Arco delivers healthy operating results in
1Q21, with net revenue 27% higher YoY, and adjusted EBITDA margin
of 35.7%
Arco Platform Limited, or Arco or Company (Nasdaq: ARCE),
today reported financial and operating results for the first
quarter ended March 31, 2021.
“We delivered solid operating results in the first quarter of
2021 and we are encouraged by the early results from our sales
cycle for the 2022 school year, as we once again benefit from
industry-leading results from our partner schools at the national
exam (ENEM) and continue to improve our platform and innovate. We
are also excited with the initial results from our redesigned
cross-sell initiative, which will help further accelerate the sale
of supplemental products and leverage the scale of our Core
segment. We note, however, that the COVID-19 pandemic is not yet
fully behind us. We see risk of revenue recognition in 2021 to be
slightly below the initially contracted values, as schools faced
lower-than-expected enrollments, mostly concentrated in pre-K and
kindergarten. We are hopeful that the environment for the education
sector will improve, mostly from 2H21 onwards, as vaccination
progresses in the country. As we look ahead, we are more than ever
focused and excited with the outlook for our business and the value
we can generate to our clients through our solutions. We are
accelerating our product development pipeline, which may soon
expand our revenue capture possibilities, particularly with our
recent entry into the B2C segment in Brazil, which is an important
step in that direction,” said Ari de Sá Neto, CEO and founder of
Arco.
First Quarter 2021 Results
- Net revenue of R$331.7 million;
- Gross profit of R$244.5 million;
- Adjusted EBITDA of R$118.4 million;
- Adjusted net income of R$61.1 million;
Key Messages
- Net revenues for the quarter increased 27% year-over-year to
R$331.7 million, representing a strong 28.5% revenue recognition
versus ACV bookings. Core solutions presented a 20% organic growth
year-over-year to R$264.6 million, while Supplemental solutions
increased 64% year-over-year to R$67.1 million, impacted by the
acquisition of Escola da Inteligência concluded in December
2020.
- Gross profit increased 26% year-over-year to R$244.5 million,
with a 73.7% margin. Excluding depreciation and amortization, cash
gross margin increased 160 bps to 78.7%.
- Selling expenses excluding depreciation and amortization
increased 35% year-over-year, representing 36% of revenues versus
34% in 1Q20, mainly impacted by the increase in sales personnel
resulting from the restructuring of the commercial teams from
recently acquired companies. General and administrative expenses
excluding depreciation and amortization, on the other hand,
increased only 7%, representing 22% of revenues, from 26% in 1Q20,
as a result of a decrease in travel expenses. As a result, adjusted
EBITDA reached R$118.4 million, 22% above 1Q20, with a 35.7%
margin.
- On Cash Flow, we expect cash generation from operations to
accelerate going forward as receivables are paid and CAPEX and
effective tax rate decline.
- As partner schools faced challenges due to the COVID-19
pandemic, some payment terms were extended to provide financial aid
to schools, resulting in an increase in trade receivables and
temporarily affecting the working capital. This strategy is aligned
with our commitment to preserving our prices and capturing and
renewing contracts on healthy economic terms. Most receivables from
the 2021 school year are still concentrated in 2021 (mostly between
Q2 and Q4), with only 2% slipping to 2022, but we acknowledge this
scenario might change depending on the evolution of the pandemic
along the year. For example, 9% of receivables from the 2020 school
year slipped to 2021, with 1/3 having already been collected
through March 31, 2021. This commercial strategy led to a 23%
sequential increase in trade receivables, reflecting 34% increase
in neither past due nor impaired receivables and an 8% decline in
past due or impaired receivables. As the profile of trade
receivables improve, allowance for doubtful accounts starts to
return to pre-pandemic levels, at around 1% of revenues.
