Arco Platform Limited provides a complete pedagogical system with technology-enabled features to deliver educational content to private schools and students in Brazil.
The company’s turnkey curriculum solutions provide educational content in both printed and digital formats delivered through the company’s platform to improve the learning process.
The company has an asset-light, highly scalable business model that emphasizes operational efficiency and profitability. In the company’s B2B2C Core...
Arco Platform Limited provides a complete pedagogical system with technology-enabled features to deliver educational content to private schools and students in Brazil.
The company’s turnkey curriculum solutions provide educational content in both printed and digital formats delivered through the company’s platform to improve the learning process.
The company has an asset-light, highly scalable business model that emphasizes operational efficiency and profitability. In the company’s B2B2C Core Curriculum and Supplemental Content Solutions, the company operates through long-term service contracts with private schools. These contracts generally have initial terms that average three years, pursuant to which the company provides educational content in printed and digital format to private schools.
The company’s network in its B2B2C Core Curriculum and Supplemental Content Solutions as of March 30, 2023, consisted of 8,071 partner schools.
The company had 2,629,674 expected number of enrolled students, or Number of Enrolled Students, across all Brazilian states as of March 30, 2023. During the COVID-19 pandemic, the company’s partner schools experienced atypical dropout rates from March 31 to September 30 resulting in a material difference between the company’s Number of Enrolled Students and the Final Number of Enrolled Students as of September of each year. In 2022 the company’s partner schools did not experience these atypical dropouts, and dropout rates reverted to pre-pandemic trends and there were no material variations to the Number of Enrolled Students.
Context
The company can deliver a more effective, personal, engaging, and enjoyable learning experience for students by combining high quality proprietary content and software applications in the company’s simple, integrated, and personalized educational platform. The company intends to move beyond traditional educational models used by schools by empowering educators, school administrators and students to achieve their highest potential through the company’s educational platform.
The company’s Core Curriculum and Supplemental Solutions enable students, teachers, and school administrators to have access to engaging and easy-to-use resources that propel academic success and meet students’ diverse learning needs. Pairing the company’s printed and digital curriculum with real-time data and teacher-led learning allows the company to personalize learning at the individual level, improving both individual student and aggregate school performance.
The company develops its educational content using a model based on extensive research and performance-based standards. The company combines printed and digital content with online lecturettes featuring expert, on-screen teachers and tailored assignments and assessments to engage students and help them master their subject areas. With this integrated approach, students can track their progress and performance, teachers can access real-time data to evaluate students and personalize their teaching and school administrators can better manage their school’s performance both on absolute and comparative terms.
The company’s solutions are designed to be highly interactive and enjoyable, which results in enhanced educational outcomes when compared to traditional models.
Solutions
The company’s platform on the B2B2C model is developed with the benefit of an evolving educational methodology and robust track record of academic results. The company’s track record of high-performing educational outcomes motivated the company to create a digital, technology-driven product that could deliver high quality education at scale.
Additionally, Positivo is the pioneer in the learning system segment in Brazil and has served the K-12 private school market for more than 40 years. The pedagogical methodology developed inside the Colegio Positivo schools was transformed into a comprehensive educational solution that quickly expanded to other schools in Brazil. Over time, Positivo expanded its product offering to address different profiles of schools and increase its addressable market.
The company provides a complete suite of turnkey curriculum solutions and technology-enabled features to help the company’s students, teachers, partner schools and parents, targeting the company’s students’ educational success.
The company’s turnkey educational platform solutions comprise core K-12 curricula, as well as supplemental educational content focused on English as a second language and 21st century skills programs (such as social and emotional learning - SEL).
Products
As a technology company in the education sector, the company’s dynamic and adaptive nature is essential to the company’s continued growth. The company’s product offerings comprise two main segments that operate in concert: Core Curriculum and Supplemental Solutions.
