareholder return, effective and transparent communication with shareholders and the market in general, with high levels of corporate governance and a strong drive for innovation.

In recent years, our parent company has successfully completed 17 acquisitions, incorporating R$4.9 billion in net revenue from sales and services (considering the first year of acquired companies’ figures). Particularly, in October 2018, it completed the acquisition of Somos Educação, making a strong move into the K-12 segment in Brazil. Somos Educação also

has a unique M&A track record in the Brazilian K-12 industry, completing 17 acquisitions since 2015, in addition to an unerring tradition in the education sector.

Since the completion of this acquisition, our parent company has been successful in delivering improvements in Somos’ go-to-market strategy, extracting synergies from payroll and procurement, completing the integration process in a timely manner, among other accomplishments, and continues, along with us, to execute our vision of being the partner of choice for K-12 private schools in Brazil.

Mission-driven culture

Our mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. This mission drives all of our decisions. Our main goals are to continue evolving as the trusted knowledge partner for our customers, enabling them to reach their full potential and achieve groundbreaking milestones in learning.

Our Growth Strategy

Increase shift towards solutions we characterize as subscription arrangements within our current customer base

We will continue focusing on increasing the percentage of our partner schools (and related stakeholders) adopting the solutions we characterize as subscription arrangements instead of purchasing content without a long-term contract. We believe there is a significant potential to increase the number of total students enrolled in solutions we characterize as subscription arrangements from 1.3 million as of December 31, 2020, to 2.5 million total students, by converting our current base of partner schools adopting core content without a long-term contract into clients of solutions we characterize as subscription arrangements, without considering any up-selling or cross-selling opportunities. In 2020, we sold products (including textbooks without subscription) to approximately 2.5 million students from private schools, of which 1.3 million were from schools that had a contractual relationship with us, or 53% of potential students from schools that use our products. From December 31, 2019 to December 31, 2020 and from December 31, 2018 to December 31, 2019, we successfully converted 11.0% (8.9% to PAR and 2.1% to learning systems) and 7.8% (6.3% to PAR and 1.5% to learning systems), respectively, of schools without a long-term contract to long-term subscription arrangements.

We believe that platforms as a service are a natural consequence of private K-12 education trends and the fact that we deliver our content through the most complete and diversified models and price points will help us expand our current customer base within the solutions we characterize as subscription arrangements. In the year ended December 31, 2020, Vasta’s net revenue from sales and services derived from solutions we characterize as subscription arrangements represented 76.2% of our total net revenue from sales and services, an increase in total contribution in total net revenue from sales and services when compared to 67.2% of our total net revenue from sales and services of Vasta and the Predecessors in the year ended December 31, 2019 and 65.5% of our total net revenue from sales and services of the Predecessors in the year ended December 31, 2018.

Increase penetration of our current services in existing capacity with our current partner school base

We utilize a land-and-expand strategy with our partner schools, beginning with core education and gradually increasing the amount of services offered to each partner school from our portfolio of complementary solutions and digital solutions. We focus on deepening relationships with our partner schools by leveraging our salesforce expertise to up-sell and cross-sell other products and services within our wide portfolio of current offers and future product and service developments and acquisitions. Our ultimate goal is to replace our partner schools’ collection of scattered educational vendors with our integrated platform of educational and digital solutions.

We believe there is significant potential to increase the total number of students enrolled in our solutions, considering our current base of partner schools and the fact that one student can be enrolled in more than one solution at the same time. As of December 31, 2020, we had 1.5 million enrollments in our solutions (1.31 million in core content and 0.21 million in complementary solutions), considering each student at each solution as an enrollment. Through cross-selling and up-selling across both our Content & EdTech Platform and Digital Platform, we believe we are able to capture up to 5.1 million new enrollments, totaling a potential of 6.6 million students enrolled in our ecosystem (including core content, socioemotional content, languages, STEAM and other academic content).

Grow our base of partner schools

We have significantly expanded our sales force and will continue doing so in new regions across Brazil, while pursuing greater market share in regions where we have strong brand awareness and price attractiveness, which has helped us establish a presence in 12.1% of the TAM for core education as of 2018. We intend to reinvest a portion of our operational leverage in profitable marketing activities that are aligned with our objective to continue increasing our base of partner schools through our superior value offering and extensive and integrated offering of products and services.

Increase the quantity of products and services we offer

We believe there is significant room to expand our value proposition to our partner schools and their stakeholders by adding new complementary education solution and digital platform to our ecosystem and, therefore, also significantly increasing our TAM potential. For instance, STEAM and academics are becoming “must-have” skills given increasing competition in the labor market. In addition, schools have been increasingly adopting management systems so they can focus on what they do best: educating.

We believe we can expand our current product offering, enhance our content and technology platforms and improve students’ learning, educators’ teaching and schools’ management experience by either developing innovative digital content in-house, engaging in strategic partnerships or carrying out mergers and acquisitions of companies and/or products that will contribute additional content or technologies to our portfolio. For example, we have identified a wide range of potential target acquisitions in Brazil that we believe will complement our business, in particular with respect to the delivery of digital solutions. With the expansion of our scope and product and service offerings through our platform, our TAM could increase even further.

Expand internationally

We believe schools, students, educators and families in Latin America are facing the same problems as in Brazil and demand the same solutions we are currently offering. Despite Spanish and Portuguese being different languages, the

stakeholders’ needs are the same and we are able to fulfill many of those since we are already producing educational content in Spanish.

Our Addressable Market and Opportunity for Growth

According to a report by Oliver Wyman that was commissioned by us, the TAM for our Content & EdTech Platform and Digital Platform for private schools in Brazil was R$25.3 billion as of 2018 and segregated between: (1) R$6.0 billion for core content; (2) R$6.4 billion for complementary education solutions; and (3) R$12.9 billion for digital platform. Oliver Wyman expects that our TAM will more than double by 2030, reaching R$54.0 billion, segregated between: (1) R$13.4 billion for core content; (2) R$14.0 billion for complementary education solutions; and (3) R$26.6 billion for digital platform. As of 2018, we estimate we captured approximately 12.1% of the TAM for core content and 0.4% of the TAM for complementary education solutions (which is included in our Content & EdTech Platform segment) and 0.5% of the TAM for our Digital Platform segment, which we believe represents significant growth opportunity.

With 48.5 million students enrolled in private and public schools in 2018 according to Censo Escolar 2018, Brazil’s K-12 education segment is significantly larger in relative terms compared to other world markets; Brazil’s K-12 students account for 23% of the total population, while in the United States this representation falls behind at 17% (considering an estimate of 56.6 million students attending school in fall 2019), according to NCES. The Brazilian private K-12 market is also large and, despite being larger than the U.S. market in relative size, there is a strong potential to increase the penetration of private K-12 education in Brazil when compared to China, Indonesia and India, for instance, as presented in the graph below. Private K-12 education is very valued by Brazilian families given the quality gap between private and public K-12 schools, as discussed in more detail in the “Industry” section.

_______________

(1) Including Hong Kong and Macao.

Source: BMI, INEP and UNESCO

We believe our opportunities to capture market growth will continue to expand as we incorporate new solutions into our existing platform. For example, we are currently working on expanding our complementary content offerings to include STEAM-based (Science, Technology, Engineering, Arts and Mathematics) and other academic curriculum, as well as increasing our offerings within our Digital Platform, including academic and financial ERP and student acquisition solutions, such as online enrollment platform, digital marketing and scholarship marketplace. We expect these complementary and digital solutions to become increasingly relevant in the K-12 segment as the current 21st century environment requires new skills from individuals, and schools have increased their rate of adoption of management systems to focus on improving education delivery to students.

Private K-12 Industry Market Trends

We believe that our addressable market is characterized by the following trends:

Digital transformation is reshaping private K-12 industry

Technology has enabled improvements in core content, complementary education and digital platform solutions. The internet and digital technology are changing the way people learn. Educational opportunities are no longer confined to the classroom as a result of technology’s potential to transform every person into a life-long learner. Technology has revolutionized learning beyond the simple digitalization of traditional textbooks through means such as gamification, immersion and virtual reality tools. Technology has re-conceptualized the learning experience, making it adaptive and highly personalized. Moreover, technology improvements have supported the development of management systems for schools to manage their costs and expenses and increase their efficiency and profitability, allowing them to focus primarily on educational activities.

Limited internal management and administrative solutions for schools

Schools have been looking for new educational and management solutions to enhance school management. According to Censo Escolar 2018, there were approximately 40,000 private schools in Brazil as of December 2018, which are mainly small-scale units dedicating significant working hours to administrative activities, such as intake, retention, financial management and communication with parents, for which they are currently interacting with multiple and unintegrated providers. This can create inefficiencies that divert a school’s focus from its core educational activities. We believe there is strong demand for an integrated platform like ours that consolidate multiple school management services, as it would lead to more actionable data reports, optimization of administrators’ time allocation and increased efficiency in schools.

Need for modernized content distribution models

There are two main facets to this trend: (1) the learners’ perspective; and (2) the perspective of other stakeholders relying on traditional content (parents, school and educators).

We believe the modern student is easily distracted, yet hungry to learn and demanding in relation to the type of content and the manner of its delivery. At the same time, most Brazilian schools and families are on the verge of discovering the benefits in the classroom from the combined use of science and technology in education. This data-driven approach can aid in delivering superior and more responsive learning outcomes through products based on personalization and adaptive learning. As a result, immersion and gamification tools, among others, are potential means of addressing modern students’ needs and engaging them more effectively, yielding better academic outcomes.

Many schools, educators and parents continue to rely solely on traditional textbooks for the teaching experience and as more modern learning approaches are not yet widespread throughout Brazil. An educational experience focused solely on textbook usage may prove too rigid for the 21st century student who demands real-time assessment and feedback; therefore, expanded integration with other learning tools is required. We believe we can lead the imminent transition of the underlying learning methods in Brazilian education, by offering assertive content in multiple formats alongside more effective high-impact learning techniques, with support from our constantly evolving neuro-pedagogical and science in learning approaches. Furthermore, integrated technological solutions customarily allow parents and educators to engage and track more closely student development.

New student skill set and importance of socio-emotional solutions

The increased labor market competitiveness and social demands in the 21st century require a new skill set from individuals. The insertion of new learning fields into old curricula, with focus on softer skills such as creativity and collaboration, has been leading a movement towards a broader learning experience. Schools in the forefront of this movement teach socio-emotional learning and collaboration skills, foster individual participation, autonomy and critical thinking, and include new areas of broad student development such as STEAM-based curriculum (Science, Technology, Engineering, Arts and Mathematics) and language instruction. We are uniquely positioned to capture this market as we already have English instruction and socio-emotional skills solutions which can be offered in the safety and comfort of the school environment, and plan to add even more solutions to our integrated platform.

