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Edited Transcript of ARCE.OQ earnings conference call or presentation 27-Aug-19 8:30pm GMT

Q2 2019 Arco Platform Ltd Earnings Call

Sep 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Arco Platform Ltd earnings conference call or presentation Tuesday, August 27, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ari De Sá Cavalcante Neto

Arco Platform Limited - Founder, CEO & Director

* David Peixoto Dos Santos

Arco Platform Limited - CFO & VP of Business Development

* Vitor Hiraiwa

Arco Platform Limited - Head of IR

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Conference Call Participants

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* Diego M. Aragão

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Guilherme Palhares

Banco BTG Pactual S.A., Research Division - Analyst

* Javier Martinez de Olcoz Cerdan

Morgan Stanley, Research Division - MD

* Maria Tereza Azevedo

UBS Investment Bank, Research Division - Director and Research Analyst

* Mariana Hernandes

Crédit Suisse AG, Research Division - Former Research Analyst

* Vitor Tomita

Itaú Corretora de Valores S.A., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Arco Platform Q2 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded. It is now my pleasure to turn the conference over to Vitor. Sir, you may begin.

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Vitor Hiraiwa, Arco Platform Limited - Head of IR [2]

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Thank you, Brian. I am pleased to welcome you to Arco's Second Quarter 2019 Conference Call. With me on the call today, we have Arco's CEO, Ari De Sá Cavalcante Neto; CFO, David Peixoto Dos Santos; and our new FP&A and IR Director, [Roberto Otero].

[Roberto], I will turn the call to you for the safe harbor remarks.

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Unidentified Company Representative, [3]

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Thanks, Vitor, and thanks, everyone, for joining the call.

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

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

The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law.

In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures in our press release.

Let me now turn the call over to Ari De Sá Cavalcante Neto, our co-CEO.

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [4]

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Thanks, [Roberto], and thanks, everyone, for joining Arco's Second Quarter 2019 Conference Call. As we approach the month of September and the first anniversary of our IPO, we find it appropriate to recap our commitments from a year ago and be accountable with investors who have been supportive of our trajectory ever since.

For those who have been following our story since the beginning, you might remember that we mentioned during the IPO some important goals we wanted to accomplish. The first and most important goal directly related to our mission was to continue to deliver high-quality education and scale and be recognized as the leader in terms of quality in education in Brazil. The second commitment was to continue to help grow our organic business by investing in our product and strengthening our relationship with our partner schools. And lastly, to continue to pursue new opportunities, launch new products and deliver successful acquisitions.

In terms of quality, our solutions have proven once again to have superior outcomes. For another year, schools using our solutions are listed among the best in the country. And similar to last year, we have 3 partner schools ranked in the top 10 in Brazil national exam, ENEM. The number of schools classified as the top 3 in their cities has increased since the IPO, which currently stands at 216 partner schools. Those academic results, combined with our focus on our clients, continue to show us that we are on the right path to enhance the academic performance of our partner schools, and as a consequence, transform their students' lives.

As we mentioned many times before, quality and brand equity in this business are crucial to succeed, and this is not built overnight. It takes time to build a strong brand given the long sales and academic cycles of the K-12 industry.

If you move to Slide 5, we'd like to remind what we consider to be the gear of our success. Our focus on the long term and our investments in our product. We think this chart shows the reasons for our outgrowth over the years. As we invest in content, quality and technology, we enable our partner schools and students to achieve superior academic results. Those results, combined with the work of our farmers, lead to higher brand equity, higher retention rates, and high net promoter scores. This has been fundamental for us to grow and gain market share, which translates into scale gains to reinvest in our product. This is our mantra. Our long-term focus is what drives us every day.

Moving to M&A, let me give you a quick recap of our strategy that is on Slide 6 of our presentation. It is divided into 3 objectives. First, extend our network of schools. Increasing our network of partner schools gives us scale to continue to invest in our products. This is key to succeeding this industry and Positivo was a unique opportunity for us to acquire an iconic brand that will add nearly 700,000 students to our platform. The higher the scale, the higher will be our capability to invest in content, technology and deliver a better solution to our customers.