The company’s Core Curriculum comprises high quality content solutions that are designed to address the Ministry of Education’s national K-12 curriculum requirements through a personalized and interactive learning experience. Students access content in various formats, such as digital, video, print and other audiovisual media that are aligned with the daily curriculum of their classes. The company’s Core Curriculum offering serves a broad range of price points, allowing the company to maximize its market reach and penetration. It is offered through six different brands, consisting of SAS, a premium solution focused on high-income private schools, with nationwide presence and strong footprint in the Northeast and North regions; COC, a premium solution focused on high-income private schools, with nationwide presence and strong footprint in the Southeast region; SPE, an educational solution focused on upper-middle-income class private schools, with nationwide presence and strong footprint in the South and Southeast regions; SAE, a solution focused on upper- middle income private schools; Conquista, a solution focused on lower-middle-income private schools; and Geekie, a digital-native content platform.
The company’s Core brands share certain key attributes, such as:
Online Homework Assessment: An extensive questions and problem-solving activities database that provides additional teacher-led instructional content to help meet individual student or small student group needs. Assessments enable thorough, customized evaluations of student performance over a single lesson, over the course of a topic, or throughout the entire academic year.
Adaptive Learning: A personalized instruction and assessment tool delivered through the company’s exam management portal to help students prepare for and take exams. The user-friendly reporting and ongoing progress monitoring features enable educators to pinpoint student needs down to the sub-skill level, while providing real-time feedback at the class level, school and national level. The platform also enables teachers to generate exams based on a given class profile, using a database containing a broad range of questions.
Interactive Learning: Leveraging the combined abilities of the company’s pedagogical and EdTech teams, the company has created augmented reality and video features throughout the company’s materials, allowing students to point their digital devices at certain sections in the company’s materials to view educational animations or recorded videos that provide further information on the topic in question, contributing to a more interactive and engaging learning experience.
Students and Teachers Web Portal: An online environment aggregating relevant content for students and teachers by grade in the form of digital classes, exam database, assessment templates, teachers’ guides and lesson plans, exams and textbooks’ problem solving in addition to articles and general educational-related tips.
In-app Communication: A responsive, simple and user-friendly communication tool for partner schools, students and parents, giving them access to exam results and problem solving, video classes, student grades, as well as the school calendar and attendance records.
Support to Partner Schools: Back-office management, educational consulting services, training programs for teachers to assess and improve the quality of their teaching methods and marketing advisory services.
As part of the company’s Core Curriculum, the company offers complementary support to partner schools consisting of:
Back Office Management Tools: HR tools with financial, student recruiting and administrative features.
Educational Consulting Services to Partner Schools: Personalized support to ensure complete understanding and appropriate implementation of the company’s learning platform. This includes constant support to partner schools throughout the school year in connection with educational practices, administrative, human resources and financial aspects, development of customized students’ assessment models, organization of education congresses and pedagogical meetings, as well as parents and students counselling.
Training Programs for Teachers and School Administrators: A suite of materials to allow partner schools and teachers to assess the quality of their teaching methods and how they can improve them through the company’s learning platform. This includes local, regional and national educational congresses, forums, seminars and lectures, in addition to training sessions.
School Marketing Advisory: A comprehensive range of marketing and communication materials, events and support through the company’s learning platform, including marketing brochures and recruitment campaigns.
The company’s Supplemental Solutions comprise Supplemental Content Solutions, providing additional value-added educational content for which partner schools can opt-in as an addition to the company’s Core Curriculum; and Other Supplemental solutions to schools and students such as education technological features schools (WPensar, EEM, Studos and Eduqo), B2C online test prep solution (MeSalva!) and life-long learning platform connecting employees of companies across Brasil to free and discounted courses (Edupass).
The company have a Supplemental Content solutions market share of 3%, calculated by dividing Arco’s Supplementary Solutions ACV Bookings for the 2022 school year by the total addressable market for Supplemental Solutions, which consists of English as a Second Language (ESL) bilingual programs (International School, PES and PGS) and 21st century skills programs (Pleno, Escola da Inteligência, NAV and Mentes), based on Educa Insights’ assessment of the private K-12 market.
