Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Arco Reports Third Quarter 2022 Results


Arco Platform Limited, or Arco or Company (Nasdaq: ARCE), today reported financial and operating results for the third quarter ended September 30th, 2022.

"We are concluding the 2022 cycle with 100% ACV bookings recognition, leading to a 48% top line growth and an increase in profitability. Initiatives put in place this year were a great first step in a long path towards improving efficiency and integration, reducing redundancy, and making Arco a more agile company to better service our partner schools and generate greater value to our shareholders. In this context free cash flow is a key success metric for our management team, together with growth, which, with a now comprehensive portfolio that includes pedagogical, financial and software solutions, will be powered by a more mature cross-selling strategy."

Ari de Sá Neto, CEO and founder

 

Net revenue

Cash Gross profit

Adj. EBITDA

 

2022
cycle

R$1,561M

R$1,249M

R$526M

 

+47.7% YoY

+49.0% YoY

+58.3% YoY

3Q22

9M22

Net revenue

Cash gross profit

Net revenue

Cash gross profit

 

 

 

 

R$253.9M

R$206.7M

R$1,096.1M

R$858.3M

 

 

 

 

 

Adj. EBITDA

Adj. Net income

Adj. EBITDA

 

Adj. Net income

 

 

 

 

R$37.2M

R$(61.9)M

R$294.5M

 

R$(51.8)M

 

Note: Please see Adjusted EBITDA Reconciliation on page 17 and Adjusted Net Income Reconciliation on pages 17 and 18.

Cycle Highlights

Arco concluded the 2022 cycle with net revenue of R$1,561 million (100% recognition of the 2022 ACV bookings provided at the beginning of the year), a 47.7% increase year-over-year (or 33.8% organic top line growth YoY). Net revenue for Core solutions totaled R$1.237 million (+46.9% YoY), while net revenue for Supplemental solutions totaled R$325 million (+50.7% YoY).

Cash gross profit was R$1,249 million (+49.0% YoY), leading to an 80.0% cash gross margin (versus 79.3% for the 2021 cycle).

Integration and efficiency initiatives contributed to an adjusted EBITDA of R$526 million for the 2022 cycle, translating into a 230-basis point expansion in adjusted EBITDA margin to 33.7%.

3Q22 and 9M22 Highlights

Net revenue for the third quarter was R$253.9 million, a 38.6% YoY increase, with Core solutions totaling R$207.1 million (+38.1% YoY) and Supplemental solutions totaling R$46.8 million (+40.5% YoY). For the first nine months of 2022, net revenue increased 42.1% YoY to R$1,096.1 million, with Core solutions increasing 49.8% to R$920.6 million and Supplemental solutions increasing 12.1% to R$175.5 million. Excluding recent M&A1, net revenue increased 19.5% YoY in 3Q22 and 28.6% YoY in 9M22 YoY.

Cash gross margin (gross margin excluding depreciation and amortization) was 81.4% in 3Q22 (vs. 79.7% in 3Q21). For the first nine months of 2022, cash gross margin was 78.3% (vs. 78.7% in 9M21). The positive results from our integration and efficiency initiatives were key to partially offset non-recurring costs resulting from late additional orders of pedagogical materials by our partner schools in the second quarter, as rush printing costs are on average 25% higher than regular printing costs and books were shipped using express tariffs and through more expensive shipping methods (air, dedicated trucks). In the first nine months of 2022, Arco delivered R$33 million in cost savings, above the total amount expected in cost savings for the full year.

Higher selling expenses excluding depreciation and amortization at R$128.5 million in 3Q22 (+42.1% YoY) and R$413.8 million (+47.7% YoY) in the first nine months of 2022 reflect (i) higher investments in commercial activities (identifying and developing leads and cross sell opportunities, intensifying pedagogical support to partner schools, resumption of in-person interactions and events, among others), which are key to fostering strong growth potential opportunities and capturing more market share over time in both Core and Supplemental segments, and (ii) higher inflation for the period (mainly impacting travel expenses). Excluding recent M&A¹, selling expenses increased 35.5% in 3Q22 and 41.3% in 9M22. As a result of the diligent cash collection process and its close relationship with partner schools, Arco was able to improve the quality of its receivables, resulting in a consistent decrease in allowance for doubtful accounts.

1 Recent M&As refer to businesses acquired in 2021 (Me Salva, Eduqo, Edupass, COC, Dom Bosco) and 2022 (PGS, Mentes).

Allowance for doubtful accounts (R$M)

3Q22

 

3Q21

 

YoY

 

2Q22

 

QoQ

 

9M22

 

9M21

 

YoY

Allowance for doubtful accounts

(1.9)

 

6.0

 

N/A

 

0.4

 

N/A

 

(8.5)

 

16.5

 

N/A

% of net revenue

- 0.8%

 

3.3%

 

-4.1 p.p.

 

-0.1%

 

0.7p.p.

 

-0.8%

 

2.1%

 

-2.9 p.p.