Business Model

Our model is based primarily on solutions we characterize as subscription arrangements, aligned with our belief that platforms as a service are a natural consequence of private K-12 education as they deliver complete and diversified models with long-term contracts, with terms ranging from three to five years in general, and high retention rates with very low churn. This model reinforces our stability, recurring revenue, asset-light profile and scalability, high operating leverage and limited

capex requirements. We believe Vasta delivers a hard-to-replicate business model, with a winning proposition for stakeholders.

We believe our business model is comprehensive, differentiated and focused on the needs of our customers, offering operational efficiency and profitability. We are an educational platform powered by technology, and our centralized, intelligent and standardized management processes enable a 360-degree view of student performance and school capabilities, generating efficiency and quality for the school system. All of our back-office support activities are easily scalable and efficiently shared among all our corporate structure. Our parent company is known for its focus on growth and student success, constant evolution, leadership, efficiency, innovation, proficiency in the integration of acquisitions and for the quality of its management.

We have a national presence with strong brands and proven academic results that attest to our differentiated quality. Our leading brands include Anglo, pH, PAR, Pitágoras, Maxi, Ético and English Stars, among others. Our portfolio of solutions encompasses various price ranges, so that we can offer viable solutions to all schools, with focus on quality, effectiveness, efficiency and profitability.

Our mission is to help private K-12 schools to be better and more profitable, supporting their digital transformation. In this context, we have decided to serve the private school segment through both B2B2C and B2B business models. Through our Content & EdTech Platform, a multi-brand, tech-enabled platform, with the flexibility and quality required to satisfy customer needs through printed and digital format and made available through a model we characterize as subscription arrangements or direct sales to students or parents, serving as an entry point for subsequent conversion into a model we characterize as subscription arrangements. Through our Digital Platform, we currently offer our Livro Fácil e-commerce, but plan to expand our portfolio to cater to all other school needs aside from education, aiming at increasing efficiency and quality.

Our technology-based approach is capable of accelerated growth and delivering innovative and personalized content and user experience. This allows us to greatly amplify the number of students served through each new contract, in turn providing, through Big Data, a better understanding of the students to our data analytics team and educators, as well as the means to identify their individual needs, compare results, create more engaging academic activities, keep the educators and managers updated on developments and stay connected with families. We use educational science to identify the learning needs of each student, both cognitively and emotionally, providing a full array of resources for their academic and personal development.

As schools are our key customers, we also aim to serve all their other needs aside from academics. These include a number of internal functions key to a school’s operation, such as academic and financial ERP and student acquisition solutions, including online enrollment platform, digital marketing and scholarship marketplace.

Our company is based on information, and we have a robust team of market-business intelligence and data analytics educational professionals, helping us leverage the vast amount of data we produce, which is the start of a virtuous cycle for our partner schools. We learn with our students and offer them continuously improving educational solutions, helping them to expand their learning and improve their own and their school’s academic results. This consequently improves the reputation of the schools and our brands. The reputation we have achieved allows us to reach more partner schools and students, providing returns throughout the cycle for all parties involved. In addition, we plan to acquire and develop multiple other products to complement our Digital Platform in the near term, enhancing the support offered to back-office activities of schools and enabling them to focus on their main core activity, therefore making the wheels of our virtuous cycle turn in such a way that benefits schools and students alike.

K-12 Platform

Our fully integrated K-12 platform aims at providing end-to-end educational and digital solutions to private K-12 schools. In order to be a one-stop-partner to schools, we aim to cater to the entire school ecosystem, not just best-in-class educational content and resources, but also offering solutions that meets schools’ other needs through a complete assortment of solutions through our Digital Platform that help schools enhance performance, grow enrollment, and increase profitability.

Our platform comprises educational solutions to be used by partner schools and their stakeholders and digital services and solutions to cater to the non-educational and administrative processes of each school, through our Content & EdTech Platform and our Digital Platform, as illustrated by the following image:

In 2020, total net revenue from sales and services from our Content & EdTech Platform and our Digital Platform accounted for 91.1% and 8.9%, respectively, of our net revenue from sales and services, compared to 89% and 11%, respectively, for the sum of our total net revenue from sales and services in 2019 and 92% and 8%, respectively, for the sum of our total net revenue from sales and services for the period from October 11 to December 31, 2018.

Consequently, our fully integrated platform grants access to all educational content available through our tech-enabled platform, made available primarily through a model we characterize as subscription arrangements. We provide end-to-end solutions and digital platform with a comprehensive and interactive approach that enhances students’ participation and performance, as well as capturing data for our data analytics educational team and business intelligence department, generating a virtuous cycle with greater content for every additional Student.

Content & EdTech Platform

Our Content & EdTech platform offers schools a large set of high quality digital and printed educational content and tech-enabled support solutions. Leveraging on our in-depth understanding of private K-12 education, we have developed a methodological approach that ensures student success through personalized, retainable and engaging learning tools that fit the modern student’s demand both in terms of content-quality and adaptive-learning.

We believe that the quality of the education we provide is fundamental. Our platform was conceived and developed based on solid educational methods, expertise from decades of educational content solutions, and a long history of favorable academic results. We offer a portfolio that is highly capable of providing high-quality education preparing our students for entry into the prestigious universities in Brazil and abroad. We maintain a very considerable database of educational content, allowing us to operate in primary education, middle school and high school, as well as in a preparatory course for admission into the best universities in Brazil and internationally.

In addition to our focus on quality, our offers are designed to help schools to provide holistic education for students. The increased competitiveness of the labor market and changes observed in the 21st century have created new demands from individuals. The insertion of new learning fields in the old school curricula, with a focus on softer skills such as creativity and collaboration, has been leading a movement towards a broader learning experience. Schools in the forefront of this movement teach socio-emotional learning and collaboration skills, foster individual participation and include new areas of broad student development such as STEAM and language instruction.

Our technological educational platform offers partner schools all the products and services that they need to be successful, including: digital and printed content, teacher training, evaluations, adaptive learning, academic intelligence,

continuous assessment, academic management tools, as well as solutions for complementary education, such as language instruction, development of socio-emotional abilities and academic programs.

Our core education and digital learning solutions are supported by value-added services to enhance student and teacher learning experiences, enabling dynamism and all-time interactive responsiveness. Our students can access materials at any time and on any electronic device, complete assignments and activities directly on our apps, watch video lessons to review content and check their performance to correct mistakes. We also created an online studying community where students feel comfortable to ask questions directly to our tutors using the app, who are available even on weekends and holidays, and learn from other questions asked by students and posted in the community. Parents are also able to use our apps to analyze the number of exercises completed by their children, check their scores by subject and monitor overall achievement rates, therefore closely following and assisting in the full development of their children. Our content can be delivered either in printed or digital format, and we are beginning to develop a turn-key solution (all included).

Customers

In the context of our Content & EdTech Platform, we are positioned as a one-stop-partner powered by technology for Brazilian private K-12 schools. Our partner schools are spread across the entire country and, given our complete array of solutions that meet different types of needs, we allow schools to choose from different academic methodologies and price ranges to better fit teachers’, parents’ and students’ preferences. We offer a variety of core education content and solutions with average annual tuition rates ranging from R$321 for Maxi to R$827 for pH, catering to a wide range of customers, as further detailed below.

Our base of partner schools is highly diversified, which reduces our dependence on any single customer or concentration of large customers. This factor provides our business model with a resilience and predictability factor as an unlikely churn of a large client would not have a disruptive impact in our business model.

Products and Services

Core Solutions

Our core content solutions are usually the first decision made by our clients to establish a partnership with us. To offer the best for our partner schools, we provide a complete and integrated portfolio of educational core solutions that cover all segments related to private K-12 education, either as bundled offers or as standalone products. Our bundles include, in particular, content solutions in different methodologies (traditional learning systems, PAR and textbooks), digital learning services and continuous teacher training.

Traditional Learning systems, PAR and Textbooks

Our offerings consist of collections of teaching material for all cycles and segments within K-12 education. These collections include digital and printed textbooks from multiple brands on all subjects for students, teacher handbooks, exercise books, books for the study of multidisciplinary subjects and student evaluations.

We market our educational solutions through long-term agreements we characterize as subscription arrangements, which allow us to have highly predictable and resilient revenue. Partner schools may choose between one of our traditional learning systems (Anglo, pH, Pitágoras, Rede Cristã de Educação, Maxi and Ético) or PAR, our textbook-based solution. Our diversified portfolio with multiple brands enables us to reach a large addressable market. Each of our learning systems has its own method, so schools can select the one that best fits their pedagogical project:

In the case of PAR, schools select their preferred books and materials, offered by our brands Editora Saraiva, Editora Ática, Editora Atual, and Editora Scipione, through a long-term agreement allowing educators to follow their own specific teaching methods. In this context, educators can select from a diverse portfolio of content, mastering the classes as they judge best and therefore enhancing our delivery. With this approach, we accommodate all schools’ choices, which is a unique approach in the educational solutions market, as other players tend to focus on either learning systems or textbooks, and no other player has a solution similar to our multi-brand, book-based solution. We currently serve around 420 thousand students and approximately 1,000 schools, spread across 23 states.

Additionally, through our publishing business, we also engage in the sale of stand-alone textbooks to schools. More than an important revenue stream, this serves as an entry level for potentially increasing the penetration of recurring partnerships. We believe schools that adopt a specific textbook from our collection of approximately 11,300 titles are more likely to switch to a model we characterize as subscription arrangements, such as PAR or a traditional educational platform, given the already established relationship. Ultimately, stand-alone textbook sales increase our opportunities to up-sell and cross-sell in schools, especially in schools where stakeholders are initially reluctant to adopt a structured content solution.

Our core content solutions we characterize as subscription arrangements (PAR and traditional learning systems) also provide for ongoing training for educators and the provision of services to partner schools, including, but not limited to, consulting services regarding school management and the organization of events for educators, parents, students and principals of partner schools, as well as a proprietary and differentiated evaluation system for partner schools and their students, available digitally and in print. All these features are provided to our clients who contract our learning systems at no additional cost beyond the contract price for the relevant learning system.

Our evaluation system includes a data-driven pedagogical offering which focuses on practice tests for standardized exams such as ENEM to our partner schools. These tests have a fundamental role in providing data, diagnosing and guiding action plans that could change or reinforce our and the schools’ pedagogical practices. In order to transform this data into important insights, we have a specific department called our Learning Evaluating Area, whose only responsibility is creating, correcting and providing feedback to our partner schools. The goal of these evaluations is to understand the cognition level and abilities of the students as well as to orient the pedagogical plan on multiple segments.

Furthermore, we also offer a continuous education program for educators, teaching coordinators, educational counselors, principals, psychologists, administrative agents, and the administrative support staff. Together with face-to-face training, usually during conferences, seminars and congresses, online learning programs are offered, linked to our parent company, Cogna’s colleges and training schools. These training products are developed by our professionals or by our partners and

associated educators. We also use certifications and courses developed by Cogna’s postsecondary education institutions or by other companies and institutions. Sold as a bundle, we also offer digital learning and continuous teacher training to schools adopting our core content, as described below.

