Good afternoon, everyone. Thank you for standing by, and welcome to Arco Platform first quarter 2023 earnings call. This event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After Arco remarks, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being broadcast live via webcast and may be accessed through Arco's website at www.investor.arcoplatform.com, where the presentation is also available. Now, I'll turn the conference over to Roberto Otero, Arco's CFO. Otero, you may begin your presentation. Thank you. Please welcome you to Arco's first quarter 2023 conference call. With me on the call today, we have Arco CEO, Ari de Sá Cavalcante Neto. During today's presentation, we will make forward-looking statements. Forward-looking statements generally relate to future events or future financial or operating performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance, our expectations and guidance for future periods, our expectations regarding strategic product initiatives and their related benefits, and our expectations regarding the market. These risks include those not set forth in the documents that were issued earlier today, as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on the information available to us as of the date hereof. You should not rely on them as predictions of future events, and we disclaim any obligation to update any forward-looking statements except as required by law. In addition, management may reference non-IFRS financial measures on this call. The non-IFRS financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IFRS. We have provided a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measure in our press release. Please note that except for revenue, gross margin, selling expense, G&A, and cash flow from operations, all other financial measures we discuss here are non-IFRS, and growth rates are compared to the prior year comparable period, unless otherwise stated. We also note that year-over-year comparisons are affected by acquisitions that were not inclued in our 2022 financials. Let me now turn the call over to Ari, Arco's CEO. Thank you, Otero. Thank you everyone for joining today's conference call. I would like to start with the highlights of the quarter on slide three. On Arco's pedagogical business, which includes our core supplemental brands, we delivered a 28% top line and EBITDA growth in the 2023 cycle so far, with adjusted EBITDA margin at 41.5%, despite an already anticipated pressure on costs to print our content. Since 2022, the industry has suffered from a material increase in printing costs, resulting from higher paper prices globally, which has been impacting our gross margins since last year. We expect this pressure to slow down in the second half of the year with a significantly lower impact on our gross margin in 2023. We are working to mitigate such circumstantial effects as we discuss further in the presentation. We remain confident we will deliver our EBITDA margin guidance for the fiscal year between 36.5% and 38.5%. Our pedagogical business has posted material and structural improvements. Adjusted EBITDA minus CapEx metric cycle to date expanded 10 percentage points year-over-year, we posted significant improvement in cash flow generation in the first quarter of the 2023 cycle, allowing Arco to generate cash, reflecting improvements across working capital, CapEx, and taxes, which Roberto Otero will discuss in more detail soon. The quarter, we also launch a new segment resulting from the acquisition of Isaac. The financial and management solutions segment debuts in Arco P&L, adding growth with a 133% increase in net revenue year-over-year. With Isaac, that enables Arco to further strengthen its dominant position in Brazil's education ecosystem by diversifying the scope of its portfolio of products, making us a true one-stop-shop platform for our partners global, while establishing closer relationship with families. I wanted to remind that we have been implementing several initiatives to drive a more efficient, agile, and scalable operation, which is shown by metrics whose performance is under our control, such as capital deployment, SG&A management, and working capital. The printing cost pressure is circumstantial. Those initiatives that we are taking are already unlocking margin gains in 2023, and will significantly improve our cash generation. On top of our efforts to improve internal operation, we must always keep our partner schools at the center of all our decisions. This commitment requires continuous investment in our products and solutions, full dedication while serving our customers, and our result to always evolve as a company. I will now turn the call to Otero, who will continue the presentation. Otero, please go ahead. Thank you, Ari, and good evening, everyone. We will begin by presenting the results of our pedagogical business, initiating on slide six. Given the difference in revenue recognition this quarter when compared to the first quarter of 2022, we strongly recommend investors to analyze our business performance on a cycle-to-date basis, starting in Q4 2022, up to