Arco Platform : Company Presentation – October 2020

Company Presentation

October 2020

Disclaimer

This presentation has been prepared solely for informational purposes and is to be maintained in strict confidence. Neither the information contained in this presentation, nor any further information made available by Arco Platform Limited (the "Company") or any of its affiliates or employees, directors, representatives, officers, agents or advisers in connection with this presentation will form the basis of or be construed as a contract or any other legal obligation. By attending the meeting where this presentation is made, you agree to be bound by the limitations described herein.

This presentation does not constitute or form a part of, and should not be construed as, an offer to purchase, sell or exchange any security, a solicitation of any offer to purchase, sell or exchange any security, or a recommendation or advice regarding any security and as such it is not and will not be registered with, or authorized by, the applicable enforcement authority. Additionally, this presentation does not constitute a recommendation regarding the securities of the Company. This presentationdoes not constitute a prospectus in whole or in part.

These slides and the accompanying oral presentation contain forward-looking statements. All statements other than statements of historical fact contained in this presentation may be forward-looking statements. These forward-looking statements are subject to risks and uncertainties, and may include, among others, financial forecasts and estimates based on assumptions or statements regarding plans, objectives and expectations. The forward-looking statements can be identified, in certain cases, through the use of words such as "believe," "may," "will," "aim," "estimate," "continue," "anticipate," "intend," "expect," "forecast", "plan", "predict", "potential", "aspiration," "should," "purpose," "belief," and similar, or variations of, or the negative of such words and expressions, although not all forward-looking statements contain these identifying words. The Company has based these forward-looking statements on its estimates and assumptions of its financial results and its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this presentation. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. In addition, the Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for the Company's management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements that the Company may make.

In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation are inherently uncertain and may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely upon forward-looking statements as predictions of future events. The Company does not undertake any obligation to update publicly or revise any forward-looking statements for any reason after the date of this presentation,to conform these statements to actual results or to changes in the Company's expectations.

In addition to IFRS financials, this presentation includes certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income and Free Cash Flow. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with IFRS. The non-GAAP financial measures used by the Company may differ from the non-GAAP financial measures used by other companies. A reconciliation of these measures to the most directly comparable IFRS measure is included in the Appendix to these slides.

Certain data in this presentation was obtained from various external sources, and neither the Company nor its affiliates, advisers or representatives have verified such data with independent sources. Accordingly, neither the Company nor any of its affiliates, advisers or representatives make any representations as to the accuracy or completeness of that data or to update such data after the date of this presentation. Such data involves risks and uncertainties and is subject to change based on various factors.

The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company.

By viewing the presentation you will be taken to have represented, warranted and undertaken that: (i) you have read and agree to comply with the contents of this disclaimer, including, without limitation, the obligation to keep this presentation and its contents confidential and (ii) you will not at any time have any discussion, correspondence or contact concerning the information in this presentation with any of the directors or employees of the Company or its subsidiaries nor with any of its suppliers, customers or partners without the prior written consent of the Company.

2

AGENDA

Section 1

Section 2

Section 3

ARCO TODAY	HOW WE GOT	WHAT IS
	HERE	COMING AHEAD

Section 4

Section 5

MANAGEMENTAPPENDIX

TEAM

3

SECTION

1

ARCO TODAY

4

Our mission is to transform the way

students learn by delivering high quality education at scale through technology to K-12 schools.

5

Arco in numbers

MARKET

LEADER1

SCRATCHING THE SURFACE OF A HUGE MARKET

R$ 1 billion
2020 ACV2	HIGH
+1.3mm	+5.4k	GROWTH
Students3	Partner Schools3

4%	HIGH
PROFITABILITY
ACV Market Share4

55%

2016 - 2020 ACV CAGR

36.5%

Adj EBITDA Margin

20195

Notes:

1. Based on the number of students of the Brazilian learning system market. 2. ACV Bookings is the yearly (assuming a school year) revenue contractually expected to be recognized from a partner school assuming no further additions or reductions in the number of enrolled students.

1. For the 2020 school year. 4. Market-share includes core and supplemental solutions. The Total Addressable Market includes supplemental solutions, which has an
   addressable market of R$18.7 billion, and the potential market for private K-12 learning systems and textbooks in Brazil, which has an addressable market of R$6.5 billion. TAM for Total Market. Source: EY-Parthenon.