In this annual report, we describe certain early-stage product offerings, and there is no material revenue effect on our revenues for such early-stage products as described in this annual report.

Digital Learning

Our digital learning solution, Plurall, is a tech-enabled platform that assists our partner schools in their digital transformation process and offers our learning systems and PAR partner schools all the support they need in a fully integrated platform. It provides a comprehensive digital learning experience and allows for tailor-made adjustments for each school. Available on the web and as iOS and Android apps, all the features can be accessed anytime and anywhere.

Plurall is a practical, organized and innovative platform offering a complete range of content and services to students, including content seen in the classroom, teaching materials, exercise lists, ENEM exams and tests from Brazil’s main university entrance exams, videos to help in the resolution of tasks, online tutoring and a database of questions and answers from other students. For every class taught, there is associated homework, providing students with a better understanding of the content. For highly-skilled students, we also offer tasks with greater complexity in order to challenge and motivate them, helping them to develop their full potential. The solution is highly responsive and makes use of artificial intelligence and machine learning algorithms.

For parents and guardians, Plurall provides summarized reports with individual performance and serves as a communication channel with the school. The report shows the results of the student, indicating strengths and weaknesses, and comparing benchmarks against other schools across Brazil.

For educators and directors, Plurall generates individual and comparison performance reports, assisting them to address specific difficulties each student is facing, as well as when challenges impact the entire classroom.

Plurall Maestro is the solution offered to educators and coordinators within the Plurall platform. The Plurall Maestro platform develops and sustains digital solutions that help educators in planning and conducting classes, offering resources, data and content that facilitate and support teaching for a specific educational platform. It allows for the creation of individualized content and data generation and evaluation reports to support in-class enhancements. The Plurall Maestro is also linked to the educators’ handbook for each brand in our portfolio and contains training regarding our content and solutions.

Continuous Teacher Training

PROFS is a teacher training program that is designed to improve work in the classroom by means of mentoring so that educators reflect on their methods and are always striving for excellent performance. As the only online training program for educators that provides certification, this solution is also offered in bundled solutions through one of our traditional learning systems or through PAR.

Complementary Education Solutions

We offer a complete and integrated portfolio of complementary education solutions we characterize as subscription arrangements that cover a number of segments related to K-12 education, supporting schools to provide a holistic education to their students.

Socio-Emotional

Languages

Academic

STEAM

Operation

After partner schools choose a solution, we begin the training processes for school managers and educators, so they get acquainted with all the facilities that our learning systems and digital learning solutions have to offer. We then initiate our relationship with the families and the students, including communication regarding the chosen solution and commercialization of our products and services. Our statistically standardized evaluation systems, digital learning environment and management and qualification tools, among others, are available to all customers.

Production and distribution of the material supplied to partner schools is carried out in the following stages:

While we do not handle certain of these steps directly, we have the technological expertise to monitor all processes, which is essential for the control of the production stages and for maintaining our standards in terms of quality and competitiveness.

Our authors are educators whose copyright can be acquired permanently or licensed by edition. In the case of licensing, the copyright payment is calculated as a percentage of net sales revenue. We currently have approximately 3,100 authors working under our various brands. We have exclusive publication and distribution of content written by such authors, and as a result, we have a robust base of educational content.

We outsource the printing of our books, using over 25 printers, some of which have served us for several decades. Private market books are printed based on sales estimates and stored in our own warehouse. Our products are distributed through a distribution center in São José dos Campos, São Paulo and four branches located in the states of São Paulo, Bahia, Pernambuco and Brasilia. Transportation of printed material is also outsourced. The transportation stage is integrated with the distribution center, and we use a number of reputable transport companies that receive specific training for the transportation of our products.

In addition, the distribution process of teaching materials is highly complex and involves a supply chain with Sustainable Farm Certification, or SFC. Accordingly, we have a corporate department devoted entirely to managing the entire production chain, using forecasting methodology to predict sales volumes and managing printing and transportation, centralizing the essential activities and outsourcing secondary activities.

Digital Platform

Our Digital Platform caters to school needs beyond education, with an aim towards increasing quality of service and efficiency, while reducing school churn and increasing new enrollments and family satisfaction. This comprehensive platform unifies the entire school administrative ecosystem and avoids piece-meal products, reducing inefficiencies and enabling schools to focus on education.

Currently, we offer solutions regarding the sale of products and services to families, catering to hundreds of partner schools through our education e-commerce platform, Livro Fácil. We plan to add various other solutions to our Digital Platform such as academic and financial ERP and student acquisition solutions, including online enrollment platform, digital marketing and scholarship marketplace, either by developing such solutions in-house or through partnerships or merger and acquisition opportunities.

Customers

Our e-commerce customers are schools, which have chosen these services in their respective agreements, and families, that have acquired their products and services directly from Livro Fácil. This service helps eliminate printed material logistic issues for schools and facilitates the process for acquiring and receiving printed materials for parents, as Livro Fácil is available through smartphones or computers, eliminating the need to dislocate to physical stores and retailers.

Products and Services

Livro Fácil is an e-commerce for the sale of educational content for schools including teaching materials, stationery and literature, among others. It also functions as a distribution hub for materials from other suppliers that are chosen by our partner schools, reinforcing our one-stop-partner positioning. It operates across the entire Brazilian territory through an integrated logistics structure with our other solutions.

After entering into the agreement for the chosen educational solution, the school decides whether the educational materials purchased by families should be delivered to the school or directly to the students’ home. Livro Fácil sends vouchers to families to make purchases through the e-commerce and, after the purchase, the products are sent to the chosen destination by our logistics partners. After the families receive the material, Livro Fácil pays the contractual commission to the schools.

By using Livro Fácil, schools can focus on their core activity and not worry about having a retail business and its implications, such as sales, stock management, payment and receivable accounts. Other additional activities that schools are spared when adopting an e-commerce solution are usage of a physical space in the school for the retail activity and the heavy tax bureaucracy associated with reselling goods.

Geographical Presence

Through our asset-light and scalable business model, we believe we have one of the largest school chains in the country, based on our review of publicly available data for private school chains in Brazil. As of December 31, 2020, we had 4,167 partner schools with 1,311 thousand students, present in all 27 Brazilian states, with a large concentration in high income states, São Paulo (30% of our students) and Rio de Janeiro (11% of our students), but with growth potential in all other regions. We believe our national network is fundamental for us to succeed in our growth strategy.

Culture

We believe that our corporate culture creates value for our partner schools and related stakeholders (including students and parents), employees and investors, as well as competitive advantages for our business. We encourage the following values to be actively cultivated by all of our employees and executives at every level:

Our culture and innovative mindset are the basis of what drives us to deliver the best and most complete offering to our partner schools and stakeholders, which trust us on a daily basis to support one of the most important pillars of our society: the next generation’s education.

Technology

Technology has enabled improvements in educational platforms and tools, changing the way people learn. By opening up a new global market opportunity no longer confined to the classroom and representing more than just digitalization of traditional textbooks, technology has brought gamification, immersion and virtual tools into the classroom, re-conceptualizing the learning experience to one that is adaptive and highly personalized.

Throughout the years, we have been able to adapt ourselves, be part of and promote the digital transformation observed in the educational market by adjusting our products and offering concept, as well as our strategy and approach using a high-quality and scalable value proposition, which also allows for tailored-made and differentiated tools.

Our product-based technological system, Plurall, makes our interaction with students increasingly friendly and intuitive and is able to support all our different brands and their specific pedagogical approaches in an integrated and bespoken manner. Plurall is a powerful source of data as every user interaction on our platforms generates multiple data points. Once they are processed and aggregated, reports become available to our final users (educators, parents and students) and to our digital content production team.

In addition, all of our solutions are based on complex proprietary IT systems and products, and we contract with datacenter service providers to host certain aspects of our platform and content. As of December 31, 2020, we had service agreements with three data center service providers, one on leased premises in São Paulo and two on cloud for the provision of data services located globally.

With in-house development of solutions, we are able to foster constant improvement of the platform and deployment of new products, as well as continuous reduction of the time between identifying a need for adjustment in processes and/or systems and its effective implementation. Our technology and digital transformation team uses best market practices for managing IT services and Scaled Agile Framework, or SAFe, for supporting the current systems and delivering new solutions.

Our employees are organized in autonomous small multidisciplinary teams called squads. Squads are cross-functional, self-organizing teams that aim at tackling a specific business objective ultimately improving productivity and overall delivery. This way of working provides greater agility to solve problems, launch new functionalities, promote continuous improvement and greater testing and integration, which in turn reduces flaws and mistakes. Product, technology, digital operations and content specialists work together on an end-to-end responsibility in a client-focused approach.

We define our squads’ priorities based on the feedback of our engagement teams, who are in direct and constant contact with school administrators, and our support teams, who access our final customers (educators, coordinators and students) to identify complains and improvement suggestions.

SAFe speeds up the prioritization and allocation of resources processes and helps develop systems that are fully aligned with our business strategy. For complex projects, we use bimodal management: parts of the project are executed with agile methodology and others by the waterfall methodology. Progress is reported periodically to management using structured

panels and indicators. The greater part of the systems development work is carried out by in-house employees with expert knowledge of the technologies applied and of our business processes, and, on occasion, by third-party specialists.

Our information is stored in physical data centers and in the professional cloud computing of international specialist companies that comply with the main international standards and contribute to the highly-scalable nature of our technology. In order to ensure that the solutions produced by the teams reach the production environments with the best possible quality and speed, we started to implement development lines with tools and processes for DevSecOps, where quality, functionality, safety and performance tests will be carried out.

Educational Systems

Within our products, aiming at delivering a fully integrated solution for schools, our partner schools use Plurall’s proprietary platform to support their digital learning experience in our ecosystem. Through multiple interfaces, such as web-based and through an app on the iOS and Android platforms, Plurall offers our stakeholders a complete range of content and services that support our core education solutions.

Plurall had more than 1,300 thousand registered student users by the end of 2020, reached a maximum of 71 thousand synchronous classes in a day, allowed teachers to send 13 million materials and activities to their group of students. In 2020, Plurall’s online tutoring services answered approximately 805 thousand questions posted, and our database of questions and answers from students totaled more than 14.7 million entries.

Initially, we provide Plurall users with a profile access management, Plurall ID, consisting of a unique identification system which allows tracking of user academic profiles over time. Moreover, we can integrate schools’ systems and Plurall ID to simplify the onboarding process and information update. All the academic structures, like grades, classes, units and groups, can be synchronized, enabling the same identity to be used for Plurall access. Data could also be integrated from Plurall to the school system to compose the final grades and cross performance reports.