The company started offering Supplemental Solutions through an ESL bilingual program in 2015, following the company’s acquisition of an interest in International School. International School provides students with an internationally oriented education, in a multicultural environment, based on a curriculum like the International Baccalaureate or Cambridge International Examinations. The company intends to add non-core supplemental educational modules to the company’s Supplemental Solutions portfolio over time.
Upon the acquisition of Positivo in 2019, the company’s Supplemental Solution also offers the PES, a bilingual program with an approach that promotes integrated learning of content and language, in partnership with Cambridge University Press. The program consists of 2-5 weekly hours of English classes with several tools to develop the skills needed to communicate well. PES also provides teachers’ training and pedagogical support to its partner schools. PES was launched in 2015 and has a strong cross-sell potential within the company’s Core Solution partner schools’ network and to expand to schools that have not yet adopted the company’s solution.
In 2019, the company started investing in the development of a social-emotional supplemental solution called Pleno, developed to meet schools’ demand for a product that goes beyond the student’s cognitive development. Through the same B2B2C business model and integrated with the K-12 curriculum, Pleno helps students to develop competencies and skills, such as self and social-awareness, design thinking and entrepreneurship.
In February 2021, the company concluded the acquisition of NAV, a developer of competence-based learning content, enhancing the company’s Supplemental Solutions offering through a competence-based curriculum to address 21st century skills, which is in the company’s portfolio since May 2019. Through projects, problem solving and technology, NAV helps students develop transferable skills, such as critical and creative thinking, and communication skills.
In December 2020, the company concluded the acquisition of Escola da Inteligência, the leading solution in social-emotional learning (SEL) in Brazil, based on a proprietary methodology and great reputation in the K-12 market.
In February 2022, the company acquired PGS, a K-12 bilingual courseware and teaching methodology, formerly known as Pearson Global School, complementing the company’s ESL offering with a high-quality solution with a differentiated pricing point; and Mentes do Amanhã (‘Mentes’), a K-12 supplemental solution focused on 21st century skills (social-emotional learning, financial literacy, and technology).
The company intends to continue adding supplemental educational modules to the company’s Supplemental Content Solutions portfolio over time, broadening Arco’s supplemental market presence by adding high-quality solutions with pricing complementarity to the company’s offering. Arco believes in the large potential for English as a Second Language and in the favorable market trend for 21st century skills. An even stronger portfolio better positions Arco to capture this demand outside and within Arco’s school base. The key attributes of the company’s Supplemental Solutions are:
Proprietary Applications: Two complementary applications providing content and English-based games that form part of students’ school year collections, including a communications tool for partner schools, students and parents.
Robotics: Pioneering activities that enable students to build and program their own Lego robots as a way to maximize learning beyond the classroom experience.
Combination of Concrete Materials and Animations: Print and digital textbooks combined with interactive animations, educational videos and exercises.
Crowdsourced Education: Collaborative and versatile platform for classrooms that allows students to collaborate in project building and problem solving.
The company’s Supplemental offering also includes other solutions such as technological and managerial features to partner schools, B2C test prep and education as a benefit.
The company’s tech and managerial features include WPensar (acquired in 2015), a company that develops and licenses school management systems software; Escola Em Movimento, or EEM (acquired in 2019), an app developer that enhances communication between schools and parents by providing chat-based interactions, location-based identifications, Net Promoter Scores, or NPS, tool to assess parent’s satisfaction and pilot project related to payments; Studos (acquired in 2020), a leading provider of adaptive solutions; and Eduqo (acquired in 2021), a learning management system (LMS) platform that connects students and professors, and also offers question banks, exams and diagnostics to its clients.
In March 2021, the company acquired Me Salva!, a B2C digital test prep solution, allowing Arco to start delivering high quality education to public sector students at affordable prices. Finally, in February 2022, the company acquired Pearson Global School, a K-12 bilingual courseware and teaching methodology, and Coleção Mentes, a K-12 supplemental solution focused on 21st century skills (social-emotional learning, financial literacy and technology).