1. Calculated by dividing 2019 Adjusted EBITDA of R$ 209.4 million by 2019 Net Revenue of R$ 572.8 million.

6

Disrupting the traditional model based on textbooks

Arco has better content, better service and better technology

Traditional Model

• B2B2C: solution sold to the school that resells to parents
• 100% subscription model, creating a strong bond with the school owner
• Integrated and hybrid solution: printed content + digital platform

All solution components for all disciplines to at least one segment, usually the whole school

	• B2B: books sold to retailers
Business model	• No/weak relationship with the schools
	• Printed books only

AdoptionFragmented

Brand & Methodology

Proven Results and 50 years of Educational Experience

Reputation

No Proven Results

Dynamic, real time interactions and always evolving based on constant feedback from partner schools

Adaptive and integrated with the content, supports teachers and school

Pedagogical and school management support

Cheaper than traditional model for parents

ContentStatic

Technology & Digital	Product Oriented Business Model/
Solutions	Distant Relationship with Clients

Services

Cost for students

More expensive for parents than Arco's solutions

Additional source of

Markup for partner schools

revenue for school

7

Arco operates an attractive B2B2C business model

Integrated educational solutions	Integrated solutions
Cheaper for parents

School

Students / Parents

+ School mark-up

B2B2C is an attractive business model for Arco

Mandatory for all
students of	High LTV/CAC	High revenue
grades that	predictability
adopt the
solution

8

Win-win solution for K-12 private schools

Personalized, engaging,	Tools that facilitate teaching process
omni-channel learning experience	and improve outcomes
Students	Teachers

Our solutions benefit all stakeholders

Greater involvement in children's

Management support, additional

consultancy services and additional

academic development, at lower cost

source of revenue

ParentsSchools

9

SECTION

2

HOW WE GOT HERE

10

Why we win this game? It's all about quality!

1	2		3
High-Quality
	Solution		Distribution
Track Record	Continuous evolution and	•	Proprietary approach
	to attracting new schools
	innovation of content,
+50 years of education		accelerate our growth
technology and
experience and industry-		• Trustworthy
leading impact on	pedagogical services		relationships create a
students' performance			phenomenal venue to
		offer new solutions to our
			5,400 partners schools

11

Value creation through a virtuous cycle crafted over

the years

(RE)INVESTMENT	SUPERIOR
IN CONTENT,
ACADEMIC
TECHNOLOGY AND
RESULTS
TALENT

SCALE GAINS,	BRAND EQUITY
AND ACCESS TO DATA	AND REFERRALS

RETENTION AND

ORGANIC GROWTH

12

Top 10 schools in the	National ranking
# of

Track record based on outstanding results

																									Arco's schools
																									are among the
9 years among the top 10 schools in Brazil1			Delivering superior outcomes around	Top 10 in 24
		out of the 27
													the country1					Brazilian states
				4		in the														56	51
3	3									State		Capital
			32			38	35
							10 schools	31
							ranking
							# of Top
2017	2018	2019			2017	2018		2019

Arco's schools have higher average scores1,2

score	Arco	Overall
average		+18%
Weighted	+15%		+15%
	2017	2018	2019

Arco's solutions increase ENEM scores overtime3

			SAS vs Competitors in Y5
SAS	SAE	Competitors	5x higher

SAE vs Competitors in Y2

growthinENEM			22x higher
scores
Average	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5

Notes:

1. Considering ENEM: Brazil´s optional national standardized exam. Source: company data, Ministry of Education. 2017 and 2018 numbers do not include Positivo's schools. Results shown are based on the objective questions scores and considers the following assumptions: (1) schools with more than 10 students and INEP ID, (2) students with scores different than zero that attended and graduated from regular high school, (3) students using Arco's solutions in high school or preparatory courses.

2. ENEM ranking considering the weighted average score per student.	13
3. Source: EY Parthenon. Based on 2018 ENEM results.

Virtuous cycle reflected on customer satisfaction

NPS for Arco's core solutions¹

82

71

"In this scenario, Positivo gave us enormous support, making the Positivo On platform available. It also offered lectures relevant for the moment, information that helped management seek for pedagogical and financial strategies and support on emotional issues." - Positivo partner school since 2018

"In times of Pandemic, Positivo reformulated itself in record time to assist us. We are satisfied" - Positivo partner school since 2013

2019 Proforma

2020 Preview

"It's amazing what you did, you managed to show a new company, a new type of service."- Positivo

partner school since 1993

Notes:	14
1. Net Promoter Score for Arco's core solutions. Calculated as the weighted average of the NPS scores per brand by the ACV. 2019 Proforma numbers include Positivo and Conquista. 2020 numbers are estimates.