Through the use of Plurall, we are able to assemble and analyze data and develop powerful insights for educators, coordinators, parents and students, ensuring constant enhancements in the learning process. Lastly, our digital solution supports the construction and correction of assessments, delivering the results to students and school staff in a more agile and user-friendly manner.

To deliver better a digital learning experience for our customers, we believe that having only a wide variety of digital content is not enough, so we produce instructional digital content inspired by what students spontaneously consume on social media (videos, interactive content, infographics, quizzes, podcasts, GIFs, etc.), paying special attention to aesthetic and artistic quality, with a simple and modern language, but without losing conceptual rigor which is essential for instructional content. As we are creating our own digital content, which is innovative and specific, we choose to develop internally the Plurall Studio, a virtual and fully cloud-based environment that allow us to innovate in the creation of educational content for students and educators, exploring interactivity and the potential of digital resources in line with the learning objectives of each of our learning systems and PAR.

Our digital platforms experienced significant growth both in user base and volume of usage when the schools closed in Brazil due to the COVID-19 pandemic. This was the result of a structured plan to support our partner schools in implementing fully digital operations. As part of this effort, we implemented new features in Plurall, such as online assessment, virtual science labs, and live digital classes, through a mix of agile internal development and integration with solutions from companies such as Google and CloudLabs.

As a result, Plurall was transformed from a complementary solution to a comprehensive digital platform for complete pedagogical implementation by our partner schools. Consequently, growth in usage has far outpaced the growth in new users. We now have significantly more users of the Plurall platform as compared to the period prior to the school closures prompted by the COVID-19 pandemic, and even more significant has been much more regular use of Plurall than ever before. At the date of this annual report, according to Censo Escolar, 1 in 4 students above the age of 11 years-old enrolled in private Brazilian K-12 schools uses Plurall as its digital learning platform. We also offered a trial version to prospective clients as part of our commercial efforts for the year, and this trial version is converting approximately four times more schools into subscription contracts than our regular go-to-market strategy.

The rate of adoption was particularly notable for K-12 teachers, who generally lag behind their students when it comes to adopting new technologies. With limited alternatives, teachers embraced Plurall as a learning platform, which significantly accelerated the digitalization of the K-12 teacher-student pedagogical relationship.

To support the expansion in users and usage of Plurall, we were required to significantly increase Plurall’s performance, using the support of Amazon Web Services, our principal cloud services provider for Plurall.

The following graphics illustrate certain key metrics related to the expansion of the usage of Plurall in connection with school closures as a result of the COVID-19 pandemic. According to data from SimilarWeb, traffic grew 310% between March (beginning of the pandemic) and June, and we have 43% of the traffic share compared to 28% for our main competitor.

Plurall Downloads and Growth in Total Visits

(1) As of March 31, 2020.

(2) Source: Company and SimilarWeb. Considers the period between March 1, 2020 and May 31, 2020.

(3) Refers to apps with services offering to a closed public defined by contract.

We have a data analytics educational area that uses all data captured by our products in several different pipelines to develop improvements to our platform. Key developments include: (1) engagement: we track the user experience and usage in the ordinary course and create dashboards for our engagement team, who in turn contact the schools and users directly in order to create a better user experience; (2) data products for final users: we deliver data in a dashboard format for educators and educators; (3) feedback for content generation: we use the data channel to create a feedback loop between students and educators that drive content updates.

Finally, we have developed a complete “plug and play” digital solution kit, speeding up the digitalization of our partner school base. The kit contemplates one chromebook, one router, one headband (optional) and one Plurall license to access all Vasta content and services related to that partner school. We began the rollout of this kit through a pilot phase that is ongoing and we expect to make a broad release of our digital solution kit in August 2020. As a consequence of the COVID-19 pandemic, we believe the new school environment is evolving to require both in-person and digitally-present learning at the same time. The chart below illustrates our spot in this new hybrid learning environment:

Innovation

Innovation is imperative for success in K-12 education both in the creation of educational content for students and educators, as well as in the distribution of such content. We believe the modern student is easily frustrated by traditional learning methods and old-fashioned content delivery. Innovation therefore plays a pivotal role in delivering superior learning outcomes: products based on personalization & adaptive learning, immersion tools and gamification have greater potential to engage students.

Our video classes are very dynamic and scalable, and allow for great user interactivity, with students navigating through different scenarios according to their responses to each question. In order to create an unparalleled adaptive learning platform, our content production is very granular, and broken into content regarding information on each specific topic and on the skills and competences required to complete the assignment. We take great care in combining the theoretical content of each topic with engaging features and a unique user experience.

We are also pioneering the incorporation of neuroscience elements into our educational platform, developing a neuro-pedagogical approach. Neuroscience offers promising insight on scientific knowledge and tools that must be applied to education. We invest intensively in research though our Learning Science Lab, partnering with highly-regarded data scientists and forward-leaning tech-driven institutions through the CpE.

In that context, we have partnered with BrainCo, a startup incubated in the Harvard Innovation Lab that develops cognitive training technology products in collaboration with scientists from the MIT Media Lab. Specifically, BrainCo has created a headband that detects and quantifies student attention levels in the classroom using electroencephalography sensors. For that solution, NASA has enabled the creation of an algorithm that transforms brain waves into a measurement of student concentration. We are currently testing the headbands on a small scale through a pilot project we have implemented at Colégio São Paulo, a school owned by Saber. We planned to expand this pilot to certain other partner schools during 2021, however, this may be delayed given schools across Brazil have been temporarily closed due to the COVID-19 pandemic. We have also established a partnership with Ciência pela Educação (the Brazilian National Scientists for Education network), bringing together over 200 scientists in the first hub dedicated to bringing scientific evidence to guide pedagogical innovations in Brazil.

Finally, we also benefit from our parent’s digital transformation and its many strategies. As an example, the Cogna group decided to approach the EdTech ecosystem in Brazil and around the world, selecting Cubo Itaú as one of the first partners after many interactions with the main players in the market. Cubo Itaú is the largest incubator for technological entrepreneurship in Latin America and was founded by Itaú Unibanco and Redpoint Ventures in 2015. The connection between Cogna and Cubo Itaú resulted in the creation of Cubo Education, a brand that strengthens and adds even more value and technological knowledge to the development of education in Brazil. This partnership created the largest EdTech hub in Latin America. Under the EdTech hub, Cogna selected, from among 410 startups, 11 with which to partner, which are either focused on solving an educational demand within Brazil, or on solving a question, problem or concrete challenge of faced by Cogna, or on creating a potential disruption in the education sphere. In order to extract value from the startup ecosystem, the Cogna has appointed 64 innovation agents from different areas as ambassadors, aiming at identifying opportunities for innovation and high impact improvements in their areas of operation.

Analytics

In 2018, the analytics area captured millions of granular data records in different behavioral dimensions. This data was organized and made available for the development of education models so that the operational areas could improve their processes intelligently and effectively. We also carried out initiatives to help intensify our culture of analytics and data-based decision making. A modern data lake cloud was established as a repository for massive amounts of data. By means of this platform, we can provide more sophisticated analyses to a number of our business areas.

Marketing and Sales

Our differentiated go-to-market strategy is based on a robust salesforce and a client-centric approach, with continuous focus on understanding our customers’ needs and delivering fully-integrated solutions. With the support of 219 experts, we target customers through multiple channels including online advertising, marketing research tools, on-site visits, social media, among others.

All of our marketing and sales processes are carried out internally and involve the coordination of several departments and various professional profiles. We work closely with Business Consultants, responsible for the commercial relationship with partner schools, together with Pedagogical Advisors and Product Specialists. Our sales force is fully integrated and is capable of selling our entire portfolio of products and services, allowing for agile, intelligent and efficient actions, placing the needs of the schools at the center of their actions.

Our processes are optimized by data coming from our Business Intelligence and Inside Sales teams. Our Business Intelligence team carries out a market census that covers around 90% of the total number of students in the private K-12 network in Brazil. This census helps us to define our approach when contacting a school, by knowing beforehand which solutions we should aim to target in our sales process.

On another hand, our inside sales team provides that, whenever a potential client demonstrates interest in one of our solutions, an automatic lead is generated, and our inside sales team is able to access existing interactions within our CRM system. Depending on the level of interest demonstrated, our on-site sales team reaches out to the school and performs the sale with a more targeted approach, enabling scalability and low cost of acquisition of new clients.

Each of our Business Consultants is responsible for serving a specific region in Brazil, and they are responsible for engaging with school leaders and identify which educational solution is best suited for each school, within our portfolio of core and complementary content solutions. After that, Pedagogical Advisors discuss with the academic department of each school what is the most appropriate methodology and what academic resources best fit their purposes. Following this, Product Specialists go through the necessary training for educators, to provide for an improved teaching and learning experience. Product Specialists are also responsible for answering any questions regarding the extracurricular products we offer, including language instruction, development of socio-emotional skills and academic programs.

The main stages of the marketing and sales process include:

For the most part, our customers sign long-term contracts with us, with terms generally ranging from three to five years. Sales are made on an annual basis to partner schools in an integrated manner, meaning that schools pay a single amount per student and have access to all the products and solutions we offer. Products are usually delivered bimonthly to schools and payment plans may vary from 30 to 60 days after delivery. The sales teams participate in 80 hours of training per year, on average, and 70% of our staff has been with us for over 3 years.

The prices are directly charged from the partner schools or families, if the partner school selected our Livro Fácil e-commerce platform. Pricing considers the production costs and the costs related to our support services, which varies according to the profile of each school and its portfolio choices.

A significant lead generator for our Anglo brand is the operation of preparatory courses for university entrance exams, that, given the quality and reputation of the brand, we constantly advertise with a list of alumni that passed the entry exams into the top universities in country.

Specifically in the case of Livro Fácil, our e-commerce platform is marketed by the integrated sales force as an additional service that might be hired by the schools in connection with the adoption of our Content Solutions. Livro Fácil is, therefore, a lead generator of cross-sell revenue that, by generating a commission to schools, can be used to sustain and help pay the adoption of an educational platform or PAR solution.

Customer Service and Support

Aiming at delivering the best after-sales support in order to increase customers’ loyalty and recurring revenue opportunities, a Pedagogical Advisor is assigned for each school once the contract is signed. The Pedagogical Advisor will regularly visit the school (usually four times a year) and will also accompany the school at all local and national events. On average, each Pedagogical Advisor coordinates 45 schools, and in addition to personal interactions, they are also available for weekly or spontaneous calls. Schools also have access to our relationship center and may, at any time, request more information about their products, services, invoices or others. In addition, Livro Fácil has its own customer service structure, serving mostly families, while also being integrated with the schools’ relationship center.

Authors who receive copyright are also under contractual responsibility to answer the various questions that the educators using our products may have and take part in marketing, engagement and capitation events for the partner schools. Our large team of authors means educators will always have someone available to assist them in their work.

