Operating results reflect revenue seasonality,
product development and sales force increase, while cash flow
improves as receivables are collected and the company resumes its
cash generation profile
Arco Platform Limited, or Arco or Company (Nasdaq: ARCE),
today reported financial and operating results for the second
quarter ended June 30, 2021.
“Operating results for the 2Q21 still reflect the challenges
imposed by the COVID-19 in the sector and the schools' operations.
Despite the revenue seasonality and the higher investments in
product and sales force impacting our margins this quarter, we
reaffirm our margin guidance for 2021. The sales cycle for the 2022
school year continues strong, with YTD organic growth pace for our
core legacy solutions multiple times ahead of 2020 and in-line with
2019 levels and renewal rates following historical trends. As for
the supplemental business, YTD data points to an acceleration
versus last cycle but a two-step recovery to pre-pandemic growth
pace, while renewal rates are, at this point, much stronger versus
2020. Finally, we are very proud of our first ESG report, released
on August 10, in which we disclose material themes to the Company
that will guide us in our path to further expand our impact on
Brazilian Education. We are confident that the worst is behind us
and as vaccination progresses in the country and we keep investing
in evolving our solutions we will be able to reaccelerate growth
and fulfill our mission to transform the way students learn by
delivering high-quality education at scale,” said Ari de Sá Neto,
CEO and founder of Arco.
Second Quarter 2021 Results
- Net revenue of R$256.3 million;
- Gross profit of R$188.2 million;
- Adjusted EBITDA of R$72.3 million; and
- Adjusted net income of R$36.4 million.
First Half 2021 Results
- Net Revenue of R$588.0 million;
- Gross Profit of R$432.7 million;
- Adjusted EBITDA of R$190.6 million; and
- Adjusted Net Income of R$97.5 million.
Key Messages
- Net revenues for the quarter increased 9% year-over-year to
R$256.3 million, representing a 21.9% revenue recognition of the
ACV bookings, above revenue recognition guidance provided in 1Q21
but below historical levels. Core solutions presented a 14% drop
versus 2Q20 to R$200.2 million as part of the revenue recognition
was anticipated to 1Q21, while Supplemental solutions increased to
R$56.1 million (versus R$1.8 million in 2Q20), impacted by the
acquisition of Escola da Inteligência concluded in December 2020.
For the 6 months of 2021, net revenues increased 18% year-over-year
to R$588.0 million, with Core solutions increasing 2% to R$464.8
million and Supplemental solutions increasing 188% to R$ 123.2
million.
- Adjusted EBITDA was R$72.3 million in 2Q21, a 28% drop versus
2Q20, impacted by lower revenue recognition due to the impact of
COVID-19’s second wave, product development and investments in
sales & marketing as Arco paves the way for future growth. As a
result, adjusted EBITDA margin was 28.2% in the quarter versus
42.8% in 2Q20. For the 6 months of 2021, adjusted EBITDA was
R$190.6 million, resulting in a margin of 32.4% versus 39.8% for
6M20. When excluding M&As concluded this year, and therefore
not incorporated in the guidance, margin was 28.8% for 2Q21 and
32.8% for 6M21. We are maintaining our 2021 adjusted EBITDA margin
guidance unchanged at 35.5%-37.5%.
- Free cash flow presented an 8% year-over-year increase to R$
63.7 million in 2Q21 and a significant improvement versus 1Q21,
mainly due to the collection of trade receivables generated in
previous quarters when the Company opted to assist its partner
schools by extending payment terms. As a result, free cash
flow/adjusted EBITDA ratio reached 88.2% (versus 58.7% in 2Q20 and
-1.7% in 1Q21).
Free cash flow (R$ MM)
2Q21
2Q20
YoY
1Q21
QoQ
Cash generated from operations
113,157
89,878
26
%
89,228
27
%
(-) Income tax paid
(4,529
)
(6,477
)
-30
%
(46,988
)
-90
%
(-) Interest paid on lease liabilities
(743
)
(285
)
161
%
(860
)
-14
%
(-) Interest paid on investment
acquisition
(70
)
-
n/a
(4,153
)
-98
%
(-) Interest paid on loans and
financing
(4,378
)
-
n/a
(3,567
)
23
%
(-) Payments for contingent
consideration
(332
)
-
n/a
-
n/a
Cash Flow from Operating Activities
103,105
83,116
24
%
33,660
206
%
(-) Acquisition of property, plant and
equipment
(2,534
)
(1,665
)
52
%
(2,998
)
-15
%
(-) Acquisition of intangible assets
(36,842
)
(22,421
)
64
%
(32,701
)
13
%
Free cash flow
63,729
59,030
8
%
(2,039
)
n/a
- The 19% QoQ reduction in trade receivables reflects Arco’s
business resilience and its capacity to collect from partner
schools to whom we provided support through more flexible payment
terms.