 

 

General and administrative expenses (G&A) continue to show the trend of a more integrated back-office strategy. In 3Q22, G&A expenses excluding depreciation and amortization were R$70.5 million (-29.1% YoY) and represented 27.8% of net revenue (versus 54.2% in 3Q21). Excluding recent M&A¹, G&A expenses decreased to R$67.7 million (-31.7% YoY) in 3Q22. Share-based compensation plan expenses increased 47.4% YoY in 3Q22 (excluding Geekie's SOP2 in 2021), representing 8.5% of 3Q22 revenue (vs. 8.0% of revenue in 3Q21). For the first nine months of 2022, G&A expenses excluding depreciation and amortization were R$209.1 million (-4.6% YoY) and represented 19.1% of net revenue (versus 28.4% in 9M21). Excluding the effects of recent M&A¹, G&A expenses decreased 10.7% YoY in 9M22 to R$194.2 million. Share-based compensation plan expenses increased 24.3% YoY in 9M22, representing 3.7% of 9M22 revenue (vs. 4.3% of revenue in 9M21). From a cost savings perspective, Arco surpassed its initial goal for the year, delivering G&A savings of R$59 million in 9M22, above the R$47 million goal for the full year.

Adjusted EBITDA was R$37.2 million in 3Q22 (+135.1% YoY), with an adjusted EBITDA margin of 14.6% (versus 8.6% in 3Q21). As for the first nine months of 2022, adjusted EBITDA increased 42.6% YoY to R$294.5 million, and adjusted EBITDA margin was 26.9% (versus 26.8% in 9M21). We expect the 2022 full year adjusted EBITDA margin to be around the bottom of the 36.5% and 38.5% guidance range we provided at the beginning of the year.

Adjusted net income (loss) in 3Q22 was R$(61.9) million, with an adjusted net margin of -24.4% (versus -11.9% in 3Q21), impacted by higher finance expenses and depreciation and amortization. For the nine-month period ended September 30th, 2022, adjusted net income was R$(51.8) million, with an adjusted net margin of -4.7% (versus 7.0% in 9M21).

A solid cash collection process in the quarter led to an important improvement in the quality of accounts receivable, with a reduction in days of sales outstanding (DSO) to 98 days in 3Q22 from 141 days in 2Q22 and 104 days in 3Q21, and a 2.1 p.p. reduction in delinquency levels to 4.0% in 3Q22 from 5.6% in 2Q22 and 6.1% in 3Q21.

Days of sales outstanding

Sep. 30, 2022

 

Sep. 30, 2021

 

YoY

 

June 30, 2022

 

QoQ

Trade receivables (R$M)

510.9

382.3

34%

687.6

-26%

(-) Allowance for doubtful accounts

77.4

77.1

0%

79.7

-3%

Trade receivables, net (R$M)

433.5

305.1

42%

607.8

-29%

Net revenue LTM pro-forma¹

1,614.5

1,073.2

50%

1,568.9

3%

Adjusted DSO

98

104

-6%

141

-30%

1) Calculated as net revenue for the last twelve months added to the pro forma revenues from businesses acquired in the period to accurately reflect the Company's operations.

Arco's corporate restructuring is ongoing. In October Arco concluded the incorporation of Geekie into CBE (Companhia Brasileira de Educação e Sistemas de Ensino, Arco's wholly-owned entity which incorporates acquired businesses), leading to estimated future annual income tax savings of approximately R$17million. Future incorporations include Pleno (2023), Escola da Inteligência (2023) and SAE Digital (2024). As we keep incorporating other businesses into CBE, we expect to capture additional tax benefits and therefore further reduce our effective tax rate, currently at 8.7% in 9M22 (versus 17.3% in 9M21).

2 As part of Geekie's acquisition, Arco acquired management future stake in Geekie, resulting from the exercise of their existing SOP. The fair value of SOP was calculated using the same valuation method as the accounts payable to selling shareholders for the acquisition of the remaining interest, resulting in the final transaction price, which were updated quarterly for Geekie's most recent fair value, until was settled in June/2022.

Intangible assets - net balances (R$M)

Sep. 30,
2022

Sep. 30,
2021

YoY

June 30,
2022

QoQ

Business Combination

2,922.5

2,334.6

25%

2,949.9

-1%

Trademarks

479.6

437.3

10%

488.8

-2%

Customer relationships

246.4

261.4

-6%

255.8

-4%

Educational system

215.7

209.6

3%

224.6

-4%

Softwares

9.8

11.4

-14%

8.6

14%

Educational platform

4.7

5.7

-18%

4.4

7%

Others¹

15.4

16.4

-6%

16.8

-8%

Goodwill

1,950.9

1,392.8

40%

1,950.9

0%

Operational

279.8

206.5

35%

288.1

-3%

Educational platform²

178.1

141.7

26%

200.1

-11%

Softwares

77.1

53.0

45%

77.1

0%

Copyrights

24.6

11.8

108%

10.8

127%

Customer relationships

0.1

0.1

-35%

0.1

-35%

TOTAL

3,202.2

2,541.2

26%

3,238.0

-1%

1) Non-compete agreements and rights on contracts. 2) Includes content development in progress.

Amortization of intangible assets (R$M)

3Q22

3Q21

YoY

2Q22

QoQ

9M22

9M21

YoY

Business Combination

(79.2)

(55.9)

42%

(73.5)

8%

(213.0)

(165.9)

28%

Trademarks

(8)

(6.5)

20%

(8.0)

-3%

(23.5)

(19.3)

22%

Customer relationships

(9.7)

(8.6)

13%

(9.4)

3%

(28.2)

(25.6)

10%

Educational system

(8.9)

(8.1)

9%

(9.4)

-6%

(27.6)

(24.2)

14%

Softwares

(0.7)

(0.9)

-22%

(0.7)

1%

(2.1)

(2.1)

0%

Educational platform

(0.2)

(0.3)

-17%

(0.2)

24%

(0.6)

(0.7)

-7%

Others¹

(1.4)

(1.3)

4%

(1.5)

-10%

(4.3)

(3.6)

18%

Goodwill

(50.6)

(30.1)

