Arco delivers R$1,002B revenues and 38%
adjusted EBITDA for FY2020 and confirms 2021 ACV of R$1,163
million
Arco Platform Limited, or Arco (Nasdaq: ARCE), today
reported financial and operating results for the fourth quarter and
full year ended December 31, 2020.
“While the year of 2020 presented an unprecedented global
challenge, the Brazilian K-12 education sector has undergone an
important technological transformation that will benefit Arco for a
long time. While taking care of our team and being financially
responsible, we were able to quickly evolve our solutions and
go-to-market to better serve existing clients and attract new
prospects. In 2021, we will continue evolving our winning factors
of brand reputation, superior solutions and distribution capability
to pursue our mission of delivering high-quality education at
scale,” said Ari de Sá Neto, CEO and founder of Arco.
Full Year 2020 Results
- Net Revenue of R$1,001.7 million;
- Adjusted EBITDA of R$381.0 million;
- Adjusted Net Income of R$220.3 million;
Fourth Quarter 2020 Results
- Net Revenue of R$296.5 million;
- Adjusted EBITDA of R$125.9 million;
- Adjusted Net Income of R$67.4 million;
Key Messages
2020 results: solid FY Revenues with high EBITDA margin
- FY20 Net Revenue of R$1,001.7 million
- Above guidance FY20 adjusted EBITDA margin of 38.0%
2021: ACV of R$1,163 million with sustained high margin
- 2021 ACV of R$1,163 million, 21% growth versus 2020
- Recovery of COVID related revenue impact of ~R$96 million not
considered in 2021 ACV
- FY21 adjusted EBITDA margin guidance of 35.5% to 37.5%
Recent acquisitions progressing as planned
- COC and Dom Bosco complement Core portfolio and reinforce
Arco’s leadership
- Arco enters the supplemental test prep vertical with the
acquisition of Me Salva!
- Escola da Inteligência, national leader in social-emotional,
close to full integration
Priorities for 2021: growth, digital and ESG
- Leverage stronger winning factors to continue growing on large
& untapped market
- Drive K-12 digitalization
- Disclose and further pursue ESG impact
Conference Call Information
Arco will discuss its fourth quarter and full year 2020 results
today, March 31, 2021, via a conference call at 6:00 p.m. Eastern
Time. To access the call, please dial: +1 412 717-9627, +1 844
204-8942, +55 11 3181-8565 or +55 11 4118-4632. An audio replay of
the call will be available through April 6, 2021, by dialing +55 11
3193-1012 and entering access code 1608874#. A live and archived
webcast of the call will be available on the Investor Relations
section of the Company’s website at
https://investor.arcoplatform.com/.
Information related to COVID-19 pandemic
As of December 31, 2020, there was a total impact of R$14.6
million on the Company's condensed consolidated financial
statements related to the COVID-19 pandemic mainly related to: (i)
revision of the expected credit losses considering estimated
increases in financial defaults, arising from renegotiations with
customers and in unemployment rates in Brazil for the foreseeable
future due COVID-19, which resulted in an increase of R$ 7.0
million in allowance for doubtful accounts as of December 31, 2020,
(ii) additional expenses of R$ 7.7 million during the year ended
December 31, 2020 related to IT, network infrastructure and an
integrated teaching platform, as well as expenses to maintain
protective measures such as cleaning and disinfecting the
installations, distribution of protective masks and alcohol to
employees and delivery of chairs, computers and work kits, (iii)
increase in inventory reserves to accurately reflect the expected
realization of inventories, which resulted in an incremental charge
of R$287 thousand, and (iv) rent concessions, regarding leased
buildings, that occurred as a direct consequence of the COVID-19
pandemic, amounting R$350 thousand.
The future impact of the COVID-19 pandemic on an ongoing basis
is still uncertain, and the Company’s management team will continue
to closely monitor and assess the potential impacts it may have on
the Company’s business, its financial performance and position.
For full disclosure regarding the COVID-19 discussion, please
refer to the December 31, 2020 condensed consolidated financial
statements submitted to the Securities and Exchange Commission on
Form 6-K.
