Arco(US:ARCE)2022-03-30 16:00Financial Performance - Total assets increased to R$5,990,119 thousand in 2021 from R$4,576,280 thousand in 2020, representing a growth of approximately 30.9%[2] - Net revenue for 2021 was R$1,232,074 thousand, up from R$1,001,710 thousand in 2020, indicating a year-over-year increase of about 22.9%[9] - Gross profit rose to R$937,667 thousand in 2021, compared to R$780,580 thousand in 2020, reflecting a growth of approximately 20.1%[9] - Operating profit for 2021 was R$129,399 thousand, slightly down from R$135,495 thousand in 2020, showing a decrease of about 4.1%[9] - The company reported a net loss of R$158,083 thousand for 2021, compared to a profit of R$16,780 thousand in 2020, marking a significant decline[9] - Total comprehensive loss for 2021 was BRL 158,083 thousand, reflecting a significant decline from the previous year's comprehensive income of BRL 16,780 thousand[16] Liabilities and Equity - Total current liabilities increased to R$1,393,211 thousand in 2021 from R$980,274 thousand in 2020, representing a rise of approximately 42.1%[5] - Non-current liabilities rose to R$2,721,674 thousand in 2021, up from R$1,395,122 thousand in 2020, indicating an increase of about 95.1%[5] - The company’s equity attributable to equity holders of the parent decreased to R$1,875,234 thousand in 2021 from R$2,200,884 thousand in 2020, a drop of about 14.8%[5] Cash Flow and Investments - Cash and cash equivalents decreased to R$211,143 thousand in 2021 from R$424,410 thousand in 2020, a decline of approximately 50.2%[3] - Cash generated from operations in 2021 was BRL 138,166 thousand, a decrease from BRL 212,634 thousand in 2020[19] - The company incurred total cash flows used in investing activities of BRL 1,493,992 thousand in 2021, compared to BRL 479,676 thousand in 2020[19] - The company purchased treasury shares amounting to BRL 200,751 thousand in 2021[19] Acquisitions and Business Expansion - The company acquired 60% of Me Salva! for an estimated addressable market of R$5 billion, expanding its supplemental solutions portfolio[37] - Arco invested R$25,000 to acquire a 30% interest in INCO, a company providing financial and administrative services to private schools[34] - The company issued 900,000 non-convertible debentures totaling R$900,000 to finance acquisitions[31] - The company completed the acquisition of COC and Dom Bosco, serving over 210,000 students across 800 partner schools[35] - Arco's total interest in Geekie increased to 57.42% after acquiring an additional 1.36% for R$4,000[34] Revenue Recognition and Business Model - Arco's business model is asset-light and scalable, with revenue driven by the number of enrolled students and a price per student per year[25] - The Company recognizes revenue from educational content sales when control is transferred to private schools, with revenue driven by the number of enrolled students and negotiated contract values[134] - Subscription revenue from school management software is recognized on a straight-line basis during the subscription period, driven by the number of enrolled students[145] Goodwill and Impairment - Goodwill is initially measured at cost and is subject to impairment testing, allocated to segments expected to benefit from the acquisition[65] - The Company assesses the recoverable amount of goodwill annually, with impairment losses recognized if the recoverable amount is less than the carrying amount[123] Tax and Deferred Tax - The Company has R$ 12,902 million of unrecognized unused tax loss carryforwards as of December 31, 2021, related to subsidiaries with a history of losses[171] - The Company recognizes deferred tax assets for deductible temporary differences and unused tax credits to the extent that it is probable that taxable profit will be available[171] - Deferred tax liabilities are recognized for all taxable temporary differences, except in specific circumstances related to goodwill and investments[150] Financial Instruments and Fair Value - Fair value measurements for financial instruments are based on market participant assumptions and categorized within a fair value hierarchy[76] - Financial assets are classified at initial recognition as amortized cost, fair value through other comprehensive income (OCI), or fair value through profit or loss, depending on cash flow characteristics and business model[80] - The Company evaluates the fair value of financial instruments, including derivatives, and recognizes gains or losses in the statement of profit or loss[99] Employee and Operational Expenses - The company incurred additional expenses of R$2,071 related to health care and employee support during the pandemic[47] - The company reported depreciation and amortization expenses of BRL 194,885 thousand in 2021, up from BRL 127,455 thousand in 2020[19] - The company experienced a foreign exchange loss of BRL 1,772 thousand in 2021, compared to a foreign exchange loss of BRL 188 thousand in 2020[19]