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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Arco Platform Ltd | NASDAQ:ARCE | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 13.98 | 13.95 | 14.05 | 0 | 01:00:00 |
Arco delivers strong cash performance in 1Q23 with R$ 208M free cash flow to firm and debuts new financial & management segment in the p&l following isaac acquisition
Arco Platform Limited, or Arco or the Company (Nasdaq: ARCE), today reported financial and operating results for the first quarter ended March 31, 2023.
1Q23
1Q23
CTD23
Consolidated
Pedagogical business
Pedagogical business
Net revenue
Cash gross profit
Net revenue
Net revenue
R$534.9M
R$370.2M
R$472.4M
R$1,136.9M
+24.4% YoY
+9.1% YoY
+9.8% YoY
+28.3% YoY
Adj. EBITDA
Adj. net income
Adj. EBITDA
Adj. EBITDA
R$110.7M
R$(42.0)M
R$125.5M
R$471.4M
-24.5% YoY
n/a
-14.5% YoY
+28.2% YoY
Consolidated 1Q23 figures includes 1Q23 full results of isaac, our most recent acquisition, that is reported within financial & management segment. Therefore, for an accurate comparison year over year we recommend investors to reach pedagogical business figures (core & supplemental solutions).
Note: Please see adjusted EBITDA reconciliation and adjusted Net Income reconciliation on page 15.
1Q23 Highlights
In the 1Q23, Arco recognized 24.5% of its 2023 ACV vs 27.6% in the 1Q22, thus we recommend investors to analyze our P&L performance on a cycle-to-date basis, for a more accurate assessment on the business underlying profitability trends.
Free cash flow to firm (managerial)
1Q23
1Q22
% of net revenue 1Q23
% of net revenue 1Q22
YoY
Adjusted EBITDA
110.7
146.7
20.7
%
34.1
%
-13 p.p
(+/-) Non-cash adjustments
15.1
(21.2
)
2.8
%
-4.9
%
+8 p.p
(+/-) Working capital
150.0
(22.7
)
28.0
%
-5.3
%
+33 p.p
(-) Income taxes paid
(31.2
)
(42.7
)
-5.8
%
-9.9
%
+4 p.p
(-) CAPEX¹
(37.0
)
(47.0
)
-6.9
%
-10.9
%
+4 p.p
Free cash flow to firm (managerial)
207.6
13.1
38.8
%
3.1
%
+36 p.p
1) Excludes R$5.5 million related to M&A payments (PGS’ and Mentes’ acquisition).
Provision for expected credit losses Pedagogical business (R$M)
1Q23
1Q22
YoY
4Q22
QoQ
Allowance for doubtful accounts
5.5
(6.2
)
n.a.
6.3
-13
%
% of net revenue
1.2
%
-1.4
%
2.5p.p.
0.9
%
0.3p.p.
Days of sales outstanding
Mar. 31, 2023
Mar. 31, 2022
YoY
Mar. 31 2023
(pedagogical)
Mar. 31, 2022
YoY
Trade receivables (R$M)
1,132.8
887.1
28
%
1,027.6
887.1
16
%
(-) Allowance for doubtful accounts
(116.2
)
(80.9
)
44
%
(90.5
)
(80.9
)
12
%
Trade receivables, net (R$M)
1,016.6
806.2
26
%
937.1
806.2
16
%
Net revenue LTM pro-forma¹
1,988.3
1,387.3
43
%
1,817.2
1,387.3
31
%
Adjusted DSO
187
212
-12
%
188
212
-11
%
1) Calculated as net revenues for the last twelve months (for 2022 added to the pro forma revenues from businesses acquired in the period to accurately reflect the Company’s operations).
CAPEX (R$M)
1Q23
1Q22
YoY
4Q22
QoQ
Acquisition of intangible assets¹
35.4
40.3
-12.2
%
42.8
-17.3
%
Educational platform - content development
0.3
3.9
-92.3
%
0.2
50.0
%
Educational platform - platforms & tech
17.6
24.6
-28.5
%
35.9
-51.0
%
Software
15.7
10.3
52.4
%
2.8
460.7
%
Copyrights and others
1.8
1.5
20.0
%
3.9
-53.8
%
Acquisition of PP&E
1.6
6.7
-76.1
%
2.0
-20.0
%
TOTAL¹
37.0
47.0
-21.3
%
44.8
-17.4
%
1) For 2022 excludes R$5.5 million related to M&A payments (PGS’ and Mentes’ acquisition from the accounting CAPEX of R$52.5 million.