In September 2021, the company acquired EduPass, a company that offers education as a benefit to corporate clients and aims to prepare the Brazilian workforce to the future of work through education and upskilling.
In January 2023, the company acquired isaac, a vertical platform to address schools’ overarching needs with software and financial solutions, including working capital management issues.
Growth Strategies
The company’s strategic initiatives include deepening relationships with the company’s existing customer base; expanding the company’s partner school base; adding new supplemental solutions; continuing to innovate and extend the company’s technological leadership; and continuing to pursue M&A opportunities.
Marketing and Sales
The company has a non-traditional sales approach, which is structured around a practice the company refers to as ‘Educational Consulting,’ which reflects both the company’s core value of ensuring that education is the company’s first priority, as well as the unique sales dynamics associated with the company’s industry.
The company has a lead time (which the company defines as the period from the moment of first contact to the execution of a contract) for the acquisition of new partner schools, and the company typically enters contracts with new partner schools within one year from the moment of first contact, which requires a series of interactions and constant contact, to build a trust-based relationship with target and partner schools. The company also holds several specialized events aimed at target and partner schools, product journeys and guided visits to the company’s units, and participate in industry fairs.
In 2022, the company had over 5,736 applicants for the company’s consultant positions, and as of December 31, 2022, the company employed more than 577 sales and marketing professionals.
To improve and optimize the company’s partner school acquisition process, the company structured a market intelligence division, which focuses on mapping and segmenting the company’s target markets to support and focus the company’s sales strategies, as well as providing the company’s sales consultants with industry knowledge and high-level market analysis and insights. The company’s market intelligence division has access to a significant volume of data, is continuously undertaking industry research and analysis and receives regular feedback from, and is in regular contact with, the company’s consultants deployed in the field.
Additionally, the company promotes specialized events that are aimed to retain partner schools. The most relevant event is Positivo’s Course Program that provides teacher’s training, workshops of recent trends in education and lectures from highly specialized and trained pedagogical professionals. In 2022, the Course Program reached 10,704 teachers.
In addition, the company works in conjunction with a branding agency, which assists the company in developing and strengthening the company’s brands, increasing their national awareness, and building the company’s institutional image. The company’s brand portfolio is structured to reflect the company’s value proposition and leverage the company’s marketing and sales strategy. A study conducted by Expertise as of July 2021 showed that the Positivo brand is the most recognizable among parents, teachers, and school events.
Furthermore, the company has a loyalty program aimed at strengthening the relationship with partner schools and increasing the length of the contract. The loyalty program allows SPE to offer more personalized consulting services from the company’s pedagogical experts, literature materials to complement the school’s curriculum, cooperative media, and other products or services, to increase a contract’s profitability.
Customer Service and Support
The company’s customer service and support come in a variety of forms, such as on-site visits, remote assistance, workshops, and events for partner schools. The company assigns independent and dedicated client-centric customer support teams to each of the company’s solutions. Customer service and support is consisted of two departments, which are focused on developing partner school relationships and are available to address any post-implementation issues that may arise: pedagogical consulting and customer service:
Pedagogical Consulting
The company’s pedagogical consulting department is responsible for the pedagogical supervision and educational development of the company’s partner schools. It aims to ensure that the company’s educational platform is being used efficiently, and to actively assist the company’s partner schools in improving the learning experience of their students and helping them develop the necessary skills inside and outside the classroom. It also leverages a dedicated management team to train and support the company’s partner schools in maximizing their supplemental revenue streams.
