TOTVS (TOTS3) Q1 2025 earnings summary

Executive summary

• Net revenue reached R$1.5 billion in 1Q25, up 19% year-over-year, with recurring revenue accelerating to 23% growth and comprising nearly 90% of total revenue.

• Adjusted EBITDA grew 24% year-over-year to R$379 million, with margin expanding 90 basis points to 25.9%.

• Adjusted net income increased 44% year-over-year to R$228 million, with margin at 15.6%.

• All business units—Management, RD Station, and Techfin—showed revenue and profitability improvements, with Management and RD Station outperforming market growth rates.

• Free cash flow was R$129 million, down 3.8% year-over-year, mainly due to working capital seasonality and higher investments.

Financial highlights

• Annual Recurring Revenue (ARR) reached R$5.8 billion, up 19% year-over-year, with a record net addition of R$287 million in the quarter.

• SaaS revenue grew over 35% year-over-year to R$584 million; recurring revenue represented 90% of total revenue.

• Adjusted gross margin was 72.6%, slightly down 30bp year-over-year but up 70bp sequentially.

• ROIC (LTM) improved to 18.3%, up 230bp year-over-year.

• Cash and equivalents stood at R$1.94 billion at quarter-end.

Outlook and guidance

• Management expects continued outperformance versus market and nominal GDP, with recurring revenue and EBITDA margin expansion as key priorities.

• Margin expansion is anticipated as operational efficiencies and integration of acquisitions progress.

• AI and cloud investments, cross-selling, and new Techfin credit products are expected to drive future growth.

• The company will continue to pass on cost increases from payroll reoneração throughout the year.