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Why we also win on M&A?

FOUNDERS AND OWNERS	WE ARRIVE EARLY AND	WE OFFER OUTSTANDING GROWTH
PREFER TO PARTNER WITH US	DECIDE QUICKLY	POTENTIAL FOR PARTNERS

• Quality-focused reputation and	• Focus from being a 100% pure
people-driven culture attract	play learning system
the best partner	• Founder owned company with
	simple decision-making
	governance

• Distribution of solution in large and high-growth partner base
• Easier to attract talents by leveraging on Arco's brand
• Benefits from learning from other brands

15

Arco has been successful in executing strategic M&A

transactions...

	Announcement Date	May 2019	August 2020
	Thesis:	Revamp the operation and solution of a	Accelerate growth of unique company in
	Accelerate Companies with Similar	well-known learning system brand in
	an attractive market
	Business Model	Brazil
	Competitive Positioning:	Leading Core solution brand in Brazil	Leading SEL brand in Brazil
	Leading Companies	698k Students1	330k Students
	Deal Terms:	12.0x EV/2018 EBITDA	60%: 12.5x EV/2019 EBITDA
	Accretive Multiples	4.0x EV/ACV²	40%: 6.0x EV/2023 ACV
		Go-to-market strategy restructured,	Subject to antitrust approval
	Integration Approach:	(shared services to be integrated, go-to-
	investments in technology, almost
	Low Complexity and Growth Oriented	market to be restructured, investments
	completed in shared services
		in technology)
Notes:
		16
1. Considers the number of students at the time of the acquisition, disclosed in the prospectus supplement dated October 21st, 2019.

2. Calculated by dividing the acquisition price of R$ 1,650 million by the 2019 ACV of R$ 397 million, disclosed in the prospectus supplement dated October 21st, 2019.

Covid-19 has reinforced our product differentiation

We have further differentiated our solutions during

the pandemic

Creation of a virtual school: offering of daily

As a result, the engagement have achieved levels we would only expect to reach further into the future

asynchronous and synchronous classes to all students from our network and prospect clients, free of charge

Expansion of digital content: online assessment,

learning objects, digital books

Remote consultancy services: farmers team serving our partners schools and offering support, such as teacher training and managerial support to school owners as well as market and legal support for schools

Available to all grades, we are producing and broadcasting

more than 12,000

video classes,

generating

34 million views1

~3x increase

in the number of sessions in our online platforms, reaching more than 18 million session only in June 2020

Note:

17

As of June 30, 2020.

SECTION

3

WHAT IS COMING AHEAD

18

We are still scratching the surface of a huge market

Total addressable market segmentation

R$ 6.5B

R$ 18.7B

TAM¹

Mkt share²

	12%		1%
Core	ESL	SEL	STEAM:	Tutoring
			Coding,
			Robotic &
			Others
			Potential to Explore New Verticals
			STEAM:
			Maker

Space to Add New Brands

Notes:	19
1. Source: EY-Parthenon.

2. Market-share calculated by dividing the 2020 ACV for each segment by the corresponding TAM

Exciting opportunities ahead supported by a consistent

strategy

1 2 3

Continue to grow	Pursue disciplined and	Make selected bets in new
organically by disrupting	accretive M&A to gain	markets that offer exciting
textbooks and gaining	scale, expand portfolio of	growth potential but
share in learning systems	brands and enter new	demand different
	verticals	capabilities

20

SECTION

4

OUR MANAGEMENT TEAM

21

Founder-Led, talented management team

Our Management Team

Ari de Sá Cavalcante Neto		Pedro Guerra	Alexandre Nakamaru
CEO		COO	CFO
Education:		Education:	Education:
Selected		Selected	Selected
experience		experience	experience

João Cunha Silva	Daniel Moreira		Bernardo Dorigo		Renata Machado
SAS CEO	Positivo CEO		Sales & Marketing Director		Chief People Officer
Education:	Education:		Education:		Education:
Selected	Selected		Selected		Selected
experience	experience		experience		experience

22

Experienced board with diverse background

Our Board of Directors

Oto de Sá Cavalcante Neto		Ari de Sá Cavalcante Neto	David Peixoto dos Santos
Chairman / Founder of Ari de Sá School		Board Member/CEO/Founder	Independent Board Member
50 years of		20 years of	10 years of
experience		experience	experience