Trade Receivables - Aging (R$
MM)
2Q21
2Q20
YoY
1Q21
QoQ
Neither past due nor impaired
357.2
247.4
44
%
481.9
-26
%
1 to 60 days
36.9
38.0
-3
%
20.5
80
%
61 to 90 days
9.3
12.7
-27
%
6.9
35
%
91 to 120 days
7.1
10.3
-31
%
4.5
58
%
121 to 180 days
7.9
8.0
-2
%
11.0
-28
%
More than 180 days
59.3
23.9
148
%
65.1
-9
%
Trade receivables
477.7
340.5
40
%
589.8
-19
%
Days of sales outstanding
2Q21
2Q20
YoY
1Q21
QoQ
Trade receivables (R$ MM)
477.7
340.5
40
%
589.8
-19
%
(-) Allowance for doubtful accounts
(71.3
)
(42.0
)
70
%
(67.3
)
6
%
Trade receivables, net (R$ MM)
406.4
298.4
36
%
522.5
-22
%
Net revenue LTM pro-forma1
1,118.6
911.8
23
%
1,130.2
-1
%
Adjusted DSO
133
119
11
%
169
-21
%
1)
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.
- No significant change in the allowance for doubtful accounts,
reflecting solid receivables profile and a strong collection
process following our strategy to assist our partner schools by
providing more flexible payment terms during the pandemic.
Allowance for doubtful accounts (R$
MM)
2Q21
2Q20
YoY
1Q21
QoQ
Allowance for doubtful accounts
(6.6
)
(6.4
)
3
%
(3.8
)
74
%
% of Revenues
-2.6
%
-2.7
%
0.1 p.p.
-1.2
%
-1.4 p.p.
Allowance for doubtful accounts
adjusted for COVID impact¹
(6.6
)
(5.5
)
20
%
(3.8
)
74
%
% of Revenues
-2.6
%
-2.3
%
-0.3 p.p.
-1.1
%
-1.5 p.p.
1)
Calculated excluding COVID-19 impact on
allowance for doubtful accounts to better reflect a normalized
level of this line.
- The increase in CAPEX observed in the 2Q21, reaching R$39.4
million or 15.4% of the net revenues, is mainly explained by an
increase in investments in software as Arco concludes Positivo’s
operational system integration. The integration of other businesses
acquired in recent years will continue in upcoming quarters but
should be less complex and therefore demand less investment.
CAPEX (R$ MM)¹
2Q21
2Q20
YoY
1Q21
QoQ
Acquisition of intangible
assets
36.8
22.4
64%
32.7
13%
Educational platform - content
development
8.1
9.7
-16%
8.7
-7%
Educational platform - platforms and
educational technology
13.0
3.6
261%
15.6
17%
Software
13.6
7.2
89%
5.8
134%
Copyrights and others
2.1
1.9
11%
2.6
-19%
Acquisition of property, plant and
equipment
2.5
1.7
47%
3.0
-17%
TOTAL
39.4
24.1
63%
35.7
10%
1)
Excluding the effect of business
combinations.
- Arco’s corporate restructuring continues to take place. On July
1st, we concluded the incorporation of SAS subsidiaries, that will
result in annual tax savings of approximately R$ 30 million. We
expect to incorporate Nave a Vela in 2021, followed by Escola em
Movimento (2022), Pleno (2022) and Studos (2022). As we keep
incorporating other businesses into CBE (Companhia Brasileira de
Educação e Sistemas de Ensino S.A., entity incorporating acquired
businesses) we will be able to capture additional tax benefits and
therefore further reduce our effective tax rate, currently at 19.4%
for 6M21 (versus 29.2% for 6M20).