The company’s pedagogical consulting team activities with partner schools include:
Implementing pedagogical methodologies in connection with the company’s educational platform and associated educational materials, making pedagogical recommendations, understanding school communities, and coordinating lesson planning;
Periodic in-person meetings and coordinated site visits to evaluate the educational process, assisting partner school owners and faculty members to develop learning and interaction projects through the use of educational media content and new technologies, and conducting lectures for parents and students;
Continuous online or on-site training for teachers and school coordinators; and
Developing educational evaluation models tailored to each partner school’s profile and needs, and training school owners and managers to use the school owner/manager specific features of the company’s educational platform.
Customer Support
The company’s customer support department provides day-to-day customer and administrative support to the company’s partner schools in connection with the company’s educational platform by e-mail and/or by telephone. The company’s customer support department interacts with the company’s pedagogical consulting department when necessary to minimize the risk of miscommunication and ensure a unified approach to customer satisfaction.
Geographic Presence
The company’s platform can be adopted by virtually any private K-12 school in Brazil. The company’s product offering addresses Core and Supplemental curriculum needs for all Brazilian schools. As of March 30, 2023, the company’s network consisted of 8,071 unique partner schools and 2,629,674 Number of Enrolled Students across all Brazilian states and in 1,649 cities, comprising students from kindergarten to high school.
Clients
The company provides a complete pedagogical system with technology-enabled features to deliver educational content to K-12 schools in Brazil. The company’s turnkey curriculum solutions provide educational content in both printed and digital formats delivered through the company’s platform to improve the learning process. The company’s network as of March 30, 2023, consisted of 8,071 partner schools.
Seasonality
The company’s revenues and operating results normally fluctuate as a result of seasonal variations in its business, principally due to the number of months in a fiscal quarter (year ended December 2022) that its partner schools are fully operational and serving students. The company’s main deliveries are shipped to partner schools in the last quarter of each year (typically in November and December), and in the first quarter of each subsequent year (typically in February and March). Furthermore, the materials the company delivers in the fourth quarter are used by its partner schools for the following school year, and as such, the company’s fourth quarter results reflect the growth in the number of its students from one school year to another, leading to generally higher revenues in the company’s fourth quarter compared to the preceding quarters in each fiscal year. Consequently, in aggregate, the seasonality of the company’s revenues has generally produced higher revenues in the first and fourth quarters of its fiscal year. In addition, the company bills partner schools and collects the sales it charges them in the first half of each academic collections year, generally resulting in a higher cash position in the first half of each fiscal year relative to the second half of each fiscal year.
A significant portion of the company’s expenses are also seasonal. Due to the nature of the company’s business cycle, the company requires significant working capital, typically in September or October of each year, to cover costs related to production and accumulation of inventory, selling and marketing expenses, and delivery of the company’s teaching materials at the end of each fiscal year in preparation for the beginning of each school year. Therefore, such operating expenses are generally incurred in the period between September and December of each year.
Regulation
The National Education Guidelines Law (Lei de Diretrizes e Bases da Educação Nacional) and the National Common Core Curriculum (Base Nacional Comum Curricular) establish what subject matters shall be taught for each level of education (early childhood education, primary education and secondary education), and the company is constantly working on its content to ensure that they comply with these guidelines, as well as with the company’s partner schools’ demands.
Intellectual Property
As of December 31, 2022, the company owned 617 trademark registrations in Brazil (563 of which have been granted, 54 of which are under review but that the company is entitled to use), two in Argentina, two in Bolivia, three in Chile, one in Ecuador, two in Paraguay, and one Uruguay.
As of December 31, 2022, the company owned 115 registered domain names in Brazil. The company also had 38 of pending trademark applications in Brazil, Paraguay and Venezuela (34 in Brazil, two in Paraguay and two in Venezuela) as of December 31, 2022. The company has several registered copyrights, most notably copyrights for text formatting, critical reading, books, drafting, text editing and review, reformulation, book updates, content coordination, illustrations and diagramming.
History
Arco Platform Limited was founded in 1941. The company was incorporated in 2018 as a Cayman Islands exempted company with limited liability duly registered with the Cayman Islands Registrar of Companies.
The Analyst Price Target shows the analysts’ low, high, and average target at a glance.