Intangible assets - net balances (R$M)
Mar 31, 2023
Mar. 31, 2022
YoY
Dec. 31, 2022
QoQ
Business Combination
3,522.4
2,977.8
18.3
%
2,893.8
21.7
%
Trademarks
486.7
495.2
-1.7
%
471.8
3.2
%
Customer relationships
236.3
265.5
-11.0
%
237.0
-0.3
%
Educational system
198.0
233.9
-15.3
%
206.9
-4.3
%
Softwares
14.3
10.3
38.8
%
8.4
70.2
%
Educational platform
5.1
4.1
24.4
%
4.7
8.5
%
Others¹
17.1
18.9
-9.5
%
14.1
21.3
%
Goodwill
2,564.9
1,949.9
31.5
%
1,950.9
31.5
%
Operational
329.6
276.1
19.4
%
290.2
13.6
%
Educational platform²
179.4
198.2
-9.5
%
188.3
-4.7
%
Softwares
124.2
66.8
85.9
%
76.7
61.9
%
Copyrights
26.0
11.0
136.4
%
25.2
3.2
%
Customer relationships
-
0.1
-100.0
%
-
n/a
TOTAL
3,852.0
3,253.9
18.4
%
3,184.0
21.0
%
1) Non-compete agreements and rights on contracts. 2) Includes content development in progress.
Amortization of intangible assets (R$M)
1Q23
1Q22
YoY
4Q22
QoQ
Business Combination
(80.5
)
(60.4
)
33.3
%
(84.4
)
-4.6
%
Trademarks
(7.9
)
(7.7
)
2.6
%
(8.0
)
-1.3
%
Customer relationships
(10.8
)
(9.2
)
17.4
%
(8.7
)
24.1
%
Educational system
(8.8
)
(9.3
)
-5.4
%
(8.8
)
0.0
%
Softwares
(1.2
)
(0.7
)
71.4
%
(0.7
)
71.4
%
Educational platform
(0.2
)
(0.2
)
0.0
%
(0.2
)
0.0
%
Others¹
(1.5
)
(1.4
)
7.1
%
(1.6
)
-6.3
%
Goodwill
(50.1
)
(31.9
)
57.1
%
(56.4
)
-11.2
%
Operational
(35.7
)
(29.5
)
21.0
%
(33.0
)
8.2
%
Educational platform²
(27.4
)
(22.3
)
22.9
%
(20.4
)
34.3
%
Softwares
(6.2
)
(5.2
)
19.2
%
(6.3
)
-1.6
%
Copyrights
(2.1
)
(1.9
)
10.5
%
(6.1
)
-65.6
%
Customer relationships
-
(0.1
)
-100.0
%
(0.2
)
-100.0
%
TOTAL
(116.2
)
(89.8
)
29.3
%
(117.4
)
-1.0
%
1) Non-compete agreements and rights on contracts. 2) Includes content development in progress.
Amortization of intangible assets (R$M)
Impacts P&L
Originates tax benefit
Amortization with tax benefit in 1Q23²
Amortization
Tax benefit
Impact on net income
Business Combination
(58.7
)
19.9
(38.7
)
Trademarks
Yes
Yes²
(2.4
)
0.8
(1.6
)
Customer relationships
Yes
Yes²
(2.9
)
1.0
(1.9
)
Educational system
Yes
Yes²
(2.8
)
0.9
(1.8
)
Others¹
Yes
Yes²
(0.5
)
0.2
(0.3
)
Goodwill
No
Yes²
(50.1
)
17.0
(33.1
)
Operational
Yes
Yes
(35.7
)
12.1
(23.6
)
TOTAL
(94.4
)
32.0
(62.3
)
1) Non-compete agreements and rights on contracts. 2) Amortizations are tax deductible only after the incorporation of the acquired business.