68%

(44.3)

14%

(126.8)

(90.3)

40%

Operational

(34.2)

(22.8)

50%

(29.1)

17%

(92.8)

(61.6)

51%

Educational platform²

(26.8)

(16.3)

64%

(21.7)

24%

(70.8)

(45.3)

56%

Softwares

(5.6)

(4.5)

24%

(5.4)

4%

(16.2)

(10.1)

60%

Copyrights

(1.6)

(2.0)

-20%

(1.8)

-11%

(5.3)

(6.1)

-13%

Customer relationships

(0.2)

-

NA

(0.2)

-10%

(0.5)

(0.1)

380%

TOTAL

(113.4)

(78.7)

44%

(102.6)

11%

(305.9)

(227.5)

34%

 

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 3Q22²

Amortization

Tax benefit

Impact on net
income

Business Combination

 

 

(58.8)

20.0

(38.8)

Trademarks

Yes

Yes²

(2.0)

0.7

(1.3)

Customer relationships

Yes

Yes²

(2.9)

1.0

(1.9)

Educational system

Yes

Yes²

(3.3)

1.1

(2.2)

Educational platform

Yes

Yes²

0.5

(0.2)

0.4

Others¹

Yes

Yes²

(0.5)

0.2

(0.4)

Goodwill

No

Yes²

(50.6)

17.2

(33.4)

Operational

Yes

Yes

(34.2)

11.6

(22.6)

TOTAL

 

 

(93.0)

31.6

(61.4)

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

2022¹

2023

2024

2025

2026+

Trademarks

21

27

27

27

318

66

Customer relationships

21

25

25

25

59

111

Educational system

25

27

27

27

106

32

Software license

-

-

-

-

-

11

Rights on contracts

1

1

1

1

3

1

Others

2

2

2

1

1

10

Goodwill

183

237

231

227

761

355

Total

253

319

313

308

1.247

587

Maximum tax benefit

86

108

106

105

424

199

1) Considers the maximum tax benefit for full year 2022. In 3Q22 we have benefited from R$17.6 million (totalizing R$44.6 million in 9M22). 2) Businesses with future tax benefit (not yet incorporated).

Amortization of intangible assets from business combination that generate tax benefit ? breakdown by solutions (R$M)

Businesses with current tax benefit

Undefined²

2022¹

2023

2024

2025

2026+

Geekie

7

42

42

42

279

-

NAVE

9

9

9

9

11

-

P2D3

57

89

89

89

364

-

Positivo, Conquista, PES English

170

170

170

169

593

-

Other Companies

10

10

4

-

-

-

Acquired companies not yet incorporated

N/A

N/A

N/A

N/A

N/A

587

Total

253

319

313

308

1.247

587

Maximum tax benefit

86

108

106

105

424

199

1) Considers the maximum tax benefit for full year 2022. In 3Q22 we have benefited from R$17.6 million (totalizing R$44.6 in 9M22). 2) Businesses with future tax benefit (not yet incorporated). 3) Refer to COC and Dom Bosco solutions acquired in 2021.

CAPEX in 3Q22 was R$30.9 million, representing 12.2% of net revenue (versus 21.4% of net revenue in 3Q21). For 9M22, CAPEX totaled R$121.1 million, or 11.1% of net revenue (versus 14.8% of net revenue in 9M21), and within the guidance range of 10.0% to 12.0% of net revenue for 2022 full year we provided in 3Q21.

CAPEX (R$M)

3Q22

3Q21

YoY

2Q22

QoQ

9M22

9M21

YoY

Acquisition of intangible assets¹

27.0

35.0

-23%

41.5

-35%

108.8

104.8

4%

Educational platform - content development

0.9

13.4

-93%

4.5

-80%

9.3

31.7

-71%

Educational platform - platforms & tech

15.2

8.5

79%

17.9

-15%

57.7

35.7

62%

Software

7.7

10.5

-27%

16.5

-54%

34.5

30.2

14%

Copyrights and others

3.2

2.5

29%

2.6

22%

7.3

7.2

2%

Acquisition of PP&E

3.9

4.0

-2%

1.7

128%

12.3

9.5

30%

TOTAL¹

30.9

39.0

-21%

43.2

-29%

121.1

114.3

6%

1) For 9M22 excludes R$14.2 million related to M&A payments (PGS' and Mentes' acquisition, being R$5.5 million in 1Q22 and R$8.7 million in 2Q22) from the accounting CAPEX of R$135.4 million.

Cash from operations for 3Q22 and 9M22 were R$89.7 million (from R$74.1 million in 3Q21) and R$384.1 million (from R$276.5 million in 9M21), respectively. Free cash flow to firm3 in 3Q22 increased 253.5% YoY to R$55.7 million, representing 22.0% of net revenues (vs. 8.6% of net revenue in 3Q21). For the nine-month period ended September 30th, 2022, free cash flow to firm also presented a significant improvement, increasing 131.9% YoY to R$212.4 million, or 19.4% of net revenue (vs. 11.9% in 9M21).

