Arco Platform Ltd (NASDAQ: ARCE) stock rose over 6.9% on 17th March, 2020 (as of 11:27 am GMT-4; Source: Google finance) after the company in the fourth quarter of FY 19 has reported 31% growth in the net revenue for the fourth quarter of 2019 was BRL158.8 million. Net revenue (including two months of Positivo and our other recent acquisitions) for the fourth quarter of 2019 was BRL247.6 million, which formed 25% of the 2020 ACV compared to 27% in the same quarter of the last year. ARCE has reached an amazing mark of 1,360,000 students in 5,400 schools, which translate into annual contract values of BRL1.006 billion. Gross margin has increased to 82.2% for the fourth quarter compared to 80.2% for the same period in 2018. The improvement is on the back of, one, economies of scale, and two, gains from negotiation with suppliers. For the fourth quarter, the adjusted EBITDA was adjusted EBITDA was BRL106.3 million compared to BRL46.1 million in the same period last year.
For fiscal 2020, the company expects consolidated ACV bookings to be BRL1.006 billion, which represents an increase of 130% compared to the last year. This reflects Arco’s stand-alone, excluding Positivo, growing at 35%. 2020 Adjusted EBITDA Margin is expected to be in the range of 35.5% to 37.5%. For the first quarter of 2020, the company expects to recognize 23% to 26% of the consolidated ACV Bookings 2020.
Meanwhile, Arco’s revised integration plan of Positivo Soluções Didáticas (“Positivo”) is estimated to be between R$50 million to R$70 million in annual EBITDA impact by the fourth year of integration. the Purchase Price Allocation for the acquisition of Positivo based on October 2019 data reflect an estimate of R$1,557 million of both identifiable intangible assets and goodwill, which is anticipated to generate an estimated tax benefit of R$529 million over their amortization period, from the time the incorporation of Positivo by EAS Educação is finalized, which the company project will happen in the third quarter 2020. The unused portion in the year of the amortization, should post a tax loss, which may be offset in the coming years, limited to 30% of the tax profit. Further, Arco ex-Positivo posted 35% ACV growth, above the range of 32% to 34% preliminary guidance provided. Despite closing the transaction by the end of the year, Positivo was able to post 9% growth on its ACV, which is an acceleration from the previous period and already an evidence of the growth potential of the business.