Q1 2023. Net revenue in the 2023 cycle grew 28% year-over-year, reaching BRL 1,136 million, with core solutions up 26% year-over-year, and supplemental solutions driving a robust 38% year-over-year growth cycle to date. In the first quarter, revenues for the pedagogical business were up 10% year-over-year, reflecting the lower revenue recognition versus last year. We maintain our guidance for BRL 1.9 billion of ACV in 2023, with 24% growth versus 2022. Moving to slide seven, we discuss the pedagogical business adjusted EBITDA margin. Despite the cost pressures, we managed to keep our adjusted EBITDA margin in line year-over-year in the 2023 cycle at 41.5%. While the content providing costs consumed 5.5 percentage points of margins, our SG&A efforts managed to generate the same positive impact on our profitability for a flat performance versus the 2022 cycle. On the next slide, we discuss in more detail the levers behind our EBITDA margin guidance achievement this year. Moving to slide eight, we expect an important improvement on gross margin behavior in the second half of the year, reflecting a few initiatives, including printing prices renegotiation due to volume reallocation and integrated supply management strategy, direct paper negotiation and acquisition from producers, and more intense technology usage will allow for more scalable content production and delivery setups. All in, we expect the pedagogical business cash gross margin to be down at approximately 2.5 percentage points in 2023. At this point, we have already signed contracts for the 2024 cycle printing process, which starts next August. On SG&A, we will continue to unlock scale gains and grow our expenses at a much slower pace when compared to our top-line growth. We have posted significantly results over the last three years and expect this trend to continue in the future. On slide nine, we disclose the main metrics behind the significant improvement in the pedagogical business cash generation in the quarter. Improvements in days of sales outstanding, delinquency, and days of inventory were key to revamp our working capital dynamics this quarter. Moving to slide 10, once more, we disclose the effect of a more optimized capital allocation strategy that continues to reflect our focus on product evolution, but also it starts to show the higher cooperation and investment coordination among our brands. These efforts resulted in pedagogical CapEx in the 2023 cycle at 6.4% of net revenue from 16.3% in 2022. This enabled us to expand almost 10 percentage points, the adjusted EBITDA minus CapEx metric in 2023 cycle to 35% from 25.2% in 2022. In slides 11 and 12, we show the improvement in every line of our operating cash flow, leading our pedagogical business to a free cash flow to firm of BRL 187.6 million in the first quarter. That represents almost 40% of net revenues in the quarter and BRL 174.5 million expansion when compared to the first quarter 2022 figures. When looking at the 2023 cycle, we delivered BRL 96.8 million free cash flow generation at BRL 321.1 million expansion versus the negative BRL 224 million free cash flow registered in the 2022 cycle to date. Moving to slide 14, we officially debut our financial and management segment with a brief recap on isaac business model and trajectory. isaac was founded in August 2020 to address K-12 schools' overarching needs with software and financial solutions as an all-in-one platform. isaac has already reached BRL 266 million in annual recurring revenue as of March 31st, and currently transacts almost BRL three billion in yearly total payment value, or TPV. isaac first product, the revenue guarantee, aids Brazilian schools' financial struggles, once helped them surpassing. First, limited managerial skills. Second, pen and paper or in legacy era systems that made billing mostly offline through paper invoices, collecting unstructured and laborious, leading to friction with parents. Eliminates financial volatility to schools once isaac becomes responsible for all tuition collection, incorporating the delinquency risk that is priced in the applied take rates, and guarantees a monthly fixed streamline to schools. Such product provides recurring and monthly revenue once schools are paid in monthly installments during a 12-year-long education cycle, and a reduced working capital, as most parents often delay a few days. Delinquency at the end of cycle is structurally low, as delinquent students cannot re-enroll for next school year, as stated by law. On slide 15, we go through the business model fundamentals of isaac that enables such powerful and complementary earnings drivers. First, intense growth based in take rate model, mandatory for all students, provides significant scale. Second, such rapid growth strengthen the relationship with schools that already use our core and supplemental solutions by offering complementary financial and managerial solutions. Additionally, provides an extra school intake sales motion that adds new schools into our school portfolio and paves the way for monetizing a pipeline of products going forward. Third, on