TOTVS S.A.
Condensed individual and consolidated Interim Financial Statements as of and for the three-months periods ended March 31, 2023
(A free translation of the original in Portuguese)
Contents | ||
Consolidated Operang and Financial Performance | 3 | |
Report on review of the interim financial informaon | 20 | |
Condensed Individual and Consolidated Statement of Financial Posion | 22 | |
Condensed Individual and Consolidated Statements of Profit or Loss | 23 | |
Condensed Individual and Consolidated Statements of Comprehensive Income | 24 | |
Condensed Individual and Consolidated Statements of Changes in Shareholders' Equity | 25 | |
Condensed Individual and Consolidated Statement of Cash Flows | 26 | |
Condensed Individual and Consolidated Statements of Value Added | 27 | |
Notes to the Condensed Individual and Consolidated Interim Financial Statements | 28 | |
1. Operaonal context | 28 | |
2. Basis of preparaon and presentaon of the interim financial informaon | 28 | |
3 Techfin Dimension | 31 | |
4 Financial instruments and sensi vity analysis of financial assets and liabilies | 33 | |
5 Cash and cash equivalents | 39 | |
6 Trade and other receivables | 40 | |
7 Recoverable taxes | 41 | |
8 Income taxes | 41 | |
9 Related party balances and transacons | 42 | |
10 Other assets | 44 | |
11 | Equity-accounted investees | 44 |
12 Property, plant and equipment | 46 | |
13 | Intangible assets | 47 |
14 | Labor liabili es | 49 |
15 | Taxes and contribu]ons liabilies | 50 |
16 | Loans and lease liabilies | 50 |
17 Debentures | 52 | |
18 | Accounts payable from acquision of subsidiaries | 53 |
19 | Provision for conngencies | 54 |
20 | Shareholders' equity | 56 |
21 | Dividends and Interest on shareholders' equity | 57 |
22 Share-based compensaon plan | 57 | |
23 Operang Segments | 58 | |
24 Earnings per share | 60 | |
25 Gross sales revenue | 60 | |
26 Costs and expenses by nature | 61 | |
27 Finance income and expenses | 61 | |
28 Private pension plan - defined contribu]on | 62 | |
29 Insurance coverage | 62 |
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(A free translation of the original in Portuguese)
Consolidated Operating and Financial Performance
Consolidated Result (in R$ thousand) | 1Q23 | 1Q22 | ∆ | 4Q22 | ∆ |
Net Revenue | 1,064,142 | 898,507 | 18.4% | 1,005,063 | 5.9% |
Management Revenue | 972,140 | 828,666 | 17.3% | 916,362 | 6.1% |
Business Performance Revenue | 92,002 | 69,841 | 31.7% | 88,701 | 3.7% |
Adjusted Contribution Margin | 577,213 | 483,920 | 19.3% | 532,178 | 8.5% |
Adjusted Management Contribution Margin | 532,020 | 450,619 | 18.1% | 488,190 | 9.0% |
Biz Performance Contribution Margin | 45,193 | 33,301 | 35.7% | 43,988 | 2.7% |
% Adjusted Contribution Margin | 54.2% | 53.9% | 30 bp | 52.9% | 130 bp |
% Adjusted Management Contribution | 54.7% | 54.4% | 30 bp | 53.3% | 140 bp |
Margin | |||||
% Biz Performance Contribution Margin | 49.1% | 47.7% | 140 bp | 49.6% | -50 bp |
Sales and Marketing Expenses | (212,497) | (176,650) | 20.3% | (195,154) | 8.9% |
Adjusted G&A Expenses | (87,695) | (88,817) | (1.3%) | (106,634) | (17.8%) |
Equity Pickup | - | 7 | (100.0%) | (449) | (100.0%) |
Mgmt. + Biz Perform. Adjusted EBITDA | 277,021 | 218,460 | 26.8% | 229,941 | 20.5% |
% Mgmt. + Biz Perf. Adjusted EBITDA | 26.0% | 24.3% | 170 bp | 22.9% | 310 bp |
- The Adjusted Contribution Margin is a non-accounting measurement (not audited) prepared by the Company and consists of the contribution margin for the period , plus extraordinary costs and expenses with operational restructuring.
Net Revenue
Net Revenue ended the quarter above R$1 billion, which means an increase of over 18% compared with the same period of the previous year. This performance reflected the progress made in all revenue lines, with emphasis on: (i) Management's Recurring Revenue, which grew 20% year-over-year, driven by the growth of SaaS Revenue, which represented 50% of the Company's total growth in 1Q23; and (ii) the 32% growth of Business Performance Revenue.
Adjusted EBITDA
Adjusted EBITDA ended the quarter at R$277 million, with an Adjusted EBITDA Margin of 26%, which means an increase of 310 basis points over 4Q22 and 170 basis points over 1Q22, due to the Margin breakthrough in the Management and Business Performance dimensions, particularly the Management's Contribution Margin, which exceeded R$500 million in the quarter and reached the highest level of Net Revenue in the last years.
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(A free translation of the original in Portuguese)
Management dimension results
The Management dimension represents the portfolio of solutions focused on the efficiency of our clients' back and middle office operations, through ERP/HR and Vertical solutions specialized in 12 segments of the economy. The results of the 2022 quarters stated for this dimension comprise the figures of Inovamind from January, Mobile2You from February, besides Gesplan, Vadu, Feedz, and RBM from October to December.