The second pillar is to deploy acquisitions that extend our product offering. As we mentioned in the last call, we believe that the school is the cornerstone in the children's education and should become the center of the learning experience, offering both core and supplemental solutions to improve the students' outcomes. On the Supplemental segment, most of the schools don't have the content nor the methodology to build a pedagogical curriculum. For that reason, Arco sees an opportunity to offer new programs as we have been doing successfully with international schools. In order to further enhance our portfolio, we invested in Nave à Vela, a competence-based supplemental solution. I will share some color on this soon.

The third M&A pillar is to deliver value-add technology features to our partner schools. This strategy complements our efforts to develop in-house solutions and tech-enabled products to our clients. We are constantly monitoring the market to identify trends and great products that fit our platform and enhance the student learning experience with technology. Escola em Movimento fulfills this need, and we are excited about the opportunity ahead.

Now I'll talk about the new acquisitions in more detail. On Slide 7, we show that Nave à Vela fits precisely into our supplemental offering. Let me share more context on our strategy and the associated opportunities. To start, students in Brazil stay in school on average 5 hours per day, usually during the morning, compared to 9.5 hours in China, 8.5 in France and 7.5 hours in the U.S. So schools in Brazil are usually idle in the afternoon. This time could be used to offer other activities for students and turn the school into the center of the learning experience as a one-stop shop content for education. Also, according to Inep, a research agency linked to Brazil's Ministry of Education, there was an increase of 45% in the number of full-time students in Brazil from 2010 to 2017. There is a demand for schools to offer new activities for their students, and we believe that esteem, 21st century skills and language could fill the gap that Brazilian schools have.

Among the Supplemental Solutions, we believe that teaching of new skills such as critical thinking, problem solving, creativity and innovation and communication are not only important from a pedagogical standpoint, but also essential to succeed in a 21st century society. This is part of a growing international trend focusing more on the development of competence-based learning than the traditional content knowledge-based. With this favorable scenario, we decided to invest in Nave à Vela. It is one of the best competence-based learning solution with a proprietary high-quality content and methodology, fully integrated with K-12 curriculum. It's adopted by top-rated schools in Brazil, growing significantly over the last years with 0 churn. Nave à Vela has the same B2B2C model with presence in more than 50 schools and 15,000 students, and represents not only a promising business unit on a stand-alone basis, but also a cross-sell opportunity once put into our network of schools.

Moving now to our Escola em Movimento acquisition on Slide 8. EEM is a powerful app with more than 500,000 active students enrolled at more than 800 schools operating under a B2B2C model. It connects all the stakeholders in the school environment, allowing them to communicate and interact through a digital platform. EEM adds enormous value to parents by allowing them to easily follow and monitor the school activities and be more present on the educational life of their children. With EEM, the school can offer an app that enhance the communication with parents, providing chat-based interaction, location-based identifications, MPS tool to assess parents' satisfaction in a pilot project on payments. This acquisition brings Arco new capabilities that further increases our value proposition to partner schools, parents and students and also allows us to access EEM's network of schools.

We're very excited about the future prospects of Nave à Vela and Escola em Movimento. Despite the fact that we've been working on these initiatives already, more important than the contribution to the short-term results is our belief that both companies fit well on our efforts to build a sustainable, differentiated business for the long term.

With that, I'll turn the call to David who will discuss the financials. David, please go ahead.

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [5]

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Thank you, Ari. We are excited about our recent acquisitions of Positivo, Nave à Vela and Escola em Movimento, all of which increased our network of school, supplemental solutions and features offered to our partner schools.

