Q4 2022 Arco Platform Ltd Earnings Call
[music].
Good afternoon, everyone and thank you for standing by and welcome to the Oracle platform fourth quarter and full year 2022 analyst call.
This event is being recorded and all participants will be in a listen only mode. During the companys presentation.
After October remarks that will be a question answer session.
At that time further instructions will be given.
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This event is also being broadcast live via webcast and may be accessed through Arcos website at investors thought Arco platform Dot com, where the presentation is also available.
Now I will turn the conference over to Cody Macquarie Heder Arco IR.
Of course, our yard director.
Karena you may begin your presentation.
Thank you I am pleased to welcome you to Arco's fourth quarter and full year 2022 conference call with me on the call today, we have Arco's CEO , Eddie just a couple of <unk> and <unk>.
During today's presentation, our executives 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 set forth in the documents that we 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 <unk> financial measures on this call. The non <unk> financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with IRS.
Have provided a reconciliation of these non <unk> financial measures to the most directly comparable <unk> financial measure in our present.
Please note that except from revenue gross margin selling expense G&A and cash flow from operations. All other financial measures. We discuss here are non <unk> 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.
Included in our 2021 financials, let me now turn the call over to Eddie Arco's CEO .
Thank you Karina and thanks, everyone for joining today's conference call.
2022 was an important year for Oracle.
We delivered solid results across our main commitments with investors, including the largest from ear for ACB growth.
The resumption of our healthy operating cash flow profile and important evolutions in our integration agenda to better and more efficiently serve our clients and continued to grow in a more sustainable way.
On cash generation, we showed improvements on all metrics that drives free cash flow generation, including higher profitability with that.
150 basis point expansion of our adjusted EBITDA margin to 36, 5% better capital allocation, taking our capex back to historical levels at 9% of revenues lower working capital consumption and finally, a lower effective tax.
Right.
As a call center as a consequence, we generate the higher cash flow after capex of Harsco Arcos history.
On growth the commercial cycle for 2023 year proves that we can focus on cash flow generation and dedicate energy two agendas without jeopardizing our growth rates.
We posted.
Intake and a strong price increase across all brands, leading to a 24% year over year ACB growth to one 9 billion reais, 100% organic.
Our two main core brands combined and sustaining high growth rates at 96% and our most recent acquired brands you'll see delivered good results in terms of growth retention and price increase.
Our cross selling efforts were once again key to such successful commercial cycle for supplemental solutions with 71% of its intake originated from cross sell.
Finally, we had an important outcome from our integration agenda.
With the corporate organization, leading to improve process and higher G&A dilution.
We remain focused on reducing redundancies in tea.
And in <unk> Tec platter for Amy at a more efficient capital allocation and higher quality across the brands.
I will now turn the call to a paddle will continue the presentation that'll. Please go ahead.
Thank you Eddie and good evening, everyone. Thank you for your time.
Moving to slide five net revenues for the fourth quarter of 2022 were 670 nanometer.
A 47% increase year over year, and representing a 34, 7% revenue recognition of the 2023, ACC, which will go to take a few slides ahead net.
Net revenues for 2022 totaled one 775 million Reais, a 44% increase versus 2021 or 37% organic growth when excluding M&A is concluded in 2021 and 2022.
Despite a 62% increase in costs year over year, mainly due to pressures coming from paper prices, we managed to deliver on 150 basis points EBITDA margin expansion year over year in 2022.
Due to the 4% contraction in our G&A and a more efficient sales process.
Moving to slide six as mentioned by early 2022 marks an inflection point on the cash flow trajectory.
We resisted the processes make structural improvements in our operations and are focused on better allocating our capital.
As a result, we improved in every line of our operating cash flow leading to a free cash flow for over 122 million reais at $260 million to $70 million expansion when compared to last year.
We improved our working capital dynamics with delinquency days receivables and collection returning to pre pandemic levels.
The effective tax rate was 13% in 2022 versus 18% in 2021.
Optimize our corporate structure to take advantage of the tax benefits all recent acquisitions.
And finally, our Capex went back to historical levels at 9% of revenues below the guidance provided to the market of between 10% and 12%.
On slide seven we show the evolution of our Capex in recent years 2020 in 2021 years of heavy investments not to mention slightly lower revenue recognition due to the students stroke outsourced partner schools as we integrated and acquired businesses <unk> invested in tools to support our partner schools to other.
Does that depend on it.
