3Q21 - Financial Statements in International Standards

TOTVS S.A.

Condensed individual and consolidated Interim Financial Statements

as of and for the three and nine-month periods ended September 30, 2021

(A free translation of the original in Portuguese)

Contents

Consolidated Operating and Financial Performance	3
Report on review of the interim financial information	16
Condensed Individual and Consolidated Statement of Financial Position	18
Condensed Individual and Consolidated Statements of Profit or Loss	19
Condensed Individual and Consolidated Statements of Comprehensive Income	20
Condensed Individual and Consolidated Statements of Changes in Shareholders' Equity	21
Condensed Individual and Consolidated Statement of Cash Flows	22
Condensed Individual and Consolidated Statements of Value Added	23
Notes to the Condensed Individual and Consolidated Interim Financial Statements	24
The Company and its operations	24
Basis of preparation and presentation of the interim financial information	25
Corporate restructuring	27
Financial instruments and sensitivity analysis of financial assets and liabilities	30
Cash and cash equivalents	36
Financial investments	37
Trade and other receivables	37
Recoverable taxes	39
Income taxes	39
Related party balances and transactions	40
Other assets	42
Equity-accounted investees	42
Property, plant and equipment	44
Intangible assets and Goodwill	45
Labor liabilities	48
Taxes and contributions liabilities	48
Loans, financing and lease liabilities	49
Debentures	50
Business partners´ payables	51
Accounts payable from acquisition of subsidiaries	51
Provision for contingencies	53
Senior shares and mezzanine obligations - Consolidated	54
Shareholders' equity	55
Dividends and Interest on shareholders' equity	56
Share-based compensation plan	56
Operating Segments	57
Earnings per share	58
Gross sales revenue	59
Costs and expenses by nature	60
Finance income and expenses	60
Private pension plan - defined contribution	61
Insurance coverage	61
Subsequent events	61

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(A free translation of the original in Portuguese)

Consolidated Operating and Financial Performance

3-DIMENSIONAL ECOSYSTEM

TOTVS' B2B technology ecosystem goes far beyond ERP, consolidating the Management, Techfn and Business Performance dimensions. This unique ecosystem is changing the competitive landscape and driving the productivity and competitiveness of digital business and fnancial services across 12 economic segments.

Below, we have a brief description of each business dimension present in the new disclosure standard, adopted as of 2Q21:

DESCRIPTION AND COMPOSITION OF BUSINESS DIMENSIONS:

Management: it is the dimension where data and integrations are generated. Therefore, it is the basis for the other ecosystem

dimensions. Includes: (i) ERP solutions; (ii) HR solutions for the management and development of human capital and payroll processing; (iii) specialized solutions for 12 economic segments; (iv) innovation open platforms that integrate and leverage ERP, HR and Specialized solutions; and (v) solutions aimed at micro and small businesses.

Business Performance: dimension that aims to support customers from different segments to increase their sales, competitiveness and performance, leveraging the results, performance and relationship in their business areas. It consolidates the digital marketing platform, consisting of RD Station and Tail Target, and sales support solutions, comprising the E-commerce suite (including the JV with VTex) and OMS (Omnichannel).

Techfn: dimension that seeks to simplify, expand and improve accessibility to B2B fnancial services, through the intensive use of

digitization, artifcial intelligence and big data. Currently, it is composed of credit solutions, including: Supplier and the new products ("Antecipa", "Consignado", "Mais Negócios", "Mais Prazo", "Painel Financeiro", "Pagamento Instantâneo" and "EduConnect Pay").

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(A free translation of the original in Portuguese)

FINANCIAL AND OPERATIONAL RESULTS

The results presented in this section includes the consolidated results of RD Station as of June 2021, Tail Target as of January 2021 and Supplier as of May 2020.

Consolidated Results:

Consolidated Result (in R$ thousand)	3Q21		3Q20	∆		2Q21	∆		9M21		9M20	∆
Consolidated Net Revenue	854,538	677,766	26.1%		763,375	11.9%		2,338,169	1,906,583	22.6%
Management Revenue	718,667	627,803	14.5%	678,854	5.9%		2,057,786	1,829,418	12.5%
Business Performance Revenue	62,714	879	>999%	23,577	166.0%		90,668	1,105	>999%
Techfin Revenue	73,157	49,084	49.0%	60,944	20.0%		189,715	76,060	149.4%
Consolidated Contribution Margin	444,395	358,802	23.9%		400,213	11.0%		1,235,834	981,052	26.0%
Management Contribution Margin	385,245	326,135	18.1%	360,853	6.8%		1,105,561	936,864	18.0%
Biz Performance Contribution Margin	29,590	822	>999%	12,021	146.2%		43,110	1,045	>999%
Techfin Contribution Margin	29,560	31,845	(7.2%)	27,339	8.1%		87,163	43,143	102.0%
% Consolidated Contribution Margin	52.0%	52.9%	-90 bp		52.4%	-40 bp		52.9%	51.5%	140 bp
% Management Contribution Margin	53.6%	51.9%	170 bp	53.2%	40 bp		53.7%	51.2%	250 bp
% Biz Performance Contribution Margin	47.2%	93.5%	-4630 bp	51.0%	-380 bp		47.5%	94.6%	-4710 bp
% Techfin Contribution Margin	40.4%	64.9%	-2450 bp	44.9%	-450 bp		45.9%	56.7%	-1080 bp
Sales and Marketing Expenses	(163,531)	(122,155)	33.9%	(138,345)	18.2%		(431,043)	(343,452)	25.5%
Adjusted G&A Expenses and Others	(88,821)	(75,225)	18.1%	(78,130)	13.7%		(239,821)	(211,978)	13.1%
Adjusted EBITDA	192,043	161,422	19.0%		183,738	4.5%		564,970	425,622	32.7%
Adjusted EBITDA Margin	22.5%	23.8%	-130 bp	24.1%	-160 bp		24.2%	22.3%	190 bp

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(A free translation of the original in Portuguese)

Management dimension Results

The Management dimension is, to a large extent, composed by the vision previously known as "Technology Results" until 1Q21, excluding the solutions that became part of the Business Performance dimension and Techfn's new products.

Management Result (in R$ thousand)	3Q21	3Q20	∆		2Q21	∆		9M21	9M20	∆
Net Revenue	718,667	627,803	14.5%		678,854	5.9%		2,057,786	1,829,418	12.5%
Recurring	590,254	490,285	20.4%	559,861	5.4%		1,684,546	1,445,307	16.6%
Non Recurring	128,413	137,518	(6.6%)	118,993	7.9%		373,240	384,111	(2.8%)
License	51,106	63,099	(19.0%)	46,419	10.1%		156,647	168,448	(7.0%)
Services	77,307	74,419	3.9%	72,574	6.5%		216,593	215,663	0.4%
Costs	(203,945)	(188,772)	8.0%	(193,869)	5.2%		(580,696)	(543,771)	6.8%
Gross Profit	514,722	439,031	17.2%		484,985	6.1%		1,477,090	1,285,647	14.9%
Gross Margin	71.6%	69.9%	170 bp	71.4%	20 bp		71.8%	70.3%	150 bp
Research and Development	(122,969)	(104,965)	17.2%	(119,466)	2.9%		(355,499)	(315,769)	12.6%
Provision for Expected Credit Losses	(6,508)	(7,931)	(17.9%)	(4,666)	39.5%		(16,030)	(33,014)	(51.4%)
Management Contribution Margin	385,245	326,135	18.1%		360,853	6.8%		1,105,561	936,864	18.0%
% Management Contribution Margin	53.6%	51.9%	170 bp	53.2%	40 bp		53.7%	51.2%	250 bp

Net Revenue

Management Net Revenue grew 14% year-over-year, surpassing the 13% growth in 2Q21, even with the 19% reduction in License revenue in the period. This performance in Net Revenue was mainly due to the organic growth of 20% in Recurring Revenue, which represented 82% of Management Net Revenue. The Agribusiness, Educational, Financial Services and Retail industry-sectors were the ones that most contributed to this advance, with growths above 20%.

In the 9-month period, Management Net Revenue grew 12%, driven by the 17% increase in Recurring Revenue, more than offsetting the 2.8% drop in Non Recurring Revenue.

Recurring Revenue

Recurring Revenue grew organically 20% year-on-year, the highest level of this metric since 2012. This same organic growth of 20% can also be seen in the ARR (Annual Recurring Revenue), which ended the quarter at R$2.6 billion, with a new record of net addition, reaching R$142.2 million, growth of 159% when compared to 3Q20 and 19% when compared to 2Q21.

Of the total addition of ARR, whether year-on-year or quarter-on-quarter, approximately 60% was due to the growth in Sales Volume, composed of new signings, which represent the sales production (new clients and cross/up-sell to existing clients), and the

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