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03/10/2021

Sinqia (SQIA3) releases its 4Q20 and 2020 results

Sinqia announcea its consolidated results for the fourth quarter of 2020 (“4Q20”) and the fiscal year ended December 31, 2020 (“2020”).

 

Financial Highlights

Portfolio of recurring contracts. Record of R$175.2 million in the quarter (+18.9% vs. 4Q19) reflecting contractual adjustments, favorable commercial performance and the consolidation of Tree and Fromtis;

Net revenues. Record of R$59.0 million in the quarter (+22.8% vs. 4Q19) and R$210.0 million in the year (+19.9% vs. 2019), with an expressive growth in the two businesses;

Net revenues from Software. Record of R$40.8 million in the quarter (+21.6% vs. 4Q19, +14.3% organic) and R$145.9 million in the year (+20.6% vs. 2019, +18.5% organic), benefited by the implementation deliveries;

Net revenues from Services. Record of R$18.2 million in the quarter (+25.5% vs. 4Q19) and R$64.1 million in the year (+18.4% vs. 2019), driven by the demand for digital transformation;

Recurring revenues. Record of R$53.1 million in the quarter (+34.0% vs. 4Q19), representing 90.0% of net revenues – the highest level since IPO, and R$184.7 million in the year (+27.1% vs. 2019), representing 88.0% of net annual revenues;

Adjusted EBITDA. Record of R$10.6 million in the quarter (+65.8% vs. 4Q19), with EBITDA margin of 18.0% – the highest quarterly profitability since the IPO, and R$30.2 million in the year (+43.0% vs. 2019), with EBITDA margin of 14.4%.

 

MESSAGE FROM THE MANAGEMENT

 

We report today the results of a year with significant achievements. In 2020, we disclosed several news, such as the entrance in a new index (SMLL – B3), three acquisitions (ISP, Tree, and Fromtis), and the launch of a corporate venture capital program. We ended with excellent results, in a quarter of records in revenues (R$59.0 million), recurrence (90.0%) and adjusted EBITDA margin (18.0%). These are our best results since the IPO. On this message from the management, we will review what’s new and explain why we are excited about 2021.

After a stock offering 18 months ago, we have noticed a significant increase in the traded volume of our shares (+231%). In May/20, they were included in the portfolio of B3’s Small Cap Index. This further helped to increase visibility and enabled the intake of new institutional and individual investors, which accounted for 111.5 thousand shareholders by the end of 2020.

Passed a cautious first semester, we ensured that the economic scenario had not jeopardized our targets and we resumed our consolidation plan. We made 3 acquisitions totaling investments of R$127.5 million (including earnouts), representing 35.2% of the funds raised in the IPO, according to the estimated schedule.

In August, we acquired ISP, a provider of software and services for private pension funds. This was our 6th acquisition in the segment and consolidated our position as leaders. In October we bought Tree, a provider of exchange software. And in December we acquired Fromtis, a software provider for FIDC.

These 3 acquisitions have been consolidated, respectively, on Feb/21, Oct/20, and Dec/20. Combined, they recorded net revenues of R$58.5 million from January to December 2020, but only R$2.5 million, from Tree and Fromtis, contributed to our figures in 2020. The full contribution will be evident in 2021.

In January, we launched Torq Ventures, the outcome of a major evolution in the open innovation strategy throughout the previous year. Our corporate venture capital program will invest in start-ups that develop innovative technologies and business ideas linked to the future of financial services.

We ended 2020 with great results in several indicators: net revenues of R$210.0 million (+19.9%), gross profit of R$71.2 million (+23.7%), general and administrative expenses of R$41.5 million (-4.2%), adjusted EBITDA of R$30.2 million (+43.0%), and adjusted cash income of R$12.2 million (+87.7%). We registered advances in both businesses – Software and Services.

In Software, the portfolio of recurring contracts, the main indicator of prospective performance, grew and reached a new record of R$175.2 million (+18.9%). Net revenues were R$145.9 million (+20.6%) with a significant increase in Subscription (+24.4%), due to the conclusion of implementations during the year. And the gross margin was 34.1% (+0.6p.p.), even with the higher R&D costs.

In Services, digital transformation became an urgent demand in the market, and we were ready to meet it. Net revenues were R$64.1 million (+18.4%) with a significant increase in Outsourcing (+33.0%), due to the customer additions and ticket expansion. We continue to experience significant demand in recent months. The gross margin was 22.9% (+1.9p.p.).

We reduced expenses to R$41.5 million (-4.2%). More important than efficient control is the change in composition: we are gradually substituting general and administrative expenses for commercial and marketing expenses, in order to enable new sales.

We end 2020 with a comfortable financial position, R$321.1 million in gross cash. ISP’s closing, in January, resulted in a reduction of R$33.6 million in this amount, but we keep enough resources to reinforce the consolidation plan at the beginning of this year. The resources are available and the M&A pipeline includes quantity and quality.

The financial sector is experiencing a process of technological disruption driven by both changes in consumer behavior and regulator positioning. New demands are arising, new paths of growth are opening up. Consolidation strategies and active innovation drive us forward. Therefore, we are looking forward to 2021.

 

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