Trade Receivables - Aging (R$
MM)
1Q21
1Q20
YoY
4Q20
QoQ
Neither past due nor impaired
481.9
326.7
47
%
360.7
34
%
1 to 60 days
20.5
19.3
6
%
26.2
-22
%
61 to 90 days
6.9
4.6
50
%
10.0
-31
%
91 to 120 days
4.5
2.2
105
%
10.5
-57
%
121 to 180 days
11.0
3.8
189
%
18.9
-42
%
More than 180 days
65.1
22.7
187
%
52.4
24
%
Trade receivables
589.8
379.3
56
%
478.7
23
%
Days of sales outstanding
1Q21
1Q20
YoY
4Q20
QoQ
Trade receivables (R$ MM)¹
522.5
344.0
51.9
%
415.3
25.8
%
Net revenue LTM
1,071.8
717.4
49.4
%
1,001.7
7.0
%
DSO
178
175
1.7
%
151
17.6
%
Net revenue LTM pro-forma²
1,130.2
892.8
26.6
%
1,080.6
4.6
%
Adjusted DSO
169
141
20.0
%
140
20.3
%
1)
Trade receivables net of the balance of
allowance for doubtful accounts.
2)
Calculated as net revenues for the last
twelve months added to the pro forma revenues from businesses
acquired in the period to accurately reflect the Company’s
operations.
Allowance for doubtful accounts (R$ MM)
1Q21
1Q20
YoY
4Q20
QoQ
Allowance for doubtful accounts
(3.8
)
(6.2
)
-38
%
(6.5
)
-40
%
% of Revenues
-1.2
%
-2.4
%
1.2 p.p.
-2.2
%
1.0 p.p.
Allowance for doubtful accounts
adjusted for COVID impact¹
(3.8
)
(3.1
)
24
%
(4.4
)
-14
%
% of Revenues
-1.1
%
-1.2
%
0.0 p.p.
-1.5
%
0.3 p.p.
1)
Calculated excluding COVID-19 impact on
allowance for doubtful accounts to better reflect a normalized
level of this line.
- Investments in product offering continue to be an important
pillar for future growth. In the quarter Arco invested in content
development and technological improvements, especially at Positivo,
acquired in 2019, and SAS, as it focuses on further differentiating
its offering in the beginning of the sale cycle for the 2022 school
year. Consequently, CAPEX reached 10.8% of revenues, but is
expected to decrease in upcoming quarters.
CAPEX (R$ MM)
1Q21
1Q20
YoY
4Q20
QoQ
Acquisition of intangible
assets
32.7
17.1
92
%
33.7
-3
%
Educational platform - content
development
17.0
8.8
93
%
19.2
-12
%
Educational platform - platforms and
educational technology
7.4
3.3
120
%
5.9
24
%
Software
5.8
3.7
56
%
5.8
0
%
Copyrights and others
2.6
1.2
112
%
2.8
-8
%
Acquisition of property, plant and
equipment
3.0
2.4
26
%
5.2
-42
%
TOTAL
35.7
19.4
84
%
38.9
-8
%
- Arco is undergoing a corporate restructuring that will soon
allow for capture additional cash tax benefits from business
combinations. Some subsidiaries of SAS are expected to be
incorporated by the end of 2021, leading to estimated tax savings
of R$30 million. Other businesses should be incorporated along the
years, generating relevant additional savings. Arco currently
benefits from the incorporation of only three entities (Positivo,
SAE and part of SAS), contributing to approximately R$60 million in
current tax benefits. Arco’s effective tax rate has already
decreased to 20.3% of taxable income (further details on the
reconciliation of the taxable income below), from 32.3% in 1Q20,
and should further reduce as we incorporate other acquired
businesses in the coming years.