Before we dig into the numbers, I'd like to introduce, for those are new to our story, our recommendation to analyze Arco on an annual basis. Since our revenues are 100% subscription-based, we operate under the annual contract value or ACV metric. ACV is calculated by multiplying the number of enrolled students at each partner school by the average ticket per student per year. As a result, we have high predictability of our revenue on a yearly basis, but revenue can vary between quarters. The amount of revenue recognized is proportional to the amount of content made available, which is not linearly distributed among the quarters and also depends on our customer's decision of when to receive the content.

Also, please note that except for revenues, gross margin, selling expenses, G&A and cash flow from operations, all financial measures I discuss here are non-IFRS, and growth rates are compared to the prior year comparable period, unless otherwise stated.

Now I will go over our financial highlights, then give more details about our margins and free cash flow and finally provide the guidance for the ACV recognition for the third quarter of 2019 and EBITDA margins for 2019 fiscal year.

First, review our numbers. Net revenue for the second quarter of 2019 was BRL 137.6 million, which represented 31% of the 2019 ACV versus 25% in the same quarter of the last year. The revenue recognition may vary among quarters with no impact in the total ACV and this happens due to the product mix, logistics and our customers' decision of when to receive the content. Despite the higher revenue recognition, we maintained our 2019 ACV guidance of BRL 441 million, unchanged. Net revenue for the first half of 2019 was BRL 254.6 million versus BRL 195.1 million in the same period last year. Combining the last 3 quarters' revenue, we have recognized 85% of the 2019 ACV, compared to 82% of 2018 ACV.

Gross margin was 81.2% for the second quarter versus 79.3% for the same period in 2018, and it's in line with our historical trend of increasing gross margin but also reflects the higher revenue recognition in this quarter. In the first semester, our gross margin was 81.3%, up 300 bps year-over-year.

Selling expenses for the second quarter of 2019 was BRL 39.3 million, up 63% compared to BRL 24.1 million for the second quarter of 2018. The higher selling expenses reflect our investments in our sales team, including hunters and farmers as an effort to offer continued support to our partner schools and expand our network of clients. G&A expenses was BRL 44.9 million, compared to BRL 70 million for the second quarter of 2018, and included BRL 20.8 million of share-based compensation and BRL 4.4 million of M&A-related expenses, which we consider to be nonrecurring. Adjusting for those 2 items, G&A would be BRL 19.7 million, showing significant scale gain year-over-year.

Adjusted EBITDA was BRL 61.4 million for the second quarter of 2019, up 128% year-over-year. We are on track to achieve adjusted EBITDA margin of 35.5% to 37.5% in 2019. Free cash flow for the second quarter of 2019 was BRL 49.5 million, increasing 28% compared to the second quarter of 2018 and reflects an 81% adjusted EBITDA conversion. In the first semester, we generated BRL 81.7 million in free cash flow or 74% of our EBITDA.

Moving now to the guidance. For the third quarter 2019, we expect to recognize around 15% of the ACV 2019 or BRL 65 million of revenues. Also, we expect our adjusted EBITDA margins full year 2019 to be in the range between 35.5% to 37.5%.

And before turning the call back to Ari for the closing remarks, I would like to provide an update on Positivo's acquisition approval process. On August 16, we got the great news that the superintendent of the Brazilian antitrust agency, CADE, published on their official gazette the approval of the acquisition with no restriction. Now we are waiting for the nomination of the CADE's new board members for the process to move on. Once this board is duly composed, a 15-day period starts to count, and if there is no objection, the transaction is formally approved. It's important also to highlight that since the signing of the transaction, we have a dedicated team working together with consulting firms to prepare for this integration. We remain confident with the success of this operation. And we will keep the market update of any new developments on this matter.

And with that, I would like to turn the call back to Ari for the closing remarks. Ari?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [6]

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Thank you, David. I would just like to quickly point out the key factor of our success throughout all these years, our strong culture. We have 6 important pillars, which is shown on Slide 13, that we believe as essential to run our business.

