TOTVS (TOTS3) investor relations material

Executive summary

• Achieved 30 consecutive quarters of double-digit organic recurring revenue growth, with a 22% CAGR over the last 21 quarters and recurring revenue now representing over 92% of total revenue; recurring revenue multiplied 4.3x over 7.5 years.

• AI enablers drove one-third of incremental recurring revenue and 28% of net new ARR additions, accelerating sales and ARR growth.

• Integration of Linx and RD Station has created a unified, highly efficient cash-generating unit, optimizing go-to-market strategies and operational structures.

• Major share buyback program executed, with a new program 50% larger announced, targeting up to 70 million shares or nearly 50% of free float.

• Recent acquisitions, including Linx, Suri, and TBDC, have strengthened the product portfolio and sector reach.

Financial highlights

• Net revenue reached R$1.92 billion in 2Q26, up 36% year-over-year, with recurring revenue at R$1.78 billion (+39% y/y), representing over 92% of total net revenue.

• Gross ARR additions grew 28% year-over-year, surpassing BRL 400 million in a single quarter.

• Adjusted EBITDA rose 39% year-over-year to R$487 million, with margin expanding to 25.4% (+190bps y/y).

• Adjusted net income reached R$241 million (+5.9% y/y), with a net margin of 12.5%; net income for 2Q26 was R$688.5 million, including gains from discontinued operations.

• Free cash flow to firm surged 50% year-over-year to R$295 million, with operating cash generation at R$506 million.

Outlook and guidance

• AI adoption among Brazilian SMBs is in early stages, presenting a unique growth opportunity as the company acts as a trusted advisor.

• Launch of LYNN foundation model and upcoming AI agent portfolio expected to expand TAM and drive future growth.

• Continued focus on expanding recurring revenue, leveraging AI, and optimizing operational efficiency; no quarterly guidance planned.

• Techfin expected to recover profitability as new credit cohorts normalize after risk adjustments.

• Regulatory changes and tax reform in Brazil seen as growth catalysts for robust management solutions.