Intangible assets - net balances (R$
MM)
1Q21
1Q20
YoY
4Q20
QoQ
Business Combination
2,398.6
1,693.9
42
%
2,387.6
0
%
Trademarks
449.5
342.4
31
%
449.0
0
%
Customer relationships
275.3
187.1
47
%
283.8
-3
%
Educational system
224.5
222.5
1
%
231.8
-3
%
Softwares
7.9
1.8
345
%
4.8
64
%
Educational platform
6.1
6.7
-9
%
6.3
-3
%
Others¹
16.8
16.6
1
%
17.5
-4
%
Goodwill
1,418.4
916.8
55
%
1,394.4
2
%
Operational
177.0
106.5
66
%
162.0
9
%
Educational platform²
130.2
81.1
61
%
119.8
9
%
Softwares
34.8
16.0
117
%
30.8
13
%
Copyrights
11.8
9.2
29
%
11.4
4
%
Customer relationships
0.1
0.2
-31
%
0.1
-11
%
TOTAL
2,575.6
1,800.4
43
%
2,549.6
1
%
Amortization of intangible assets (R$
MM)
1Q21
1Q20
YoY
4Q20
QoQ
Business Combination
(55.0
)
(20.5
)
169
%
(51.0
)
8
%
Trademarks
(6.4
)
(4.6
)
39
%
(5.2
)
24
%
Customer relationships
(8.5
)
(5.6
)
51
%
(6.8
)
25
%
Educational system
(8.0
)
(6.5
)
23
%
(7.2
)
11
%
Softwares
(0.6
)
(0.4
)
67
%
(0.6
)
13
%
Educational platform
(0.2
)
(0.3
)
-40
%
(0.2
)
0
%
Others¹
(1.1
)
(0.5
)
109
%
(0.9
)
23
%
Goodwill
(30.1
)
(2.5
)
1125
%
(30.1
)
0
%
Operational
(18.6
)
(9.6
)
93
%
(43.5
)
-57
%
Educational platform²
(13.6
)
(7.2
)
90
%
(40.1
)
-66
%
Softwares
(2.9
)
(1.0
)
192
%
(1.6
)
83
%
Copyrights
(2.0
)
(1.4
)
41
%
(1.8
)
12
%
Customer relationships
(0.0
)
(0.0
)
0
%
(0.0
)
50
%
TOTAL
(73.6
)
(30.1
)
145
%
(94.5
)
-22
%
1)
Non-compete agreements and rights on
contracts.
2)
Includes content development in
progress.
Amortization of intangible assets (R$ MM)
Impacts P&L
Originates tax benefit
Amortizations with tax benefit
in 1Q21
Amortization
Tax benefit
Impact on net income
Business Combination
(45.5
)
15.5
(30.1
)
Trademarks
Yes
Yes²
(4.1
)
1.4
(2.7
)
Customer relationships
Yes
Yes²
(5.3
)
1.8
(3.5
)
Educational system
Yes
Yes²
(5.3
)
1.8
(3.5
)
Educational platform
Yes
Yes²
(0.2
)
0.1
(0.1
)
Others¹
Yes
Yes²
(0.5
)
0.2
(0.4
)
Goodwill
No
Yes²
(30.1
)
10.2
(19.9
)
Operational
Yes
Yes
(18.6
)
6.3
(12.3
)
TOTAL
(64.1
)
21.8
(42.3
)
1)
Non-compete agreements and rights on
contracts.
2)
Amortizations are tax deductible only
after the incorporation of the acquired business. In 1Q21, 62% of
the balance of the intangible assets from business combinations
generates tax benefits.
Amortization of intangible assets from business combination that
generate tax benefit - schedule (R$ MM)
Businesses with current tax
benefit
(already incorporated)
Undefined¹
2021
2022
2023
2024
2025 +
Trademarks
16.8
16.9
16.9
16.9
244.1
132.3
Customer relationships
21.7
20.5
20.5
20.5
74.4
121.8
Educational system
22.6
22.0
21.0
21.0
101.7
34.2
Software
-
-
-
-
-
8.5
Educational platform
0.7
0.7
0.7
0.7
3.5
-
Others
1.5
1.2
1.1
0.9
-
9.5
Goodwill
120.5
120.5
120.5
114.6
341.2
631.2
Total
183.7
181.9
180.8
174.7
764.9
937.5
Maximum tax benefit
62.5
61.9
61.5
59.4
260.1
318.8
1)
Businesses with future tax benefit (to be
incorporated).