3 Please reference page 19 (reconciliation of free cash flow) for additional details.

Free cash flow to firm (managerial)

9M21

% of net
revenue

9M22

% of net
revenue

YoY

Adjusted EBITDA

206.5

26.8%

294.5

26.9%

+43%

(+/-) Noncash adjustments

(2.4)

-0.3%

(12.6)

-1.2%

+430%

(+/-) Working capital

72.5

9.4%

102.2

9.3%

+41%

(-) Income taxes paid

(70.7)

-9.2%

(50.6)

-4.6%

-28%

(-) CAPEX¹

(114.3)

-14.8%

(121.1)

-11.1%

+6%

Free cash flow to firm (managerial)

91.6

11.9%

212.4

19.4%

+132%

1) Excludes R$14.2 million related to M&A payments (PGS' and Mentes' acquisition, being R$5.5 million in 1Q22 and R$8.7 million in 2Q22) from the accounting CAPEX of R$135.4 million for 9M22

Arco's cash and cash equivalents plus financial investments position as of September 30th, 2022, was R$1,015 million, while financial debt and accounts payable to selling shareholders were R$2,797 million, leading to a net debt of R$1,782 million. As part of Arco's balance sheet management strategy, on August 5th, 2022, we announced the closing of a new Debentures issuance amounting to R$1,200 million. Net proceeds were partially used to prepay the Debentures issued in August 2021, and the balance was used to strengthen Arco's cash position while extending its debt maturity profile. The new Debentures mature on August 3rd, 2027, with principal to be amortized in three equal installments payable on August 3rd, 2025, August 3rd, 2026, and August 3rd, 2027, and bear interest at CDI +2.30% per annum, payable semi-annually on February 3rd and August 3rd.

We had another strong commercial cycle for the 2023 school year, with a new student intake and upsell for both Core and Supplemental solutions indicating healthy organic growth YoY. Retention rates remained consistent with historical trends and average price increase was 2-3 p.p. above inflation (considers expected inflation ? IPCA ? of 5.88% for 2022 and 5.01% for 2023, as per Brazilian Central Bank Focus Report as of November 18th, 2022). Cross-sell initiatives were again a key driver to our go-to-market strategy, leading to a ~2 p.p. increase in the number of schools in our core base with at least one Supplemental solution to ~17% (from ~15% in 2022 school year). We are providing a 2023 ACV guidance for our pedagogical solutions of approximately R$1,930 million, which represents approximately 24% organic growth versus 2022 cycle net revenues of R$1,561 million.

COC, one of our recently acquired Core solutions had positive results for its first commercial cycle post acquisition, with a 17-point increase in the NPS to 66 leading to a 15 p.p. improvement in retention rate for the 2023 school year to 95%. We were able to implement significant price increases for the 2023 cycle (~4 p.p. above expected inflation). Finally, the year-over-year ACV growth was over 30%.

We are also providing an adjusted EBITDA margin guidance range for 2023 fiscal year for our pedagogical solutions of 36.5% to 38.5%, in line with the range provided for 2022 fiscal year, and a CAPEX as a percentage of revenue guidance range for 2023 fiscal year of 8.0% to 10.0%, below the 10.0% to 12.0% range provided for 2022 fiscal year. The expansion of our adjusted EBITDA ? CAPEX as a percentage of revenue metric reflects Arco's integration initiatives and corporate restructuring in place as Arco paves the way to become a portfolio hub of education solutions and a more efficient company, including (i) strategic sourcing, (ii) supply chain: printing costs & freight, (iii) IT systems optimization, (iv) corporate reorganization, (v) supplemental synergies, (vi) sales & operations planning, (vii) increased cooperation among core units, and (viii) technology integration.

Arco initiated its efficiency and integration agenda in 2021, with the goal of improving our operations, internal processes, and capital allocation strategy, leading to enhanced cash generation and generating more value to our shareholders. Accordingly, free cash flow became a key success metric to management, with three main drivers: (i) continuous margin expansion; (ii) return of capex to pre-covid levels as a percentage of revenue (at high single-digit rates), and (iii) normalization of working capital.

Finally, the Brazilian antitrust agency (CADE) approved the isaac acquisition on November 16th. The transaction is expected to close on January 2nd, 2023.

Conference Call Information

Arco will discuss its third quarter 2022 results today, December 1st, 2022, 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 December 7th, 2022, by dialing +55 (11) 3193-1012 and entering access code 1608874#. 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 hundreds of thousands 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 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

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.

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 related (gains) losses and expenses, plus non-recurring expenses and plus effects related to COVID-19 pandemic. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by Net Revenue.

We calculate Adjusted Net Income as profit (loss) for the year, plus amortization of intangible assets from business combinations (which refers to the amortization of the following intangible assets from business combinations: (i) rights on contracts, (ii) customer relationships, (iii) educational system, (iv) trademarks, (v) non-compete agreement and (vi) software resulting from acquisitions), 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 income (expenses), net (which refers to interest expenses related to accounts payable to selling shareholders from business combinations adjusted by fair value), plus share-based compensation plan, restricted stock units and related payroll taxes (restricted stock units), plus/minus non-cash adjustments related to Derivatives and Convertible Notes, 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, plus non-recurring expenses, which are related to consulting expenses for Sarbanes-Oxley implementation, plus effects related to COVID-19 pandemic, which includes the revision of the Company's estimated credit losses from its trade receivables based on expected increases in financial default and in unemployment rates in Brazil for the year and plus/minus changes in current and deferred tax recognized in statements of income applied to all adjustments to net income (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).

For purposes of the calculation of Adjusted Net Income for the year ended December 31, 2021, we have excluded the following adjustments that we applied to the calculation of Adjusted Net Income for prior periods: (i) Interest income (expenses) linked to a fixed rate (we will maintain the adjustment for Interest income (expenses) that refers to adjustments by fair value); (ii) Foreign exchange effects on cash and cash equivalents and (iii) share of loss of equity accounted investees and. These adjustments will not be applied to the calculation of Adjusted Net Income going forward. We believe that eliminating these adjustments from our calculation of Adjusted Net Income for the year ended December 31, 2021 and going forward does not impact our investors' ability to assess our results of operations. We have not retroactively restated Net Adjusted Income for the periods prior to 2021.