Amortization of intangible assets from business combination that generate tax benefit – breakdown by type (R$M)
Businesses with current tax benefit
Undefined²
2023
2024
2025
2026+
Trademarks
27
27
27
318
)
66
Customer relationships
25
25
25
59
111
Educational system
27
27
27
106
32
Software license
-
-
-
-
11
Rights on contracts
1
1
1
2
1
Others
2
2
1
1
10
Goodwill
237
231
227
761
355
Total
319
313
308
1.247
587
Maximum tax benefit
108
106
105
424
199
Amortization of intangible assets from business combination that generate tax benefit – breakdown by solutions (R$M)
Businesses with current tax benefit
Undefined²
2023
2024
2025
2026+
Geekie
42
42
42
279
-
NAVE
9
9
9
11
-
P2D
89
89
89
364
-
Positivo, Conquista, PES English
170
170
168
593
-
Other Companies
9
3
-
-
-
Acquired companies not yet incorporated
N/A
N/A
N/A
N/A
587
Total
319
313
308
1.247
587
Maximum tax benefit
108
106
105
424
199
1) Excludes Convertible notes: considers the conversion into equity of the convertible senior notes with no future disbursement of principal (US$150 M) issued on Nov 30, 2021. These notes mature in 7 years, on Nov 15, 2028, and bear interest at 8% per year fixed in Brazilian reais (R$66 M per year). 2) Amount subject to an arbitration process. Please reference the Financial Statements as of March 31st, 2023, for additional details.
Conference Call Information
Arco will discuss its first quarter 2023 results today, May 25, 2023, 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) 4090-1621. For enhanced audio connection investors may connect through Web Phone (access code: 7636515).
An audio replay of the call will be available through June 1, 2023, by dialing +55 (11) 4118-5151 and entering access code 219191#. 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/.
About Arco Platform Limited (Nasdaq: ARCE)
Arco has empowered millions 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-GAAP financial measures including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin, Taxable Income Reconciliation and Managerial 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 press release 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 - Pedagogical
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.
Key Business Metrics – Financial & Management (“revenue guarantee” solution)
Contracted schools are the primary operating metric and represents the total number of schools with active contracts with isaac. Schools sign contracts for 1 year (or longer) with isaac to guarantee tuition from all of the enrolled students. After signing and onboarding a partner school, services can be initiated at any month of the year.
Total payment value (TPV) indicates the full amount to be transacted by isaac to contracted schools. It is calculated by the total tuition fee owed by parents to their schools.
Take rate is the primary revenue driver and is a percentage of TPV agreed upon contract signing. It is priced upon school sign-up based on school historical delinquency rate, risk profile and operating costs. It may be renegotiated or adjusted based on the contract’s performance.
Annual recurring revenue (ARR) is the contracted annualized revenue for a given month. Annual contracts and recurring nature make ARR a good proxy for growth, given isaac’s high growth profile, mitigating seasonal and onboarding effects.
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 and Managerial Free Cash Flow and 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 and restricted stock units, plus provision for payroll taxes (restricted stock units), plus/minus M&A expenses (expenses related to acquisitions, and legal services mainly due to International School arbitration), minus other changes to equity accounted on investees (which refers to gains related to capital contribution from others on investees leading to an increase in equity of the investee) and plus non-recurring expenses (expenses related to our organizational restructuring in such as consulting services expenses and workforce reduction expenses). We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by Net Revenue.
We calculate Adjusted Net Income (Loss) as profit (loss) for the year (or period), plus share-based compensation plan, restricted stock units and related payroll taxes (restricted stock units), plus M&A expenses (expenses related to acquisitions, and legal services mainly due to International School arbitration), minus other changes to equity accounted on investees (which refers to gains related to capital contribution from others on investees leading to an increase in equity of the investee), plus non-recurring expenses (expenses related to our organizational restructuring in such as consulting services expenses and workforce reduction expenses), plus amortization of intangible assets from business combinations (which refers to the amortization of the following intangible assets from business combinations: (i) trademarks, (ii) customer relationships, (iii) educational system, (iv) software resulting from acquisitions, (v) educational platform, (vi) non-compete agreement and (vii) rights on contracts), plus/minus changes in accounts payable to selling shareholders (which refers to changes in fair value of contingent consideration and accounts payable to selling shareholders—finance costs), plus interest expenses, net (which refers to interest expenses related to accounts payable to selling shareholders from business combinations adjusted by fair value), plus/minus non-cash adjustments related to derivatives and convertible notes (which Refers to changes in fair value of derivative instruments from put option to convert senior notes) and plus/minus changes in current and deferred tax recognized in statements of income applied to all adjustments to net income (loss), which refers to tax effects of changes in deferred tax assets and liabilities recognized in profit or loss corresponding to financial instruments from acquisition of interests, tax benefit from tax deductible goodwill, share-based compensation and amortization of intangible assets).