About Arco Platform Limited (Nasdaq: ARCE)
Arco has empowered hundreds of thousands of students to rewrite
their futures through education. Our data-driven learning
methodology, proprietary adaptable curriculum, interactive hybrid
content, and high-quality pedagogical services allow students to
personalize their learning experience while enabling schools to
thrive.
Forward-Looking Statements
This press release contains forward-looking statements as
pertains to Arco Platform Limited (the “Company”) within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, but not limited to, the Company’s expectations or
predictions of future financial or business performance conditions.
The achievement or success of the matters covered by statements
herein involves substantial known and unknown risks, uncertainties,
and assumptions, including with respect to the COVID-19 pandemic.
If any such risks or uncertainties materialize or if any of the
assumptions prove incorrect, the Company’s results could differ
materially from the results expressed or implied by the statements
we make. You should not rely upon forward-looking statements as
predictions of future events. Forward looking statements are made
based on the Company’s current expectations and projections
relating to its financial conditions, result of operations, plans,
objectives, future performance and business, and these statements
are not guarantees of future performance.
Statements which herein address activities, events, conditions
or developments that the Company expects, believes or anticipates
will or may occur in the future are forward-looking statements. You
can generally identify forward-looking statements by the use of
forward-looking terminology such as “anticipate,” “believe,” “can,”
“continue,” “could,” “estimate,” “evaluate,” “expect,” “explore,”
“forecast,” “guidance,” “intend,” “likely,” “may,” “might,”
“outlook,” “plan,” “potential,” “predict,” “probable,” “project,”
“seek,” “should,” “view,” or “will,” or the negative thereof or
other variations thereon or comparable terminology. All statements
other than statements of historical fact could be deemed forward
looking, including risks and uncertainties related to statements
about our competition; our ability to attract, upsell and retain
customers; our ability to increase the price of our solutions; our
ability to expand our sales and marketing capabilities; general
market, political, economic, and business conditions in Brazil or
abroad; and our financial targets which include revenue, share
count and other IFRS measures, as well as non-IFRS financial
measures including Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, Adjusted Net Income Margin, Free Cash Flow and
Adjusted Free Cash Flow.
Forward-looking statements represent the Company management’s
beliefs and assumptions only as of the date such statements are
made, and the Company undertakes no obligation to update any
forward-looking statements made in this presentation to reflect
events or circumstances after the date of this press release or to
reflect new information or the occurrence of unanticipated events,
except as required by law.
Further information on these and other factors that could affect
the Company’s financial results is included in filings the Company
makes with the Securities and Exchange Commission from time to
time, including the section titled “Risk Factors” in the Company’s
most recent Forms 20-F and 6-K. These documents are available on
the SEC Filings section of the Investor Relations section of the
Company’s website at: https://investor.arcoplatform.com/
Key Business Metrics
ACV Bookings: we define ACV Bookings as the revenue we would
contractually expect to recognize from a partner school in each
school year pursuant to the terms of our contract with such partner
school, assuming no further additions or reductions in the number
of enrolled students that will access our content at such partner
school in such school year (we define “school year” for purposes of
calculation of ACV Bookings as the twelve-month period starting in
October of the previous year to September of the mentioned current
year). We calculate ACV Bookings by multiplying the number of
enrolled students at each partner 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 partner
school.
Non-GAAP Financial Measures
To supplement the Company's condensed consolidated financial
statements, which are prepared and presented in accordance with
International Financial Reporting Standards as issued by the
International Accounting Standards Board—IASB, we use Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Net
Income Margin, Free Cash Flow and Adjusted Free Cash Flow which are
non-GAAP financial measures.
We calculate Adjusted EBITDA as profit (loss) for the year (or
period) plus/minus income taxes, plus/minus finance result, plus
depreciation and amortization, plus/minus share of (profit) loss of
equity-accounted investees, plus share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units), plus M&A expenses, plus non-recurring expenses
and plus effects related to COVID-19 pandemic. We calculate
Adjusted EBITDA Margin as Adjusted EBITDA divided by Net
Revenue.