In addition, to improve the use of our digital learning solution, we also deliver support focused on Plurall users. Our Engagement team is responsible for assisting our users and creating a better use experience. We segmented our team in two areas, one is responsible for supporting our partner schools by tracking and analyzing the user experience and maintaining close contact with schools to provide a better use of the Plurall ecosystem. Another one is responsible for assisting students, answering questions through the online support module that is available on our digital learning platform.

As a result of our high-quality customer-focused approach, our clients have a very positive experience, as evidenced by our high NPS score among core education and digital learning brands. As of December 31, 2020, we scored 80 and 77 out of 100 possible points for Anglo and pH learning systems, as rated by our partner schools, and 57 out of 100 possible points for our digital learning platform (Plurall), as rated by school coordinators.

Competition

We compete with publishers, textbook providers, online learning solutions and all other players offering services to private K-12 schools. For partner schools, reputation and content and platform quality are key differentiators. We believe that we are the only one-stop-partner in the private school marketplace able to cater to schools’ entire ecosystem by providing a comprehensive set of solutions for schools in terms of core content and complementary content and digital solutions. Unlike other providers in the market, we are able to cater to a wide range of school needs, from core content, to complementary content and, through our Digital Platform, a growing set of administrative and managerial tools for schools, which we expect will only continue to expand as we expand our core and complementary solutions and grow the product offerings of our Digital Platform.

Our large proprietary technology content and support systems improve our intellectual agility and responsiveness both in the development and also enhancement of our solutions. Also, among our main competitive strengths sits the fact that we

have a robust salesforce and client-centric mindset with a self-reinforcing network under a mostly model we characterize as subscription arrangements.

Within our Content & EdTech Platform, we compete with traditional publishers, textbook suppliers and other providers of educational curriculum solutions. There is no concentration of market power in the markets in which we operate except the publishing market, which is highly concentrated among a few players including us. We are one of the three largest players in the educational publishing market in Brazil, with a 30% market share of the textbook market in the private sector according to Oliver Wyman Strategy.

The learning systems market is highly fragmented, with a large number of players, but only a few of them have nationwide presence or the know-how for the sale of teaching materials and educational methodology as we have.

Through PAR, we are able to target a range of schools that do not want to adopt traditional learning systems, increasing opportunities for up-sell and cross-sell in schools which only purchase stand-alone textbooks. We are the only player offering this type of solution.

For the Digital Platform segment, retailers selling textbooks and stationery, physical bookstores and e-commerce platforms are competitors or alternatives to Livro Fácil. Educational solutions are usually commercialized directly between us and the school or by Livro Fácil, but, in specific cases, stand-alone products might be available in the distribution channels mentioned above.

Seasonality

Our revenue is primarily derived from the sales of our educational solutions and digital platform to partner schools. Each of these activities has its own seasonality, as specified below.

Content & EdTech Platform

Our main deliveries of printed materials and digital materials to our customers occur in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March), and revenue is recognized when the customers obtain control over the materials. In addition, the printed and digital materials we provide in the fourth quarter are used by our customers in the following school year and, therefore, our fourth quarter results reflect the growth in the number of our students from one school year to the next, leading to higher revenue in general in our fourth quarter compared with the preceding quarters in each year. Consequently, in aggregate, the seasonality of our revenue generally produces higher revenue in the first and fourth quarters of our fiscal year. In addition, we generally bill our customers during the first half of each school year (which starts in January), which generally results in a higher cash position in the first half of each year compared to the second half.

A significant part of our expenses is also seasonal. Due to the nature of our business cycle, we need significant working capital, typically in September or October of each year, in order to cover costs related to production and inventory accumulation, selling and marketing expenses, and delivery of our teaching materials at the end of each year in preparation for the beginning of each school year. As a result, these operating expenses are generally incurred between September and December of each year.

Digital Platform

Purchases through our Livro Fácil e-commerce platform are very intense during the back-to-school period, between November, when school enrollment takes place and families plan to anticipate the purchase of products and services, and February of the following year, when classes are about to start. Thus, e-commerce revenue is mainly concentrated in the first and fourth quarters of the year.

INDUSTRY OVERVIEW

Introduction to the Brazilian Educational System

The general education system in Brazil consists of K-12 and postsecondary education. K-12 comprises preschool, lower secondary, upper secondary and high school education levels, totaling 14 years of education, while postsecondary education consists of undergraduate and graduate degrees, totaling 3 to 8 years of education, a period substantially shorter than the K-12 cycle. In addition to the general education system, Brazil also provides special education for people with disabilities, professional education and education program for young adults (Educação de Jovens e Adultos), or EJA, who were unable to access or complete K-12 education at the appropriate age.

In 2020, there were 47.3 million students enrolled in private and public K-12 schools in Brazil. Brazil’s K-12 students account for 22% of the total population, while in the United States this representation falls behind at 17% (considering an estimate of 56.6 million students attending school in fall 2019), according to the NCES. The chart below sets forth the total number of students enrolled per stage of the education cycle, as well as the duration and age. Also in 2020, 8.8 million students were enrolled in private schools in Brazil, which makes Brazil the fourth largest market for private schools in the world, after India, China and Indonesia.

Educational Cycle in Brazil
(in millions, except age and years, 2020)

Source: MEC/INEP

Market Fundamentals of the Private K-12 Segment in Brazil

The Importance of K-12 Education

K-12 education is compulsory in Brazil, and is provided by both private and public schools, with the majority of students enrolled in public schools. Under Brazilian law, guardians are required to enroll children at the age of six in a primary education facility and the Brazilian Government is required to provide students with public access to primary and secondary education. Despite having access to public K-12 education, families seek to enroll their children in private schools to secure higher quality education. There is a significant difference in student performance for public versus private K-12 education, as measured by performance on standardized exams such as the ENEM.

The ENEM is extremely important for students’ future opportunities as it is required for access to high-quality postsecondary education in Brazil. It is the standardized national test for university admission in Brazil. In 2019, 53% of all students in Brazil enrolled in their final year of high school took the ENEM. Of the 100 highest ranked schools for performance on the ENEM in 2019, 90 are private. The superior performance of private school students on the ENEM when compared to public school students is an important factor for families when deciding whether to invest in private K-12 education for their children. The chart below sets forth the performance gap in the ENEM for public school students as compared to private school students.

Histogram of schools by ENEM grade
(in %, 2019)

Source: ENEM 2019 – INEP. Consolidated by SOMOS, considering only schools with more than 10 ENEM participants.

The poor quality of public K-12 education is a result of the allocation of scarce Government investments in the segment. Although Brazil’s investment in education in terms of GDP is high when compared to other countries, the majority of funding is directed to postsecondary education, which is evident when comparing public spending per K-12 student to those in postsecondary education. The Brazilian Government invests three times more per public student in postsecondary education than per public student in K-12 education. The chart below presents the difference in government expenditure per student in K-12 as compared to postsecondary education.

Public Expenditure per Student
(in US$, 2016)

Source: OECD – Organization for Economic Co-Operation and Development

Priority in Household Spending

According to HSBC’s “The Value of Education” 2014 report, 79% of all Brazilian families consider a high-quality education the best investment they could make. This cultural belief leads to education being a top priority in household spending. The chart below shows that Brazil is currently one of the countries with the highest education spending in the world and one of the fastest growing in the last 10 years.

Total Amount of Spending by Households on Education
(in US$ billion)

According to a study by Oliver Wyman, in Brazil, the number of applicants for postsecondary education per seat has increased by 38% between 2012 and 2017, increasing student competitiveness and consequently parents’ desire to provide the best K-12 education to their children. According to IBGE, in Brazil, the share of income destined to education increased from 2.5% of monthly expenses in 2009 to 3.8% in 2018. Families believe education is an effective investment to ensure that their children will be able to access high quality postsecondary education institutions and increase their future earning potential. In Brazil, the average wage of an employee that has completed some form of postsecondary education is 2.5 times higher than an employee with only secondary education, a wider wage gap when compared to others OECD countries.

Source: OECD

Resilience of the Private School Segment

As a result of the positive economic growth in Brazil’s economy in the early 2000s, real wages have increased and thousands of families were able to rise to the middle class, which in turn has increased the shift to private schooling due to increased disposable income. According to FGV Social, the Brazilian middle class increased by 48.2 million people from 2003 to 2018, representing 55% of the population versus 37% in 2003. Additionally, according to FGV, social classes A and B accounted for 14% of total population in 2018, an increase of 5 percentage points when compared to the 9% recorded in 2003.

The chart below sets forth recent growth in private school enrollments compared to reductions in overall K-12 enrollments, demonstrating the migration of students from the public to the private system in Brazil.

Number of Enrollments
(in thousands, except percentages)

Source: MEC/INEP

Private school enrollments have gained share over the past decade and remain stable despite the Brazilian economic crisis in recent years, demonstrating the resilience of the sector. Therefore, with the resumption of economic growth, this segment is expected to have room for growth in coming years and well-positioned players will have the opportunity to capture these gains.

Number of Enrollments in Brazilian Private K-12 Education
(in %)

Sizeable Student Population and Migration from Public to Private Schools

With 48.5 million students enrolled in 2018, Brazil has the 5th largest K-12 student population in the world. As set forth in the chart below, Brazil is only behind Southeast Asian countries and the USA.

Enrollments in K-12 Education
(in million students, 2018)

Source: Ministry of Education of each country, INEP and UNESCO

Despite the migration of students from public to private schools over the last years, when comparing Brazil to other countries in the world, there is still significant runway for increased penetration, since private school penetration in Brazil is lower than in other developing markets.

Public and Private Enrollments in Selected Emerging Economies and Selected Large Countries
(million students and % who attend private school, 2018)

(1)      Including Hong Kong or Macao
Source: BMI, INEP and UNESCO

In Brazil, the private school market is gaining share from the public-school market due to the poor quality of public K-12 education, improvement in household wealth and the rising importance of education. The result of this landscape can be seen in the report released by the Varkey Foundation, which places Brazil as one of the leading countries when measuring parents’ desire to switch children to private schools if it was affordable to them. 81% of Brazilian families whose child attends a state school would be fairly likely or very likely to send their child to a fee-paying school, while the global average is 55%. The chart below presents this ranking with selected countries.

Likelihood of Sending Child to Private School if Affordable
(in %, 2018)

Source: Varkey Foundation, 2018

Complementary Content and Full-time Education

With recent changes in society and the job market presenting a more competitive scenario and preference for individuals with a holistic education, highlighting the importance of a diverse set of competencies aside from the core and technical curricula, schools have begun to demand more complementary content. Parents have been looking for complementary activities to enroll their children in order to provide them with a complete education and learning experience. These activities include language courses, tutoring, STEAM-based curriculum (Science, Technology, Engineering, Arts and Mathematics) and 21st century skills, such as critical thinking, which provide an important addition to student development and formation and are usually provided outside of regular school hours, either at school or at third party provider locations.