In 2022, we invested in a more efficient and integrated ways. Adjusted EBITDA minus Capex also returned to historical levels and we believe there is room to further improve in years to come.
Moving to slide eight we ended the year with 1.305 billion Reais logos in financing and 1 billion 392, 1 billion Reais in accounts payable to <unk> shareholders for <unk>.
And at three one times net debt to adjusted EBITDA multiple down 60 bps from end of 2021.
We're confident our cash position combined with future cash generation from the operations is enough to cover for a short term obligations and we are committed to continue reducing over leverage through higher profitability and strong cash generation in years to come.
To conclude this session on slide nine we present the main highlights lowered 2022 ESG report.
Had an important improvement in key metrics and are confident the achievement of our 2025 schools.
We've increased our impact on education with the expansion of students impacted by arpin are vertical solutions and initiatives from the <unk> due to an approval rates universities through zoom, obviously, that's using our solutions increased 33% in 2022.
We increased the percentage of women in leadership positions as a percentage of ethnic diversity, our voluntary turnover reduced almost five percentage points.
NPS improved six points versus 2021.
Finally, we concluded our first carbon footprint measurement for scopes, one and two and 2023, we're committed to analyze the best alternatives to reduce or compensate for such emissions.
No we have an important and critical role and there were some <unk>.
And we are committed to continue impact lives through quality education, and a sustainable business.
Okay.
Moving to slide 11, we are proud of the results about 2023 commercial cycle our ACD.
<unk>, Richard 1.930 billion Reais, representing a strong 24% year over year organic growth.
The core segment grew by 23% year over year, 2000, and <unk> was $1 5 billion.
Over.
Most one 8 million students.
Our supplemental content solutions grew by 35% <unk> of $393 million and over 876000 students.
We'd like to highlight the stellar performance, obviously youll see a brand we acquired end of 2021.
First commercial cycle under Arco's umbrella through 2022.
The solution delivered 30% year over year growth, a 15 percentage point improvement in retention to 95% and a price increased five percentage points above inflation.
You saw the intelligent edge, and Plano or social emotional products delivered more than 40% growth year over year, confirming social emotional other relevant competency cited schools.
And on cross sell 71% of the New school intake for supplemental content solutions was originated from cross sell initiatives. Despite the increase in the number of course students using one or more supplemental content solutions to 18% from 15% in 2022 fiscal year. There is still room to increase its penetration in a conveyor.
<unk> of the benefits of these strategies to the entire portfolio.
According to our analysis referrals increased by 23 times the lead conversion of supplemental content solutions.
And having a supplemental solutions reduce cost by 50% for those schools.
On slide 12, we detailed the buildup of our 2022 ACD bookings our growth has always relied on our ability to retrain retain our clients improve our value proposition driving price increases.
Our solutions within our cordless calls and attracting new partner schools. This year it was not different.
Despite the slightly higher cost of detour at 91% of our main core solutions sustained retention rates above 95%.
This year's average price increase was more than three percentage points above inflation at 9% and we delivered the largest ACB of new contracts in the company's history at 391 million Reais.
Moving to slide 14, we'd like to provide a quick update on the <unk> operation.
<unk> concluded 2022, but the top line is slightly higher than expected at 163 million Reais, almost 1000 partner schools and on annual recurring revenue of 235 million Reais.
On Slide 15, released IDEXX main priorities for 2023, which include investments in the go to market to further consolidated its leadership position in the market.
<unk> product offerings, and unlock scale gains and improve efficiency and capture synergies with articles through car, so leading to a reduction in each block.
I will now turn the call back 23. Please go ahead.
Thank you with that on slide 17, we present, our four main priorities for 'twenty three.
First on slide 18, we will continue to improve and our structure to better and more efficiently serve our clients.
We have initiated our efficiency roadmap in 2022 with the corporate reorganization and integration of the supply chain chain teams under a single structure.
In 'twenty three we'll focus on the strategic sourcing, especially on initiatives related to printing costs logistics and inventory discards and optimizing our internal it systems and improving the quality of our educational plot of Forbes on enhancing our sales efficiency with the creation of.
And operation Excellence center aiming to increase sales performance.
Elevate our planning and monitoring capacity support optimal capital allocation between business units and lead cross brand initiatives.
On slide 19, our second priority is to sustain our high growth profile. We will continue to use our proprietary sales process the quality of our solution and our reputation to increase our market share and the penetration of solutions, Inc. Current Parker SKU.
Yes.