We calculate Adjusted Net Income as profit (loss) for the year
(or period), plus share-based compensation plan, restricted stock
units and provision for payroll taxes (restricted stock units),
plus amortization of intangible assets from business combinations
(which refers to the amortization of the following intangible
assets from business combinations: (i) rights on contracts, (ii)
customer relationships, (iii) educational system, (iv) trademarks,
(v) non-compete agreement (vi) software and (vii) educational
platform resulting from acquisitions), plus/minus changes in fair
value of derivative instruments (which refers to (i) changes in
fair value of derivative instruments—finance income, and plus (ii)
changes in fair value of derivative instruments—finance costs),
plus/minus changes in accounts payable to selling shareholders plus
share of (profit) loss of equity-accounted investees, plus/minus
changes in current and deferred tax recognized in statements of
income applied to all adjustments to net income, plus/minus foreign
exchange gains/loss on cash and cash equivalents, plus interest
expenses, net, plus M&A expenses, plus non-recurring expenses
and plus effects related to COVID-19 pandemic. We calculate
Adjusted Net Income Margin as Adjusted Net Income divided by Net
Revenue.
We calculate Free Cash Flow as Net Cash Flows from Operating
activities, less acquisition of property and equipment, less
acquisition of intangible assets. We consider Free Cash Flow to be
a liquidity measure that provides useful information to management
and investors about the amount of cash generated by operating
activities and cash used for investments in property and equipment
required to maintain and grow our business. We calculate Adjusted
Free Cash Flow as free cash flow for the year (or period) plus (i)
interest change in financial investments, (ii) M&A expenses,
and (iii) non-recurring expenses.
We understand that, although Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Net Income, Adjusted Net Income Margin, Free Cash
Flow and Adjusted Free Cash Flow 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, Adjusted EBITDA Margin, Adjusted
Net Income, Adjusted Net Income Margin Free Cash Flow and Adjusted
Free Cash Flow 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.
Arco Platform Limited
Consolidated Statements of
Financial Position
December 30,
December 31,
(In thousands of Brazilian
reais)
2020
2019
Assets
Current assets
Cash and cash equivalents
424,410
48,900
Financial investments
712,645
574,804
Trade receivables
415,282
329,428
Inventories
74,076
40,106
Recoverable taxes
19,304
15,612
Financial instruments from acquisition of
interest
-
3,794
Related parties
9,970
1,298
Other assets
24,073
14,630
Total current assets
1,679,760
1,028,572
Non-current assets
Financial instruments from acquisition of
interest
-
32,152
Deferred income tax
236,903
156,748
Recoverable taxes
1,121
6,613
Financial investments
10,349
4,690
Related parties
10,508
14,813
Other assets
22,239
14,399
Investments and interests in other
entities
9,654
48,574
Property and equipment
26,087
21,328
Right-of-use assets
30,022
21,631
Intangible assets
2,549,637
1,811,903
Total non-current assets
2,896,520
2,132,851
Total assets
4,576,280
3,161,423
December 30,
December 31,
(In thousands of Brazilian
reais)
2020
2019
Liabilities
Current liabilities
Trade payables
40,925
34,521
Labor and social obligations
85,069
68,511
Taxes and contributions payable
9,676
7,508
Income taxes payable
44,731
52,038
Advances from customers
23,080
25,626
Lease liabilities
12,742
6,845
Loans and financing
107,706
98,561
Accounts payable to selling
shareholders
656,014
117,959
Other liabilities
331
607
Total current liabilities
980,274
412,176
Non-current liabilities