Intangible assets - net balances (R$
MM)
2Q21
2Q20
YoY
1Q21
QoQ
Business Combination
2,374.1
1,683.7
41%
2,398.6
-1%
Trademarks
443.0
337.8
31%
449.5
-1%
Customer relationships
266.8
181.2
47%
275.3
-3%
Educational system
216.4
215.9
0%
224.5
-4%
Software
7.3
2.8
156%
7.9
-8%
Educational platform
6.0
13.4
-56%
6.1
-3%
Others¹
15.9
15.8
0%
16.8
-6%
Goodwill
1,418.7
916.8
55%
1,418.4
0%
Operational
193.0
109.9
76%
177.0
9%
Educational platform²
136.0
79.4
71%
130.2
4%
Software
45.3
20.5
121%
34.8
30%
Copyrights
11.7
9.9
19%
11.8
-1%
Customer relationships
0.1
0.2
-34%
0.1
-12%
TOTAL
2,567.1
1,793.7
43%
2,575.6
0%
Amortization of intangible assets (R$
MM)
2Q21
2Q20
YoY
1Q21
QoQ
Business Combination
(55.0
)
(17.6
)
212
%
(55.0
)
0
%
Trademarks
(6.4
)
(4.6
)
38
%
(6.4
)
-1
%
Customer relationships
(8.5
)
(5.9
)
44
%
(8.5
)
0
%
Educational system
(8.1
)
(6.5
)
24
%
(8.0
)
1
%
Software
(0.6
)
(0.3
)
119
%
(0.6
)
-4
%
Educational platform
(0.2
)
0.2
-180
%
(0.2
)
0
%
Others¹
(1.2
)
(0.5
)
118
%
(1.1
)
4
%
Goodwill
(30.1
)
-
NA
(30.1
)
0
%
Operational
(20.6
)
(8.3
)
149
%
(18.6
)
11
%
Educational platform²
(15.2
)
(5.5
)
175
%
(13.6
)
11
%
Software
(3.4
)
(1.2
)
177
%
(2.9
)
16
%
Copyrights
(2.1
)
(1.5
)
36
%
(2.0
)
2
%
Customer relationships
(0.0
)
(0.0
)
0
%
(0.0
)
0
%
TOTAL
(75.7
)
(25.9
)
192
%
(73.6
)
3
%
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 2Q21
Amortization
Tax benefit
Impact on net income
Business Combination
(46.3
)
15.8
(30.6
)
Trademarks
Yes
Yes²
(4.3
)
1.5
(2.8
)
Customer relationships
Yes
Yes²
(5.3
)
1.8
(3.5
)
Educational system
Yes
Yes²
(5.9
)
2.0
(3.9
)
Educational platform
Yes
Yes²
(0.2
)
0.1
(0.1
)
Others¹
Yes
Yes²
(0.5
)
0.2
(0.3
)
Goodwill
No
Yes²
(30.1
)
10.2
(19.9
)
Operational
Yes
Yes
(20.6
)
7.0
(13.6
)
TOTAL
(66.9
)
22.8
(44.2
)
1)
Non-compete agreements and rights on
contracts.
2)
Amortizations are tax deductible only
after the incorporation of the acquired business. In 2Q21, 22% 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
16.9
16.9
16.9
16.9
244.0
132.0
Customer relationships
21.6
20.5
20.5
20.5
74.4
121.7
Educational system
23.0
21.9
21.0
21.0
101.7
33.9
Software
-
-
-
-
-
8.5
Educational platform
0.7
0.7
0.7
0.7
3.5
0.0
Others
1.3
1.2
1.1
0.9
- 0.0
9.1
Goodwill
120.5
120.5
120.5
114.6
341.2
631.4
Total
184.1
181.8
180.8
174.7
764.9
936.7
Maximum tax benefit
62.6
61.8
61.5
59.4
260.1
318.5
1)
Businesses with future tax benefit (to be
incorporated).
- Arco’s cash and cash equivalent position (Sum of cash and cash
equivalents and short-term financial investment) of R$866 million
is enough to meet the obligations for the year of R$633 million in
debt and accounts payable to selling shareholders (Accounts payable
to selling shareholders do not include acquisitions announced still
pending anti-trust approval or acquisitions closed after June 30,
2021). Additionally, we are currently working on a credit line of
approximately R$900 million at attractive conditions to finance the
previously announced acquisition of COC and Dom Bosco Core learning
systems from Pearson and refinance existing debt.
