Arco Platform (ARCE) 24 May 222022 Q1 Earnings call transcript

Good afternoon, everyone. Thank you for standing by, and welcome to Arco Platform First Quarter 2022 Earnings Call. This event is being recorded, and all participants will be in listen-only mode during the company’s presentation. After Arco remarks, there will be a question-and-answer session. At that time, further instructions will be given. is through broadcast where Arco's is available. event and via the This also accessed maybe website Instructions] also live being webcast presentation [Operator at investor.arcoplatform.com,

Arco's the presentation. your to Now, may conference will Carina, you turn Carina I Carreira, IR Director. begin over

With pleased Arco's Call. CEO, Arco Sá Neto; on you. Ari XXXX I'm Arco's CFO, Quarter today, and welcome de to Thank the Roberto to call you First Conference me have Otero. we Cavalcante

our presentation, During executives forward-looking statements. will today's make

events future and those to results future financial unknown relate uncertainties performance generally statements materially factors contemplated actual or or operating forward-looking statements. cause involve risks from Forward-looking these to differ our and known by that and other may

documents our business financial expectations in future our regarding guidance benefits earlier forward-looking information our statements this periods, filings include us and for include, presentation forth These and and the to expectations The with our statements Commission. related regarding the that the of set based hereof. on and not Exchange are their presentation market. we date the in as initiatives well to risks strategic limited the today, as and in more product described issued available expectations are in Securities fully performance, Forward-looking related but to, statements those the as those this

obligation You should any update to forward-looking any events, not by statements, disclaim law. rely on as we them future as predictions and except required of

with measures non-IFRS for or may substitute not management addition, as call. isolation accordance financial to IFRS. prepared reference this in intended financial in results The considered In are on non-IFRS be measures a

all otherwise financial period, note in most rates financial these expense, measures discuss growth comparable from non-IFRS gross that are our year and margin, from directly a here we press reconciliation stated. comparable measures the financial have operations, prior unless and Please flow of to cash compared provided G&A non-IFRS, revenue, are other selling except to release. the measure IFRS We

year-over-year comparisons our that that note not also included by financials. acquisitions were are We affected XXXX in

CEO. Let me now turn the Arco's call to Ari, over

everyone, We X. all Thank today's and slide like you start quarter and the call. on joining families for are would safe. and to I highlights you, thanks, with conference healthy Carina, the that for hope your

First, students the pandemic, the who creating really as started school dropped significant to year This of sector. led return by pace, quarter. of at in results, orders number resumption our out very during the in private fourth and in quarter momentum of positive movement in mentioned a placed the K-XX favored additional from a classes the Brazilian the schools strong the a first

result to date a the of XXXX of ACV figures the April show year. from XX%, over we causing years, as expectation cycle delivered Second, to the XXXX, stage quarter, revenues will of revenues part that this highest our unusual these that were the of XXX% effect this through recognition into April, in When at second this which October level our the ACV analyzing to slipping late orders quarter. effect, conversion recognized neutralize confirming first quarter, placed past an first this of orders level was are traditionally high being in the in

improve Third, for months in margin improve year-over-year four of adjusted points processes increased XXXX, commitment first basis our the our EBITDA evidenced efficiency. to XXX and

of to our XX.X% We for XX.X%. fiscal margin are year reaffirming XXXX guidance

generation. Finally, on cash

who presentation. going important now to leading forward. Please, will the a the This in percentage priority of of Also, us ahead. profile, is revenues This strong and COC levels cash tax quarter, to a receivable we for Otero. Dom key turn we concluded will this already Otero, had healthier in returning indicating year. savings Bosco, CapEx I call continue historical the as a May, incorporation generation

the the incremental illustrated your million revenue Part of Ari, time. everyone. volume quarter. schools X, evening, that effect of first consequent of the to April, Thank of April late performing. XXXX. those quarter and quarter, of first between better present To good those for proxy effect also slipping had in partner the placed four you Thank be orders in results, think is on enrollment today by accumulated results to how BRLXX the to and we usually high this orders January you, the we be our Starting resulting better high a in Slide delivered business of orders in the profitability is the recorded for we second of show will XXXX additional and months as

XXXX representing Net XX.X% number were of for was BRLXXX acquisitions growth of concluded When top line revenue the excluding revenues first line strong to growth quarter XX%. ACV. a top recently, the recognition Moving million, X. XX% the organic Slide and year-over-year XXXX

mentioned the the content for we high are line this of top months As of excluding schools XX% level of effect, presenting orders unusual XX% which partner early by XXXX, by quarter delivered typical growth late being led the first placed by first or this acquisitions. the April. increased To in neutralize seasonal to part four Ari, year-over-year in

the a past approximately makes us which of to XXX% ACV have the recognition XX%, for of ACV confident reached cycle cycle. years result, highest recognition several As we XXXX the the date over

year, positive our cross-selling excluding some classroom. to quarter, with including the first initiatives expenses, decided strategically schools of Brazil were Moving of line investments line, as take that commercial M&As environment Slide return to we in in the students to not the top last across advantage to grew X. as higher anticipate to Selling consolidated in

