Strategy and Competitive Advantages

A focus on providing high quality academic education. Anima’s academic project values the development of student autonomy, seeking to provide a broad education for professionals, individuals and citizens and to ensure that students have access to a high quality academic education. Based on the studies carried out by Hoper, 47.4% of the aspects analyzed by students in the process of choosing an institution of higher education are related to the quality¹ of the institution, while only 22% are related to their location. Based on its proprietary methodology, Anima‘s curriculum provides a modular and interdisciplinary approach, allowing students to connect with the different disciplines of each course, adding value to their learning process. This goes well beyond standardization of the curriculum, which is based on the anachronistic concept, still adopted by several Brazilian educational institutions, of simply transferring content. The Company believes that, with the advent of technology, access to content is virtually universal, and it therefore focuses on developing lasting skills that will enable students to have greater autonomy and a broader range of activities in their chosen profession. Anima’s ability to provide prime-quality higher education is underpinned by the preparation of its professors, 75% of whom have a master’s degree or doctorate. Teaching quality has been proven by a series of internal and external indicators, including: (i) consistent student satisfaction results - in October and November 2014, more than 67% of students rated our institutions as very good or excellent in the Company’s internal surveys; (ii) according to the MEC’s Preliminary Course Concept (CPC) grade, 78% of the courses evaluated were ranked in the top three offered by private higher education institutions in their respective fields; (iii) 100% of the courses assessed by the MEC through on-site audits between April 2014 and March 2015 received a Course Concept (CC) rating of 3 or more, while 93% received a rating of 4 or 5; (iv) Anima has managed to consistently improve its institutions’ General Course Index (IGC) ratings, with UNA being ranked the best private university center in the state of Minas Gerais, and UniBH as the second best such center in Belo Horizonte, according to the 2011, 2012 and 2013 IGC published by the MEC. Student recognition of our quality is also reflected in the Company’s continuing high average ticket in recent years.

¹ The following aspects were considered as quality-related by Hoper’s study: quality, market recognition, friends’ recommendation, brand recognition and tradition, and Enade results.

A differentiated business model that allows for a privileged position, in order to take advantage of the growth potential of the Brazilian education sector. Anima believes that it has a differentiated business model that provides a high standard of academic quality, which, together with its strong business culture, leads to positive and sustainable results over time. In addition, there is a growing demand (from the MEC, the labor market and also from students) for quality in the education sector in Brazil, placing Anima in a unique position with respect to other private educational groups. This trend can be seen in the growth of the volume of students relying on student loans (more than one million in December 2013, up from 75,900 in 2010), initially through private entities, but subsequently strongly enhanced by the expansion of the Federal Government’s student loan program (FIES). These financing mechanisms allow students to choose the institution and courses in which they would like to enroll, not simply those that they would be able to afford. Consequently, there is a migratory trend among students throughout the country towards institutions focused on academic excellence and social and corporate responsibility, with differentiated brands and reputations. Accordingly, Anima believes it has an advantage over its competitors in the private sector, given that it is fully equipped to accompany the growth of Brazil’s higher education sector, thereby generating more value for its shareholders.

A portfolio of brands with strong traditions and reputations. Education brands in Brazil are mainly local or regional, with the exceptions restricted to mass generalist or niche institutions, with a focus on one or only a few areas of learning. UNA, UniBH and Unimonte are traditional brands with more than 40 years of history in the regions in which they operate. Anima is seeking an independent, unique positioning for its brands, respecting their strategic positioning and commitment to quality education, while also being open to the introduction of modern and innovative elements, which are essential characteristics of the Company. For example, the ability to create proprietary identities permits the management of two teaching institutions in the same city (UNA and UniBH) with similar price points and course portfolios, in a highly synergetic manner, attracting students with different profiles and simultaneously expanding the market share of both institutions. Thus, the Anima brands function as an important amalgam, especially for the corporate world, strengthening the concept of a network and absorbing and transferring credibility between the educational institutions. At the beginning of 2013, another traditional brand, HSM, was added to the portfolio. HSM has more than 25 years’ experience in the organization of business management events and a strong presence in the corporate world. With operations focused on business and management education, we believe HSM has the potential to become a benchmark brand in this niche, with a nationwide reach, not only reinforcing portfolio and brand quality perception, but also enabling the Company to gain scale through network synergies. We believe its reputation and market positioning have made a definitive contribution to the success of the Company’s acquisitions in recent years and to the integration of the acquired institutions, as well as being essential for our future growth strategy. Given that the education sector is still highly fragmented and has several strong regional brands, Anima’s strategy of preserving the acquired brands after their incorporation into the network strengthens the benefits arising from their regional reputation and recognition of the principles and values in Anima’s business model.

