Brazilian software giant Totvs accelerates diversification plan

Company reports progress in its strategy to move beyond enterprise resource planning tools.

Brazil-based software firm Totvs has reported progress in diversifying its product portfolio and moving beyond its core business of enterprise resource planning (ERP) tools.

Traditionally an ERP house with its roots dating from the 1980s, Totvs said it has achieved positive results in the third quarter of 2021 with its new three-pillar offering of management, business performance and techfin systems.

The company reported a 26% growth in net revenue to 855 million reais ($157 million) for Q3 2021, driven by a positive performance across all the pillars, including ERP systems. According to Totvs, the new business areas accounted for 42% of the profits recorded during the period.

On the other hand, the business systems strand the company is best known for has also delivered positive results, with recurring revenues growing 20% in relation to the same quarter in 2020. According to the firm, this is a record result since 2012.

In business performance, a division that has accounted for 7.3% of the company's revenues in the past has seen a 46% growth rate in relation to the previous year.

This pillar was bolstered with the marketing automation products of RD Station; a startup acquired in March 2021 in what was Brazil's largest private M&A deal in the software sector. At the time, Totvs described the acquisition as a means to boost customer loyalty and add value to its users through an enhanced presence in the business performance space.

The techfin division, which provides products that enable clients to deliver financial services, has seen revenue growth of 49% in relation to the third quarter of 2020. According to Totvs, B2B credit intermediation firm Supplier, acquired in 2019, has helped bolster the company's business in the financial services area.

Totvs claims to have about 50% of the Brazilian enterprise software market; the company has a traditionally large footprint in the small and medium business (SMB) space.

The firm placed its bets on a shift to the software-as-a-service (SaaS) model in 2016, a move that was initially painful for the company but paid off later: SaaS currently accounts for 65% of new business, while subscriptions represent 80% of the company's business overall.

According to the chief executive at Totvs, Dennis Herszkowicz, the company's follow-on offering in the public markets, which raised 1.4 billion reais raised ($190 million) in September, boosts the company's capacity to make new acquisitions and accelerate its own innovation capacity and transformation.