After years of strong growth and creation of this large platform cross sell became a central piece in order growth. So we'll continue to leverage on the close relationship with our partner schools to expand the adoption of other Oracle solutions.
Finally, as we continue to invest in updating and evolving our solutions, we are able to support price increases above inflation, while improving subsection of levels.
On slide 20, our top priority for 2023 as boost cash flow generation.
We are confident that by making our operation leaner and more efficient our cash flow profile will improve significantly in the coming years, we will do so by improving our process and structure optimizing our corporate structure and continue to reduce our effective tax rate.
Of course also investing our capital on a more diligent and efficient manner.
Thank you for your time, operator, we can now open for questions.
Thank you.
Floor is now open for questions.
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Questions will be taken in the order they are received.
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Please hold while we poll for question.
The first question comes with Luca because we meet with Stifel. Please.
Please go ahead.
Good evening, everyone and thank you for taking my question.
Sorry, significant dilution and G&A expenses.
Please provide more color on the initiatives.
<unk> dilution and also if you can comment.
You have a lag of mature I appreciate and expect more dilution going forward that would be helpful. Please. Thank you.
Debt.
We're not a centralized or fully integrated.
Across the brands that we own so we'll be integrating or whatever we think that is not what drives differentiation of our brand and where we think we can better serve our clients by centralizing and integrating okay. There is also a place to back office, we still had some back office areas.
Where are located at the brands level that would be integrating into the holding level.
When we.
We managed to decrease the size of some teams along 2022.
The second reason relies on managing third party services and third party suppliers in a more efficient way and internalizing some activities that prudently as we work.
Going through third party.
Players in general Okay.
So the largest effect was in 2022, when we look from 2023 boards I think this will allow us to.
Grow the G&A at a much slower pace when compared to top line growth. Okay. So we should not expect G&A to reduce.
In nominal terms I think while we are not short term sorry, what blue C. SG&A dilution contributing to margins the case, so thats the expectation.
Thank you Alberto thank.
Thank you Luca.
Right.
Thanks, Kevin.
Yes.
Yes.
The second question comes with Marcelo Santos with Jpmorgan. Please go ahead hi.
Good evening.
Thanks for taking my question I have two actually the first one is you provided information on how the ACB changes on prices, 9% comprised 9% on churn how does this differ between core and supplemental solutions could you give us some idea on how this changed between.
The solutions and the second question.
There was a decline in the ACC of all their supplementary solutions I know, it's quite small I just wanted to understand better you made.
Can you.
Stopped some of the sales efforts for some of these initiatives. So what are you changing on those initiatives, which are which are these initiatives that are responsible for does decline. Thank you.
I'm, a fellow that adhere to as we move forward for the question.
On the first one I would say starting with with pricing. This in this cycle. We saw a more similar pricing performance when comparing reported to supplemental which is a change when we compare to two.
Historically.
Mental or the level of pricing power, we have four core we did not have four for supplemental.
Certainly this cycle, we managed to increase both quarter supplemental.
By a similar.
Right Okay. So.
So this is to answer your point move pricing when it comes to retention.
I would say that for core brand for most of the core brands, besides stability or improvement in KDE.
Sanction taking for example, SaaS SaaS as an example, we reached 98, 5% retention rate. This is the most premium brand we own that.
So in general it was a very good performance on the supplemental as you know I mean retention rates for supplemental are still lower when compared to two core. Okay. So that's why when you look at the combined churn it shows a deterioration compared to last year, mostly because of the higher share of supplemental in the back.
As of ACB in face of this is the first aspect there and the second one in this cycle. We saw continued stock which is a lower price point.
Also gaining share in the overall <unk>.
And <unk> still has a slightly lower retention rate when compared to other core brands. So it was mostly a mix effect, okay, driving 9% churn, which shows to be higher than the last year, but when you look.
And the brands and compared to last year in most of them, we saw stability and in some cases, such as SaaS for example, always saw reissue rate.
Crazy.
Significant.
Okay.
Yes.
Yes, the other supplemental.
<unk> segment actually there those are mostly tax services.
To some extent some communication tools that we were offering too.
Okay, so to customers outside our base.
We decided to only offer those services in house.
Our base of <unk>.
And so we're interested to sell those services to clients that do not belong to our base of scoops. Okay. So so that it was this really a business decision to reduce complexity and focus on what moves the needle. So we decided to keep those services.
And stop selling them too.
Outside of our base.
Okay.
Okay perfect. Thank you very much.
