Earnings stock to watch: Arco Platform Ltd (NASDAQ: ARCE)

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Arco Platform Ltd (NASDAQ: ARCE) stock rose 0.65% after the company in the first quarter of FY 19 has reported the net revenue of R$117.1 million, net income of R$30.8 million, Adjusted Net Income of R$40.8 million and adjusted EBITDA of R$49.0 million.

Earnings stock to watch: Arco Platform Ltd (NASDAQ: ARCE)

Meanwhile, consistent with the M&A strategy, ARCE had recently announced the acquisition of Sistema Positivo de Ensino, which will double the reach to partner schools and students, add complementary regions, and strengthen the capacity to invest in high-quality content and technology. With the acquisition of Positivo, Arco will expand its scale and more than double its reach to over 4,800 partner schools and 1.2 million students. The acquisition of Positivo is also in line with the long-term vision to become a one-stop shop platform, continuously expanding the product offering and positively impacting students’ learning experiences. Positivo has served the K-12 private school market for more than 40 years with over 695,000 students, nearly 3,400 partner schools and presence in more than 1,500 cities in Brazil.

Moreover, under terms of the agreement, Arco will acquire Positivo for R$1,650 million in cash, with 50% due at the time of closing. The remaining 50% will be deferred over 5 years, with no payment in 2020, 10% paid in each of 2021 and 2022, and 15% paid in each of 2023 and 2024, all adjusted by the Certificate Deposit Interbank (CDI). The acquisition has been approved by the Boards of Directors of both Arco and Positivo. The transaction is not subject to any shareholder votes, however is subject to customary closing conditions, including antitrust and other regulatory approvals. Itaú BBA served as exclusive financial advisor and Lobo de Rizzo served as legal advisor to Arco. BTG Pactual served as exclusive financial advisor and Machado Meyer served as legal advisor to Positivo.

On the other hand, ARCE typically deliver the Core Curriculum content four times each year, in March, June, August and December and the Supplemental Solutions content twice each year, in June and December, usually two to three months prior to the start of each school quarter.

For the second quarter of 2019, ARCE expects 24% to 26% of the 2019 ACV Bookings of R$440.9 million and in a strong position to build the 2020 ACV. Net Revenue is expected to be in the range of R$105.8 million to R$114.6 million.

For FY 19, the adjusted EBITDA margin is expected to be in the range of 35.5% to 37.5%.

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