We calculate Managerial Free Cash Flow as Net Cash Flows from Operating activities, less acquisition of property and equipment, less acquisition of intangible assets, adjusted by M&A-related payments that may be classified as CAPEX or as payment of contingent consideration. 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 year (or 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 (Loss), Adjusted Net Income (Loss) Margin and Managerial 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 (Loss), Adjusted Net Income (Loss) Margin, Managerial 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
Interim condensed consolidated statements of financial position
March 31,
December 31,
(In thousands of Brazilian reais)
2023
2022
Assets
(unaudited)
Current assets
Cash and cash equivalents
693,908
216,360
Financial investments
119,963
391,785
Trade receivables
1,016,611
856,887
Inventories
219,245
254,060
Recoverable taxes
69,570
67,166
Related parties
4,079
3,956
Other assets
121,548
82,515
Total current assets
2,244,924
1,872,729
Non-current assets
Financial investments
23,834
30,861
Recoverable taxes
11,010
11,108
Deferred income tax
449,766
337,267
Other assets
78,334
78,038
Investments and interests in other entities
23,093
111,631
Property and equipment
56,870
59,031
Right-of-use assets
69,136
68,696
Intangible assets
3,851,953
3,184,047
Total non-current assets
4,563,996
3,880,679
Total assets
6,808,920
5,753,408
Liabilities
Current liabilities
Trade payables
218,138
182,748
Labor and social obligations
134,054
89,044
Lease liabilities
35,124
34,329
Loans and financing
55,373
102,873
Derivative financial instruments
5,181
3,693
Taxes and contributions payable
19,232
9,488
Income taxes payable
13,352
28,576
Advances from customers
223,299
16,079
Accounts payable to selling shareholders
1,073,957
1,060,746
Other liabilities
8,155
6,013
Total current liabilities
1,785,865
1,533,589
Non-current liabilities
Labor and social obligations
2,605
1,451
Lease liabilities
42,459
42,576
Loans and financing
1,819,346
1,833,956
Derivative financial instruments
63,800
110,154
Provision for legal proceedings
2,358
3,174
Accounts payable to selling shareholders
347,980
330,457
Other liabilities
600
621
Total non-current liabilities
2,279,148
2,322,389
Equity
Share capital
14
11
Capital reserve
2,757,393
2,009,799
Treasury shares
-
(8,205
)
Share-based compensation reserve
95,061
95,008
Accumulated losses
(108,561
)
(199,183
)
Total equity
2,743,907
1,897,430
Total liabilities and equity
6,808,920
5,753,408
Arco Platform Limited
Interim condensed consolidated statements of income
Three-month period ended March 31,
(In thousands of Brazilian reais, except earnings per share)
2023
2022
(unaudited)
(unaudited)
Revenue
534,906
430,037
Cost of sales
(215,734
)
(116,578
)
Gross profit
319,172
313,459
Operating expenses:
Selling expenses
(191,171
)
(164,353
)
General and administrative expenses
(163,682
)
(86,100
)
Other income, net
156,187
17,394
Operating profit
120,506
80,400
Finance income
102,931
159,233
Finance costs
(161,902
)
(125,101
)
Finance result
(58,971
)
34,132
Share of loss of equity-accounted investees
(852
)
(5,642
)
Profit before income taxes
60,683
108,890
Income taxes - income (expense)
Current
(15,085
)
(21,847
)
Deferred
45,024
15,616
Total income taxes – income (expense)
29,939
(6,231
)
Net profit for the period
90,622
102,659
Basic earnings per share – in Brazilian reais
Class A
1.38
1.83
Class B
1.38
1.83
Diluted earnings per share – in Brazilian reais
Class A
0.28
(1.42
)
Class B
1.38
1.83
Weighted-average shares used to compute net profit per share:
Basic
65,778
56,100
Diluted
71,402
61,380
Arco Platform Limited
Interim condensed consolidated statements of cash flows
Three-month period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Operating activities
Profit before income taxes
60,683
108,890
Adjustments to reconcile profit before income taxes to cash from operations