- Despite early in the commercial cycle, we see a clear
acceleration in the pace of organic growth versus 2020. Cross-sell
initiatives continue to play an important role in our commercial
strategy, representing at this point 85% of the supplemental intake
for the 2022 school year. Additionally, cross-sell initiatives are
now powered by the creation of a centralized supplemental business
unit, ArcoPlus, which will enable synergies among solutions.
- In 2021 Arco launched SAS Adapt, a version of our legacy brand
SAS that allows for higher customization, provides more detailed
information on students’ engagement and pedagogical gaps, creates
higher connectivity among all content available in the platform,
and enables more personalized tracks and flexible curriculum. Such
product evolution increases our reach to schools that demand more
customization possibilities, especially the premium segment, as it
allows them to adapt their curriculum and plan pedagogical
interventions to fulfill their students’ needs. The access to the
premium segment will also be a great opportunity to further improve
our solutions as we gather feedback from the best schools in the
country. SAS Adapt was created using the best technology available,
relying on features from Studos, the adaptive learning solution
acquired in September 2020, and Eduqo, a LMS provider acquired in
July 2021.
- Aligned with our commitment to continuously evolve our
solutions, Arco is in the process of creating a single technology
backbone for all our solutions. A dedicated area was created to
lead this project, ArcoTech, that will consolidate Arco’s features
and services such as WPensar, Escola em Movimento, Studos and
Eduqo, while gathering the best technological features of the
platforms of each of our brands, allowing us to simplify our
structure and become an even more agile and responsive company,
enhancing our solutions, and delivering a better experience to our
clients. Eduqo, acquired in July 2021, further improves the
backbone of our platform as its solutions fit into every school
routine, with the mission of providing a personalized learning
experience and helping schools to acquire more students based on
data intelligence.
- On August 10, Arco released its first ESG report, an important
step towards disclosure improvement and commitment to increase our
impact in the Brazilian Education sector. Our materiality
assessment confirmed the three main themes to be addresses in this
first report: impact on education, the focus on people and strong
and sustainable structure. The report can be downloaded at
https://investor.arcoplatform.com/esg/.
Conference Call Information
Arco will discuss its second quarter 2021 results today, August
19, 2021, via a conference call at 5 p.m. Eastern Time (6 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 August 25, 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 June 30, 2021, there was a total net impact of R$937
thousand on the Company's condensed consolidated financial
statements related to the COVID-19 pandemic mainly related to: (i)
additional expenses of R$ 1,102 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$165 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 June 30, 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, Taxable Income
Reconciliation and 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/minus 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
June 30,
December 31,
(In thousands of Brazilian
reais)
2021
2020
Assets
(unaudited)
Current assets
Cash and cash equivalents
314,692
424,410
Financial investments
550,936
712,645
Trade receivables
406,408
415,282
Inventories
86,410
74,076
Recoverable taxes
20,377
19,304
Related parties
4,421
9,970
Other assets
35,363
24,073
Total current assets
1,418,607
1,679,760
Non-current assets
Deferred income tax
269,015
236,903
Recoverable taxes
1,122
1,121
Financial investments
27,618
10,349
Related parties
6,554
10,508
Other assets
31,044
22,239
Investments and interests in other
entities
80,248
9,654
Property and equipment
26,222
26,087
Right-of-use assets
39,057
30,022
Intangible assets
2,567,100
2,549,637
Total non-current assets