Management Result (in R$ thousand) | 1Q23 | 1Q22 | ∆ | 4Q22 | ∆ |
Net Revenue | 972,140 | 828,666 | 17.3% | 916,362 | 6.1% |
Recurring | 814,076 | 676,630 | 20.3% | 788,674 | 3.2% |
Non Recurring | 158,064 | 152,036 | 4.0% | 127,688 | 23.8% |
License | 81,186 | 80,751 | 0.5% | 49,510 | 64.0% |
Services | 76,878 | 71,285 | 7.8% | 78,178 | (1.7%) |
Costs | (266,167) | (231,257) | 15.1% | (261,477) | 1.8% |
Gross Profit | 705,973 | 597,409 | 18.2% | 654,885 | 7.8% |
Gross Margin | 72.6% | 72.1% | 50 bp | 71.5% | 110 bp |
Research and Development | (169,420) | (140,126) | 20.9% | (162,997) | 3.9% |
Provision for Expected Credit Losses | (5,854) | (6,664) | (12.2%) | (3,698) | 58.3% |
Management Contribution Margin | 530,699 | 450,619 | 17.8% | 488,190 | 8.7% |
% Management Contribution Margin | 54.6% | 54.4% | 20 bp | 53.3% | 130 bp |
Oper. Restructuring Extraord. Adjustment | 1,321 | - | - | - | - |
Adjusted Management Contrib. Margin | 532,020 | 450,619 | 18.1% | 488,190 | 9.0% |
% Adjusted Management Contrib. Margin | 54.7% | 54.4% | 30 bp | 53.3% | 140 bp |
- The Adjusted Contribution Margin is a non-accounting measurement (not audited) prepared by the Company and consists of the contribution margin for the period, plus extraordinary costs and expenses with operational restructuring.
Net Revenue
Net Revenue from Management increased 17% versus 1Q22, driven by: (i) 20% year-over-year growth in Recurring Revenue; and (ii) an increase of R$36.1 million in Corporate Model Licenses, with emphasis on the year-over-year increase in the Distribution segment that had growth of almost 40%, and in the Manufacturing and Construction and Projects segments that grew over 37%.
Recurring Revenue
The Recurring Revenue growth in the quarter reflects the SaaS Revenue growth in the period, which increased 33% year-over-year, as noted in the chart on the side. As to SaaS, the major highlights were: (i) 41% growth in Cloud revenue; and (ii) 29% increase in new signings, which equate to new sales.
As already discussed in previous quarters, the good performance of new signings has, as one of the main reasons, the constant progress in the perception of
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(A free translation of the original in Portuguese)
product quality by clients, reflected on the NPS (Net Promoter Score) indicator, which, once again, reached its highest historical level. With TOTVS, the increase in NPS impacts sales performance quickly and positively and, when combined with the expansion of the portfolio and the reduction of TCO (Total Cost of Ownership), creates the conditions for the company to reach high levels of new signings and, consequently, the "Volume" component in the addition of Annualized Recurring Revenue (ARR).
In this quarter, the Management ARR reached, as provided in the chart on the side, over R$3.8 billion, with a total addition of R$164 million in the quarter. The 1Q23 Renewal Rate was 98%, slightly below the average of recent years, explained mainly by a fluctuation in the renewal of Dimensa contracts in the quarter. Different from other TOTVS's Management operations, Dimensa is focused on just over a hundred large financial market accounts, which can generate greater volatility in its quarterly rates, in the case of a delay in the renewing of some contract.
As already mentioned in previous years, the Corporate Model is applied in 1Q, generating impact in the revenues from Licenses and ARR. With Licenses, the increase reflects only clients that grew year-over-year, changing price range, while in ARR the impact represents the net balance between clients who "went up" and those who "went down" in the price list, according to their updated contractual metric. In this year, even with the increase in licenses of the Corporate Model contributing at a level similar to that of 2022 with revenue from Licenses, the impact on the addition of ARR was proportionally lower as we had an increase in the amount of clients that had a reduction in monthly fees in 1Q23, reflecting the reduction in inflation rates that usually correct the revenues of the companies.
Disregarding the effects of Corporate Model, the reduction in the Net Addition of ARR, when compared with 4Q22, reflects: (i) the aforementioned 100 basis point reduction in the renewal rate, influenced by Dimensa; and (ii) the strong and expected reduction in inflation rates, which was responsible for the reduction of Price component of approximately 55% versus 1Q22 and 40% versus 4Q22. On the other hand, the new signings continued with a very positive performance, reaching a new record for a first quarter, which presents seasonality of sales, mainly in the beginning of the period, since in the 1Q there
are fewer working days and less economic movement. In view of this, as previously predicted and verified in the chart at the side, there was a further increase in the relevance of the Volume component in the gross addition of ARR in the last 12 months, from 78% in the previous quarter to 82% in 1Q23. It is important to mention that this percentage is regarding to the average of the last 12 months and not the percentage of the quarter in question. As this percentage has been growing, it means that the percentage in 1Q23 in particular was even higher than 82%.
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TOTVS SA published this content on 05 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2023 07:49:05 UTC.