Valuing people. Anima’s development is directly related to the people with whom the Company interacts, given that the success of an institution depends on the development of a proprietary and authentic organizational culture, based on principles and values that are practiced on a daily basis. As such, the development of employees and professors is encouraged through specific initiatives for each group. First, we created a permanent training program called "Anima Inspiring Leaders", which brings together 110 people in leadership positions from both the academic and management areas. Anima also offers training programs for all course coordinators through its Training Program for Academic Managers (PDGA), an essential tool for the development of future leaders capable of reconciling academic principles with a business dynamic and includes personnel, marketing, financial and academic modules. Currently with 160 participants, the Talent Orchestra (Orquestra de Talentos) program targets intermediate-level leaders and provides space for the development of innovative practices and process improvements, including rewarding the best projects. Still focusing on employee development, the Y Career Program (Carreira Y), attended by 90 people, provides those in specialist positions with the content and interaction they need to progress in their careers, as well as a space for the creation of projects. The best projects in this program are also rewarded. Finally, the Company enhances the value of its faculty through actions that increase their feeling of integration within the institution and the perception of their importance to the student learning process.

A strong profile of profitability with significant growth. The Company’s operations provide a high level of profitability and a significant return on invested capital. In addition, upon acquiring an institution, efforts are made to maximize synergies and operational efficiency and, consequently, translate these actions into an increase in profitability. The unique value and solid reputation of the Anima brands allows us to charge monthly tuition fees that exceed the market average, with EBITDA per student that is also higher than that of the other publicly-held education companies focusing on standardized education, allowing for the continuation of consistent growth and the realization of investments in quality.

Experienced management, focused on results and supported by a renowned strategic partner. Management is composed of an aligned group with more than 10 years’ experience working as a team and a profound knowledge and experience of the education sector. Most of the executives, including the Company’s founders, are also part of the controlling bloc, strengthening the alignment of interests between shareholders and the management team. This team has been building a track record of success and growth, both organic and through acquisitions. It is also worth mentioning the presence of Dr. Ozires Silva, founder of Embraer, former CEO of Petrobras and former Minister of Infrastructure, who is Chairman of the Company’s Board of Directors and Dean of Unimonte. The Company seeks to align its interests with those of its executives through a bonus structure that is tied to the results achieved.

The Company’s expansion and growth fronts are divided into four main pillars:

Organic growth. The Company intends to continue increasing its student base and market share based on the reputation of its brands, thus improving its financial results through initiatives that include:

  • Course portfolio management aimed at expanding and renewing offerings: The Company is constantly assessing the need for professionals in the job market and developing programs with the purpose of meeting those demands. The Company’s status as a university center and university enables it to offer new courses and expand the number of places offered without requiring previous approval from the MEC in the municipalities where its institutions are present (except for medical, law, psychology and dentistry courses, due to legal and regulatory restrictions). The Company is therefore able to respond rapidly to behavioral changes in demand for new courses and/or new places in new units. For instance, in response to job market changes, the Company implemented a strategy to expand its portfolio of places in engineering courses, which grew from 10% of total enrollments in 2010, with 3,368 students distributed through ten courses, to 26% of enrollments at the close of 2014, with 18,700 students in fourteen courses.
  • Multi-campus expansion: Management’s experience has taught it that, in large urban centers, convenience is an important variable in students’ decision-making process, some of whom may be prevented from attending their institution of choice due to commuting difficulties. Once the location requirement is met, the main choice factor is academic quality. The Company is therefore doing everything possible to expand coverage in municipalities where it is already present by opening new units through a multi-campus strategy. The Company’s expansion team is constantly seeking new opportunities to move into areas that are not fully served or that have excellent growth and development potential, based on demographic and socio-economic indicators. In February 2012, for example, the Company opened a campus in a new region in Belo Horizonte called Linha Verde, which has already become one of UNA’s leading campuses in terms of student numbers, with 2,000 enrolments at the end of 2014. The Company also opened a new UniBH campus in the Linha Verde region in August 2013, which had 2,300 students at the close of 2014, having made good use of the Company’s courses and brand portfolio management to meet local demand.
  • Expansion of units outside the state capitals: Management intends to open new units in regions outside the state capitals where there is demand for quality higher education. Based on the experience with UNA, Management realized that, after the Company’s brands have become consolidated in their base municipalities, they have the potential and reach to act as regional anchors. This strategy was underlined by the installation of a greenfield UNA unit in Contagem in 2008 and, more recently, in February 2013, by the acquisition of a small college in Betim, which was converted to the UNA brand. In August 2013, April 2014 and September 2014, the Company filed three new requests to open colleges in municipalities in Minas Gerais, where it believes the UNA brand has great strength and is widely recognized among young people and the local academic community. It is important to emphasize that this growth front permits greater operational scale and efficiency gains given that, in addition to the integration of the Company’s Shared Services Center ("CSC") and the central management structure, the satellite units offer potential gains of scale with the regional anchor, especially in terms of the unit’s general management and academic management and coordination. Whenever the Company sees fit, it will attempt to replicate this strategy in other states as it acquires other anchor brands.