3,047,980
2,896,520
Total assets
4,466,587
4,576,280
June 30,
December 31,
(In thousands of Brazilian
reais)
2021
2020
Liabilities
(unaudited)
Current liabilities
Trade payables
48,764
40,925
Labor and social obligations
96,711
85,069
Taxes and contributions payable
4,883
9,676
Income taxes payable
32,584
44,731
Advances from customers
43,387
23,080
Lease liabilities
16,622
12,742
Loans and financing
305,587
107,706
Accounts payable to selling
shareholders
676,378
656,014
Other liabilities
4,781
331
Total current liabilities
1,229,697
980,274
Non-current liabilities
Labor and social obligations
39,815
36,570
Lease liabilities
28,982
22,478
Loans and financing
3,142
203,413
Provision for legal proceedings
1,853
1,366
Accounts payable to selling
shareholders
1,066,610
1,130,501
Other liabilities
772
794
Total non-current liabilities
1,141,174
1,395,122
Equity
Share capital
11
11
Capital reserve
2,203,141
2,200,645
Treasury shares
(107,936
)
-
Share-based compensation reserve
89,297
80,817
Accumulated losses
(88,797
)
(80,589
)
Total equity
2,095,716
2,200,884
Total liabilities and equity
4,466,587
4,576,280
Arco Platform Limited
Interim Condensed Consolidated
Statements of Income
Three months period ended June
30,
Six months period ended June
30,
(In thousands of Brazilian reais,
except earnings per share)
2021
2020
2021
2020
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net revenue
256,301
234,864
587,973
496,443
Cost of sales
(68,103
)
(43,120
)
(155,228
)
(110,340
)
Gross profit
188,198
191,744
432,745
386,103
Operating expenses:
Selling expenses
(118,727
)
(88,070
)
(238,385
)
(175,970
)
General and administrative expenses
(61,988
)
(60,139
)
(136,294
)
(126,922
)
Other income (expense), net
975
347
2,500
759
Operating profit
8,458
43,882
60,566
83,970
Finance income
12,114
12,792
22,054
22,179
Finance costs
(45,678
)
(30,752
)
(84,292
)
(69,091
)
Finance result
(33,564
)
(17,960
)
(62,238
)
(46,912
)
Share of loss of equity-accounted
investees
(1,728
)
(3,293
)
(2,751
)
(3,999
)
(Loss) profit before income
taxes
(26,834
)
22,629
(4,423
)
33,059
Income taxes - income (expense)
Current
(18,544
)
(22,435
)
(35,897
)
(54,623
)
Deferred
25,359
16,050
32,112
41,629
Total income taxes – income (expense)
6,815
(6,385
)
(3,785
)
(12,994
)
(Loss) net profit for the
period
(20,019
)
16,244
(8,208
)
20,065
Basic earnings per share – in Brazilian
reais
Class A
(0.35
)
0.30
(0.14
)
0.37
Class B
(0.35
)
0.30
(0.14
)
0.37
Diluted earnings per share – in Brazilian
reais
Class A
(0.35
)
0.29
(0.14
)
0.36
Class B
(0.35
)
0.30
(0.14
)
0.37
Weighted-average shares used to compute
net (loss) profit per share:
Basic
57,020
54,942
57,214
54,941
Diluted
57,307
55,335
57,501
55,334
Arco Platform Limited
Interim Condensed Consolidated
Statements of Cash Flows
Three months period ended June
30,
Six months period ended June
30,
(In thousands of Brazilian
reais)
2021
2020
2021
2020
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Operating activities
(Loss) profit before income taxes for the
period
(26,834
)
22,629
(4,423
)
33,059
Adjustments to reconcile (loss) profit
before income taxes
Depreciation and amortization
45,423
31,373
93,475
60,048
Inventory reserves
5,162
1,538
7,386
3,644
Allowance for doubtful accounts
6,610
6,386
10,499
12,554
Loss on sale/disposal of property and
equipment and intangible assets disposed
2
780
135
1,452
Fair value change in financial instruments
from acquisition interests
-
(913
)
-
(859
)
Changes in accounts payable to selling
shareholders
2,677
294
489
6,894
Share of loss of equity-accounted
investees
1,728
3,293
2,751
3,999
Share-based compensation plan
6,189
8,741
15,555
17,648
Accrued interest
5,216
5,733
8,905
6,975
Interest accretion on acquisition
liability
26,643
16,711
54,024
36,977
Income non-cash equivalents
(4,729
)
(3,617
)
(8,495
)
(5,656
)
Interest on lease liabilities
1,138
687
2,157
1,419
Provision for legal proceedings
(857
)
561
(211
)
594
Provision for payroll taxes (restricted
stock units)
1,948
3,158
1,427
9,046
Foreign exchange income
3,813
922
4,092
180
Other financial cost/revenue, net
(2,139
)
(1,038
)
(2,498
)
(1,038
)
71,990
97,238
185,268
186,936