The next question comes with Savi add Matt Kelley with Morgan Stanley . Please go ahead.
Yes. Thank you.
I have four questions if I may.
The first one is on margins.
<unk>.
You are guiding for a range of flat to 200 basis points increase in margin sort of 36 five to six 5% to 38 five.
I was trying to do the math back of envelope maps.
Muscle on those numbers.
Increasing prices, 9%. So this is more than inflation do you have a churn of 9% I guess that.
Logically you at all.
Losing some of the less profitable clients paper.
Paper was price.
Price pressure last year, so hopefully this year.
Should we be similar or improved printing you you mentioned in the call is going to improve because of our scale.
But at the Liberty, you'll have the negative impact of around 30 million.
So let me talk about the steel margin should we be increasing no are you being conservative in that guidance, what is behind that flat to small increase in margins.
That's number one.
Hey have yet, but that'll here good to speak to you so.
So on margins.
That we saw on paper prices last year affected the negotiations that we established for this year.
Remember that we start producing and creating.
Content.
Early in the process. So we started this process.
Sometime around July of last year. So those negotiations actually happened during 2022, when the level of paper prices, where they are still quite high and those contracts remain in place for the majority of 2023 and we are already in the process of negotiating prices.
The 2024 cycle with a complete different price level in Q4 for <unk>.
So we should not see this this effect next year based on the negotiations that we have in place and there are other than actually but for the I would say at least half of 2023.
To deal with a higher price to print.
Our content. Okay. So that's the single reason why we're not increasing the EBITDA margin range.
But youre right I mean, when you look at the other components of our profitability.
They would contribute to a higher margin, but I mean, we do see some gross margin pressure, especially in the first half of the year.
Understood very clear.
Thank you Jose.
For the second only shack.
So you are growing pretty fast.
David will more than double in this already reaching quite a reasonable case.
Sure.
Why did.
Do you think that you want to be breakeven or maybe the strategy is not to go into breakeven just to use these.
Distinguish your marketing cost too to subsidize the growth in coral what is their strategy in prices because I guess that is the reason why why you are still expecting negative margin you speakers of prices you have already quite a reasonable escape not to be profitable.
In terms of your yes, you are right I mean, when we model.
<unk>.
We expect the company to be able to reach breakeven by the end of <unk>.
Next year. So that's the expectation so end of 2020 for beginning of 2025.
This scale.
The company's supposed to reach that should be the inflection point in terms of profitability.
There could be upside and downside cases to this.
Assumption.
So upside for example is the speed at which we will.
Both in terms of cross sell.
We are assuming a certain percentage of this incremental growth to come from cross sell but this could prove to be.
Conservative, especially because <unk> is not a pedagogical product and we are basing the cross sell assumption.
Our experience with biological products right.
So eventually we could see upsize definitely we could also see downside so I think it's.
Realistic to assume and I think it's reasonable to assume a breakeven as we cross.
24, okay.
Okay great.
Great.
So the idea is to make money and eventually okay.
No.
Another question, we saw onshore elemental the bookings.
Obviously, theyre going forward youre going to have a fantastic 2023.
Misunderstand my comment but.
Only 26%, but growing quite similar to core or no.
However, with more volumes of lithium prices encore.
Should it be.
Victim supplemental to grow Darwin dyncorp, given the penetration in the cross selling so you have more complexity on the sequel to cross sell.
So part of reason why prices are lower what is happening there.
Okay.
Sure. Thank you.
I think I agree overall.
Sure.
Javier.
<unk> International call.
We would have grown about 40% close to 2% to 45%.
Percent so.
Once we are managing this company.
Completely for sure this will impact performance growth performance.
We saw a stronger performance in other billing of products that we own.
So I think we can say that once.
We are fully managing International school, we will probably benefit more from cross sell and also from the go to market strategies and processes that we've been applying to two other brands. Okay. So again, when we exclude in trenches called the performance would be about 40% growth.
I think considering the scale of those products already I think it's a it's a very solid performance.
Performance, Okay. So it's difficult to compare the growth rates of three or four years ago.
Above 60%, 65% because of the scale.
This is also mix.
Smaller right, so, but again I think we can do better than what we did in 2023 and <unk> in our portfolio will be one of the drivers, but not only I think cross sell is a learning curve.
I think we will see.
See a room to improve cross sell our processes internally.
Okay is alerting purposes in new.
We're doing it step by step there, but it should also be a source of.
Improvement in growth rates for supplemental.
Okay. Thank you my final question.