In addition to being sources of knowledge enhancement, complementary content can generate additional revenue to schools. Also, the ability to provide these services in the school is a trend that promotes more convenience for families. Demographic changes such as the entry of women into the labor market and the long working hours led parents to find in schools an integrated center for solutions, offering full time education with complementary content. Therefore, the demand for this kind of solution has been growing in recent years. The number of students enrolled in full-time education in high school increased 18% from 2017 to 2018, according to INEP.

Education, Technology and Digitalization

In light of the current developments in technology in recent years and the need to constantly improve the quality of K-12 education, digitalization is playing a critical role in schools in terms of personalizing learning, supporting educators and increasing school productivity.

Looking at more mature markets, for example the United States and the United Kingdom, digital solutions are already moving towards an integrated offering at some schools, creating personalized learning paths and practices in order to differentiate learning among children in the classroom. According to Digital Education Survey (2016), 81% of educators with 10 or fewer years of experience believe that technology has had a positive impact on students’ learning. Another survey of British educators conducted by a UK EdTech company discloses that 77% of respondents believe that the implementation of technology in the classroom has made their workload easier.

Brazil exhibits favorable prospects for adoption of technological education solutions, considering it is the fourth largest country in terms of internet users in the world, according to a study by the United Nations Conference on Trade and Development, or UNCTAD. Since 2015, more than 50% of the educators in K-12 private schools were using internet in classrooms. In 2017 this number reached 61%, according to the Center of Studies on Information and Communication Technology (Centro de Estudos sobre as Tecnologias da Informação e da Comunicação), or CETIC.

The K-12 segment has been moving towards increased digitalization. According to Oliver Wyman, digital learning devices are expected to spread exponentially among Brazilian schools until 2022. In July 2019, the MEC announced that students will be assessed on the ENEM in digital format starting in 2020. According to the MEC, the migration to digital assessments will occur gradually until 2026, when the ENEM will be assessed entirely in digital format.

Schools with at Least One Device per Two Students
(in % of respondents)

Source: Survey conducted by Oliver Wyman with school decision makers in October 2019

In order to bring the most value to students and educators, providers of educational content have been incorporating higher quality technology, pedagogical solutions, teacher development programs and other value-added services.

Professionalization of Schools

There are 39,986 private schools in Brazil, of which approximately 80% have less than 500 students. These small-scale units dedicate significant working hours to administrative activities, such as intake, retention, financial management and communication with parents. This can be an inefficient use of resources that diverts the school’s focus away from its core educational activities and also represents lots of hidden costs to the school.

Due to this challenging scenario, the digitalization progress can be an important tool of professionalization in schools. The value of digitalization is extensive, covering solutions ranging from curriculum products to back-office tools focused on efficiency. These result in productivity gains for schools and allow them to save time and costs through systems that help them reduce their back-office size and that provide integration with other systems, reducing the amount of manual entries. Another key tool for more effective school management is big data intelligence, which creates actionable insights to aid in business tasks such as forecasting, student recruitment, drop-out alerts, among others.

This movement to make back-office processes more efficient has led providers to begin migrating towards one-stop-shop solutions, primarily as a result of the lack of integration between providers, which complicates data analysis and visualization, leads to duplicative manual entry across multiple systems and generates errors and mismatched information, introducing risk. Moreover, logging into and navigating through different system is time consuming and adds complexity.

Therefore, schools have taken some measures to become more efficient. Such measures include (1) increasing purchases from a single vendor and centralizing data and data visualization; (2) the use of CRM (enrollment management) as a recruiting tool; (3) migration towards cloud computing for quick and easy updates; and (4) reduction of customized offerings, which create issues when providers carry out software updates, and are generally more expensive.

Products and Services Addressing Schools’ Needs

Addressing the Needs of a Highly Fragmented and Heterogeneous Market

The Brazilian market presents a large number of schools with different scales and focusing on very diverse audiences. There is currently no meaningful consolidation in the Brazilian private K-12 segment, with 80% of schools holding less than 500 students and the five largest school operators holding less than 10% of the total enrollments. In addition to being highly fragmented, the Brazilian private school market is also heterogeneous, with schools following a wide variety of pedagogical approaches and teaching methods.

Number of Students per School
(in %)

Source: Oliver Wyman - INEP

Average Monthly Tuition
(in R$)

Source: Based on Vasta’s internal survey

These schools lack the time, capacity and resources to develop their own content and pedagogical solutions and often require complementary education solutions to provide holistic education to students. In addition to content and pedagogical solutions, these schools also need tools and technology to help with school administration, so they can focus on their primary activity which is education, as well as reduce costs and improve efficiency levels.

Core Content Solutions

Core content solutions encompass educational content for schools and students, digital learning environment and continued learning and development for educators.

Schools and educators are the primary decision makers when determining which option to be used in terms of: (1) content (textbooks, learning systems or hybrid options); (2) format and functionalities (digital and print, among others); (3) brand or provider; and (4) the channel that will be adopted for sales to parents (whether directly through the school, through e-commerce, or by other means).

Core content comprises the mandatory K-12 curriculum and schools have adopted three different options to deliver content to students based on their pedagogical approach: (1) stand-alone textbooks, encompassing content which are purchased by parents at bookstores or other marketplaces and are usually adopted by schools that prefer to develop their own curricula, lesson plans and classroom activities to ensure flexibility in pedagogical curricula and in-depth learning for all grades; (2) learning systems, which comprise content in different formats across all grades for schools that are looking for structured content and associated services, such as lesson plans, pedagogical and marketing support, and other support services. These materials are adopted and purchased by schools from an education company and sold to parents with a mark-up by the schools; or (3) a hybrid approach, combining the use of textbooks and learning systems for schools seeking to use their own lesson plan and pedagogical approach for selected grades (adopting books) while adopting learning systems for the remaining grades.

Methodological Option in the Private Schools
(2018)

Source: Vasta’s internal database (“Lista de adoção”), covering around 85% of Brazilian students in private market.

Digital learning platforms encompass solutions and support for schools, educators, parents and students. Schools and educators are able to tailor learning activities combining feedback provided by students, levels of classroom engagement and examination results. Parents can access real-time student performance metrics and work together with the school to help their children improve academic results. Students are provided with online digital content that may also be downloaded, together with tutoring support during and outside regular school hours.

We believe digital learning platforms represent a clear opportunity to deliver high-quality education at a lower cost to parents since it enables scale gains to education providers both inside and outside the classroom. Companies are investing in adaptive learning platforms to provide students with content tailored to their individual needs and 24-hour connectivity. With the use of technology, education expands beyond the classroom, allowing students to access more engaging content in different forms and through various sources.

Resources for continued learning and development for educators, which enhance the learning experience for educators and their students, include a wide variety of areas, such as classroom teaching skills, student engagement methods, testing strategies and introduction of new technologies, among others.

According to Oliver Wyman, the services we provide through our core solutions have a total addressable market of R$6.0 billion per year as of 2018.

We believe we are uniquely positioned in the sector, since we are able to offer all kinds of choices, regardless of the chosen methodology. Partner schools may choose between one of our traditional learning systems or PAR’s educational platform, our book-based content solution. Our core content solutions include content in different formats and a wide range of services such as digital learning, pedagogical support, continuous teacher training and others. Despite the fact that stand-alone textbooks are not part of our core strategy, they are important as a first step to start a relationship with a school, which can eventually subscribe to PAR or one of our learning systems in the future. Therefore, through this range of services, we are able to fully serve the entire educational market.

Complementary Content Solutions

There is a diverse set of complementary education solutions available for students that include language courses, tutoring, robotics, socio-emotional and other 21st century skills that have gained relevance in the field of education over the last years. The rising demand was driven by the increasing parental focus on ensuring that their children are “21st century ready” for the employment market and acceptance into high quality postsecondary education institutions. The main criteria parents seek are socio-emotional health, global awareness, digital skills and critical thinking.

In order to improve and educate better citizens, education in schools has been updated year after year. In this process, socio-emotional education has become an important vertical in which students learn to reflect and effectively apply necessary knowledge, attitudes and skills throughout school and future life.

Demand for complementary education has also been increasing, primarily driven by parents’ long working hours and social changes such as the increase in participation of women in the workforce. Other aspects that support these structural changes are related to logistics (more limited mobility) and security challenges. In this way, schools have become integrated centers of solutions.

Complementary education is also becoming increasingly relevant for schools because: (1) they contribute to a holistic education to students; (2) they can increase student retention; and (3) they provide additional revenue streams to schools.

After centuries of technological progress and advances in international cooperation, the world is more connected than ever. The globalization process also impacts the education sector. Over the past years the number of Brazilians living in foreign countries and exchange students has grown significantly. Therefore, the number of students looking to learn English also increased. According to the Brazilian Association of Bilingual Education (Associação Brasileira do Ensino Bilíngue) or Abebi, the market for bilingual schools has grown between 6% and 10% in Brazil in the last 5 years.

Brazilians Living in Foreign Countries
(in millions)

Source: UNESCO

Digitalization is turning STEAM into an essential subject for future workforce preparation. According to Innovation and Science Australia, 92% of future jobs will need digital skills. Since 1990, there has been a 79% increase in the number of jobs related to STEM, according to Pew Research Center. Consequently, countries are adopting STEAM subjects in the mandatory curricula. For example, beginning in 2018, coding became a core subject in Sweden, starting from the first grade in primary school. In China, since 2015, STEAM education has been a key trend for the Ministry of Education, becoming a compulsory module in K-12 and an extra module in the high school curriculum. This movement is driven mainly by international workforce preparation and focusing on productivity gains.

In China, high competition to enter in high quality universities is leading to an increase in expenditure per child in after school programs, especially in tutoring programs. The after-school market in the country increased from US$34 billion in 2011 to US$74 billion in 2016, representing a CAGR of 18%. According to Oliver Wyman, in 2021 this market is expected to achieve US$170 billion, representing a CAGR of 19%.

According to Oliver Wyman, the services we provide through our complementary education solutions have a total addressable market of R$6.4 billion per year as of 2018.

Our current platform offers language courses, socio-emotional content and academic programs, and we are constantly looking to incorporate new solutions into our existing platform. We are currently working on expanding our complementary offerings to include STEAM.

School Management Services

The school management services market in Brazil is currently very fragmented, with schools adopting different operating systems to support all their needs including financial and academic ERP and student acquisition solutions, including online enrollment platform, digital marketing and scholarship marketplace. These services aim to increase school efficiency by

leveraging back-office functions, allowing school management to be able to focus primarily on educational activities, increasing the quality of education.

This market is increasingly relevant as technology is further developed and as schools seek alternatives to manage their costs and increase their efficiency. This movement can be corroborated by the report published by Liga Ventures on EdTechs, which shows that, in Brazil, out of the 297 education startups mapped, school management and communication is the largest segment in number of companies, with 48 startups as of June 2019.