Depreciation and amortization
93,176
65,781
Inventory allowances
9,364
2,399
Provision (reversal) for expected credit losses
30,077
(6,231
)
Loss (profit) on sale/disposal of property and equipment and intangible
542
(78
)
Fair value change in derivative financial instruments
(43,794
)
(11,653
)
Fair value adjustment in accounts payable to selling shareholders
17,601
7,028
Share of loss of equity-accounted investees
852
5,642
Share-based compensation plan
20,824
6,195
Accrued interest on loans and financing
69,862
48,770
Interest accretion on accounts payable to selling shareholders
42,822
43,930
Income from financial investment
(1,330
)
(20,560
)
Interest on lease liabilities
2,924
1,161
(Reversal) provision for legal proceedings
(843
)
95
Provision for payroll taxes (restricted stock units)
(3,133
)
(3,260
)
Foreign exchange effects, net
(16,191
)
(105,306
)
Fair value of previously held interest in associate
(156,414
)
-
Gain on changes of interest of investment
-
(16,413
)
Other financial expense (income), net
(1,224
)
(923
)
125,798
125,467
Changes in assets and liabilities
Trade receivables
(87,781
)
(206,926
)
Inventories
15,319
2,115
Recoverable taxes
6,341
3,182
Other assets
(29,248
)
(8,010
)
Trade payables
24,613
29,455
Labor and social obligations
23,582
14,115
Taxes and contributions payable
7,354
(1,206
)
Advances from customers
207,220
135,170
Other liabilities
(17,374
)
9,424
Cash from operations
275,824
102,786
Income taxes paid
(31,165
)
(42,682
)
Interest paid on lease liabilities
(2,364
)
(1,307
)
Interest paid on accounts payable to selling shareholders
(227
)
(378
)
Interest paid on loans and financing
(110,593
)
(15,580
)
Payments for contingent consideration
(17,601
)
-
Net cash flows generated from operating activities
113,874
42,839
Investing activities
Acquisition of property and equipment
(1,644
)
(6,672
)
Payment of investments and interests in other entities
(20
)
(18
)
Cash attributed from acquisition of subsidiaries
164,252
-
Acquisition of intangible assets
(35,396
)
(45,812
)
Purchase of financial investments
(109,792
)
(167,800
)
Redemption of financial investments
382,305
422,743
Interest received from financial investments
7,666
3,762
Net cash flows generated from investing activities
407,371
206,203
Financing activities
Purchase of treasury shares
-
(34,723
)
Payment of lease liabilities
(10,004
)
(6,293
)
Payment of accounts payable to selling shareholders
(27,158
)
(1,977
)
Loans and financings payments
(5,955
)
(205,860
)
Net cash flows used in financing activities
(43,117
)
(248,853
)
Foreign exchange effects on cash and cash equivalents
(580
)
(2,028
)
Increase (decreased) in cash and cash equivalents
477,548
(1,839
)
Cash and cash equivalents
At the beginning of the period
216,360
211,143
At the end of the period
693,908
209,304
Increase (decreased) in cash and cash equivalents
477,548
(1,839
)
Arco Platform Limited
Reconciliation of Non-GAAP Measures
Reconciliation of Adjusted EBITDA
Three-month period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Net profit for the period
90,622
102,659
(+/-) Income taxes
(29,939
)
6,231
(+/-) Finance result
58,971
(34,132
)
(+) Depreciation and amortization
93,176
65,781
(+) Share of loss of equity-accounted investees
852
5,642
EBITDA
213,682
146,181
(+) Share-based compensation plan
36,980
15,423
(+) Share-based compensation plan and restricted stock units
20,824
8,020
(+) Provision for payroll taxes (restricted stock units)
16,156
7,403
(+) M&A expenses
3,089
1,472
(-) Other changes to equity accounted investees
(156,414
)
(16,413
)
(+) Non-recurring expenses
13,348
-
Adjusted EBITDA
110,685
146,663
Revenue
534,906
430,037
EBITDA Margin
39.9
%
34.0
%
Adjusted EBITDA Margin
20.7
%
34.1
%
Reconciliation of Adjusted Net Income (Loss)
Three-month period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Net profit for the period
