Arco Platform Limited

Good afternoon, everyone. Thank you for standing by and welcome to ARCO Platform's third 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 remarks, there will be a question and answer session. At that time, further instructions 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 third quarter 2022 conference call. With me on the call today, we have Arco's CEO, Ari de Saca Volcanti 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. Forth-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 expectation 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 on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in according to 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 for revenues, gross margin, selling expense, G&A and cash flow from operations, all other financial measures we disclose here are non-IFRS and growth rates are compared to the prior year comparable period unless otherwise stated. We also note that year-over-year comparisons are affected by acquisitions that were not included in our 2001 financials. Let me now turn the call over to Ari, our co-CEO.

Thank you, Karina. Otero and I would like to present three main topics today. First, the conclusion of the 2022 cycle with 100% of ACV recognition to a top line of R$1.561 billion, representing a 48% year-over-year growth. Profitability improved in 2022 cycle with a 2.3% point increase in adjusted EBITDA margin. Second, the significant improvement in the free cash flow to firm in the first nine months of 2022, mainly driven by a more efficient operation, healthier working capital dynamic, lower effective tax rate, and lower CAPEX as a percentage of revenues. We are reaffirming the adjusted EBITDA margin guidance for 2022 and expect to be closer to the bottom of the range. And third, the outlook for 2023 with commercial cycle for our pedagogical solutions indicating a strong 24% organic growth for the 2023 cycle and integration and efficiency initiatives leading to a better cash generation profile. We are maintaining the adjusted EBITDA margin guidance for fiscal year 2023 at 36.5% to 38.5% and reducing the CAPEX guidance to 8% to 10% of net revenue. This implies an EBITDA minus CAPEX margin above pre-IPO levels. Finally, the conclusion of ISA acquisition is progressing well. The Brazilian Antitrust Agency approved the acquisition of November 16, and we expect the closing to take place on January 2, 2023. In the meantime, we have a multifunctional team working in the backstage to make sure we are ready to integrate ISAC and start extracting synergies gained from day one. Moving to slide five, after two years delivering net revenue below the ACV, as COVID-19 led to students dropping out of the school due to the healthy and economic reasons, We delivered 100% of the 2022 cycle ACV for both core and supplemental segments. This outcome translates into a 48% year-over-year top-line growth or a 34% organic growth when excluding solutions acquired in the cycle. On slide 6, we show that the strong year-over-year top-line growth was followed by an increase in profitability as we integrate our operations and start to benefit from the scale we created over time. As a result, cash gross margin increased 70 basis points to 80%, and adjusted EBITDA margin increased 230 base points to 33.7% for the 2022 cycle. I will now turn the call to Otero, who will continue the presentation. Otero, please go ahead.