Changes in assets and liabilities
Trade receivables
109,460
39,179
385
18,467
Inventories
(15,545
)
(7,078
)
(11,967
)
(7,563
)
Recoverable taxes
2,944
(2,610
)
2,467
(4,304
)
Other assets
(4,524
)
(1,865
)
(8,455
)
(18,901
)
Trade payables
(4,893
)
(16,353
)
7,225
(3,715
)
Labor and social obligations
7,921
21,164
10,256
15,622
Taxes and contributions payable
(2,279
)
(219
)
(5,083
)
(2,779
)
Advances from customers
(53,798
)
(38,654
)
19,985
10,826
Other liabilities
1,881
(924
)
2,304
(982
)
Cash generated from operations
113,157
89,878
202,385
193,607
Income taxes paid
(4,529
)
(6,477
)
(51,517
)
(64,020
)
Interest paid on lease liabilities
(743
)
(285
)
(1,603
)
(710
)
Interest paid on accounts payable to
selling shareholders
(70
)
-
(4,223
)
-
Interest paid on loans and financing
(4,378
)
-
(7,945
)
-
Payments for contingent consideration
(332
)
-
(332
)
(3,696
)
Net cash flows from operating
activities
103,105
83,116
136,765
125,181
Investing activities
Acquisition of property and equipment
(2,534
)
(1,665
)
(5,532
)
(4,042
)
Investments in unconsolidated entities
(48,195
)
-
(73,222
)
(12,675
)
Acquisition of subsidiaries, net of cash
acquired
-
-
(15,217
)
-
Payment of accounts payable to selling
shareholders
(92,836
)
-
(92,836
)
-
Acquisition of intangible assets
(36,842
)
(22,421
)
(69,543
)
(39,480
)
Sale (purchase) of financial
investments
97,818
60,774
152,935
(122,402
)
Net cash flows (used in) from investing
activities
(82,589
)
36,688
(103,415
)
(178,599
)
Financing activities
Purchase of treasury shares
(56,711
)
-
(109,737
)
-
Payment of lease liabilities
(2,964
)
(3,779
)
(6,354
)
(3,779
)
Payment to owners to acquire entity’s
shares
(949
)
(1,001
)
(19,442
)
(1,001
)
Loans and financing
(1,743
)
1,801
(3,443
)
198,372
Net cash flows (used in) from financing
activities
(62,367
)
(2,979
)
(138,976
)
193,592
Foreign exchange effects on cash and cash
equivalents
(3,813
)
(922
)
(4,092
)
(180
)
Decrease (increase) in cash and cash
equivalents
(45,664
)
115,903
(109,718
)
139,994
Cash and cash equivalents at the beginning
of the period
360,356
72,991
424,410
48,900
Cash and cash equivalents at the end of
the period
314,692
188,894
314,692
188,894
Decrease (increase) in cash and cash
equivalents
(45,664
)
115,903
(109,718
)
139,994
Arco Platform Limited
Reconciliation of Non-GAAP
Measures
Three months period ended June
30,
Six months period ended June
30,
(In thousands of Brazilian
reais)
2021
2020
2021
2020
Adjusted EBITDA Reconciliation
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Loss) profit for the period
(20,019
)
16,244
(8,208
)
20,065
(+/-) Income taxes
(6,815
)
6,385
3,785
12,994
(+/-) Finance result
33,564
17,960
62,238
46,912
(+) Depreciation and amortization
45,423
31,373
93,475
60,048
(+) Share of loss of equity-accounted
investees
1,728
3,293
2,751
3,999
EBITDA
53,881
75,255
154,041
144,018
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units).
9,324
15,480
21,048
31,440
(+) M&A expenses
3,853
2,427
7,850
3,991
(+) Non-recurring expenses
4,683
2,827
6,558
10,058
(+) Effects related to Covid-19
pandemic
523
4,591
1,152
7,993
Adjusted EBITDA
72,264
100,580
190,649
197,500
Net Revenue
256,301
234,864
587,973
496,443
EBITDA Margin
21.0
%
32.0
%
26.2
%
29.0
%
Adjusted EBITDA Margin
28.2
%
42.8
%
32.4
%
39.8
%
Three months period ended June
30,
Six months period ended June
30,
(In thousands of Brazilian
reais)
2021
2020
2021
2020
Adjusted Net Income
Reconciliation
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Loss) profit for the period
(20,019
)
16,244
(8,208
)
20,065
(+/-) Adjustments related to business
combination
32,477
13,028
62,210
37,201
(+) Amortization of intangible assets from
business combinations
24,890
18,252
49,752
36,235
(+/-) Changes in accounts payable to
selling shareholders
2,677
294
489
6,894
(+) Interest on acquisition of
investments, net (linked to a fixed rate)¹
9,545
7,557
14,452
16,256
(+) Interest on acquisition of
investments, net (adjusted by fair value)²
17,098
8,921
39,572
20,240
(+/-) Tax effects
(21,733
)
(21,996
)
(42,055
)
(42,424
)
(+) Share-based compensation plan,
restricted stock units and provision for payroll taxes (restricted
stock units).