90,622
102,659
(+) Share-based compensation plan
36,980
15,423
(+) Share-based compensation plan and restricted stock units
20,824
8,020
(+) Provision for payroll taxes (restricted stock units)
16,156
7,403
(+) M&A expenses
3,089
1,472
(-) Other changes to equity accounted investees
(156,414
)
(16,413
)
(+) Non-recurring expenses
13,348
-
(+/-) Adjustments related to business combination
56,995
49,903
(+) Amortization of intangible assets from business combinations
30,363
28,457
(+/-) Changes in accounts payable to selling shareholders
17,601
7,028
(+) Interest expenses, net (adjusted by fair value)
9,031
14,418
(+/-) Non-cash adjustments related to derivative instruments and convertible notes
(54,983
)
(105,649
)
(+/-) Tax effects
(31,662
)
(16,140
)
Adjusted Net Income (Loss)
(42,025
)
31,255
Net Revenue
534,906
430,037
Adjusted Net Income Margin
-7.9
%
7.3
%
Weighted average shares
65,778
56,100
Adjusted EPS
(0.64
)
0.56
Reconciliation of Free Cash Flow
Three-month period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Profit before income taxes
60,683
108,890
(+/-) Non-cash adjustments to reconcile Adj, EBITDA to cash from operations
65,115
16,577
(+/-) Working capital (Changes in assets and liabilities)
150,026
(22,681
)
Cash from operations
275,824
102,786
(-) Income tax paid
(31,165
)
(42,682
)
(-) CAPEX
(37,040
)
(52,484
)
Free cash flow to firm
207,619
7,620
(-) Interest paid on loans and financings & lease liabilities
(112,957
)
(16,887
)
(-) Interest paid on accounts payable to selling shareholders
(227
)
(378
)
(-) Payments for contingent consideration2
(17,601
)
-
Free cash flow
76,834
(9,645
)
(-) M&A classified as intangible assets acquisition (CAPEX1)
-
5,507
(-) M&A classified as payments for contingent consideration2
17,601
-
Free cash flow (managerial)
94,435
(4,138
)
1)
For 2022, considers R$5.5 million related to M&A payments (PGS’ and Mentes’ acquisition) from the accounting CAPEX of R$52.5 million.
2)
Related to M&A payment (difference between amount in the PPA and the final transaction amount calculated by the earn-out multiple related to the acquisition of subsidiaries).
Three-month period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Free cash flow to firm
207,619
7,620
(+) M&A classified as CAPEX¹
-
5,507
Free cash flow to firm (managerial)
207,619
13,127
1)
For 2022, considers R$5.5 million related to M&A payments (PGS’ and Mentes’ acquisition) from the accounting CAPEX of R$52.5 million.
Reconciliation of Taxable Income
Three months period ended March 31,
(In thousands of Brazilian reais)
2023
2022
(unaudited)
(unaudited)
Profit before income taxes
60,683
108,890
(+) Share-based compensation plan, RSU and provision for payroll taxes¹
25,129
(2,232
)
(+) Amortization of intangible assets from business combinations before incorporation¹
4,181
7,752
(+/-) Changes in accounts payable to selling shareholders¹
(9,226
)
29,873
(+) Share of loss of equity‑accounted investees
852
5,642
(+) Net income from Arco Platform (Cayman)
(177,442
)
(109,515
)
(+) Fiscal loss without deferred
1,930
5,151
(+/-) Provisions booked in the period
103,356
31,285
(+) Tax loss carryforward
69,887
29,679
(+) Others
528
5,080
Taxable income
79,878
111,605
Current income tax under actual profit method
(27,159
)
(37,946
)
% Tax rate under actual profit method
34.0
%
34.0
%
Effective current income tax
(27,159
)
(37,946
)
% Effective tax rate
34.0
%
32.5
%
(+) Recognition of tax-deductible amortization of goodwill and added value²
20,693
11,322
(+/-) Other additions (exclusions)
(8,619
)
4,777
Effective current income tax accounted for goodwill benefit
(15,085
)
(21,847
)
% Effective tax rate accounting for goodwill benefit
18.9
%
19.6
%
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/20230525005734/en/
Arco Platform Limited IR@arcoeducacao.com.br https://investor.arcoplatform.com/
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