Today, I want to talk about one specifically, which is the value we attribute to our people. Without our great team, we wouldn't be here right now, a company that is able to deliver high-quality education at scale and impact the learning experience of thousands of students. In order to keep improving and growing further, we need to constantly find new talents that will promote our culture further. This year, we achieved a remarkable accomplishment and became one of the largest trainee programs in Brazil. We're very proud of that. Our program had over 46,000 applicants, and we managed to find 14 new talents to be part of our team. Being recognized as a great place to work and having those thousands of young talents willing to join our team means a lot to us and is a proof that we are on the right path to continue to deliver our mission.

With that, we conclude our presentation. Thank you for your time, and we can now open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from the line of Vitor Tomita with Itaú.

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Vitor Tomita, Itaú Corretora de Valores S.A., Research Division - Research Analyst [2]

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Congratulations on the results. On our side, our question would be, if could you elaborate more on the price paid for the new acquisitions and the structure of the transactions, and also on whether this company's management will remain with Arco?

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [3]

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Vitor, thank you for your question. So regarding the acquisitions, so the first one, Nave à Vela, it was an acquisition in 4 installments, and we start with the first step when we acquired 13% of the company for BRL 4.2 million, and the remaining 87% will be acquired in 3 installments according to the company's performance and as we stated in the financial statement.

And the other acquisition, Escola em Movimento, EEM, this one was already fully acquired for BRL 18 million, with BRL 16 million paid upfront and BRL 2 million remain to be paid in 2 installments. Both of the companies, we keep the management. They are working with us to extract the synergies and grow the business. And I believe that I answered most of your questions, right?

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Vitor Tomita, Itaú Corretora de Valores S.A., Research Division - Research Analyst [4]

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Yes. Perfect.

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [5]

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Thank you.

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Operator [6]

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And our next question will come from the line of Mariana Hernandes with Crédit Suisse.

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Mariana Hernandes, Crédit Suisse AG, Research Division - Former Research Analyst [7]

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My questions are also about the recent acquisitions, but in the sense that I would like to get more color about how the business models work. So for instance, for Escola em Movimento, how are you going to charge for it or going to provide as a free tool for partner school to have access to or how is it going to work?

And in regards to Nave à Vela, I mean, how much parents will need to pay for this addition to tuitions? And do you have any estimates about the potential addressable market size of this business? Or any other details that you are able to share about this acquisition in terms of how the operations work, it would be very useful.

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [8]

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Mariana, thank you for your question. So the 2 companies that we have acquired, they operate in the same business model as our current business do. So we sell that to the schools and the schools resell that to the students, both the app from Escola em Movimento as well as Nave à Vela. We intend to keep them as independent operations, so they have their sales force team, they go to the schools and then negotiate long-term contracts with the schools, so that the schools can use the solutions. But we also plan to extract synergies especially in the back-office area, and we do see across opportunities both in the case of Nave à Vela and Escola em Movimento.

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Mariana Hernandes, Crédit Suisse AG, Research Division - Former Research Analyst [9]

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Perfect. And just a quick follow-up. Are you able to share any details about how much does it cost for schools or, in the end, for parents to acquire these optionalities?

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [10]

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So since the Nave à Vela business, we are not yet consolidating, we expect to disclose the information when we perform the second installment payment and when we acquire the formal control of the company, and then we can share those financial numbers with you.

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Operator [11]

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And our next question will come from the line of San Diego Aragão (sic) [Diego Aragão] of Goldman Sachs.

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Diego M. Aragão, Goldman Sachs Group Inc., Research Division - Equity Analyst [12]

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Okay. So my name is now San Diego then, that's great. Thank you for the update on Positivo. I guess my question is a follow-up on the 2 smaller deals you mentioned. So first, how should we think about their organic growth in 2020? And second, how is the revenue recognition for these companies? I understand that you also want to keep them independent, but how fast do you see them gaining some penetration within your customer base?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [13]

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Thank you, Diego, for your question. These companies have a very strong track record in organic growth through all the last years. It's still soon to predict how they will perform for the following year, but since the quality of the products and -- that we have seen, we are very optimistic in how they will grow organically. Of course, we expect to do a cross-sell between -- among all our business units and these new solutions, but I think it's still early to predict any kind of revenue or numbers in terms of these 2 companies. Can you please repeat the last part of your question, please?