top of that, isaac state-of-the-art technology team and structure is a main pillar while enhancing pricing and collection processes and reducing our cost to serve while gaining scale. isaac trajectory as March 2023 is on track to its historical robust growth profile, as we can see in slide 16. ARR growth year-over-year surpassed the 80% mark and is combined with a powerful increase of efficiency. When analyzing school over total headcount metric in a single year, isaac was able to almost double such ratio, demonstrating the power and scalability of its tech-enabled model. Moving to slide 17, we show the first earnings result of our post financial and management segment. Net revenue in the first quarter were BRL 62.5 million and 133% growth versus a pro forma net revenue of the first quarter of 2022, prior to the acquisition. Adjusted EBITDA margin was -23.6%, an expressive 74 percentage points year-over-year expansion versus a pro forma adjusted EBITDA of the first quarter. EBITDA improvement correlates directly to scale gains resulting from its growth and tech profile. Due to its rapid growth pace, it's expected that margins will gradually increase quarter-over-quarter, ramping up on revenue growth and scale gains. We're confident in reaching our net revenue guidance of between BRL 300 million and BRL 350 million for the 2023 fiscal year, and hovering our -10% adjusted EBITDA margin guidance for the FNM segment in this fiscal year. On slide 19, we provide a snapshot of our consolidated first quarter 23 results that combines both pedagogical and FNM results. First quarter consolidated figures delivered a net revenue of BRL 534.9 million and adjusted EBITDA of BRL 110.7 million, with 20.7% adjusted EBITDA margin. Consolidated adjusted net income was -BRL 42 million, representing a -7.9% adjusted net income margin. Consolidated free cash flow to firm reached BRL 207.6 million, representing 38.8% of net revenue in the period. Moving to slide 20, we present the evolution of our free cash flow to firm since 2018 in order to highlight the significant performance of this beginning of the year. Definitely a milestone once we deliver the highest rate over revenues in such period. On slide 21, we highlight our free cash flow generation after financial expenses, reaching BRL 94.4 million, or 17.7% of net revenues in the first quarter, initiating a year of robust cash collection, as disclosed on slide 22. From the BRL 937 million of accounts receivables that are not past due in March 31st, we expect to collect approximately BRL 460 million up until the end of June. Such result collaborates to our continuous deleveraging process, as disclosed in slide 23. In the first quarter, we further reduced our net debt over adjusted EBITDA last 12 months to 3x, calculating according to our covenant specifications. While analyzing our current obligations, we continue to deploy our liability management strategy in order to meet our obligations for short and long term. As mentioned in previous calls, we're confident in our cash generation capacity, and on top of that, we're currently at final stages of issuing an additional credit line to strengthen our balance sheet to make for the future capital disbursements. With that, we conclude the representation. Operator, we can now open for questions. Thank you. Thank you. The floor is now open for questions. If you have a question, please press star one on your touch tone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Questions will be taken in the order they are received. We do ask that when you pose your question, that you pick up your handset to provide optimum sound quality. Our first question comes from Lucca Marquezini with Itaú BBA. Please go ahead. Good evening, everyone, and thank you for taking our questions. We got two questions from our side. First, Otero, you mentioned that during the call that Arco has already negotiated the premium contract, contracts for next year's commercial cycle. Can you please provide more color on the terms negotiated and also how they compare to this year's costs? Secondly, regarding cash flow generation, you saw a significant improvement that was mainly caused by better working capital. Can you please comment on the recurrence of these effects that led to this improvement in working capital? Thank you. Hi, Luca. Thanks for the question. By starting with the, with the first one, as you said, yes, we already have signed contracts for the first batch of the 2024 content. We start the screening process by the end of July, beginning of August. At this point, all those negotiations are pretty much really advanced, and some contracts are signed, as I said. For those, we are seeing prices per page down in nominal terms, okay? I would say a mid to high single digit decline in prices per page for the initial deliveries, which, as I said, we start printing in August, and we start delivering to schools by mid to the end of the fourth quarter. Okay? On your second point on cash flow generation, you're right. I think that's the most important highlight of the quarter. It is 100% recurring, okay? There's