IPO Launch: Vitru Limited Seeks $258 Million U.S. IPO


Vitru Limited (VTRU) intends to raise $258 million in an IPO of its common shares, according to an F-1 registration statement.

The firm provides an online distance learning and offline hub system for post-secondary students in Brazil.

VTRU is seeing sharply slowing short-term growth results, has a significant selling shareholder contingent and Brazil is still in the midst of a continued high rate of Covid-19 pandemic infections.

Florianopolis, Brazil-based Vitru was founded to develop and deliver course offerings in more than 200 subjects in a virtual learning environment for post-secondary students located in Brazil.

Management is headed by Chairman Mr. Bruno Zaremba, who has been with the firm since 2020 and was previously a director at BK Brasil Operacao e Assessoria a Restaurantes S.A., an owner and operator of Burger King and related brands in Brazil.

Below is a brief overview video of rethinking Brazil's digital future:

Source: TED Archive

The company has over 3,600 tutors and operates more than 600 'hubs' via what it calls a 'hybrid' model representing a combination of digital learning and a weekly in-person meeting with a dedicated local tutor.

Vitru has received at least $104 million from investors including Mundi Holdings I and II, Vinci Capital Partners II, Agresti Investments, Botticelli Investments, Caravaggio Investments, Raffaello Investments and NB Verrocchio.

The company produces national and local marketing campaigns through digital marketing channels such as Google, YouTube, Facebook and Instagram in conjunction with more traditional means, including radio, TV, billboards and print media.

Local marketing activities are partnered through the 'hubs,' who have input in the process.

Selling expenses as a percentage of total revenue have been variable as revenues have increased.

The Selling efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling spend, dropped from 0.6x to 0.3x in the most recent reporting period.

According to a 2015 market research report by Ken Research, the total education market in Brazil is expected to exceed $350 billion by the end of 2020, with the K-12 segment accounting for the highest percentage of the total market at about 2/3 of the total.

From 2010 - 2015, the Brazilian education market saw a CAGR of 8.8%, and grew at a CAGR of 4.1% through 2018.

The main drivers for this expected growth are increased government and private spending on education, a growth in the number of private institution alternatives in urban areas and wider use of digital technologies to deliver learning opportunities.

Also, the previous robust growth rate has been principally due to a partnership 'between Pernambuco, the largest state in the northeast region which entered in partnership with multiple companies for the improvement of education levels.'

Management says there are no directly comparable competitors.

Vitru’s recent financial results can be summarized as follows:

  • Growing topline revenue
  • Increasing gross profit, but lowered gross margin percentage
  • A swing to operating profit and margin
  • Increasing cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of June 30, 2020, Vitru had $43.3 million in cash and $150.0 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2020, was $7.1 million.

Vitru intends to raise $258 million in gross proceeds from an IPO of its common shares.

Existing shareholders intend to sell 5.23 million shares and Vitru will offer 6.0 million shares.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $514.8 million, excluding the effects of underwriter over-allotment options.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 48.7%.

Management says it will use the net proceeds from the IPO as follows:

We intend to use the net proceeds from this offering for organic growth through the expansion of our hybrid platform and course offerings, acquisitions and for other general corporate purposes.

Management’s presentation of the company roadshow isn’t available.

Listed bookrunners of the IPO are Goldman Sachs, BofA Securities, Itau BBA, Morgan Stanley, Bradesco BBI, BTG Pactual, Credit Suisse, and Santander XP Investimentos.


Vitru is seeking U.S. public capital for its selling shareholders as well as for the firm’s organic growth initiatives.

VTRU’s financials show continued topline revenue growth despite the Covid-19 crisis in Brazil, although at a reduced rate of growth in the most recent period.

The firm has swung into profitable territory which is admirable, but one wonders if this was done for ‘window dressing’ purposes for the IPO.

Selling expenses as a percentage of total revenue have been variable as revenues have increased; its Selling efficiency rate has dropped in half during the most recent period.

The market opportunity for digital first post-secondary education in Brazil is robust and the firm has adopted a hybrid approach to keeping students engaged and moving forward.

Goldman Sachs is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 68.5% since their IPO. This is a top-tier performance for all major underwriters during the period.

As to valuation, compared to rapidly growing Arco Platform, VTRU’s offering appears reasonably priced.

However, VTRU’s revenue growth and selling efficiency has dropped, likely as a result of the Covid-19 pandemic, whereas ARCE has powered forward with a high growth rate.

Given the firm’s sharply slowing short-term growth results, the significant selling shareholder contingent and Brazil’s continued high rate of Covid-19 pandemic infections, my opinion on the IPO is NEUTRAL.

Expected IPO Pricing Date: September 16, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)


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