9,324
15,480
21,048
31,440
(+/-) Changes in fair value of derivative
instruments
-
(913
)
-
(859
)
(+) Share of loss of equity-accounted
investees
1,728
3,293
2,751
3,999
(+/-) Foreign exchange on cash and cash
equivalents
3,813
922
4,092
180
(+) M&A expenses
3,853
2,427
7,850
3,991
(+) Non-recurring expenses
4,683
2,827
6,558
10,058
(+) Effects related to Covid-19
pandemic
523
4,591
1,152
7,993
Adjusted Net Income
36,382
57,899
97,453
114,068
Net Revenue
256,301
234,864
587,973
496,443
Adjusted Net Income Margin
14.2
%
24.7
%
16.6
%
23.0
%
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 June
30,
Six months period ended June
30,
(In thousands of Brazilian
reais)
2021
2020
2021
2020
Free Cash Flow Reconciliation
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Cash generated from operations
113,157
89,878
202,385
193,607
(-) Income tax paid
(4,529
)
(6,477
)
(51,517
)
(64,020
)
(-) Interest paid on lease liabilities
(743
)
(285
)
(1,603
)
(710
)
(-) Interest paid on investment
acquisition
(70
)
-
(4,223
)
-
(-) Interest paid on loans and
financing
(4,378
)
-
(7,945
)
-
(-) Payments for contingent
consideration
(332
)
-
(332
)
(3,696
)
Cash Flow from Operating
Activities
103,105
83,116
136,765
125,181
(-) Acquisition of property and
equipment
(2,534
)
(1,665
)
(5,532
)
(4,042
)
(-) Acquisition of intangible assets
(36,842
)
(22,421
)
(69,543
)
(39,480
)
Free Cash Flow
63,729
59,030
61,690
81,659
Three months period ended June
30,
Six months period ended June
30,
(In thousands of Brazilian
reais)
2021
2020
2021
2020
Taxable Income Reconciliation
(unaudited)
(unaudited)
(unaudited)
(unaudited)
(Loss) profit before income
taxes
(26,834
)
22,629
(4,423
)
33,059
(+) Share-based compensation plan, RSU and
provision for payroll taxes¹
466
16,567
9,036
25,776
(+) Amortization of intangible assets from
business combinations before incorporation¹
4,859
25,025
9,760
39,549
(+/-) Changes in accounts payable to
selling shareholders¹
21,765
15,765
39,411
32,883
(+/-) Share of loss of equity‑accounted
investees
(587
)
(1,120
)
(935
)
(1,360
)
(+) Net income from Arco Platform
(Cayman)
8,151
4,649
13,800
5,279
(+) Fiscal loss without deferred
3,383
1,150
4,767
2,463
(+/-) Provisions booked in the period
8,854
13,288
13,327
24,598
(+) Tax loss carryforward
74,312
(12,493
)
91,366
17,276
(+) Others
4,756
2,105
8,519
7,831
Taxable income
99,125
87,565
184,628
187,353
Current income tax under actual profit
method
(33,702
)
(29,773
)
(62,773
)
(63,700
)
% Tax rate under actual profit method
34.0
%
34.0
%
34.0
%
34.0
%
(+) Effect of presumed profit benefit
2,774
4,368
3,266
4,929
Effective current income tax
(30,928
)
(25,405
)
(59,507
)
(58,771
)
% Effective tax rate
31.2
%
29.0
%
32.2
%
31.4
%
(+) Recognition of tax-deductible
amortization of goodwill and added value²
11,097
923
21,935
1,845
(+/-) Other additions (exclusions)
1,287
2,047
1,675
2,303
Effective current income tax accounted
for goodwill benefit
(18,544
)
(22,435
)
(35,897
)
(54,623
)
% Effective tax rate accounting for
goodwill benefit
18.7
%
25.6
%
19.4
%
29.2
%
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/20210819005754/en/
Investor Relations Contact: Arco Platform Limited
IR@arcoeducacao.com.br
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