TOTVS (TOTS3) Q2 2024 earnings summary

Executive summary

• Consolidated net revenue grew 20% year-over-year to R$1.3 billion in Q2 2024, driven by strong recurring revenue in Management, Business Performance, and robust Techfin growth.

• SaaS revenue increased 33% year-over-year, with Management recurring revenue surpassing R$1 billion and Business Performance recurring revenue up 40%.

• Techfin revenue net of funding rose 47% year-over-year, with credit production and portfolio growth, and delinquency rates 300 bps below the national average.

• Adjusted EBITDA reached R$296 million, up 15% year-over-year, with a margin of 22.2%.

• Management highlighted innovation, AI advances, and a strong market position, with expectations for improved profitability in 2H24 as inflation indices normalize.

Financial highlights

• Adjusted EBITDA margin was 22.2% in Q2 2024, down 100 basis points year-over-year.

• Management adjusted EBITDA margin: 24.9%, down 90 basis points year-over-year.

• Business Performance adjusted EBITDA margin: 5.6%, with net revenue up 39% year-over-year.

• Techfin EBITDA turned positive at R$0.3 million, with margin at 0.5%.

• Cash and equivalents at R$2.2 billion as of June 30, 2024.

Outlook and guidance

• Management expects improved profitability in 2H24 as the IGP-M inflation index turns positive, supporting price adjustments in recurring revenue.

• Techfin is anticipated to benefit from normalized market conditions and historical seasonality, with higher profitability expected in the second half.

• Management and Business Performance markets are expected to outpace nominal GDP growth, with continued strong ARR additions.