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05/12/2020

Sinqia (SQIA3) releases its 1Q20 results

Sinqia announces today its consolidated results for the first quarter 2020 (“1Q20”).

Financial highlights:

Net revenues. Record of R$ 48.6 million in the quarter (+26.2% vs. 1Q19), an increase due to organic growth (+13.2% vs. 1Q19) and inorganic (+13.0% vs. 1Q19);

Net revenues of Software. Record of R$ 35.0 million (+41.1% vs. 1Q19), an increase due to organic growth (+21.0% vs. 1Q19) and inorganic (+20.1% vs. 1Q19);

Recurring revenues. Record of R$ 41.2 million (+27.5% vs. 1Q19), an increase mainly due to the growth of Software Subscription with the termination of part of the Implementations;

Gross profit. Registered R$ 15.8 million (+29.2% vs. 1Q19), an increase mainly due to the growth of revenues combined with a slight improvement in profitability (+0.8 p.p. vs. 1Q19);

Adjusted EBITDA. Registered R$ 3.4 million (-5.7% vs. 1Q19), drop related mainly to the reduction in gross profit from Services.

Adjusted cash earnings. Reached R$ 1.5 million (+97.5% vs. 1Q19) compared to R$ 0.7 million in the same quarter last year.

MESSAGE FROM MANAGEMENT

We ended this quarter with record net revenues of R$ 48.6 million, up 26.2% over 1Q19. In Software, there was a record R$ 35.0 million, a 41.1% growth, mainly due to the consolidation of the full results of the last 4 acquisitions.

Recurrent revenues reached a record R$ 41.2 million, up 27.5% over 1Q19, representing 84.7% of the total, the highest percentage in the historical series. This is an important feature that provides us with predictability in results, even in times of crisis. The implementation subsidy strategy continues to contribute to the growth of recurring Software Subscription revenues, which reached a record R$ 29.2 million, up 38.4% over 1Q19 and 8.5% over 4Q19.

Gross profit was R$ 15.8 million, up 29.2% over 1Q19, with gross margin up 32.4%, up 0.8 p.p. over 1Q19. In Software, there was a 0.4 p.p. advance despite the higher implementation costs of R$ 5.6 million in the quarter, against R$ 2.7 million over 1Q19.

General and administrative expenses were R$ 12.5 million, up 3.0% from 1Q19 also due to the consolidation of the full results of the last 4 acquisitions. However, there was an important relative reduction, to 25.6% against 31.4% of net revenues in 1Q19, due to the capture of synergies with integrations of the acquired companies.

Adjusted EBITDA was R$ 3.4 million, down 5.7% from 1Q19, with an adjusted EBITDA margin of 7.0%. Profitability continues to be pressured by high implementation costs, of R$ 5.6 million in the quarter, which increased to 35.3% against 21.9% of gross profit in 1Q19.

Regarding the dissemination of the new coronavirus (“COVID-19”), we have adopted the measures disclosed in the Notice to the Market of 19 March 2020, we have maintained all the commitments assumed with our customers and we continue to be prepared to support them in facing this scenario. As for the effects on Sinqia in this first quarter, we observe: (i) decrease of sales as of the second half of March, (ii) irrelevant effects on revenues, costs, gross profit and expenses, (iii) irrelevant effects on accounts receivable, which variation is due to operational causes and (iv) anticipation of investment for the acquisition of notebooks aiming all employees to work from home.

Finally, we remained in a comfortable financial position, with gross cash of R$ 340.9 million at the end of the quarter. Facing the moment of uncertainty and economic downturn, we are evaluating the impacts of the crisis on our M&A pipeline and adopting a more conservative stance, aiming at maintaining high liquidity and low leverage. The opportunities continue to plenty exist, and we will wait for the right moment to convert them, without jeopardizing the long-term plan.

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