Arco Platform Ltd (NASDAQ: ARCE) stock rose over 2.1% in the pre market session of August 28th, 2019 ( Source: Google finance) after the company in the second quarter of FY 19 has reported the net revenue of BRL 137.6 million, which represented 31% of the 2019 ACV versus 25% in the same quarter of the last year. The revenue recognition may vary among quarters with no impact in the total ACV and this happened due to the product mix, logistics and the customers’ decision of when to receive the content. Despite the higher revenue recognition, the company has maintained the 2019 ACV guidance of BRL 441 million, unchanged. Net revenue for the first half of 2019 was BRL 254.6 million versus BRL 195.1 million in the same period last year. Gross margin was 81.2% for the second quarter versus 79.3% for the same period in 2018, and it’s in line with the historical trend of increasing gross margin but also reflects the higher revenue recognition in this quarter. In the first semester, the gross margin was 81.3%, up 300 bps year-over-year.
Moreover, the Adjusted EBITDA was BRL 61.4 million for the second quarter of 2019, up 128% year-over-year. the company is on track to achieve adjusted EBITDA margin of 35.5% to 37.5% in 2019. Free cash flow for the second quarter of 2019 was BRL 49.5 million, increasing 28% compared to the second quarter of 2018 and reflects an 81% adjusted EBITDA conversion. In the first semester, the company has generated BRL 81.7 million in free cash flow or 74% of our EBITDA.
Additionally, selling expenses for the second quarter of 2019 was BRL 39.3 million, up 63% compared to BRL 24.1 million for the second quarter of 2018. The higher selling expenses reflect the investments in the sales team, including hunters and farmers as an effort to offer continued support the partner schools and extend the network of clients. G&A expenses was BRL 44.9 million, compared to BRL 70 million for the second quarter of 2018, and included BRL 20.8 million of share-based compensation and BRL 4.4 million of M&A-related expenses, which the company consider to be nonrecurring. Adjusting for those 2 items, G&A would be BRL 19.7 million, showing significant scale gain year-over-year.
For the third quarter 2019, the company expects to recognize around 15% of the ACV 2019 or BRL 65 million of revenues. Also, the company expect the adjusted EBITDA margins full year 2019 to be in the range between 35.5% to 37.5%.