We calculate Managerial Free Cash Flow as Net Cash Flows from Operating activities, less acquisition of property and equipment, less acquisition of intangible assets, less M&A-related payments. 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 understand that, although Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Net Income Margin and Managerial Free Cash Flow 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, Adjusted Net Income Margin and Managerial Free Cash Flow 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

 

 

 

 

 

 

 

September 30,

 

December 31,

(In thousands of Brazilian reais)

 

2022

 

2021

Assets

 

(unaudited)

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

314,015

 

211,143

Financial investments

 

661,465

 

973,294

Trade receivables

 

433,491

 

593,263

Inventories

 

231,470

 

158,582

Recoverable taxes

 

65,069

 

38,811

Derivative financial instruments

 

-

 

301

Related parties

 

3,838

 

4,571

Other assets

 

87,948

 

66,962

Total current assets

 

1,797,296

 

2,046,927

 

 

 

 

 

Non-current assets

 

 

 

 

Financial investments

 

39,057

 

40,762

Derivative financial instruments

 

-

 

560

Related parties

 

-

 

6,819

Recoverable taxes

 

12,657

 

22,216

Deferred income tax

 

367,340

 

321,223

Other assets

 

73,916

 

57,534

Investments and interests in other entities

 

121,787

 

126,873

Property and equipment

 

64,558

 

73,885

Right-of-use assets

 

25,229

 

35,960

Intangible assets

 

3,202,214

 

3,257,360

Total non-current assets

 

3,906,758

 

3,943,192

 

 

 

 

 

Total assets

 

5,704,054

 

5,990,119

 

 

September 30,

 

December 31,

(In thousands of Brazilian reais)

 

2022

 

2021

Liabilities

 

(unaudited)

 

 

Current liabilities

 

 

 

 

Trade payables

 

152,336

 

103,292

Labor and social obligations

 

108,087

 

157,601

Lease liabilities

 

20,688

 

20,122

Loans and financing

 

58,772

 

228,448

Derivative financial instruments

 

2,671

 

-

Taxes and contributions payable

 

5,384

 

7,953

Income taxes payable

 

13,468

 

37,775

Advances from customers

 

5,731

 

35,291

Accounts payable to selling shareholders

 

879,418

 

799,553

Other liabilities

 

5,188

 

3,176

Total current liabilities

 

1,251,743

 

1,393,211

 

 

 

 

 

Non-current liabilities

 

 

 

 

Labor and social obligations

 

1,179

 

661

Lease liabilities

 

10,611

 

22,996

Loans and financing

 

1,853,495

 

1,602,879

Derivative financial instruments

 

63,947

 

223,561

Provision for legal proceedings

 

2,821

 

1,398

Accounts payable to selling shareholders

 

653,917

 

869,233

Other liabilities

 

365

 

946

Total non-current liabilities

 

2,586,335

 

2,721,674

 

 

 

 

 

Equity

 

 

 

 

Share capital

 

11

 

11

Capital reserve

 

2,103,699

 

2,203,857

Treasury shares

 

(114,701)

 

(180,775)

Share-based compensation reserve

 

98,785

 

90,813

Accumulated losses

 

(221,818)

 

(238,672)

Total equity

 

1,865,976

 

1,875,234

 

 

 

 

 

Total liabilities and equity

 

5,704,054

5,990,119

Arco Platform Limited

Interim condensed consolidated statements of income

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

(In thousands of Brazilian reais, except earnings per share)

2022

 

2021

 

2022

 

2021

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

Revenue

253,922

183,267

1,096,096

771,240

Cost of sales

(62,820)

(44,766)

(312,452)

(199,994)

Gross profit

191,102

138,501

783,644

571,246

 

 

 

 

 

 

 

 

Operating expenses:

Selling expenses

(153,549)

(114,982)

(492,341)

(353,367)

General and administrative expenses

(85,518)

(109,867)

(251,655)

(246,161)

Other income, net

(1,714)

413

17,356

2,913

Operating profit

(49,679)

(85,935)

57,004

(25,369)

 

 

 

 

 

 

 

 

Finance income

105,629

20,353

479,244

42,407

Finance costs

(159,511)

(124,947)

(523,097)

(209,239)

Finance result

(53,882)

(104,594)

(43,853)

(166,832)

 

 

 

 

 

 

 

 

Share of loss of equity-accounted investees

(4,284)

(5,575)

(24,220)

(8,326)

 

 

 

 

 

(Loss) profit before income taxes

(107,845)

(196,104)

(11,069)

(200,527)

Income taxes - income (expense)

Current

(4,385)

(1,246)

(18,194)

(37,143)

Deferred

39,766

53,290

46,117

85,402

Total income taxes ? income (expense)

35,381

52,044

27,923

48,259

Net (loss) profit for the period

(72,464)

(144,060)

16,854

(152,268)

 

Basic earnings per share ? in Brazilian reais

Class A

(1.30)

(2,53)

0.30

(2.67)

Class B

(1.30)

(2,53)

0.30

(2.67)

Diluted earnings per share ? in Brazilian reais

Class A

(1.30)

(2,53)

0.30

(2.67)

Class B

(1.30)

(2,53)

0.30

(2.67)

 

Weighted-average shares used to compute net (loss) profit per share:

Basic

55,807

56,902

55,940

57,109

Diluted

55,807

57,122

61,228

57,329

Arco Platform Limited

Interim condensed consolidated statements of cash flows

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

(In thousands of Brazilian reais)

2022

 

2021

 

2022

 

2021

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Operating activities

 

 

 

 

 

 

 

Loss before income taxes

(107,845)

 

(196,104)

 

(11,069)

 

(200,527)

Adjustments to reconcile loss before income taxes to cash from operations

 

 

 

 

 

 

 

Depreciation and amortization

55,617

 

42,605

 

195,700

 

136,080

Inventory reserves

9,264

 

5,579

 

22,603

 

12,965

Provision (reversal) for expected credit losses

(1,919)

 

5,987

 

(8,522)

 

16,486

Loss (profit) on sale/disposal of property and equipment and intangible

2

 

87

 

(190)

 

222

Fair value change in financial derivative

(58,589)

 

-

 

(154,562)

 

-

Fair value adjustment in accounts payable to selling shareholders

-

 

74,664

 

(26,320)

 

75,153

Share of loss of equity-accounted investees

4,284

 

5,575

 

24,220

 

8,326

Share-based compensation plan

17,706

 

41,760

 

26,752

 

57,315

Accrued interest on loans and financing

72,549

 

11,705

 

178,093

 

20,610

Interest accretion on accounts payable to selling shareholders

47,268

 

30,802

 

136,942

 

84,826

Interest from financial investment

(24,763)

 

(6,421)

 

(63,116)

 

(14,916)

Interest on lease liabilities

1,001

 

1,204

 

3,288

 

3,361

Provision for legal proceedings

1,317

 

248

 

1,423

 

37

Provision for payroll taxes (restricted stock units)

3,871

 

1,259

 

788

 

2,686

Foreign exchange (income) expenses, net

21,316

 

(1,945)

 

(22,346)

 

2,147

Gain on changes of interest of investment

46

 

-

 

(17,712)

 

-

Other financial expense (income), net

(987)

 

1,792

 

(4,115)

 

(706)

40,138

 

18,797

 

281,857

 

204,065

Changes in assets and liabilities

 

 

 

 

 

 

 

Trade receivables

170,531

 

95,594

 

166,187

 

95,979

Inventories

(47,514)

 

(6,372)

 

(75,185)

 

(18,339)

Recoverable taxes

(16,421)

 

(5,463)

 

(7,973)

 

(2,996)

Other assets

9,867

 

(12,776)

 

(25,210)

 

(21,231)

Trade payables

(2,593)

 

21,809

 

49,044

 

29,034

Labor and social obligations

324

 

1,069

 

26,069

 

11,325

Taxes and contributions payable

(1,671)

 

(1,388)

 

(2,649)

 

(6,471)

Advances from customers

(55,201)

 

(36,559)

 

(29,560)

 

(16,574)

Other liabilities

(7,713)

 

(574)

 

1,515

 

1,730

Cash from operations

89,747

 

74,137

 

384,095

 

276,522

Income taxes paid

(3,101)

 

(19,167)

 

(50,575)

 

(70,684)

Interest paid on lease liabilities

(1,250)

 

(918)

 

(3,596)

 

(2,521)

Interest paid on accounts payable to selling shareholders

(1,702)

 

(1,031)

 

(38,616)

 

(5,254)

Interest paid on loans and financing

(115,856)

 

(5,461)

 

(147,848)

 

(13,406)

Payments for contingent consideration

(146)

 

-

 

(70,687)

 

(332)

Payments for stock options

-

 

-

 

(75,578)

 

-

Net cash flows from operating activities

(32,308)

 

47,560

 

(2,805)

 

184,325

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Acquisition of property and equipment

(3,925)

 

(4,010)

 

(12,323)

 

(9,542)

Payment of investments and interests in other entities

(14)

 

(53,538)

 

(32)

 

(126,760)

Acquisition of subsidiaries, net of cash acquired

-

 

(15,839)

 

-

 

(31,056)

Payments of accounts payable to selling shareholders

(1,270)

 

(8,449)

 

(1,270)

 

(101,285)

Acquisition of intangible assets

(26,976)

 

(35,190)

 

(123,029)

 

(104,733)

Maturity of financial investments

(264,243)

 

213,374

 

376,650

 

366,309

Loans to related parties

1

 

-

 

(4,811)

 

-

Net cash flows from (used in) investing activities

(296,427)

 

96,348

 

235,185

 

(7,067)

Financing activities

 

 

 

 

 

 

 

Purchase of treasury shares

(1,523)

 

(25,069)

 

(53,139)

 

(134,806)

Payment of lease liabilities

(3,774)

 

(4,245)

 

(15,779)

 

(10,599)

Payment of accounts payable to selling shareholders

(10,884)

 

(13)

 

(132,154)

 

(19,455)

Loans and financings - additions

1,189,058

 

891,116

 

1,189,058

 

887,673

Loans and financings ? payment

(905,582)

 

-

 

(1,116,911)

 

-

Net cash flows (used in) from financing activities

267,295

 

861,789

 

(128,925)

 

722,813

 

 

 

 

 

 

 

Foreign exchange effects on cash and cash equivalents

(298)

 

1,945

 

(583)

 

(2,147)

Increase in cash and cash equivalents

(61,738)

 

1,007,642

 

102,872

 

897,924

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

At the beginning of the period

375,753

 

314,692

 

211,143

 

424,410

At the end of the period

314,015

 

1,322,334

 

314,015

 

1,322,334

Increase in cash and cash equivalents

(61,738)

 

1,007,642

 

102,872

 

897,924

 