- Arco’s cash and cash equivalent position of R$1,018 million is
robust to meet short term obligations of R$756 million in debt and
accounts payable to selling shareholders. Arco has firm proposals
from banks for a credit line between R$600 and R$700 million to
further strengthen its balance sheet.
- Looking ahead, Arco is paving the way to further accelerate
growth by
- Reinforcing the Core segment with top-of-mind brands. COC and
Dom Bosco acquisition, which is still pending anti-trust approval,
was strategic for Arco. First, it was financially accretive as
price paid is equivalent to 14.4x 2020 EBITDA and is expected to
generate tax benefit NPV of approximately R$214 mm when the
businesses are incorporated. COC and Dom Bosco complement Arco’s
current portfolio, both from a price and geographic point of view.
They are top-of-mind brands and according to a study conducted by
EY Parthenon in 2019, COC is among learning system brands with best
awareness among parents and principals. COC and Dom Bosco have a
proven track record of student admissions, with 48% of COC schools
and 28% of Dom Bosco schools are in the top 3 in the national exam
(ENEM) ranking for their municipalities. Arco has an extensive
M&A track record of “acquire and improve” and will accelerate
growth of the acquired solutions by applying its winning factors of
high-quality content, relevant technology, reliable customer
service and effective distribution. Finally, the acquisition
includes a commercial agreement to distribute selected supplemental
solutions from Pearson, which complement its current offering,
boosting cross-sell opportunities.
- Successfully launching cross-sell initiatives. Arco has
invested in more incentives, bundle benefits and training. As a
result, 72% of 2022 YTD new school intake for supplemental
solutions comes from cross-sell initiatives.
- Leveraging our superior value proposition. As a result of the
focus on continuously evolving our products through differentiated
technology, content and pedagogical services, Arco has increased in
15% the NPS for its legacy brands SAS and SAE to 88, and 13% for
Positivo to 75 in 2020. Arco has helped its partner schools achieve
strong academic results and is the leader in admissions in public
universities through the national exam (ENEM), well ahead of the
second player with respect to students admitted in 1st to 10th
place.
- Entering the huge and promising B2C market. Arco has already
started investing in team and marketing, while focusing on
increasing the share of premium offerings such as medicine
test-prep courses to accelerate Me Salva!’s growth. As a result, Me
Salva!’s sales are expected to nearly double in 2021. By leveraging
on Me Salva!’s high-quality test-prep offering, Arco expects to
launch a B2B test-prep solution for partner schools as early as the
second half of this year.
- On the ESG front, Arco has concluded its first materiality
assessment, indicating stakeholders’ priority themes related to
impact on education and team as an asset, in line with Arco’s
strategy and goals. As a result, the Company will initially pursue
better disclosure and improvement in these topics.
Conference Call Information
Arco will discuss its first quarter 2021 results today, May 24,
2021, via a conference call at 6 p.m. Eastern Time (7 p.m. Brasilia
Time). To access the call, please dial: +1 (412) 717-9627, +1 (844)
204-8942 or +55 (11) 3181-8565. An audio replay of the call will be
available through May 31, 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 March 31, 2021, there was a total net impact of R$447
thousand on the Company's condensed consolidated financial
statements related to the COVID-19 pandemic mainly related to: (i)
additional expenses of R$ 579 thousand related to health care in
food and emotional health programs to the Company’s employees, and
(iv) savings on rent concessions, regarding leased buildings, that
occurred as a direct consequence of the COVID-19 pandemic,
amounting R$132 thousand.
The Company assessed the existence of potential impairment
indicators and the possible impacts on the key assumptions and
projections caused by the pandemic on the recoverability of
long-lived assets and concluded that there are no indications that
demonstrate the need to recognize a provision for impairment of
long-lived assets in the consolidated financial statements.