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Operator [14]

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Diego's line has left the queue. Our next question will come from the line of Javier Martinez with Morgan Stanley.

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [15]

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In reality, I was with the same idea that San Diego was asking, to try to understand with the penetration, I understand that it's maybe a little bit early. Your commercial team, so you will have it independent, I understand that, I understand why. But I guess that your commercial team will be already ready to sell that as part of your platform in the next commercial year, no? I guess no, this year is too early, no? Is that a good assumption? And second, when will be this second installment? So when will -- from where -- from when will you be able to consolidate the control of the company and have the actual control of the company, of Nave à Vela, sorry?

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [16]

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So just answering the last part of your question, and sorry -- thank you, Javier, for your comment. So just jumping to the end of the question, we expect to consolidate for -- the Nave à Vela company for the ACV 2020. And the Escola em Movimento, as I said, we already acquired 100%. So from the next quarter, they would be already consolidated in our financial statements.

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [17]

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Javier, answering your question regarding how we are selling these products, yes, we intend to keep the sales force separate. But of course, we are studying possibilities to bundle the solutions in order to offer a more comprehensive product to the schools. Sometimes it makes sense to a school to buy the learning system together with the tech app or the 21st social and emotional skills product. So yes, we see an opportunity to enter new schools with these products, Escola em Movimento and Nave à Vela, but also, we are planning to develop specific solutions, bundling each of these solutions together with our current products.

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [18]

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Ari, so as far as I am aware, these are similar products that used to be in the market, that was the leader in ENEM. But I am not aware of any other product. So is it a good understanding that it is a market with really low level of competition? So there is no -- so it's a potentially big market without many competitors at use and maybe one or maybe somebody else or -- so if you could give us an idea of how many players do we have on the table to try to understand how this is going to look like would be very helpful.

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [19]

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Yes. I think you are correct. There are a few players in the competition of this market. I think we can benefit from the scale in order to develop a very high-quality solution and deliver that into the platform of schools that we already have relationships with. They operate in the same Supplemental segment as international school. And also, you can see a very strong trend in the education area to start to teach the kids not only the traditional core curriculum but also this kind of skill. So we see a good trend on that opportunity on that market.

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [20]

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And this finally, this is a product, correct me if I'm wrong, more for the secondary students or this is a product for all the ages? I'm not 100% sure about that. Just to try to understand from your addressable market, which portion of the students/parents will be buying this? It's more for the secondary students, right?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [21]

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So it's for all the segments, actually. This is a product that works with the skills of culture, of innovation, entrepreneurship, creativity. So you have a specific products for all the segments of a K-12 private school.

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [22]

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And the product works? Sounds like a very exciting proposition for parents. I want my kids to go to that school, but you know what I mean, that sometimes -- so to visualize how it's very innovative, so it works well?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [23]

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Yes. The product works very well. Two things that we can mention about the company is that there are 2 very talented founders who came from USP and developed that curriculum there, and the second one is that they are already in the top-rated schools in Brazil.

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [24]

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Okay. Sounds very exciting...

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [25]

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Just to add one more comment which is, I think it's important. In the last 4 years, the company had 0 churn, which is a very important metric to access the quality...

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Javier Martinez de Olcoz Cerdan, Morgan Stanley, Research Division - MD [26]

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That's the surprising figure because in a product like this, it's like -- it sounds like amazing, no? Like, this is the kind of thing that you try as a parent. You say, okay let's try with my kids, but then they don't like it, they like it, and you send them to do soccer or whatever, no? But -- so not having been successful with all the schools is quite surprising, no? So sounds like you have a very interesting thing in your hands, no? Let's say, will be good if you can give us eventually more information to try to quantify the potential of the addressable market, et cetera, et cetera.

