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03/04/2020

Sinqia (SQIA3) releases its 4Q19 and 2019 results

Sinqia announces today its consolidated results for the fourth quarter 2019 (“4Q19”) and the fiscal year ended 31 Dec. 2019 (“2019”).

Financial highlights:

Net revenues. Record of R$ 48.1 million in the quarter (+21.2% vs. 4Q18) and record of R$ 175.1 million in the year (+23.3% vs. 2018), mainly due to the inorganic and organic growth;

Portfolio of recurring contracts. Record of R$ 147.3 million (+59.3% vs. 2018), highlighting the 14.7% increase in the organic portfolio, a proxy for future growth in Software revenues;

Recurring revenues. Record of R$ 39.6 million in the quarter (+23.1% vs. 4Q18) and record of R$ 145.4 million in the year (+25.6% vs. 2018), a significant increase mainly due to the growth of Software Subscription;

Gross profit. Record of R$ 17.6 million in the quarter (+19.1% vs. 4Q18) and record of R$ 57.9 million in the year (+9.4% vs. 2018), despite the high implementation costs resulting from the change in the commercial model;

 Adjusted EBITDA. Record of R$ 6.4 million in the quarter (+31,2% vs. 4Q18) and record of R$ 21.1 million (+9,8% vs. 2018) mainly due to the results of the acquired companies.

MESSAGE FROM MANAGEMENT

The year 2019 was a very positive year, marked by in Sinqia’s important steps that resulted in several records. In order to build a technology provider for the even more robust financial system, (i) we substantially accelerated the speed of the consolidation strategy with 4 acquisitions in the year, totaling 14 since 2005; and (ii) we made 2 important fundraising to finance these and the next acquisitions.

At the beginning of the year, in January, we acquired Atena, a software supplier for pension entities, aiming to expand the customers portfolio and the scope of the software.

In February, we carried out the 1st issue of simple debentures (not convertible into shares), in the amount of R$ 50.0 million, mainly to finance acquisitions, the spread of which was reduced to CDI (interbank deposit) + 1.5% at the end of the year. In the same month, we acquired ADSPrev, also focused on pensions.

In May, we bought Softpar, focused on solutions for banks, finance societies and development agencies, the biggest acquisition of the year, contributing R$ 11.0 million in net revenues in 2019, considering 7 months of consolidation.

In August, we received for the first time in our history the Great Place To Work (GPTW) certification. This is an important achievement for Sinqia, which has been building an increasingly better work environment for the more than 1.1 thousand employees.

In September, we carried out our 2nd share offer (follow-on), the largest in our history, in the amount of R$ 362.7 million, 100% primary, the proceeds of which will be used to expand participation in the application software market for the financial industry, through strategic acquisitions. This follow-on significantly improved SQIA3’s liquidity, reaching R$ 12.8 million in average daily trading volume (“ADTV”) in 4Q19, against R$ 0.4 million in 4Q18. Also, in that month, we were nominated, for the 3rd consecutive time, as one of the 100 largest technology suppliers to financial institutions (FinTechs) in the world in the 2019 IDC FinTech Rankings – Top 100, prepared by the International Data Corporation.

In December, we acquired Stock & Info, our 5th acquisition in the pension vertical, consolidating our relevance in the sector. It is worth remembering that we left zero, in 2013, for the absolute leadership of this vertical after 5 acquisitions in 7 years, adding about 100 customers, corresponding to 1/3 of the pension entities in the country. Such model of serial acquisitions must be replicated in other verticals. We emphasize that, due to the successful integration of the last 4 acquisitions, most of the synergies have already been captured and all companies have already been incorporated, reducing expenses and enabling the use of tax benefits related to the amortization of the goodwill generated in the acquisitions.

Regarding the results, our net revenues was a record of R$ 175.1 million in the year, a strong growth of 23.3% over the R$ 142.1 million in 2018. From the growth of R$ 33.0 million, R$ 24.7 million were inorganic from the last 4 acquisitions and R$ 8.3 million were organic (R$ 6.1 million in Software and R$ 2.2 million in Services).

The organic addition does not yet fully reflect the sales made in 2019, which reached a record gross value of R$ 17.9 million only in Software, as a result of the successful change in the business model, starting to subsidize the setup of some sales, that is, changing variable Implementation revenues in the short term for higher recurring Subscription revenues in the medium term, expected to start taking effect between 2020 and 2021.

Still in the Software unit, the portfolio of recurring contracts signed (including those not yet implemented) reached a gross value of R$ 147.3 million at the end of 2019, against R$ 92.5 million in the same period of 2018, growth of 59.3%. There was an organic addition of R$ 13.6 million, or 14.7%, a number that represents sales less cancellations plus adjustments. Despite the recognized challenge in the setup schedule, it is known that when the implantations are completed, the organic growth of revenues should approach the organic growth of the portfolio of contract, currently in double digits.

Recurring revenues, 83.0% of the total, were a record of R$ 145.4 million, an increase of 25.6% over 2018. Adjusted EBITDA (excluding extraordinary items) reached a record of R$ 21.1 million in the year, an increase of 9.8% over R$ 19.2 million in 2018, even with implementation costs, calculated managerially at R$ 12.1 million last year, to support the high volume of sales after changing the commercial model. The adjusted EBITDA margin decreased to 12.0% compared to 13.5% in 2018, profitability clearly impacted by the costs with implementation, but which will bring a higher recurrence profile after the software setup.

We have also expanded investments in Research, Development & Innovation (“RD&I”) to update the software from the acquisitions, in order to provide our customers with the most desired experience in financial technology. We invested R$ 0.9 million more, totaling R$ 4.1 million last year against R$ 3.2 million in 2018.

Finally, we emphasize that Sinqia is ready to open a new consolidation cycle with more intensity. We would not have carried out the follow-on if we were not convinced that there are many opportunities for M&A, including in the short term. We are confident that, with discipline and agility, we will make a new growth rise for Sinqia.

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News

Acquisition of Softpar
Settlement of the Debentures
Dividends payment
Acquisition of ADSPrev
Change of ticker and trading name
Headquarters Change
Closing of the Acquisition of Atena