Linx S.A. (LINX)

  • Offer Price

    $9.40

  • Offer Size

    32,800,000

  • 3-Year Outlook

    Positive

  • Volatility

    High

  • First Day Turnover

    14.71%

Description

We are a leading cloud-based technology company in Latin America and a market leader in Brazil in terms of revenue. We are focused on developing and providing affordable, easy-to-use, reliable and seamlessly integrated software solutions to retailers in Latin America, through our software-as-a-service, or SaaS, business model.

During 2018, our subscription revenue accounted for 86.8%, or R$680.8 million, of our gross operating revenue, an increase of 15.5% over 2017 in reais. During the three-month period ended March 31, 2019, our subscription revenue accounted for 89.1%, or R$180.5 million, of our gross operating revenue, an increase of 11.1% over the corresponding period in 2018 in reais. With a comprehensive offering of solutions, we are an end-to-end service provider that offers business management tools, payment solutions, e-commerce and omni-channel applications through an integrated and ever-evolving platform to retailers of all sizes and capabilities.

 Since our incorporation in 1985, our consumer-centric and entrepreneurial culture has been focused on innovation, agility, and building a reliable infrastructure, all of which have enabled us to adapt to our customers' needs, deliver user-friendly software solutions and services and develop a comprehensive portfolio of integrated solutions.

These capabilities have contributed to our resilient and predictable operations, with subscription revenue accounting for 86.8% of our gross operating revenue in 2018 and a quarterly customer retention rate of over 99% through the year. In addition, our growth is supported by a strong track record of adding new products to our portfolio, including our most recent Linx Pay Hub integrated payment processing solution, in order to anticipate trends and adapt to changes in our market. These ongoing efforts are exemplified by the upcoming products we intend to launch in 2019, including a QR code acceptance solution at cash registers that replaces debit cards and a digital wallet for retail customers that do not want a checking account.

As a result of our innovation capacity, ability to adapt to evolving customer needs and our cross-selling efforts, we have successfully retained and increased year-over-year the share of our services in our customers' wallet, as demonstrated in the following cohort analysis. For purposes of the following chart, we define (1) "annual cohort" as the subscription revenue generated from customers and that is added to our portfolio of customers in a given year and (2) "compound cohort growth rate" as the percentage of the subscription revenue generated by the relevant annual cohort of customers in 2018 relative to the revenue generated by the same annual cohort in the year immediately after they were added to our portfolio of customers.

Compound cohort growth rates are calculated using this method to capture customer-generated revenues over a 12-month period (a full fiscal year), while also mitigating the fact that customers are added to the portfolio on different days of the year. Annual cohort revenue estimated using this metric takes into consideration both new organic customers and customers of companies that we acquire. As evidenced in the following chart, all of our annual cohorts have been kept at more than 100% of their respective initial annual revenue.

Lawyers

  • White and Case LLP

Auditors

  • Ernst & Young Auditores Independentes S.S
Investors
Pre-IPO Holdings(%)
  • Google Ventures
  • Intel Ventures
  • Patricoff Ventures
  • Kleiner Perkins
  • 30
  • 20
  • 5
  • 18

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