Arco Platform Limited

Good afternoon, everyone. Thank you for standing by and welcome to ARCO platform second quarter 2022 earnings call. This event is being recorded and all participants will be in a listen-only mode during the company's presentation. After ARCO's remarks, there will be a question and answer session. At this time, further instruction will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being broadcast live via webcast and may be accessed through ARCO's website at https://investor.arcoplatform.com where the presentation is also available. Now, I'll turn the conference over to Karina Carreira, ARCO's IR Director. Karina, you may begin your presentation.

Thank you. I'm pleased to welcome you to ARCO's second quarter 2022 conference call. With me on the call today, we have ARCO's CEO, Aridhissa Cavalcanti Neto, and ARCO's CFO, Roberto Otero. 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, our expectations and guidance for future periods, our expectations regarding strategic product initiatives and their related benefits, and our expectations regarding the market. These risks include those set forth in the documents that we issued earlier today, as well as those more fully described in our findings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the day 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 in 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 measure in our press release. Please note that except from revenue, gross margin, selling expense, G&A, and cash flow from operations, all other financial measures we discussed here are non-IFRS, and growth rates are compared to the prior period comparable period unless otherwise stated. We also note that year-over-year comparisons are affected by acquisitions that were not included in our 2021 financials. Let me now turn the call over to Ari, ARCO's CEO.

Thank you, Karina, and thanks everyone for joining today's conference call. We hope that you and your families are all healthy and safe. I'd like to start with the highlights of the quarter on slide three. First, we had net revenues of R$ 412 million in the second quarter, 61% above the second quarter of 2021, reflecting the high level of late orders placed by partner schools, which part of the delivery slipped to April. For the first six months of the year, we accumulated revenues of R$ 842 million, a 43% increase year-over-year or a 31% organic growth. As a result, we already had 83% of the 2022 ACV recognized cycle to date. This quarter, we had important efficiency results arising from our integration agenda, which were crucial to offset non-recurring increase in operating costs resulted from late orders. The adjusted EBITDA margin was 26.9% in second quarter versus 28.2% in second quarter of 2021. And 30.6% in the first six months versus 32.4% in the same period of 2021. When excluding the one-off impact from late orders in our operating cost, adjusted EBITDA margin for the first six months of 2022 was 33.2%, 80 basis point above six months 2021. We'd like to take this opportunity to reaffirm our adjusted EBITDA margin guidance range for 2022 full year of 36.5 and 38.5% at this time. Second, This was an extremely positive quarter of a cash generation perspective, as we had a strong cash collection, reduced days sales outstanding, lower delinquency, and reduced capex as a percentage of revenue, leading to an adjusted free cash flow generation of 90 million reais in the quarter. In August, we concluded the issuance of debentures aiming to strengthen our cash position and extend our debit maturity profile. Finally, we are very excited about the promising commercial cycle for 2023 school year as we resume in-person interactions with schools. It is still early in the cycle as most of our ACB bookings happens between September and November, but schools' enthusiasm is already leading to encouraging preliminary results. I will now return the call to Otero, who will continue the presentation. Otero, please go ahead.