no one-off effect in this cash flow generation. Actually, this goes back to, I mean, the business fundamentals, right? This business generates a lot of cash. The key reason why our cash flow performance deteriorated in the last two years, has much more to do with circumstantial events, such as COVID and the incorporation of the acquisitions. Assuming a normalized environment, which is the one we are operating at right now, the business generates cash naturally. I don't want to minimize the impact or the influence of internal initiatives and the work the team is doing to improve, of course, and accelerate the return to this very healthy cash flow profile. We've been putting a lot of focus on that, through internal processes, through incentives to the management. This has become the key metric through which we measure success, in the company. Now this is reflecting in concrete results. Okay? Again, this is recurring, there's no one-off effect, and you should see this behavior throughout the year, okay? That's very clear, Otero. Thank you. Our next question comes from Lucas Nagano with Morgan Stanley. Please go ahead. Hey, good evening. Thanks for taking our questions. We have two questions. First one is related to costs. I understand that for the 2024 cycle, the printing costs should reduce, but what are your expectations on the margins for the rest of the 2023 cycle, given that the materials must have been already printed? Second question is related to the next the 2024 sales process. Could you give some color on your perception on the competitive environment and which level of ACV growth you're targeting for core and supplemental? Do you see isaac helping to accelerate the growth in the pedagogical segment as well? Hey, this is Otero speaking. Starting with the first question on costs and the expectation for this year, Nagano. As I said during the opening remarks, we expect the gross margin this year, in the fiscal year, okay, to be down around 2% to 3% points max. Okay? This means an improving curve in the upcoming quarters. Okay? This reflects negotiations that are already affecting the 2023 cycle. We were mostly exposed to higher prices for the first batches of the 2023 cycle, but along the process, we managed to relocate volume in other suppliers and other printing companies, and managed to reduce prices for the current cycle. For the 2024 cycle, which we start printing in August, this affects the Q4 directly and helps ourselves minimize the impact in the entire year. Again, the 2023, as I said, I mean, we saw pressure, especially for the beginning of the printing process, but we managed to relocate capacity and not be fully exposed to those higher prices for the entire cycle. Again, we expect the gross margin to be down this year at a much lower pace than what we showed in the first quarter. Okay? On the second point, for the 2024 sales process, it is early to say, as you know, I mean, the curve accelerates a lot in the second half of the year traditionally. What we can share at this point is that when we compare to the 2023 ACV build-up process, we are ahead of the curve in pretty much every metric that we look at. In terms of a price increase, in terms of cross-selling, upselling and a new school addition, we are performing ahead of the curve and slightly ahead of our expectations. Again, it's important to emphasize that it's early. Let's keep expectations bearing in mind that we are still beginning the process. But the data we have at this point shows encouraging expectations for the completion of the sales cycle. With regards to Isaac, I would say that at this point, we are focusing more on the cross-sell to sell Isaac. I would say it's early to focus on what we would call a reverse cross-sell, which we do for supplemental products, and I think we will end up doing with isaac. isaac already has more than 1,200 schools as clients, so it is a relevant base of potential clients to our post-pedagogical business. It is important, but for a matter of focus, and priority, we are at this point focusing more on the cross-sell of the pedagogical sales force, helping create leads and sell isaac to our current pedagogical clients. I think it's much more a matter of prioritization and focus, and probably we're going to start the reverse cross-sell more likely towards the end of this year or in 2024. I think this answered the questions. Thank you, Lucas. Thank you, Otero. That's very helpful. Our next question comes from Jessica Miller with JP Morgan. Please go ahead. Hi, thank you for taking my question. I had two. First on that, do you continue to expect breakeven by the end of... opportunities in the public sector? Thank you. Hi, Jessica. Roberto Otero here. I'm sorry, could you repeat the first and second question? I'm not sure if it's our connection here. I lost you. If you could repeat, I would appreciate it. Thank you. Yeah, sure. My second question is regarding the public sector. Do you see any opportunities here going forward? Great, thank you. Thanks for repeating the question. On the first one, yes, this continues to be the base case. As you saw