Edward Ruiz	Martins Scobari		Pablo Doberti		Stelleo Tolda
Independent board member /	Independent board member		Independent board member /		Independent board member
Audit committee chairman				Audit committee member
48 years of	25 years of		25 years of		20 years of
experience	experience		experience		experience

23

Our management team is evaluated and rewarded based

on simple metrics related to long term value creation

Management target KPIs

Client NPS

Client

Cash flow

retention

ACVEmployee

growth retention

24

APPENDIX

1

COMPETITIVE ADVANTAGES

25

Content: always evolving proprietary methodology

Constant update	Effective operation
Ensures that our students have	Our content is delivered at least
the most up-to-date and	one month before classes starts
engaging content

Our editorial team¹	20 years¹	Personalized content per brand
has over 470 people dedicated	is the average time our key	ensuring the independence of
to the development and	editorial leaders have been	the methodology and agility in
improvement of our content	working with us	responding to customer needs
Note:		26

1. As of June 30, 2020, considering our Core Solutions only.

Tech-enabled learning methodology

The use of data to personalize the student learning experience &

to improve the solutions throughout the time

DATA-BASED

PERSONALIZED LEARNING

Customized learning itineraries

based on online and offline

assessment results

HYBRID INTERACTIVE

CONTENT

ONLINE SOLUTIONS

Delivering digital content, working on activities and receiving customized feedback

OFFLINE SOLUTIONS

Printed books as a gateway to online solutions through QR codes, augmented reality features and answer sheets

TEACHER AND SCHOOL		PARENT AND STUDENT
EMPOWERMENT		ENGAGEMENT

Tools that ease the teacher	Differentiated communication
routine (e.g artificial	tools
intelligence-based essay
correction and automatic
assessment generators)
Solutions that improve school
management (e.g ERP, remote
pedagogical support)

27

APPENDIX

2

K-12 MARKET IN BRAZIL

28

Survey summary

Primary information about learning systems and textbooks

Principal demographics

n = 500	Textbook
	59%

Parents demographics

n = 709	Textbook3
	8%

Learning

System

41%

Learning

System

62%

15%

27%

5%

6%

4%

9%

34%

3% 2%

6% 14%

12%

24%

18%

21%

School size

0-100

101-200

201-300

301-400

401-500

501-600 >600

School tuition

<_r24_>

R$ 0.3k-R$ 0.5K

R$ 0.5k-R$ 0.7K

R$ 0.7k-R$ 1K

R$ 1k-R$ 1.5K

R$ 1.5k-R$ 2K

R$ 2k-R$ 2.5K

>2.5k

27%

4%

14%49%

20%

3%

11%61%

Notes:	29
1. Source: EY-Parthenon's assessment of the private K-12 learning systems market.

Arco's brand equity and proven academic results

Perception of our core brands and how we score in the National Exam

BRAND EQUITY

IMPACT ON ENEM SCORES

Top 3 most well-known brands among principals,	Competitors present lower growth in ENEM scores compared
with a very good reputation	to Arco's brands, considering objective questions

Most well-known brand among principals and

parents across all LS brands, with a very good reputation

Perception of parent's users (NPS) is strong

Average growth in ENEM scores

SAS		SAE	Competitors	SAS vs Competitors in Y5
				5x higher

	SAE vs Competitors in Y2
		22x higher
Year 0	Year 1	Year 2	Year 3	Year 4	Year 5

Notes:	30
1. Source: EY-Parthenon's assessment of the private K-12 learning systems market.

Principal's and parent's characteristics

Their perceptions on Learning Systems

PRINCIPALS	PARENTS
• Preference for integrated solutions	• 53% of parents prefer schools with LS

• Recognize the relevance of Learning System (LS) to	• 85% of parents that have experienced both non-LS and
support their needs and teacher needs	LS environments, believe that LS had a positive impact
	on their children's engagement
• Misread the level of their schools' difficulties, but	• 40% of non-LS parents, who believe LS schools perform
understand that the pain points are competition and	better academically, are planning on changing school in
retention	the next 3 years
• Limited visibility of their schools' performance	• 61% of parents that experienced both non-LS and LS
compared to competitors	environments, recognize the benefit of technological
	tools on children's engagement

Notes:	31
1. Source: EY-Parthenon's assessment of the private K-12 learning systems market.