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [27]

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Sure. We can do that. We believe so.

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Operator [28]

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And our next question will come from line of Maria Azevedo with UBS.

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Maria Tereza Azevedo, UBS Investment Bank, Research Division - Director and Research Analyst [29]

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You're on track to reach your target. Do you see any upside risks for your EBITDA guidance for the year? And if you can comment on more general terms about 2020 commercial outlook -- commercial and competitive, and now that you have a stronger sales force, if we should expect some accelerated growth in that line?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [30]

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Maria, thank you for your question. Talking about the sales cycle, we believe it's too early in the year, but we are optimistic with the Brazil results of this season. And I think David can answer your question regarding the margins of EBITDA.

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David Peixoto Dos Santos, Arco Platform Limited - CFO & VP of Business Development [31]

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So the margins are actually in line with our expectations. So we -- so every quarter, we will discuss if we'd like to update these numbers and report changes in the projections. But so far, we are still in line with the first projection that we discussed with you.

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Maria Tereza Azevedo, UBS Investment Bank, Research Division - Director and Research Analyst [32]

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Perfect. And just as a follow-up question, Ari, do you consider accessing the equity markets in the future, in the short term, to foster more acquisitions and also improve stock liquidity? Is this a scenario you are considering?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [33]

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Yes. So we are -- I mean, we are always analyzing opportunities to a better capital structure. But concerning the acquisitions that we already performed, we can finance them with the cash generation from operations without the need of new capital injections. And also, if we see new opportunities for M&A, and we want to decide, we already have a preapproved financial line that can work as a bridge to finance new targets.

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Operator [34]

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(Operator Instructions) Our next question will come from Guilherme Palhares with BTG.

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Guilherme Palhares, Banco BTG Pactual S.A., Research Division - Analyst [35]

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Two questions here, one is Nave à Vela. Just to be clear, this product, it's different from what (inaudible) it's called Inteligência because of its maker feature, right? So just to get that clear.

And the second question is on Escola em Movimento. We understand that the company itself has other learning systems as clients. And then just want to understand what are the plans for that business unit in terms of this relationship with other learning system, and what is the company thinking about with that software solution here?

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [36]

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Thank you, Guilherme, for your question. So the Nave à Vela product is quite unique in terms of the quality of the content and the approach. It's not a feature, so it's really a product that we are selling to the schools, then the schools are putting in place class per week, and they are reselling that to the parents. So that's pretty much how it works.

But talking about Escola em Movimento, Escola em Movimento is more like a feature that you sell to the school, then the school sell that to the parents, and that feature is a tech feature. It's an app that enables the interaction and communication among parents and the school, the academic performance, and we believe we can add new capabilities to this app. But it's a feature that the school uses to communicate with the parents, and we believe there's a lot of opportunities to add new features and enhance the school and the parents' experience through that.

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Operator [37]

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And we have follow-up questions coming from the line of Diego Aragão with Goldman Sachs.

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Diego M. Aragão, Goldman Sachs Group Inc., Research Division - Equity Analyst [38]

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Unfortunately, I got disconnected previously. So my apologies if I missed some of your comments, but just want to check whether there are some earn-outs related to these acquisitions.

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Ari De Sá Cavalcante Neto, Arco Platform Limited - Founder, CEO & Director [39]

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So thank you for your follow-up questions. So regarding Escola em Movimento, we don't have. And talking about Nave à Vela, yes. So there's other 3 installments, they are related with the company's performance, and they are valid. On average, 5x revenues in the last 12 months. So it's an average because it varies depending on the installment. The average, so it's 3, it's 6 and then 4 and then 3, so on average is 5x revenue in the last 12 months. And we provide more details about this on our financial statements.

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Operator [40]

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And I'm showing no further questions in the queue. Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and we may all disconnect. Everybody, have a wonderful day.