• Consolidated Net Revenue: BRL 1.4 billion, 15% increase year-over-year, 4.2% increase quarter-over-quarter.

• Recurring Revenue: 22 consecutive quarters of double-digit growth.

• EBITDA Margin: Increased by 200 basis points from Q2 2024 and 20 basis points from Q1 2024.

• Adjusted Net Income: Grew 55% over Q2 2024.

• Free Cash Flow: Increased 55% year-over-year, 16% over Q2 2024, and 19% year-to-date.

• Management Revenue: 89% of this quarter's management revenue, 20% growth year-over-year.

• ARR Management: BRL 4.8 billion, with organic net addition of BRL 155 million, 19% increase year-over-year.

• Business Performance ARR: Near BRL 600 million.

• Techfin Credit Production: 5.6% increase year-over-year.

• Share Buyback Program: New program approved for up to 18 million shares.

• Warning! GuruFocus has detected 2 Warning Sign with TTVSY.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Totvs SA (TTVSY) achieved 22 consecutive quarters of double-digit recurring revenue growth, with the 23rd quarter anticipated soon.

• Consolidated net revenue increased by 15% year-over-year and 4.2% quarter-over-quarter, driven by management, business performance, and techfin revenues.

• Adjusted net income grew by an impressive 55% over the previous quarter, showcasing strong profitability recovery.

• The company's focus on cloud solutions is seen as a significant growth opportunity, with more than half of the customer base still on-premise.

• Totvs SA (TTVSY) announced a new share buyback program, reflecting confidence in its financial health and commitment to maximizing shareholder value.

Negative Points

• The mismatch between IGPM and IPCA indices has negatively impacted margins, although this is expected to reverse soon.

• Business performance retention rates have shown some fluctuations, attributed to the discretionary nature of the business.

• The company is experiencing a transition in its subscription model, which may temporarily affect margins until the full benefits are realized.

• Despite strong growth, the company faces challenges in maintaining profitability across all segments due to varying market dynamics.

• The integration of recent acquisitions initially brought below-average profitability, impacting short-term financial performance.

Q & A Highlights

Q: Can you provide more details on the profitability improvements in business performance and the new go-to-market strategy for management customers? A: Dennis Herszkowicz, CEO, explained that the profitability improvements are due to the scalability and operational leverage inherent in the SaaS business model. The company is approaching an ARR of 600 million reals, and the profitability is expected to be sustainable. Regarding the new go-to-market strategy, it involves cross-selling business performance products to management clients using field sales. This approach has shown great potential, with clients expressing significant interest in the portfolio.