 

 

 

 

 

 

Arco Platform Limited

Reconciliation of Non-GAAP Measures

 

Reconciliation of Adjusted EBITDA

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

(In thousands of Brazilian reais)

2022

 

2021

 

2022

 

2021

 

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net (loss) profit for the period

(72,464)

(144,060)

16,854

(152,268)

(+/-) Income taxes

(35,381)

(52,044)

(27,923)

(48,259)

(+/-) Finance result

53,882

104,594

43,853

166,832

(+) Depreciation and amortization

55,617

42,605

195,700

136,080

(+) Share of loss of equity-accounted investees

4,284

5,575

24,220

8,326

EBITDA

5,938

(43,330)

252,704

110,711

(+) Share-based compensation plan

21,596

42,993

40,745

64,041

(+) Share-based compensation plan and restricted stock units

 

16,922

 

41,630

 

26,752

 

57,315

(+) Provision for payroll taxes (restricted stock units)

 

4,674

 

1,363

 

13,993

 

6,726

(+) M&A expenses

1,490

15,299

10,676

29,055

(+/-) Other changes to equity accounted investees3

 

46

 

-

 

(17,712)

 

-

(+) Non-recurring expenses

8,083

296

8,083

948

(+) Effects related to Covid-19 pandemic

-

544

-

1,696

Adjusted EBITDA

37,153

15,802

294,496

206,451

 

Revenue

253,922

183,267

1,096,096

771,240

EBITDA Margin

2.3%

-23.6%

23.1%

14.4%

Adjusted EBITDA Margin

14.6%

8.6%

26.9%

26.8%

Reconciliation of Adjusted Net Income

 

Three-month period ended September 30,

(In thousands of Brazilian reais)

2022

2021
pro forma1

2021
reported

(unaudited)

(unaudited)

(unaudited)

Net loss for the period

(72,464)

(144,060)

(144,060)

(+) Share-based compensation plan

 

21,596

42,993

42,993

(+) Share-based compensation plan and restricted stock units

16,922

41,630

41,630

(+) Provision for payroll taxes (restricted stock units)

 

4,674

1,363

1,363

(+) M&A expenses

 

1,490

15,299

14,353

(+/-) Other changes to equity accounted investees3

 

46

-

-

(+) Non-recurring expenses

 

8,083

296

1,242

(+) Effects related to Covid-19 pandemic

 

-

544

544

(+/-) Adjustments related to business combination

 

31,435

114,669

131,064

(+) Amortization of intangible assets from business combinations

 

23,911

25,598

25,598

(+/-) Changes in accounts payable to selling shareholders

 

-

74,664

74,664

(+) Interest expenses, net (adjusted by fair value)

 

7,524

14,407

14,407

(+) Interest on acquisition of investments, net (linked to a fixed rate)1

 

-

-

16,395

(+/-) Non-cash adjustments related to derivative instruments and convertible notes

 

(32,690)

-

-

(+/-) Foreign exchange on cash and cash equivalents1

 

-

-

(1,945)

(+) Share of loss of equity-accounted investees1

 

-

-

5,575

(+/-) Tax effects

(19,441)

(51,579)

(61,738)

Adjusted Net Income

(61,945)

(21,838)

(11,972)

 

Net Revenue

253,922

183,267

183,267

Adjusted Net Income Margin

-24.4%

-11.9%

-6.5%

Weighted average shares

 

55,807

56,902

56,902

Adjusted EPS

 

(1.11)

(0.38)

(0.21)

Nine-month period ended September 30,

(In thousands of Brazilian reais)

2022

2021
pro forma1

2021
Reported

(unaudited)

(unaudited)

(unaudited)

Net (loss) profit for the period

16,854

(152,268)

(152,268)

(+) Share-based compensation plan

 

40,745

64,041

64,041

(+) Share-based compensation plan and restricted stock units

26,752

57,315

57,315

(+) Provision for payroll taxes (restricted stock units)

 

13,993

6,726

6,726

(+) M&A expenses

 

10,676

29,055

22,203

(+/-) Other changes to equity accounted investees3

 

(17,712)

-

-

(+) Non-recurring expenses

 

8,083

948

7,800

(+) Effects related to Covid-19 pandemic

 

-

1,696

1,696

(+/-) Adjustments related to business combination

 

89,472

204,482

235,329

(+) Amortization of intangible assets from business combinations

 

81,510

75,350

75,350

(+/-) Changes in accounts payable to selling shareholders

 

(26,320)

75,153

75,153

(+) Interest expenses, net (adjusted by fair value)

 

34,282

53,979

53,979

(+) Interest on acquisition of investments, net (linked to a fixed rate)1

 

-

-

30,847

(+/-) Non-cash adjustments related to derivative instruments and convertible notes2

 

(157,910)

-

-

(+/-) Foreign exchange on cash and cash equivalents1

 

-

-

2,147

(+) Share of loss of equity-accounted investees1

 

-

-

8,326

(+/-) Tax effects

(41,963)

(93,634)

(103,793)

Adjusted Net Income

(51,755)

54,320

85,481

 

Net Revenue

1,096,096

771,240

771,240

Adjusted Net Income Margin

-4.7%

7.0%

11.1%

Weighted average shares

 

55,940

57,109

57,109

Adjusted EPS

 

(0.93)

0.95

1.50

1)

Adjusted net income for previous periods presented in this column excludes the following adjustments: (i) Interest on acquisition of investments, net (linked to a fixed rate); (ii) Foreign exchange on cash and cash equivalents; and (iii) Share of loss of equity-accounted investees. Such adjustments will be no longer consider in the net income reconciliation from 4Q21 onwards and are presented for comparison purposes only in the "Reported" column.