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 March 31, 2021 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 Taxable Income Reconciliation
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 Taxable Income Reconciliation as profit (loss) for
the period adjusted for permanent and temporary additions and
exclusions (for example, adjustments to provisions and
amortizations in the period) and for all tax benefits that Arco is
entitled to (for example, goodwill). The effective tax rate will be
the current taxes for the period divided by the taxable income. In
Brazil, taxes are charged based on the taxable income, not the
accounting income, which means companies can have an accounting
loss and a taxable profit. Additionally, Arco owns several
companies and taxes are calculated individually.
We understand that, although Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Net Income, Adjusted Net Income Margin, Free Cash
Flow and Taxable Income Reconciliation 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 Taxable
Income Reconciliation 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
March 31,
December 31,
(In thousands of Brazilian
reais)
2021
2020
Assets
(unaudited)
Current assets
Cash and cash equivalents
360,356
424,410
Financial investments
657,348
712,645
Trade receivables
522,522
415,282
Inventories
69,230
74,076
Recoverable taxes
22,113
19,304
Related parties
3,838
9,970
Other assets
30,581
24,073
Total current assets
1,665,988
1,679,760
Non-current assets
Financial instruments from acquisition of
interest
-
-
Deferred income tax
243,656
236,903
Recoverable taxes
1,121
1,121
Financial investments
14,294
10,349
Related parties
11,731
10,508
Other assets
25,280
22,239
Investments and interests in other
entities
33,638
9,654
Property and equipment
26,481
26,087
Right-of-use assets
34,773
30,022
Intangible assets
2,575,577
2,549,637
Total non-current assets
2,966,551
2,896,520
Total assets
4,632,539
4,576,280
March 31,
December 31,
(In thousands of Brazilian
reais)
2021
2020
Liabilities
(unaudited)
Current liabilities
Trade payables
53,657
40,925
Labor and social obligations
87,102
85,069
Taxes and contributions payable
7,022
9,676
Income taxes payable
17,389
44,731
Advances from customers
97,185
23,080
Lease liabilities
14,565
12,742
Loans and financing
306,476
107,706
Accounts payable to selling
shareholders
648,172
656,014
Other liabilities
3,042
331
Total current liabilities
1,234,610
980,274
Non-current liabilities
Labor and social obligations
37,642
36,570
Lease liabilities
25,593
22,478
Loans and financing
3,157
203,413
Provision for legal proceedings
2,201
1,366
Accounts payable to selling
shareholders
1,160,408
1,130,501
Other liabilities
889
794
Total non-current liabilities
1,229,890
1,395,122
Equity
Share capital
11
11
Capital reserve
2,149,419
2,200,645
Share-based compensation reserve
87,387
80,817
Accumulated losses
(68,778
)
(80,589
)
Total equity
2,168,039
2,200,884
Total liabilities and equity
4,632,539
4,576,280
Arco Platform Limited
Interim Condensed Consolidated
Statements of Income
Three months period ended
March 31,
(In thousands of Brazilian reais,
except earnings per share)
2021
2020
(unaudited)
(unaudited)
Net revenue
331,672
261,579
Cost of sales
(87,125
)
(67,220
)
Gross profit
244,547
194,359
Operating expenses:
Selling expenses
(119,658
)
(87,900
)
General and administrative expenses
(74,306
)
(66,783
)
Other income, net
1,525
412
Operating profit
52,108
40,088
Finance income
9,940
9,387
Finance costs
(38,614
)
(38,339
)
Finance result
(28,674
)
(28,952
)
Share of loss of equity-accounted
investees
(1,023
)
(706
)
Profit before income taxes
22,411
10,430
Income taxes - income (expense)
Current
(17,353
)
(32,188
)
Deferred
6,753
25,579
Total income taxes – income (expense)
(10,600
)
(6,609
)
Net profit for the period
11,811
3,821
Basic earnings per share – in Brazilian
reais
Class A
0.21
0.07
Class B
0.21
0.07
Diluted earnings per share – in Brazilian
reais
Class A
0.20
0.07
Class B
