A Change in Business Strategy Leads Totvs to Report a Record Jump in Annual Profit

Brazilian IT services firm Totvs has reported 84.4% jump in net profit for 2019, saying that its new business strategy is paying off higher dividends.

The company has posted a net profit of US$58 million, an 84.4% increase compared to the US$31 million recorded in 2018. For the full year, the company’s revenue totaled US$526 million.

Interestingly, the company’s revenue rose sharply in the final three months of the year.

Considering comments from the company officials, Totvs made two crucial changes to its business strategy in the past 12 months: it diversified away from hardware and started focusing on software. Also, it began renting out software for a small subscription fee.

“We carried out the divestment of hardware operations, returning to focus exclusively on software,” said Dennis Herszkowicz, president of Totvs, in a message to shareholders. “We favor products that generate recurring revenue, and we look for new businesses.”

Totvs’ Ebitda (earnings before interest, taxes, depreciation, and amortization) stood at US$109 million in 2019, up 35.8% over the previous year.

Analysts say Totvs benefitted greatly from its partnership with VTEX, one of Brazil’s most prominent e-commerce firms. Following the partnership in the first half of last year, Totvs started offering its customers with integrated solutions for managing their businesses.

The Sao Paulo-based IT vendor made two major acquisitions last year. In October, it bought Supplier, a fintech with expertise in lending credit to B2B enterprises. Later, it purchased Consico, a management systems provider. The second acquisition bolstered its operations significantly in the retail sector.