Labor and social obligations
36,570
2,801
Lease liabilities
22,478
19,012
Loans and financing
203,413
-
Financial instruments from acquisition of
interest
-
33,940
Provision for legal proceedings
1,366
251
Accounts payable to selling
shareholders
1,130,501
1,098,273
Other liabilities
794
160
Total non-current liabilities
1,395,122
1,154,437
Equity
Share capital
11
11
Capital reserve
2,200,645
1,607,622
Share-based compensation reserve
80,817
84,546
Accumulated losses
(80,589
)
(97,369
)
Total equity
2,200,884
1,594,810
Total liabilities and equity
4,576,280
3,161,423
Arco Platform Limited
Consolidated Statements of
Income
Three months ended December
31,
Twelve months ended December
31,
(In thousands of Brazilian reais,
except earnings per share)
2020
2019
2020
2019
Net revenue
296,537
247,644
1,001,710
572,837
Cost of sales
(66,305
)
(55,374
)
(221,130
)
(117,258
)
Gross profit
230,232
192,270
780,580
455,579
Operating expenses:
Selling expenses
(97,687
)
(76,691
)
(372,269
)
(199,780
)
General and administrative expenses
(71,528
)
(56,165
)
(270,558
)
(191,438
)
Other income (expense), net
(6,251
)
(8,738
)
(2,258
)
(6,287
)
Operating profit
54,766
50,676
135,495
58,074
Finance income
9,614
24,943
45,211
72,047
Finance costs
(28,110
)
(37,032
)
(142,013
)
(170,855
)
Finance result
(18,496
)
(12,089
)
(96,802
)
(98,808
)
Share of profit (loss) of equity-accounted
investees
8,450
153
409
(1,800
)
Profit before income taxes
44,720
38,740
39,102
(42,534
)
Income taxes - income (expense)
Current
(18,538
)
(14,596
)
(87,379
)
(46,850
)
Deferred
(1,979
)
18,371
65,057
79,953
Total income taxes – income (expense)
(20,517
)
3,775
(22,322
)
33,103
Profit (loss) for the period
24,203
42,515
16,780
(9,431
)
Basic earnings per share – in Brazilian
reais
Class A
0.42
0.79
0.30
(0.18
)
Class B
0.42
0.79
0.30
(0.18
)
Diluted earnings per share – in Brazilian
reais
Class A
0.42
0.78
0.30
(0.18
)
Class B
0.42
0.78
0.30
(0.18
)
Weighted-average shares used to compute
net income per share:
Basic
57,588
53,812
55,758
51,552
Diluted
57,749
54,149
55,919
51,552
Arco Platform Limited
Consolidated Statements of
Cash Flows
Three months ended December
31,
Twelve months ended December
31,
(In thousands of Brazilian
reais)
2020
2019
2020
2019
Operating activities
Profit (loss) before income taxes for the
period
44,720
38,740
39,102
(42,534
)
Adjustments to reconcile profit (loss)
before income taxes
Depreciation and amortization
37,692
23,865
127,455
48,314
Inventory reserves
4,114
4,273
7,453
8,476
Allowance for doubtful accounts
6,451
7,903
34,684
17,392
Loss on sale/disposal of property and
equipment and intangible assets disposed
2,753
2,906
4,277
3,499
Fair value change in financial instruments
from acquisition interests
(124
)
(10,822
)
(562
)
(473
)
Changes in accounts payable to selling
shareholders
458
7,622
20,330
89,403
Share of (profit) loss of equity-accounted
investees
(8,450
)
(153
)
(409
)
1,800
Share-based compensation plan
21,024
612
36,333
33,043
Accrued interest on loans and
financing
3,810
1,002
19,862
1,002
Interest accretion on acquisition
liability
18,389
17,496
68,379
42,206
Income from non-cash equivalents
(3,532
)
(45,797
)
(13,388
)
(45,797
)
Interest on lease liabilities
976
258
3,036
1,489
Provision for legal proceedings
(7
)
20
587
120
Provision for payroll taxes (restricted
stock units)
(1,831
)
(15,066
)
(2,997
)
8,333
Foreign exchange income (loss)
183
571
(188
)
555
Changes in fair value of step
acquisitions
3,555
(3,708
)
307
(3,708
)
Gain on sale of investment
-
(34
)
-
(3,286
)
Other financial cost/revenue, net
(466
)
(881
)
(2,315
)
(2,362
)
129,715
28,807
341,946
157,472
Changes in assets and liabilities
Trade receivables
(148,908
)
(176,193
)
(108,087
)
(136,407
)
Inventories