0.21
0.07
Weighted-average shares used to compute
net income per share:
Basic
57,411
54,939
Diluted
57,631
55,336
Arco Platform Limited
Interim Condensed Consolidated
Statements of Cash Flows
Three months period ended
March 31,
(In thousands of Brazilian
reais)
2021
2020
(unaudited)
(unaudited)
Operating activities
Profit before income taxes for the
period
22,411
10,430
Adjustments to reconcile profit (loss)
before income taxes
Depreciation and amortization
48,052
28,675
Inventory reserves
2,224
2,106
Allowance for doubtful accounts
3,889
6,168
Loss on sale/disposal of property and
equipment and intangible assets disposed
133
672
Fair value change in financial instruments
from acquisition interests
-
54
Changes in accounts payable to selling
shareholders
(2,188
)
6,600
Share of loss of equity-accounted
investees
1,023
706
Share-based compensation plan
9,366
8,907
Accrued interest
3,689
1,242
Interest accretion on acquisition
liability
27,381
20,266
Income from non-cash equivalents
(3,766
)
(2,039
)
Interest on lease liabilities
1,019
732
Provision for legal proceedings
646
33
Provision for payroll taxes (restricted
stock units)
(521
)
5,888
Foreign exchange income (loss)
279
(742
)
Other financial cost/revenue, net
(359
)
-
113,278
89,698
Changes in assets and liabilities
Trade receivables
(109,075
)
(20,712
)
Inventories
3,578
(485
)
Recoverable taxes
(477
)
(1,694
)
Other assets
(3,931
)
(17,036
)
Trade payables
12,118
12,638
Labor and social obligations
2,335
(5,542
)
Taxes and contributions payable
(2,804
)
(2,560
)
Advances from customers
73,783
49,480
Other liabilities
423
(58
)
Cash generated from operations
89,228
103,729
Income taxes paid
(46,988
)
(57,543
)
Interest paid on lease liabilities
(860
)
(425
)
Interest paid on accounts payable to
selling shareholders
(4,153
)
-
Interest paid on loans and financing
(3,567
)
-
Payments for contingent consideration
-
(3,696
)
Net cash flows generated from operating
activities
33,660
42,065
Investing activities
Acquisition of property and equipment
(2,998
)
(2,377
)
Payment of investments and interests in
other entities
(25,027
)
(12,675
)
Acquisition of subsidiaries, net of cash
acquired
(15,217
)
-
Acquisition of intangible assets
(32,701
)
(17,059
)
Net sales (purchases) of financial
investments
55,117
(183,176
)
Net cash flows used in investing
activities
(20,826
)
(215,287
)
Financing activities
Purchase of treasury shares
(53,026
)
-
Payment of lease liabilities
(3,390
)
-
Payment of loans and financing
(1,700
)
(2,354
)
Payment to owners to acquire entity’s
shares
(18,493
)
-
Loans and financing
-
198,925
Net cash flows (used in) generated from
financing activities
(76,609
)
196,571
Foreign exchange effects on cash and cash
equivalents
(279
)
742
(Decrease) increase in cash and cash
equivalents
(64,054
)
24,091
Cash and cash equivalents at the beginning
of the period
424,410
48,900
Cash and cash equivalents at the end of
the period
360,356
72,991
(Decrease) increase in cash and cash
equivalents
(64,054
)
24,091
Arco Platform Limited
Reconciliation of Non-GAAP
Measures
Three months period
ended March 31,
(In thousands of Brazilian
reais)
2021
2020
Adjusted EBITDA Reconciliation
(unaudited)
(unaudited)
Profit for the period
11,811
3,821
(+/-) Income taxes
10,600
6,609
(+/-) Finance result
28,674
28,952
(+) Depreciation and amortization
48,052
28,675
(+/-) Share of loss of equity-accounted
investees
1,023
706
EBITDA
100,160
68,763
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units)
11,724
15,960
(+) M&A expenses
3,997
1,564
(+) Non-recurring expenses
1,875
7,231
(+) Effects related to Covid-19
pandemic
629
3,402
Adjusted EBITDA
118,385
96,920
Net Revenue
331,672
261,579
EBITDA Margin
30.2
%
26.3
%
Adjusted EBITDA Margin
35.7
%
37.1
%
Three months period
ended March 31,
(In thousands of Brazilian
reais)
2021
2020
Adjusted Net Income
Reconciliation
(unaudited)
(unaudited)
Profit for the period
11,811
3,821
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units).