Friday.
Okay.
No the offer was on December .
Right now for four months ago.
Could you update us <unk>, so why its taking so long for the board.
To have a view of what is what is happening there.
Hi, yes. Thank.
Thank you for your question.
Just on the last question regarding the supplemental.
I just want to clarify that in this year, we have 71% of the new intakes for supplemental coming from cross sell so I thought that was said we have been improving the cross sale process and as you exclude the international school.
From the supplemental.
Solutions, we posted a growth of more than 40%.
We still have a very low penetration, but we went from 15% to 18% of at least one solution.
Of supplemental in our core brands and we also have the growth that are coming from new schools that were not used products for Marco.
So we expect to have a solid growth of supplemental solutions throughout the years.
Higher level than we have.
On core of course, which is a larger business regarding.
Regarding your second question. So unfortunately, I don't have any update for you right now.
The last update that we gave was through a formal communication and thats.
What we have to say.
Rich on the last communication that we did with the market.
But.
We're supposed to be waiting for an answer from the board right.
Yes, I believe so.
Okay. Okay.
Thank you Eddie.
Thank you, we'll take Colombia.
Thank you. The next question comes with Moody's disappear with credit Suisse.
Please go ahead.
Hello, Hello, guys. Thank you. Thank you for the sort of.
To put the questions here.
So I have two questions one related to the deaths.
Self so.
I understand from the speech that you were relying a lot on the on the operating cash flow to deleverage.
But.
If you could.
Maybe to stay with their other options too.
To decrease that's level given it's it's it's.
Kind of.
Kind of a considerable high level now.
And the second one is related to resolve.
Now that the macroeconomics are deteriorating and.
The interest rates are up.
If if there would be problems.
Related to two more delinquency or <unk>.
Or even if there could be a risk of a diverse selection of wallets.
Doug the outsize luck. Thank you.
Okay.
Types of EBITDA, thanks for the questions.
It's a thorough here so.
I mean, we think we actually assured that.
<unk> will continue doing.
During 2023, okay.
It will be mostly driven by EBITDA expansion okay.
For for this year. So we expect the three one times that we ended 2022 to be below three times.
At the end of 2023, okay.
But as I said I mean, we still have a.
Relevant amount of sellers' notes are coming due.
Okay.
We show both the presentation and the financial statements.
Continue to book International scope as a short term obligation. This is more a contractual.
Our obligation, but as you know this is still under arbitration and the most likely scenario is that international school.
Will become.
We come to a definition only at the beginning of next year. Okay. So in terms of outflow, we should not expect based on the information that we have to date and of course the scenario can change that this outflow will only happen next year still in terms of balance sheet management.
Probably do is replace those sellers note with banking laws alone. This year, okay. Despite the impact from the kind of event in the market, we're not see a negative.
Impact in our ability to.
To attract or to add those those those lines and financial institutions EBITDA.
Sites to offer those those lines to us okay. So this is.
While we'd probably do okay in terms of balance sheet management again replace others note.
Banking loans and were not see.
The impact in terms of appetite or conditions for us to do so this year. Okay. So that would be the source of the single source of incremental liquidity.
Went to seek this year aside from that the deleverage will come from.
EBITDA expansion and operating cash flow.
Generation, mostly okay.
In terms of.
<unk> actually.
The collection period for Isaac finishing right now right. So after the completion of the enrollment process at schools. So the period between January and March is actually quite important is actually what drives the result of the cycle.
For for Isaac So at this point, we can say that the collection performance was very good.
It was.
Much better than how the market performed in terms of Npls.
And it was better than <unk> performance in the prior cycle and queso.
Despite the deterioration in demand environment in general driven.
Driven by several factors, including interest rates.
Did not see that affecting the collection or the ability to collect.
Isaac again, Npls and delinquency in general is performing better than last year and much better than than the market.
Performing.
I mean, given the profile of the business.
And then how contracts are renewed IDEXX can use all of this information to reprice the contract for the next cycle the numbers I'm, giving you.
Is the average of the portfolio, but of course, a 17 seven specific situations you have different performances.
Specific schools, then they can use the moment too.
The renewal moment to reprice, those contracts and bringing the net take rate back to where it should be okay. So at this point again, we're not seeing any negative implications to the business.
Do you see any any kind of risk.
The potential clients.
A little bit more adversely selective like the the worst schools or or let's say the worst being favorites could end up with music.
I think.
It's difficult to put.
To generalize a bet I.
I think at the end.