Creating a differentiated distance learning program. The distance learning segment has enormous market potential, mainly as a result of its more attractive tuition fees, wider geographical reach (due to the reduced need for students to commute) and high historical growth rate. According to the MEC’s Higher Education Census, the number of private distance learning enrollments in higher education in Brazil moved up from 6,390 students in 2002 to 1.11 million in 2013. In July 2014, the MEC certified the Company’s distance learning program, which received top grades in the three items assessed: institutional accreditation, course authorization and center assessment. The Company believes that distance learning will make a substantial contribution to revenue in the coming years, given the segment’s growth trajectory and potential gains from the dilution of fixed costs, which may generate higher return margins than the classroom-based course average.

Taking advantage of sector consolidation opportunities. Part of the Company’s growth strategy is based on the merger and acquisition of other educational institutions. The Company seeks to identify assets capable of adding value and competitiveness to the Group, while using the Company’s curricular technology, centralized processes and corporate structures. Accordingly, it has a rigorous screening process for potential acquisitions focusing on two main fronts: (i) the attractiveness of the market and its competitive environment, assessed through quantitative and qualitative analyses that compare several social, demographic and market-related aspects; and (ii) the attractiveness of the institution, whose assessment criteria include institutional strength, risks and potential related to: (a) the brand, (b) the team / human capital, (c) management and potential synergies, (d) commitment to the Company’s positioning, values, principles and organizational culture and (e) operating and financial performance. The Company’s Shared Service Center was designed to provide a more efficient and integrated administrative, financial and academic platform capable of catalyzing the best practices of each of the Company’s institutions and the quality standard offered in all of their units. The Center also improves the speed and effectiveness with which new institutions and business units are integrated, resulting in incremental cost reductions and significant gains of scale. The Company believes that these factors will permit the integration of acquisitions in a streamlined, efficient and profitable manner. The Company also believes that the capital from the IPO not only generated liquidity, but also flexibility in the negotiation process, leading to new possibilities. The Company’s expansion team is currently studying opportunities in 42 Brazilian cities, seeking institutions committed to Anima’s quality education positioning and capable of strengthening its competitive edge and creating value for its shareholders.

In July 2014 Anima concluded the acquisition of Universidade So Judas Tadeu (USJT) in So Paulo. USJT is a perfect example of an institution committed to Anima’s strategy and positioning, in addition to being one of the most respected educational institutions in So Paulo, known for its high academic rigor and excellent operating performance, as underlined by several MEC indicators, its high level of student and employee satisfaction, and its solid operating and financial performance. USJT has shown considerable potential for growth and the capture of synergies, either through operating efficiency gains or the expansion of campuses in So Paulo city and other municipalities in the state.

Expanding the Company’s operating market through knowledge verticals. Knowledge verticals are business units whose brands are recognized nationwide for their expertise in certain areas and which are capable of enhancing local operations through local co-branding and the development of new products and services that are scalable through the Company’s network. The Company believes that, more than just a growth front, knowledge verticals constitute an important competitive advantage. This strategy is already being implemented at HSM. This new business unit, acquired in March 2013, has multiple strategic goals, leveraging the Company’s operations in the corporate education segment while acting as a management vector in the network. The Company believes that HSM has all the necessary conditions (brand, know-how, content and products) to reinforce its product and business portfolio by offering its products locally in the Company’s University Centers (as graduate and short-duration courses offered by the Company’s network). In addition, the Company’s University Centers have already begun to incorporate new and unique elements into their courses, relying on HSM’s know-how in the management area for the development and updating of their educational projects, as well as adding differentiated educational content to their undergraduate and graduate courses (including the transmission of major events, access to HSM’s content, workshops and soft skills development). Knowledge verticals have the potential to develop products that will be distributed in the future virtual channels, particularly the distance learning centers. HSM is the Company’s first step in this direction and Anima believes that there is potential to explore new verticals in other fields. The Company therefore seeks to differentiate and make its products profitable through knowledge verticals, reinforcing its brand portfolio in both senses: the vertical brand reinforcing the local brand and the local brand expanding the visibility and reach of the vertical brand.

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