in the first quarter, they posted a minus 26% EBITDA margin, differently from Arco. The isaac business builds up revenue along the year, right? Sorry, minus 23.6 EBITDA margin. Differently from Arco's business, isaac compounds revenue along the year. Right, Jessica? The scale gains and the operating leverage happens along the year, right? You should expect this minus 23.6 to converge to our guidance for the full year. Everything's on track. I think the business is performing in line with the expectations. There's nothing at this point that would lead us to believe that the breakeven would take longer to happen than what we initially planned. So far, so good. The business is performing 100% in line with the expectations. With regards to the public sector, I think it's a good question. Honestly, we think the opportunity in the private sector is so big, and we think we can explore this opportunity in the private sector in so many ways that at this point, for a matter of focus, we will continue to focus in the private sector. We are just scratching the surface in many segments in which we operate. We have as isaac, I mean, adding even more strength to the platform. For a matter of focus and for a matter of belief, that this is the best place to focus, we will continue to, I mean, focus on the, on the private sector. Okay? Clear. Thank you. Our next question comes from Pedro Caravina with Credit Suisse. Please go ahead. Hi, guys. Thanks for taking my question. I would like to do a follow-up on cash generation. You improved a lot the cash generation for the 2023 cycle. If I may ask, what are behind the better working capital dynamics, following my colleague's question, and what should we expect for the following two quarters of the cycle? Is there a concentration of cash generation in the first two quarters, or is, I don't know, better terms and improvements at all? Also, I noticed that there was a reduction in CapEx, expanding. Why were the levels higher in 2022, and what should be a recurring level going forward, for CapEx, maybe as a percentage of revenues? Thanks. Hey, Pedro, Otero here. Thanks for the questions. In terms of the cash flow improvement, I think it's much more a normalization of the working capital behavior. I think we are leaving behind events or impactful events that really changed and affected the behavior of the company's working capital. I think impacts on receivables, inventories, to a lesser extent, on payables as well. We're seeing a normalization across the board. If you look at delinquency, for example, we're now a performance. Our performance on delinquency right now is better than a pre-COVID levels. I'll say the business is going back to its normal profile. Internally, we are putting much more focus on that as well, right? I think this adds more fuel to this recovery or accelerates this recovery. Okay, Pedro. Internally, we're putting a lot of effort. This applies to contracts with schools, this applies to S&OP, this applies to all those renegotiation going on with the printing suppliers. It is a very ample effort that is translating into this improvement in working capital. Because this has become a key focus, and the internal incentives are all towards this goal, okay? In terms of the expectation for the next quarters, the second quarter is usually a very strong quarter as well for collection, okay? You should not expect anything different. The Q4 is usually the quarter at which we see our highest consumption, right, in terms of cash and working capital consumption. You should expect a similar trend to that. Q1, Q2 are very strong in terms of collection and inflow of cash. Q4 usually the weakest one for cash flow generation, okay? In terms of the CapEx spending, we have not changed the mindset towards, I mean, being the dominant and the best player in terms of quality, and product quality and technology evolution. This has not changed at all, and this is not the reason why CapEx is actually losing relevance as a percentage of revenues. I think it has much more to do with the way we've been operating the company and the level of coordination among the brands and reduce redundancy across the brands. All those things that some of them we even discussed at Arco Day, in terms of, I mean, centralizing technology development, for example. transcript of a speech given by Ari de Sá Cavalcante Neto, CEO and Founder of Arco Platform Limited. "All of that translates into a more efficient capital deployment process, and now it's reflecting into the CapEx losing relevance as a percentage of revenues. We maintain the guidance of CapEx as a percentage of revenues of 8%-10%. But at this point, I would say that there are signs that CapEx will trend below, or slightly below or at the low end of this guidance. Okay? Very clear, Otero. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your touch tone phone. Please hold while we poll for questions. At this time, we have no further questions in the queue. That concludes Arco's first quarter 2023 earnings call. Thank you very much for your participation. Have a good night. You may now disconnect.