Sinqia S A : releases its 2Q21 results

08/04/2021

Sinqia releases its 2Q21 results

Sinqia announces its consolidated results for the second quarter of 2021 ('2Q21').

2Q21 Highlights

Innovation strategy

We announced the investment in Celcoin by Torq Ventures, our CVC program;

Consolidation Strategy

We announced the acquisition of Mercer Brazil's pension administration business;

Capital Structure

We announced a debenture issue of up to R$250.0 million;

Software ARR

All-time high of R$272.8 million in 2Q21 (+81.4% vs. 2Q20);

Number of Customers

497 customers at the end of 2Q21 (+153 vs. 2Q20);

Net Revenue

All-time high of R$87.8 million in 2Q21 (+77.2% vs. 2Q20);

Recurring Revenue

All-time high of R$82.2 million in 2Q21 (+88.9% vs. 2Q20), 93.6% of the total;

Adjusted EBITDA

All-time high of R$19.7 million in 2Q21 (+168.1% vs. 2Q20), with a margin of 22.4%.

MESSAGE FROM MANAGEMENT

The Annual Recurring Revenue (ARR) from software hit an all-time high of R$272.8 million in 2Q21, R$122.4 million more than in 2Q20, with a growth of 81.4%. The inorganic increment was R$104.3 million, derived from the acquisitions of Tree, Fromtis, ISP, Simply, and FEPWeb, while organic growth came to R$18.1 million, mainly driven by higher sales volume and contracts readjustments. This means an increase of 12.1%, excluding the contribution of the new unit Sinqia Digital, which is growing at expressive rates.

Net revenue hit an all-time high of R$87.8 million, an addition of R$38.3 million, and a growth of 77.2% vs. 2Q20. Inorganic growth was R$29.5 million, resulting from the same acquisitions, while organic increment was R$8.7 million, with an evolution both in Software and Services lines. This represents an organic growth of 17.7% vs. 2Q20, excluding the contribution of the new unit Sinqia Digital.

Speaking of Digital, we would like to demonstrate better its performance: as shown in the chart below, the net revenue from the Digital segment, unaudited in previous periods, increased from R$7.2 million in 2Q20 to R$12.0 million in 2Q21, significant growth of 66.7%, because (i) its products meet the new requirements of the financial system; (ii) its business strategy is based on the land and expand concept; and (iii) its business model is based on transactional pricing. It is worth noting that such growth still does not reflect the cross-sell with other Company businesses, which is just starting.

Net revenue - Digital (R$ million)

Recurring revenue hit an all-time high of R$82.2 million, up 88.9% over 2Q20. The recurrence percentage reached 93.6%, the highest ever in the Company's history.

Gross profit reached an all-time high of R$37.5 million, up 123.9% vs. 2Q20, also with significant increases in Software and Services, and the special contribution of the new unit Sinqia Digital. The gross margin was 42.7%, the highest level in more than three years, growing 8.9p.p.. Due to talent shortage in the technology area, we faced challenges to increase the number of employees at the speed projected, mainly in R&D, which had a positive impact on gross profit and gross margin performance.

General and administrative expenses totaled R$19.0 million, up 73.3% over 2Q20, mainly due to the acquisitions. Given that the volume increased at a pace slower than the Company's growth, such expenses accounted for 21.7% of net revenue, a reduction of 0.5p.p..

Consequently, adjusted EBITDA reached an all-time high of R$19.7 million, up 168.1% vs. 2Q20, with an EBITDA margin of 22.4%, growth of 7.6p.p., finally surpassing the 20.0% projected in the short term. We will establish a new goal in the medium term, with optimization of our organic business, the capture of synergies from the latest acquisitions, and contributions from the next acquisitions, with potentially higher margins.

The total Depreciation and Amortization reached R$11.6 million, up 108.1% because of the increase from the acquisitions in the period, being half of the volume refers to the amortization of intangible assets; financial result came to a negative R$2.9 million; and income tax and social contribution totaled R$0.4 million. Consequently, net income hit an all-time high of R$4.8 million (8.3x higher), and net margin came to 5.5% (4.3 p.p. higher).

Gross cash totaled R$154.1 million in 2Q21 and, to reinforce the balance, we announced the Company's second debenture issue in July, of up to R$250 million, the funds of which will be used to increase market share. Part of these funds have already been allocated to the investments in Celcoin, and the acquisition of a division of Mercer; the remained should be soon allocated to the new acquisitions. Net cash came to R$25.0 million at the end of the quarter.

To take advantage of all the opportunities offered by the market, we plan to capitalize the Company. And we remain focused on our consolidation plan.

ACCESS THE RESULTS

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