The advancement of digitization can be an important tool of professionalization in schools. Looking at more mature markets, for example, United States, we can see that there is already a migration towards an integrated offering of digital services at some schools.

We believe our Digital Platform is built to cater to all other school needs or management services aside from education, offering unified management and increasing efficiency and quality of services. Currently, we offer Livro Fácil, the largest education-related e-commerce in Brazil, selling educational content and stationery items, while also functioning as a hub for distributing materials from other suppliers that are chosen by our partner schools, reinforcing our one-stop-partner positioning. In addition, we are also developing a number of other solutions for our Digital Platform through a full stack of digital services, including academic and financial ERP and student acquisition solutions, such as online enrollment platform, digital marketing and scholarship marketplace.

According to Oliver Wyman, our Digital Platform has a total addressable market of R$12.9 billion per year as of 2018.

Platform as a Service: Total Private K-12 Addressable Market

To address the challenges faced by the private K-12 segment in Brazil and in light of market fundamentals, we believe we are well positioned to cater all school needs through our “platform as a service” approach. The solutions available today are still fragmented, with different tools being offered by different providers, which end up generating some challenges for schools. The possibility of adopting an integrated provider will allow schools to generate significant gains in terms of cost reduction, time optimization and focus of school managers and educators and a seamless and user-friendly experience for families. In addition, they create significant barriers to new entrants. Moreover, the adoption of digital functionalities is still in an incipient stage and subject to major transformations. We are positioned to deliver key digital functionalities for education and school management through our integrated platform as a service approach, providing state-of-the-art end-to-end solutions.

We believe we have built one of the most complete and integrated platforms of K-12 products and services capable of promoting the digital transformation in schools through our Content & EdTech Platform and our Digital Platform. Our Content & EdTech Platform is mainly focused on the core and complementary education with a multi-brand tech enabled platform that delivers high quality content according to each student profile, while our Digital Platform is designed to provide school management services through an integrated approach.

As a result, we believe we are uniquely positioned to capture the full spectrum of products and services of the private K-12 market in Brazil, amounting to a total addressable market of R$25.3 billion per year as of 2018.

Private K-12 TAM
(in R$ billion, 2018)

Source: Oliver Wyman

We believe we are well positioned to deliver key digital functionalities for education and school management through our integrated platform as a service approach, providing state-of-the-art end-to-end solutions.

Our integrated Platform as a Service

REGULATORY OVERVIEW

The Brazilian constitution establishes education as a right of all citizens, the provision of which is a duty of the state and the family. Accordingly, the government is required to provide all Brazilian citizens with access to free primary education that requires compulsory attendance. Private investment in education is permitted so long as entities providing regulated education services comply with the applicable rules and requirements.

The Brazilian education system is organized as a cooperation regime among federal, state and municipal governments. The federal government is responsible for organizing and coordinating the federal education system in order to guarantee equal opportunity and quality of education throughout Brazil. Brazilian states and the Brazilian Federal District are required to focus on primary and secondary education (which are similar to the final years of elementary school, junior high and high school), while municipalities are responsible for providing preschool and primary education (which are similar to kindergarten and the first years of elementary school), and each is responsible for establishing and implementing the relevant rules and regulations for each educational stage the subject of its focus, including monitoring and evaluation, and the issuance of all relevant authorizations, recognitions and qualifications required for each such educational stage.

Law No. 9,394/1996, or the National Education Guidelines Law (Lei de Diretrizes e Bases da Educação Nacional), or LDB, establishes the guidelines for the provision of education services in Brazil and sets forth the federal government’s duty to: (1) coordinate the national education system; (2) prepare the National Education Plan (Plano Nacional de Educação), or PNE; (3) provide financial assistance to the states, the Federal District and municipalities; and (4) define, in cooperation with other federal entities, the responsibilities and guidelines for primary and secondary education.

In addition, the federal government, through Law No. 13,005 of June 25, 2014, implemented the PNE, with a duration of ten years from the date of its publication. The National Education Plan established objectives for Brazilian education. For primary and secondary education, which encompasses kindergarten, elementary school and high school, the objectives are: (1) the universalization of preschool education, with a target to enroll at least 50% of all children up to three years of age in schools by 2024; (2) the universalization of primary education, with a target to enroll at least 95% of children between the ages of six and 14 in schools by 2024; (3) the universalization of secondary education, with a target to enroll at least 85% of adolescents between the ages of 15 and 17 in schools by 2024; (4) to ensure that all children learn the Brazilian Portuguese alphabet by the third year of primary education; (5) to make available full-time education in at least 50% of public schools; (6) to improve the quality of primary education as evaluated by the IDEB; (7) to ensure that all students are literate by the time they are 15 years-old; (8) to make available to 25% of primary and secondary education to young adults and adults; and (9) to increase enrollment in professional studies to three times the current enrollment rate. Accordingly, each of the federal, state and municipal governments was required to prepare a ten-year education plan and establish policies, guidelines and objectives applicable to the segment of the Brazilian education system over which it is responsible. In addition, these objectives act as guidelines for the private education sector.

Primary and Secondary Education

Primary and secondary education in Brazil is equivalent to K-12 education in the United States, and consists of preschool, elementary school, junior high and high school, which are regulated by the LDB, the National Education Plan and by directives established by the CNE.

The LDB regulates mandatory subjects, the minimum number of teaching hours and school days, the minimum classroom attendance and grade advancement. States, municipalities and educational institutions can pass rules and regulations according to specific regional and local requirements, such as differences in curricula and calendar, grade advancement and issuance of academic documentation for primary and secondary education students.

The National Education Plan establishes ten-year targets for all the levels and stages of education, mandating that states and municipalities create and establish similar plans compatible with such national targets. It is incumbent upon the Primary and Secondary Education Secretariat (Secretaria de Educação Básica), or SEB, of the MEC, to monitor compliance with the PNE by states and municipalities. This supervision includes guidance and rules for evaluating the stages of primary and secondary education.

Under the federal constitution and the LDB, access to primary and secondary education is a right of all children from the ages of four to seventeen. Following amendments to Law No. 11,274 on February 6, 2006, the duration of primary and secondary education was extended from a period of eight years to a period of nine years. Among the purposes of primary education are: (1) development of the capacity to learn, including basic abilities in reading, writing and arithmetic; (2) comprehension of the natural and social environment, the political system, technology, arts and social values; (3) development of the capacity to acquire new knowledge and abilities and the formation of attitudes and values; and (4) strengthening family ties, social cohesion and mutual tolerance. Assessment of primary education is coordinated by the state legislation of each individual state, on a case-by-case basis.

Secondary education is designed to fulfill the government’s duty to progressively complete the formation of the citizen, seeking universalization of scope and coverage. Secondary education is conducted for a period of not less than three years and seeks: (1) the consolidation and deepening of the knowledge acquired in primary education; (2) the basic preparation of the person being educated for work and to be able to adapt within the labor market or pursue further education; (3) the

improvement of the student as a person, including ethical formation and the development of intellectual autonomy and critical thinking; and (4) the comprehension of the scientific and technological bases of the productive processes, relating theory to practice in each discipline. Assessment of secondary education is conducted on a national scale and coordinated by the MEC.

Regulatory Bodies

The main regulatory bodies of the Brazilian education system are:

The MEC is the federal government agency responsible for education in Brazil. It formulates and evaluates Brazilian national education policy, ensuring the quality of education and compliance with education regulations. The INEP is a collegiate federal entity responsible for evaluating educational institutions and student performance, as well as conducting research in order to provide a reliable database for public use.

The MEC is assisted by the CNE, which is the entity with decision-making and deliberative powers to ensure the improvement of national education. The CNE is comprised of the CEB, which is the collegiate responsible for the regulation of elementary and high school, and the CES, which is the collegiate responsible for the postsecondary education system. CEB and CES are each composed of 12 members appointed by the President of Brazil.

States and municipalities are responsible for regulating preschool, elementary and high school education, respecting the macro directives from the CNE. State Secretaries of Education (Secretarias Estaduais de Educação) are assisted by the State Councils of Education (Conselhos Estaduais de Educação) and are the main regulatory bodies for the for primary and secondary school education. The Municipal Secretaries of Education (Secretarias Municipais de Educação) are assisted by the Municipal Councils of Education (Conselhos Municipais de Educação) and are the main regulatory bodies of preschool education.

The LDB grants power to states and municipalities to authorize, accredit and supervise primary and secondary education institutions. This is achieved through each governmental entity’s respective Department of Education.

Regulations Applicable to Our Activities

There is not a specific regulation for the exercise of sale of educational content, either digital or printed content, as regarding the need to obtain government approval for the development of such activities. Therefore, we are not directly regulated by MEC or any other regulatory agency with regard to those activities.

However, our Core & EdTech platform and related educational materials seek to comply with the LDB and the directives established by the BNCC. In addition, our school Anglo São Paulo and partner schools are providers of primary and secondary education, regulated by the Municipal and State Secretaries of Education, under the supervision of MEC, and must comply with applicable regulations. Recently, the BNCC, was launched in Brazil and, therefore, we are required to incorporate all the BNCC standards into our educational products and content. The BNCC contemplates a set of guidelines that provides a curriculum itinerary specifying the core skills and knowledge that must be developed as part of primary and secondary education in Brazil and each school has the autonomy to elaborate or adapt their curricula and pedagogical projects according to such guidelines.

The BNCC guidelines were established following overall poor student performance levels achieved while the predecessor education guidelines were in effect. Several indicators suggest that the predecessor guidelines were failing in many ways, leading the MEC to initiate discussions relating to a new method based upon a comparison between Brazil and other countries’ results, which formed the basis for developing the BNCC. Simply put, the LDB and the BNCC establish what subject matters shall be developed during each level of education (preschool, elementary school and high school).

As provided by the LDB and the BNCC, preschool education should enable children to live in society, to play, to participate, to explore, to express themselves, and to know themselves. Primary education, in turn, shall offer the following subject matters: (1) Brazilian Portuguese; (2) Arts; (3) Mathematics; (4) Geography; (5) History; (6) Religious Studies; (7) English; (8) Science and (9) Physical Education. Also, according to the current BNCC, secondary education shall offer curriculum covering the following subjects (1) Brazilian Portuguese; (2) Arts; (3) Mathematics; (4) Geography; (5) History; (6) Physics; (7); Chemistry; (8) Biology; (9) English, (10) Physical Education, (11) Sociology; and (12) Philosophy. As our partner schools have autonomy to establish their pedagogical projects, there are no other guidelines relevant to the materials provided.

Relevant government agencies, such as the MEC and CNE, are still discussing amendments to the BNCC, which are also being debated by society at large in the public discourse. While following the BNCC is yet to be required of every school in the country, there are opportunities to provide core and complementary content solutions to improve and adapt to the new status quo in the Brazilian education market.