year-over-year contracting X, the real estate from slide the expenses to excluding On the at services third-party when actually below software, expenses, and other in acquisitions. savings BRLXX other quarter. growing the corporate detail gains personnel, G&A representing initiatives with improvement, obtained we hand, On show efficiency continued this and X% million X% important line top and

acquisitions, when above year-over-year. X, Moving quarter first or EBITDA the flat of XX% slide for leading margin million, excluding reached quarter first a BRLXXX.X XX.X% to to adjusted of XXXX, the the XX.X%

cycle the higher and depreciation XXX we income and months think XX% in showing which Looking and representing top a recently continuous expansion expected quarter, and figures, is at the revamp EBITDA in of quarter number proxy internal better the year-over-year four points, amortization of profitability cycle-to-date, clear efficiency X, for is businesses. for product year evolution of of higher product a slide business strong summarized topline adjusted how On Adjusted the and year-over-year acquired financial contracted initiatives. the net the the for jumped four-month the our on margin investments XX% accumulated performance of basis the costs of profitability. growth XXXX we year-over-year reflecting with the

XX.X% first the roughly million, In revenues. figures XX, was in This executed. of of the reduction slide at of XXXX, of reflects projects lower BRLXX integration higher CapEx the Moving the units, business for and performance. level quarter, to months down much CapEx a CapEx being cash four cooperation to generation present drivers on XX% redundancy net driving accumulated looking across we the When revenues. went higher

On past process aid receivables. the additional payment receivables, our like already acquired XX% growth, receivables, pandemic as a next strong organic and better collected collected million of the in the schools a the COVID-XX and due highlight expected collection approximately the impaired only April, led total to an slide, that and during is lower BRLXXX lower to was months of to businesses, BRLXXX portion now already of or We'd increased incremental in past of delinquency of which revenue extended of detail Nevertheless, profile the partner BRLXXX result offered revenue from years. the terms million we a due receivables, to net as from be May million the June.

COC and which Finally, rate May, on slide will of second Dom incorporation onwards. XX, Bosco the quarter effective to from lower we lead concluded the in tax

Arco's once are business will acquired is the of be incorporated. Therefore, and goodwill effective consolidated rate. Dom tax to taxes As Bosco deductible at law, per the the tax Brazilian able forward, amortization going COC net from businesses we lowering

combined BRLXX reference, a in in million solutions taxes XXXX. As paid these

We Ari turn expect including for for remarks. Inteligência Digital, Geekie, Pleno, da other leading I'll the Ari, to years please closing incorporate quarters, Escola business go ahead. tax ahead. the acquired SAE call important his several and savings back to to in future

our sectors the Thank the you, Schools pandemic, ahead were were most the Brazil during us. like finish optimism by the globally. I the would longest in this emphasizing period closed for call suffered among schools with of that as Otero. year to

higher the making and with to growth our the more of is last schools of we the clients for decisions With our our strengthened NPS upselling different supplemental and students the of the across resumption and schools, and we prospect to for enrollments managers prices grades, core, these achieved lower the our higher partnership level being than gains confident services owners start of through The momentum reducing allowing relationship future, over started We, stress in-person combination see brands, a schools. we an solutions, upbeat including years have a as will of dropped with cohort into has return to to other clients, out adoption churn. increasing operation percent the classes, solutions. convert and scores couple and are much cross-sell ever, who all of of

improved We have and results also decided this point. the this industry year are quite go-to-market early capitalize on already momentum, to at strategy encouraging to these anticipate our

management through the team. Finally, become but only flow allocation creation and the company, key emphasize through have discipline capital cash to in I of processes, our incentives wanted generations alignment priorities the also for financial strategy not of

trust Our to cash the value for we thank into flow translate can is for and now generation shareholders. equity the come earnings for We expect open your goal main to Operator, quality, to growth line years we top questions. strong you support. and creation

now The question-and-answer [Operator comes Ladies first and BBA. Lucca session. with from Please will sir. gentlemen, proceed, Marchesini Itau question we begin Instructions] the

taking our everyone Good question. thanks and evening for

brands higher office be whether in efficiencies this brands? be second same in expect was for supplemental Could magnitude Thank you. in appeared is this is volume comment the total you the more question also, question attracted corporate to this back intense our partial million late XXXX. we reorganization. recognition this acquired April. across please solution. and savings on First XX Should announced of legacy if BRL or orders on The expected And regarding the or XXXX? And has and of company savings related additional to should the

the it's questions. Hi Thanks here. Otero for Lucca,

regarding the more I was in say, it it's across the But equally split okay? all brands. core first would segment, one, concentrated So the

office, areas we XXXX for provided year, the across to this On would such I very supply say okay? savings, would process. example, core as as But delivering areas, three-year it's similar say of more the for second limited a So, we in results like it guidance brands, a is movement process. okay? back year saw takes of technology, would chain. we the the that say all It's for in one, capable some I such longer, So regarding I are the most in this first other a that only. longer not two

Very clear Thank you. Otero.