First selection.
This business is.
These actually benefits from the fact that you have a very pulverized base.
Families are paying you one single client right. So the client is this call, but again you will have a base of 200 300.
So this mitigates the adverse selection.
Risks in general Okay.
I think at the end is X leverages the last phone they're appropriate Harry.
Starting for data.
Payment performance.
Fourth calls for families. So they have a lot of data intelligence of backing their pricing.
The strategy Okay. So.
If this is the case.
They will decide not to bring that squall or do well price that's a completely different level relative to the portfolio. Okay. So the risk appetite is low because it's not necessary.
The rely a lot older appropriate every data to price the contracts completed individually NK sold that the pricing is done individually for its coal based on historical figures that those calls are supplied twice a combined with information that is like through.
It's a technology can collect.
To also combine and bringing the ideal pricing for those schools okay.
Okay great.
Great. Thank you.
Thank you. The next question comes yes.
BTG Pactual please.
Please go ahead.
Okay.
Good evening everyone.
Two questions here on our side. The first is regarding working capital dynamics.
We see that Q4 is usually.
Hit by worse, working capital dynamics, especially because of the concentration of revenue recognition in the quarter.
And this time, we also saw a similar scenario.
Specialty because we had these higher revenue concentration.
But I just wonder if.
This is the reason and we should.
C.
The normalization of these working capital dynamics soon or if there is any other reason.
For the change in working capital that we saw right. That's the first one and the second one.
As regarding the.
Very nice breakdown that you gave us on the ACP.
Explain what was the churn and price increases and new clients and I just wonder if you could share with us what was the historical churn levels I imagine that if we compare to the last couple of years.
The trend.
Probably improved a lot and I just wonder if we are seeing here.
A normalized trend level interest could you see space for them for improving this.
Ahead, or if it should continue at least at this run rate.
Great Okay.
That's it thank you guys.
Hey, Thanks for the question so on the first one.
The reason there is as I said, a higher revenue recognition in the quarter, but more than that okay. It's a higher revenue recognition for supplemental solutions.
In the quarter encase, the supplemental has a different of DSO.
Profile when compared to core okay. So.
So I mean, when we compare brand by brand relative to.
Last year, we're not seeing an increase.
So we'll keep but we did see a higher revenue recognition or a higher revenue concentration for supplemental solutions.
Okay, and they have a different profile. So we should see as collection.
Kicks off and he has already started which you see underutilization there. Okay. So delinquency in general is performing quite well. Okay. So at this point, we are ready with delinquency levels better than those that we've posted before COVID-19.
I think it's a combination of.
The coal market.
Recovery after the pandemic, but also several internal processes that we implemented during COVID-19.
Combined are driving this improvement in collection in general.
You should see.
DSO or the cash cycle.
A whole normalizing as the revenue recognition and the mix also.
<unk> license and the seasonality.
Okay.
In terms of ACC and the trim level.
When we look at churn levels before the IPO.
As to two range around 5%.
After the IPO as we added more supplemental.
Solutions to the portfolio you went up to between seven to eight and in this cycle, we posted 9%.
Again, I think the key reasons, we did not see a deterioration.
Churn.
The churn that we provide you is actually combined churn for all of the solutions for the mix impact a lot here.
And we have two components. The first one is supplemental with it's still a higher churn compared to core.
I think here, we don't think it should be structurally higher than core it should be higher but not a structurally higher and not at the magnitude.
It is today. So I think there is room to improve here and also some core brands with still a higher churn when compared to the more mature ones and they outgrew in this cycle. So as a consequence, the combined shirt looks higher than those.
<unk> that we posted.
A couple of years ago. So looking ahead, what should drive.
Churn reduction is our efforts to reduce churn or supplemental as a whole. Okay. We still have our brands and supplemental with 15, almost 20% churn. It's extremely high so there is room to improve and in the core brands challenging.
<unk>.
Mature brands to bring their retention rates to levels close to.
As for the Tivo for examples you'll see all of them with retention rates above 95%. Okay. So that's the challenge that's the goal.
And we expect that to drive combined churn too.
Close to 7%.
We posted in previous years at least.
That's clear thank you operator.
Thank you.
If anyone has any question you'll make press star one on your Touchtone phone.
Well. Thank you very much at this time, we have no further questions in the queue.
This concludes our call fourth quarter and full year 2022 earnings call. Thank you very much for your participation and have a nice rest of your day.
Okay.
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Okay.
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Okay.
Okay.
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