(10,109
)
(3,669
)
(18,161
)
(14,637
)
Recoverable taxes
7,970
(944
)
3,152
(8,494
)
Other assets
(6,768
)
(9,376
)
(14,087
)
(16,035
)
Trade payables
7,677
(37
)
3,886
8,455
Labor and social obligations
(37,593
)
(2,390
)
7,239
15,950
Taxes and contributions payable
(8,650
)
2,491
1,147
1,951
Advances from customers
17,292
22,334
(2,981
)
19,997
Other liabilities
(533
)
112
(1,420
)
(268
)
Cash (used in) generated from
operations
(49,907
)
(138,865
)
212,634
27,984
Income taxes paid
(4,641
)
(6,107
)
(95,053
)
(34,747
)
Interest paid on lease liabilities
(914
)
(455
)
(2,100
)
(852
)
Interest paid on accounts payable to
selling shareholders
(140
)
-
(187
)
-
Interest paid on loans and financing
(3,556
)
-
(13,423
)
-
Payments for contingent consideration
(9,520
)
-
(9,520
)
-
Net cash flows (used in) generated from
operating activities
(68,678
)
(145,427
)
92,351
(7,615
)
Investing activities
Acquisition of property and equipment
(5,159
)
(3,382
)
(10,822
)
(10,991
)
Payment of investments and interests in
other entities
-
(36,435
)
(32,628
)
(41,853
)
Acquisition of subsidiaries, net of cash
acquired
(182,284
)
(782,748
)
(204,286
)
(798,885
)
Payment of accounts payables to selling
shareholders
-
-
-
-
Acquisition of intangible assets
(33,758
)
(16,741
)
(96,827
)
(43,102
)
Net sales (purchases) of financial
investments
192,028
365,821
(130,113
)
277,389
Loans to related parties
(5,000
)
-
(5,000
)
(14,000
)
Net cash flows used in investing
activities
(34,173
)
(473,485
)
(479,676
)
(631,442
)
Financing activities
Capital increase - exercised stock
options
-
1
-
13,830
Capital increase - proceeds from public
offering
-
589,602
591,898
589,602
Share issuance costs
1,240
(18,224
)
(16,291
)
(18,897
)
Payment of lease liabilities
(2,782
)
(1,698
)
(8,510
)
(4,407
)
Payment of loans and financing
(837
)
(511
)
(301,151
)
(563
)
Payment to owners to acquire entity’s
shares
(779
)
(928
)
(1,733
)
(928
)
Loans and financing
62
97,574
498,434
97,574
Dividends paid by subsidiaries
3,696
-
-
-
Net cash flows generated from financing
activities
600
665,816
762,647
676,211
Foreign exchange effects on cash and cash
equivalents
(183
)
(572
)
188
(555
)
(Decrease) increase in cash and cash
equivalents
(102,434
)
46,332
375,510
36,599
Cash and cash equivalents at the beginning
of the period
526,844
2,568
48,900
12,301
Cash and cash equivalents at the end of
the period
424,410
48,900
424,410
48,900
(Decrease) increase in cash and cash
equivalents
(102,434
)
46,332
375,510
36,599
Arco Platform Limited
Reconciliation of Non-GAAP
Measures
Three months ended December
31,
Twelve months ended December
31,
(In thousands of Brazilian
reais)
2020
2019
2020
2019
Adjusted EBITDA Reconciliation
Profit (loss) for the period
24,203
42,515
16,780
(9,431
)
(+/-) Income taxes
20,517
(3,775
)
22,322
(33,103
)
(+/-) Finance result
18,496
12,089
96,802
98,808
(+) Depreciation and amortization
37,692
23,865
127,455
48,314
(+/-) Share of (profit) loss of
equity-accounted investees
(8,450
)
(153
)
(409
)
1,800
EBITDA
92,458
74,541
262,950
106,388
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units)
18,566
11,148
69,846
66,978
(+) M&A expenses
8,063
15,939
13,751
28,848
(+) Non-recurring expenses
2,736
4,675
19,488
7,142
(+) Effects related to Covid-19
pandemic
4,075
-
14,990
-
Adjusted EBITDA
125,898
106,303
381,025
209,356
Net Revenue
296,537
247,644
1,001,710
572,837
EBITDA Margin
31.2
%
30.1
%
26.3
%
18.6
%
Adjusted EBITDA Margin
42.5
%
42.9
%
38.0
%
36.5
%
Three months ended December
31,
Twelve months ended December
31,
(In thousands of Brazilian
reais)
2020
2019
2020
2019
Adjusted Net Income
Reconciliation
Profit (loss) for the period
24,203
42,515
16,780
(9,431
)
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units).