11,724
15,960
(+) Amortization of intangible assets from
business combinations
24,862
17,983
(+/-) Changes in fair value of derivative
instruments
-
54
(+/-) Changes in accounts payable to
selling shareholders
(2,188
)
6,600
(+) Share of loss of equity-accounted
investees
1,023
706
(+/-) Tax effects
(20,322
)
(20,428
)
(+/-) Foreign exchange on cash and cash
equivalents
279
(742
)
(+) Interest on acquisition of
investments, net (linked to a fixed rate)¹
22,474
11,319
(+) Interest on acquisition of
investments, net (adjusted by fair value)²
4,907
8,699
(+) M&A expenses
3,997
1,564
(+) Non-recurring expenses
1,875
7,231
(+) Effects related to Covid-19
pandemic
629
3,402
Adjusted Net Income
61,071
56,169
Net Revenue
331,672
261,579
Adjusted Net Income Margin
18.4
%
21.5
%
1)
Refer to interest expenses on liabilities
related to business combinations and investments in associates that
are linked to a fixed rate (CDI or SELIC).
2)
Refer to interest expense on liabilities
related to business combinations and investments in associates that
are adjusted by the fair value of the acquired business.
Three months period ended
March 31,
(In thousands of Brazilian
reais)
2021
2020
Free Cash Flow Reconciliation
(unaudited)
(unaudited)
Cash generated from operations
89,228
103,729
(-) Income tax paid
(46,988
)
(57,543
)
(-) Interest paid on lease liabilities
(860
)
(425
)
(-) Interest paid on investment
acquisition
(4,153
)
-
(-) Interest paid on loans and
financing
(3,567
)
-
(-) Payments for contingent
consideration
-
(3,696
)
Cash Flow from Operating
Activities
33,660
42,065
(-) Acquisition of property and
equipment
(2,998
)
(2,377
)
(-) Acquisition of intangible assets
(32,701
)
(17,059
)
Free Cash Flow
(2,039
)
22,629
Three months period
ended March 31,
(In thousands of Brazilian
reais)
2021
2020
Taxable Income Reconciliation
(unaudited)
(unaudited)
Profit before income taxes
22,411
10,430
(+) Share-based compensation plan, RSU and
provision for payroll taxes¹
8,570
9,209
(+) Amortization of intangible assets from
business combinations before incorporation¹
4,901
14,524
(+/-) Changes in accounts payable to
selling shareholders¹
17,646
17,118
(+/-) Share of loss of equity-accounted
investees
(348
)
(240
)
(+) Net income from Arco Platform
(Cayman)
5,649
629
(+) Fiscal loss without deferred
1,384
1,313
(+/-) Provisions booked in the period
4,473
11,310
(+) Tax loss carryforward
17,054
29,769
(+) Others
3,763
5,726
Taxable income
85,503
99,788
Current income tax under actual profit
method
(29,071
)
(33,927
)
% Tax rate under actual profit method
34.0
%
34.0
%
(+) Effect of presumed profit benefit
492
561
Effective current income tax
(28,579
)
(33,366
)
% Effective tax rate
33.4
%
33.4
%
(+) Recognition of tax-deductible
amortization of goodwill and added value²
10,838
922
(+/-) Other additions (exclusions)
388
256
Effective current income tax accounted
for goodwill benefit
(17,353
)
(32,188
)
% Effective tax rate accounting for
goodwill benefit
20.3
%
32.3
%
1)
Temporary differences between the carrying
amount of an asset or liability in the balance sheet and its tax
base that will yield amounts that can be deducted in the future
when determining taxable profit or loss.
2)
Added value refers to the fair value of
intangible assets from business combinations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210524005800/en/
Investor Relations Contact: Arco Platform Limited Carina
Carreira IR@arcoeducacao.com.br
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