TOTVS (TOTS3) Q2 2025 earnings summary

Executive summary

• Net revenue grew 17% year-over-year in 2Q25, driven by a 20% increase in recurring revenue, which now represents over 91% of total revenue.

• Adjusted EBITDA rose 23% year-over-year to R$363 million, with margin expanding 120 basis points to 24.4%.

• Adjusted net income surged 51% year-over-year to R$218 million, reflecting operational efficiency and lower income tax expenses.

• Major acquisitions, including Linx, Agger S.A., and VarejOnline, reinforced the ecosystem strategy and are expected to enhance customer relevance and synergies, especially in the retail segment.

• Launched TOTVS Tax Intelligence to support clients through Brazil's tax reform, contributing to ARR growth.

Financial highlights

• 2Q25 net revenue: R$1,488 million (+17% YoY); recurring revenue: R$1,357 million (+20% YoY); ARR net addition increased 23% year-over-year.

• Adjusted EBITDA: R$362.8 million (+23% YoY); adjusted EBITDA margin: 24.4% (+120 bps YoY).

• Adjusted net income: R$218.3 million (+50.9% YoY); adjusted net margin: 14.7% (+330 bps YoY).

• Free cash flow: R$196 million (+25% YoY, +51% QoQ).

• ROIC (LTM): 20.1% (+350 bps YoY); EPS (LTM): R$1.54 (+35% YoY).

Outlook and guidance

• Management anticipates continued growth in recurring revenue, leveraging digitalization and tax reform opportunities.

• Expansion of product portfolio and cross-sell initiatives expected to drive further growth.

• Management expects continued operational efficiency and margin expansion, barring significant inflationary mismatches.

• No major changes anticipated in working capital structure for the year; recent impacts seen as temporary.

• Focus on maintaining strong performance in H2 2025 and setting the stage for a successful 2026.