18,566
11,148
69,846
66,978
(+) Amortization of intangible assets from
business combinations
21,349
13,485
76,067
23,173
(+/-) Changes in fair value of derivative
instruments
(124
)
(10,822
)
(562
)
(473
)
(+/-) Changes in accounts payable to
selling shareholders
458
7,622
20,330
89,403
(+) Share of loss (profit) of
equity-accounted investees
(8,450
)
(153
)
(409
)
1,800
(+/-) Tax effects
(21,706
)
(25,112
)
(76,898
)
(79,569
)
(+/-) Foreign exchange on cash and cash
equivalents
183
571
(188
)
555
(+) Interest expenses, net
18,049
17,153
67,058
41,042
(+) M&A expenses
8,063
15,939
13,751
28,848
(+) Non-recurring expenses
2,736
4,675
19,488
7,142
(+) Effects related to Covid-19
pandemic
4,075
-
14,990
-
Adjusted Net Income
67,402
77,021
220,253
169,468
Net Revenue
296,537
247,644
1,001,710
572,837
Adjusted Net Income Margin
22.7
%
31.1
%
22.0
%
29.6
%
Three months ended December
31,
Twelve months ended December
31,
(In thousands of Brazilian
reais)
2020
2019
2020
2019
Free Cash Flow Reconciliation
Cash generated from operations
(49,907
)
(138,865
)
212,634
27,984
(-) Income tax paid
(4,641
)
(6,107
)
(95,053
)
(34,747
)
(-) Interest paid on lease liabilities
(914
)
(455
)
(2,100
)
(852
)
(-) Interest paid on investment
acquisition
(140
)
-
(187
)
-
(-) Interest paid on loans and
financing
(3,556
)
-
(13,423
)
-
(-) Payments for contingent
consideration
(9,520
)
-
(9,520
)
-
Cash Flow from Operating
Activities
(68,678
)
(145,427
)
92,351
(7,615
)
(-) Acquisition of property and
equipment
(5,159
)
(3,382
)
(10,822
)
(10,991
)
(-) Acquisition of intangible assets
(33,758
)
(16,741
)
(96,827
)
(43,102
)
Free Cash Flow
(107,595
)
(165,550
)
(15,298
)
(61,708
)
(+) Interest change in financial
investments
3,532
45,797
13,388
45,797
(+) Working capital of acquired
companies
22,915
55,078
22,915
55,078
(+) Business combinations
-
5,699
22,642
5,699
(+) M&A expenses
8,063
15,939
13,751
28,848
(+) Others
2,736
8,784
15,379
11,251
(+) Labor and social obligations of
restricted stock units
13,548
(3,561
)
-
(3,561
)
(+) Working capital and expenses related
to Covid-19 pandemic
39,943
-
39,943
-
Adjusted Free Cash Flow
(16,858
)
(37,814
)
112,720
81,404
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210331005974/en/
Investor Relations Contact: Arco Platform Limited
IR@arcoeducacao.com.br Carina Carreira
(carinacarreira@arcoeducacao.com.br)
Arco Platform (NASDAQ:ARCE)
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