Market dynamics

Main indicators on K-12 sector in Brazil

Price Increase Power

The likelihood for future price increases of LS is strengthened by:

• Principals' current expectations, influenced by inflation and content's quality improvement
• More than 60% of LS increased their price between 6% and 10%

Average tuition readjustment in Brazil

(in % YoY)

Avg tuition increase (%)		Avg LS price increase + Avg CLA increase (%)

10.5%

4%

2012

2013

2014

2015

2016

2017

Schools have been increasing tuition at higher rates than price increase of LS and Collective Labor Agreements (CLA), combined

Learning System

	Elementary/Middle Schools' Learning System adoption by		76%
		tuition (% of LS adoption)
	41%	63%	55%	56%		of parents in non-LS schools
24%			32%	15%	believe that LS schools perform
						better academically
0-400	401-600	601-800	801-1000	1001-12001201-2000	>2000

• 40% consider changing their children's school in the next
  3 years
• 54% have a household income of at least R$5.000

Supplemental Activities

Why in school Supplemental Solution is expected to grow:

R$18.7bn	48%	29%
of schools offer less than 4	of parents want to allocate their
supplemental activities and are	children spare time to in-school
Supplemental Solutions TAM	willing to increase their current	supplemental activities
offering in the next 3 years

Parents' misconception:

believe their children are

attending more supplemental activities than they really are

32

Education in brazil

Where to find the main information

Instituto Nacional de Estudos e		Todos pela Educação
	Pesquisas Anísio Teixeira
	Information on the K-12		Research on Brazillian
	Market in Brazil		Education
	http://portal.inep.gov.br/resultados-				https://www.todospelaeducacao.
	e-resumos		org.br/conteudos

http://inep.gov.br/sinopses-estatisticas-

da-educacao-basica

33

APPENDIX

3

FINANCIALS

34

Annual contract value ("ACV") bookings

What is it?

Revenue we would contractually expect to recognize from a partner school in each school year, assuming no further additions or reductions in enrolled students in such school

Equivalent to the number of enrolled students at each partner school times the average ticket per student per year

Why is it Important?

Meaningful indicator of demand for our platform and the market's response to it

Used by investors and securities analysts in their evaluation of companies

Difference Between ACV Bookings and Revenues

While ACV bookings is recorded upon the signing of contracts for a full school year, revenue is recognized at the moment content is delivered to partner schools

Content is delivered two to four times a year and typically two to three months prior to the start of each school quarter

Annual contract value revenue dynamics

ACV Bookings to Net Revenues

Fiscal Year 1		Fiscal Year 2

1Q Year 1

2Q Year 1

3Q Year 1

4Q Year 1

1Q Year 2

2Q Year 2

3Q Year 2

4Q Year 2

Commercial Effort

to Sign Contracts

$100

and Capture ACV

Bookings for Year 2

Content Delivery

and Revenue

Recognition of ACV Bookings for Year 2

Partner Schools Use

Cash Collection

Matches Fiscal Year

$100

$100

36

Track record of strong growth

Students		Top 10 Schools' ACV Concentration
('000)		(%)

CAGR1

51%

1,362

12%

10%

499

406

322

265

6%

2016	2017	2018	2019	2020	2017	2018	2019
Notes:							37

1. CAGR = { (final value/ initial value)^(1/ # years) } -1

Growing with sustainable profitability

Net Revenue	Adjusted EBITDA1	Adjusted Net Income2
(R$ in million)	(R$ in million, %)	(R$ in million, %)
			Adjusted EBITDA Adjusted EBITDA Margin			Adj. Net Income Adjusted Net Margin

					250						60%250						60%
		573
								209		198	55%						55%
				496	200					200
											50%			169			50%
	381				150		142		43%		45%						45%
									150
										40%
			255			37%	37%	37%	110		40%		112		36%	114	40%
244
				100	91					100				92
													35%
											35%
												67	29%	30%
											30%				30%
											27%
					50						50
											25%					23%	25%
					0						20% 0						20%
2017	2018	2019	1H19	1H20		2017	2018	2019	1H19	1H20		2017	2018	2019	1H19	1H20
Notes:																	38
1. Adjusted EBITDA margin for the year (or period) divided by net revenue of the same year (or period)

2. Adjusted Net Margin for the year (or period) divided by net revenue of the same year (or period)

2020 ACV build-up

(1)

(2)

(3)

(4)

Note:
1.	Calculated as % of 2019 ACV (Arco and Positivo).
2. Value of renewed contracts before accounting any price increases, upselling or organic variations.	39
3. Calculated as % of 2019 Renewed ACV.
4.	Additional students take into account new clients, upsell in existing clients and organic changes in the existing clients.

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