2)

Such adjustment was previously named "(+/?) Changes in fair value of derivative instruments".

3)

Refers to (gains) losses related to capital contribution from others on investees leading to an increase in equity of the investee.

Reconciliation of Free Cash Flow

 

Three-month period ended
September 30,

 

Nine-month period ended
September 30,

(In thousands of Brazilian reais)

2022

 

2021

 

2022

 

2021

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Loss profit before income taxes

 

(107,845)

 

(196,104)

 

(11,069)

 

(200,527)

(+/-) Non-cash adjustments to reconcile Adj. EBITDA to cash from operations

 

147,983

 

214,901

 

292,926

 

404,592

(+/-) Working capital (Changes in assets and liabilities)

 

49,609

 

55,340

 

102,238

 

72,457

Cash from operations

89,747

 

74,137

384,095

276,522

(-) Income tax paid

(3,101)

 

(19,167)

 

(50,575)

(70,684)

(-) CAPEX

 

(30,901)

 

(39,200)

 

(135,352)

 

(114,275)

Free cash flow to firm

 

55,745

 

15,770

 

198,168

 

91,563

(-) Interest paid on loans and financings & lease liabilities

(117,106)

 

(6,379)

 

(151,444)

(15,927)

(-) Interest paid on accounts payable to selling shareholders

 

(1,702)

 

(1,031)

 

(38,616)

 

(5,254)

(-) Payments for contingent consideration

 

(146)

 

-

 

(70,687)

 

(332)

(-) Payments of stock options¹

 

-

 

-

 

(75,578)

 

-

Free cash flow

 

(63,209)

 

8,360

 

(138,157)

 

70,050

(-) M&A classified as Payments of stock options¹

 

-

 

-

 

75,578

 

-

(-) M&A classified as CAPEX²

 

-

 

-

 

14,208

 

-

(-) M&A classified as payments for contingent consideration³

 

146

 

-

 

70,687

 

332

Free cash flow (managerial)

 

(63,063)

 

8,360

 

22,316

 

70,382

1)

For 9M22 considers R$75 million related to M&A payment booked as stock option plan expense (Geekie employees' SOP).

2)

For 9M22, considers R$14.2 million related to M&A payments (PGS' and Mentes' acquisition, being R$5.5 million in 1Q22 and R$8.7 million in 2Q22) from the accounting CAPEX of R$135.4 million.

3)

For 9M22, considers R$70 million of contingent consideration related to M&A payment (difference between amount in the PPA and the final transaction amount calculated by the earn-out multiple.

Three-month period ended September 30,

 

Nine-month period ended September 30,

(In thousands of Brazilian reais)

2022

 

2021

 

2022

 

2021

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Free cash flow to firm

 

55,745

 

15,770

 

198,168

 

91,563

(+) M&A classified as CAPEX¹

 

-

 

-

 

14,208

 

-

Free cash flow to firm (managerial)

 

55,745

 

15,770

 

212,376

 

91,563

1)

For 9M22, considers R$14.2 million related to M&A payments (PGS' and Mentes' acquisition, being R$5.5 million in 1Q22 and R$8.7 million in 2Q22) from the accounting CAPEX of R$135.4 million.

Reconciliation of Taxable Income

 

Three months period ended
September 30,

 

Nine months period ended
September 30,

(In thousands of Brazilian reais)

2022

2021

 

2022

 

2021

 

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Loss before income taxes

 

(107,845)

(196,104)

 

(11,069)

 

(200,527)

(+) Share-based compensation plan, RSU and provision for payroll taxes¹

 

26,215

44,929

 

7,401

 

53,965

(+) Amortization of intangible assets from business combinations before incorporation¹

 

7,477

725

 

21,323

 

10,485

(+/-) Changes in accounts payable to selling shareholders¹

 

17,751

92,173

 

41,355

 

131,584

(+/-) Share of loss of equity?accounted investees

 

4,284

(1,896)

 

24,220

 

(2,831)

(+) Net income from Arco Platform (Cayman)

 

(7,719)

2,971

 

(112,227)

 

16,771

(+) Fiscal loss without deferred

 

3,487

4,168

 

15,333

 

8,935

(+/-) Provisions booked in the period

 

(14,706)

(3,546)

 

29,413

 

9,781

(+) Tax loss carryforward

131,869

77,673

 

168,892

 

169,039

(+) Others

13,471

9,349

 

23,643

 

17,868

Taxable income

74,284

30,442

 

208,284

 

215,070

 

 

 

 

 

 

 

Current income tax under actual profit method

(25,257)

(10,350)

 

(70,817)

 

(73,123)

% Tax rate under actual profit method

34.0%

34.0%

 

34.0%

 

34.0%

(+) Effect of presumed profit benefit

-

-

 

-

 

3,266

Effective current income tax

(25,257)

(10,350)

 

(70,817)

 

(69,857)

% Effective tax rate

34.0%

34.0%

 

34.0%

 

32.5%

(+) Recognition of tax-deductible amortization of goodwill and added value²

17,692

10,867

 

44,560

 

32,802

(+/-) Other additions (exclusions)

3,181

(1,763)

 

8,063

 

(88)

Effective current income tax accounted for goodwill benefit

(4,385)

(1,246)

 

(18,194)

 

(37,143)

% Effective tax rate accounting for goodwill benefit

5.9%

4.1%

 

8.7%

 

17.3%

 

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.

 


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