In terms of the sales of books and e-books, we benefit from the provisions of article 150, item VI, paragraph “d” of the Brazilian Federal Constitution, which establishes that the Federal Government, the States and the Municipalities cannot levy taxes, such as the Tax on Industrialized Products (IPI) and Goods and Services Tax (ICMS) on the sale of books, newspapers, periodicals or the paper intended for the printing thereof. Although constitutional immunity applies to taxes, it does not apply to social contributions, such as the Social Integration Program (PIS) and the Contribution to Social Security Financing (COFINS). In the light of this, the Federal Government, by means of Law No. 11,033, dated December 21, 2004, reduced the rates of PIS and COFINS tax on revenue resulting from the sale of books in Brazil to zero, effective December 2004. The aim of this reduction in the tax burden was to stimulate the production chain and marketing of books in Brazil. For the purpose of this reduction the definition of a book is as contained in Law No. 10,753, dated October 30, 2003.

Furthermore, there is not a specific regulation for preparatory courses for university admission exams and for their textbook material. Therefore, we do not need to obtain governmental authorization to implement these activities and does not need to observe BNCC guidelines for the development of related textbooks.

In addition, the provision of services and sale of goods to municipalities and other public entities are subject to specific rules on public bidding procedures. Pursuant to Brazilian Federal Constitution, public authorities must initiate a public bidding procedure before hiring any services, purchases or sales. Such public biddings aim to provide the most advantageous conditions to public purchasers. These procedures are established by Federal Law No. 8,666/93 and cannot be overridden by state and local laws.

As general rule, public bidding procedures are mandatory and can only be exempted under certain specific circumstances (that is, only if considered unfeasible or if waived) in which cases, specific administrative procedure are required in connection with such exemptions. Failure to follow the procedures required for waiver or unfeasibility could subject the relevant public authorities and contracted parties to negative consequences, which include (1) annulment of the agreement; (2) prohibition to contract with the public authorities for a certain period of time; (3) mandatory reimbursement to the Public Treasury for any overcharge with respect to the relevant service or good; and (4) civil and administrative penalties for the losses and/or damages born by the public authorities.

Additionally, rules applicable to contracts with public authorities differ from those applicable to private agreements. Public authorities can unilaterally amend or terminate the agreements, and are also entitled to access all administrative, accounting, technical, economic, and financial information of the private entities contracting with them for purpose monitoring the relevant contract.

The provision of services and sale of goods to entities within the “S System” (“Sistema S,” which includes SESI and SENAI) are subject to certain rules and principles that are similar to those applicable to public entities. However, entities within the S System are private entities that provide social services (“parastatal” entities), are not part of the government nor included in its structure and, as a result, are not subject to the provisions set forth under Federal Law No. 8,666/93. However, given that such parastatal entities are funded by the collection of specific federal taxes, they must observe the administrative principles on the execution of contracts. Consequently, SESI must observe its own rules of proceedings for tenders and contracts. Possible sanctions for default in contracts executed with parastatal entities include early termination, fines and

prohibition to contract that specific entity. In addition to that, SESI and the other parastatal entities are subject to the internal and external control from the Federal Controller General (Controladoria Geral da União) and the Federal Court of Auditors (Tribunal de Contas da União), respectively.

C.       Organizational Structure

We are a Cayman Islands exempted company incorporated with limited liability on October 16, 2019 for purposes of effectuating our initial public offering. Prior to our initial public offering we undertook a corporate reorganization as described under “Presentation of Financial and Certain Other Information—Corporate Events.”

The diagram below depicts our organizational structure as of the date of this annual report:

For more details about our organizational structure please see “Presentation of Financial and Other Information—Organizational Structure” and refer to notes 1.1 and 1.2 to our audited consolidated financial statements.

D.       Property, Plant and Equipment

Intellectual Property

In order to maintain our intellectual property rights, including our rights in connection with our products and services, we rely on confidentiality agreements with employees and third parties and other types of statutory arrangements, in addition to a combination of laws, copyrights and software. In addition, we license technology from third parties and have licenses for all the software utilized in our activities.

We are party to approximately 4,500 agreements with third party authors with respect to educational content. We own approximately 465 trademark registrations, including the trademarks and logos of “Somos Educação,” “Editora Atica,” “Editora Scipione,” “Atual Editora,” “Sistema Anglo de Ensino,” “Par Plataforma Educacional,” “Sistema Maxi de Ensino,” “English Stars,” “Rede Cristã de Educação” and “MindMakers,” among others. We also have approximately 30 pending trademark applications in Brazil and three in the United States for trademarks “Vasta,” “Vasta Educação” and “Somos Educação,” and unregistered trademarks that we use to promote our brands. We also have the right to use trademark registrations for “Pitágoras” (owned by a subsidiary of our parent company), and “Saraiva” (owned by Saraiva Gestão de Marcas S.A., a company jointly owned by our parent company and third parties who are not controlled by us nor our parent company). As of the date of this annual report, we owned approximately 220 registered domain names in Brazil.

Our main trademarks already registered or in the process of registration in our name include the following: trademarks and logos of “Vasta,” “Somos Educação,” “Somos Science in Learning,” “Ético,” “Editora Atica,” “Sistema Maxi de Ensino,” “Plurall,” “Livro Fácil,” “Sistema pH de Ensino,” “Editora Scipione,” “Sistema Anglo de Ensino,” “PROFS,” “PAR

Plataforma Educacional,” “Biblioteca PAR,” “Editora Atual,” “English Stars,” “Rede Cristã de Educação” and “MindMakers,” among others.

Properties

We occupy 29 properties for our operations. Our registered office and our central administrative unit (corporate office) is at Av. Paulista, 901, 5th Floor, Bela Vista, São Paulo – SP, CEP 01310-100, Brazil.

Most of our units are located in properties leased from third parties, for which we have long-term lease agreements with fixed monthly rental rates. In a few instances, rental rates are tied to a percentage of revenue with a pre-established minimum value. For the year ended December 31, 2020 and 2019, we spent R$14.3 million and R$20.4 million, respectively, on the rental of property and condominium charges. It is our belief that our current facilities are appropriate for our needs and that we will be able to renew our lease agreements and obtain additional space, if necessary, on commercially reasonable terms to meet future needs.

We have equity stakes in five companies: Somos Sistemas, Colégio Anglo São Paulo, Livro Fácil, A&R Comércio e Serviços de Informática Ltda.(Pluri Educacional), Mind Makers and Meritt.

Additionally, our subsidiary Somos Sistemas has entered into commercial lease agreements with certain subsidiaries of our parent company. For more information, see “Item 7. Major Shareholders and Related Party Transactions—B. Related party transactions—Lease and Sublease Agreements.”

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes thereto as well as the information presented under “Item 3. Key Information—A. Selected financial data.” The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in “Forward-Looking Statements” and “Item 3. Key Information—D. Risk factors.”

A.       Operating Results

Key Business Metrics

We review the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The key metrics presented below correspond, as applicable for comparison, to the results of Vasta for the year ended December 31, 2020 and year ended December 31, 2019, to the sum of the metrics of Vasta for the period from October 11, 2018 to December 31, 2018 with those of the Predecessors for the period from January 1, 2018 to October 10, 2018.

Enrolled Students

The number of enrolled students is the primary operational metric our management reviews. It represents the total number of students at our partner schools served by our platform during a given school year. Although our primary customers are the partner schools we attract to our customer base, our revenues are determined by the number of enrolled students that access our content in these partner schools.

We typically have significant visibility of the number of students we will serve by the end of November, before the next school year starts. However, since we allow our partner schools to make small adjustments to their estimates to account for late admissions and dropouts, this number may fluctuate slightly through May, though it typically does not change from June to September.

The following tables set forth the number of enrolled students at our partner schools as of the dates indicated.

ACV Bookings

This annual report presents our ACV Bookings for the convenience of investors. This operating metric is not prepared in accordance with IFRS. ACV Bookings is a non-accounting managerial metric and represents our partner schools’ commitment to pay for our offerings. We believe it is a meaningful indicator of demand for our platform. In particular, we believe ACV Bookings is a helpful metric because it is designed to show amounts that we expect to be recognized as revenue from subscription services for the twelve-month period from October 1 of one fiscal year through September 30 of the following fiscal year. We generally deliver our educational materials to schools in the last calendar quarter of each year, so that schools can prepare their classes in advance prior to the beginning of the school year in January. Consequently, as we recognize revenue when the customers obtain control over the materials, our results of operations for the last quarter of a given fiscal year contain revenues related to the content that will be used by schools on the following school year and that was delivered prior to the beginning of the new fiscal year. Therefore, ACV Bookings convey information that has predictive value for subsequent months, and which may not be as clearly conveyed or understood by simply analyzing our statement of profit or loss, especially in our current scenario of high growth.

We define ACV Bookings as the revenue we would expect to recognize from a partner school in each school year, based on the number of students who have contracted our services, or “enrolled students,” that will access our content at such partner school in such school year. We calculate ACV Bookings by multiplying the number of enrolled students at each school by the average ticket per student per year; the related number of enrolled students and average ticket per student per year are each calculated in accordance with the terms of each contract with each school. Although our contracts with our schools are typically for a four-year term, we record only one year of revenue when calculating ACV Bookings and disregard the other three years of revenue for the purposes of the calculation of ACV Bookings. For example, if a school enters into a four-year contract to provide one of our Content & EdTech Platform solutions (such as learning systems or PAR) to 100 students for a contractual fee of US$100 per student per year, we record US$10,000 as ACV Bookings, and not the total contract value of US$40,000.

On March 31, 2021, we announced the result of ACV Bookings for the 2021 sales cycle (from October 2020 to September 2021), which reached R$853 million based on contracted amounts as of such date. This volume represents growth of 23% over the amount registered in the 2020 sales cycle. The number of enrolled students deriving results of ACV Bookings for the 2021 sales cycle is 1,500 thousand. The ACV Bookings is calculated based on the sum of actual contracts signed during the sales period and assumes the historical rates of returned goods from customers for the preceding 24-month period. Since the actual rates of returned goods from sales during the period may be different from the historical average rates and the actual volume of merchandise ordered by our customers may be different from the contracted amount, the actual revenue recognized during the period between October 2020 and September 2021 may be different from the ACV Bookings for the 2021 sales cycle. The COVID-19 pandemic could have an adverse effect on our ACV Bookings for the 2020 sales cycle (from October 2021 to September 2022), and while we have implemented certain measures to address the potential impact of COVID-19 on our ACV Bookings and business in general, we believe that our actual revenue recognized in the year 2021 to be derived from solutions we characterize as subscription arrangements will be adversely affected by effects of declining enrollment at our partner schools during the first half of 2021, particularly in respect of childhood education.] See “Item 3. Key Information—D. Risk Factors—Certain Factors Relating to Our Business and Industry—Our operations and results may be negatively impacted by the COVID-19 pandemic” and “—D. Trend Information.”