Thank you.

sir. comes next with from Vitor The question Please Tomita Sachs. proceed Goldman

thanks Thank taking you. for questions. Good our all and evening

side. have two questions our We from

The is on enrollments. -- on first one the also the late

expected return And our both underestimated would Given of actually than question second that in the would been be schools revenue on enrollments potential on you full the and may surpass have leverage. ACV dropout see cycle figure the for number higher that the do to announced? have students that pandemic, you

Thank If more debt give your markets the upcoming environment. maturities strategy for us you. could current you expanding on color some capital considering

Vitor, here. questions. the for Thanks Hi it's Otero

that this say, okay? very one, given mood. -- for a cash, students general, strong, will Ari call mentioned his after not inflow opening from overall successful price we're seeing without those implemented first I an the seeing almost On ground, as the of increasing but on tuitions see a schools that is was a following float the in increase quite economic we dropped remarks, couple the who years of I to are, So, during what say momentum out, only prices. would

regards at that would at deleveraging revenues, can upside terms leveraging there the be to, a the is priority quarter general already we it's expect and to say net happening, we around encouraging, environment I eventually, the guarantee ACV okay? In to indebtedness, into us But for X.X plan the and mean, figures, some rollover would and that of okay? the the quite in debt okay? three finish point, the times enrollment, So, case this the I that, in XXX% say year is -- times. I'll say we this EBITDA, the to With could yes, key we recognition I year, of of finished

and As continue also the we EBITDA April the so we're coming. to onwards, cash accelerates inflation expand already okay, from receivables seeing

mean, so to -- at far. okay, the of is debenture, this the course, that's extend despite closed. the and are. May momentum, collected maturity debentures we those of very any of the, it's market mean, we We two have those But guidance equity I towards With very a cannot, in course, because are expectation. to So, of years, of rates in working regards the significant for bad a same not operation I provide the until okay? point, three the five to April but that portion course, is, of where interest market

little there is move in the general, environment overall general, demand supply okay? are in okay? further our more in than bit time, So, seeing for that indebtedness good market we So, a in to a

Very clear. Thank much. you very

go Morgan Thank Martinez Javier The next ahead you. Stanley. with Please sir. question comes from

sure that you questions you. a understood couple those to orders of well. make just it additional Thank Thank wanted to I guys. on you, ask I

not? that additional or month is move this timing you. about of implicit like guidance, margin I'm know the orders more that is in of about understanding my that that I it's bookings understood one or about slide a So move included And just Thank April. little it's case, So if expected? don't number the on that's from the other are things guidance And those something? orders? Slide Is the talking that is I also the than additional bit X, originally or fees orders, or the correct, if missing to correctly is the we lower, XX% in also, in

Thanks Hi, Javier, for Otero questions. Thanks. the here.

combination on say, would of I first it's both. question, a So your

And orders. than later additional usual came it the they is yes, case. So

than So the the year, of this fourth this content all okay? basically, supply we actually use of across in is and that. demand saw school second and really there semester the schools we is to consequence, across number the us, So is as that brands previous first the a those complexity this usually current some actual to to it the the But okay? was when content came year then started, time higher expected, And the the year and need the and of delivered schools first in students truth and quarter deliver deliver produce as Brazil widespread fiscal quarter what okay? chain the

see year, compare Part in still very mean, months. a But quarter very the of or provided will see the end With So you that mix that's orders four the we have I those usually guidance, is months periods, seasonality by those you if in additional to okay? mean, ACV our revenues highest okay? second EBITDA track margins don't okay? to is The in lower of guidance, the see the first first weeks is the the increase, Part confident okay? So margins, the we already think going the of typical. in months are I mean, in QX months that with So the mean, on last that And, of already is we're to mean, guidance I why of the when EBITDA we to first actually margin April, margin of versus first linked and six QX, deliver is be to okay? you reflected the we three that versus I committing margin guidance. we four that or thing guidance. the lower would important last of we year. we're surpass given it traditionally, regards of reflected brands margin, margins, I profile accumulation okay? ACV

Roberto, thank very you much.

have the cost price this incremental -- terms you everything scale the companies incremental cost have, impact that you -- have under year line, you incremental the the of passing not the of in in paper so is with Now I because that of that of okay everything through has printing control?

Javier. question, last Sure. that have great was of That's first supply a would that the areas year, chain. I say we Yes, integrated one

all for they because timing. with bid But later and a joined we of excluding pretty creating much altogether, Bosco okay, So Dom national negotiations. brands, those made companies COC on, the

we in to fixed, the for page paper for able percentage year printed, okay, points general, three below this XXXX. price And So increase the okay? inflation, were already is price per

for now we think in power right? starting mean, our that negotiation already is -- bargain are I the this the for safeguarded. be will So we much We the volume, cycle. use have And higher But able next benefit, okay? we it XXXX, to

page are We points below printed. percentage a running three the price basis per for on inflation comparable

clear. Very Thank much. very you

Javier. you, Thank

further no today. we It questions appears Instructions] for [Operator have

concludes that very the participation a have your Educacao good today. Thank So much Conference Arco and Audio for day. for you