TOTVS S.A. (TOTS3) Earnings Call Transcript & Summary

Good morning. Welcome to TOTVS Third Quarter '24 (sic) [ Fourth Quarter '25 ] Results Conference Call. I am Sergio Serio, and I'm pleased to be here today with you with a different dynamics, not only because of the results and because of LYNN's announcement, but because we have the whole TOTVS team with us with a very interesting dynamics and sell-side analysts on site. And therefore, we're going to use a hybrid model. But as usual, we start with the presentation for the quarter's key highlights. And at the end, we will have our Q&A session, and we will also take remote questions. [Operator Instructions] But before we start, it is important to note that any forward-looking statements regarding TOTVS's future performance are based on current information and assumptions. They involve uncertainties and risks and many factors may cause the company's results to differ from the expectations presented here. I will now hand over to Maia.

Good morning, Sergio. Good morning, everyone. The consolidated results reflect yet another quarter of strong and consistent top line performance and substantial bottom line progress, especially noteworthy for a fourth quarter, which typically carries seasonal effect that negatively impact profitability. Consolidated net revenue exceeded BRL 1.5 billion in the quarter, growing 16% year-over-year. The main driver for this growth continues to be recurring revenue, which increased 18% and reached 91% of total revenue, an additional 150 basis points year-over-year. This is the result of a 22% increase in management and RD SaaS revenue, which in turn is linked to a net addition of BRL 200 million in ARR during the quarter. In terms of profitability, EBITDA closed the quarter at BRL 409 million, up 24% year-over-year translating into an EBITDA margin of 27.1%, representing a 170 basis point increase year-over-year and 100 basis points quarter-over-quarter. Adjusted net income totaled BRL 258 million in the quarter, growing 14% versus the previous year and 12% versus the prior quarter. Additionally, earnings per share increased 25% year-over-year. This bottom line performance reflects the operating leverage driven by consistent top line growth and disciplined cost and expense management. I now turn over to Apendino, who will comment on the management's results on Slide 4.

Good morning, everyone. Management maintained its robust growth pace of 17% year-over-year, closing the quarter with revenue of BRL 1.3 billion. The absolute highlight with SaaS plus Cloud revenue grew 24% in the quarter and 28% for the year. The performance reflects success in converting new sales and migrating the installed base to the cloud. EBITDA margin reached nearly 29%, representing almost 2 percentage points more than in the fourth quarter of '24. TOTVS continues to trend towards the highest profitability levels in its history while simultaneously preserving strong revenue growth. This profitability improvement reflects disciplined cost management, focusing on operational efficiency gains and reducing customers' TCO, making our offerings increasingly competitive in the SMB market. In addition, the universalization of T-Cloud continues to pave the way for activating artificial intelligence services, which we will discuss shortly. The positive correlation between scale and margin expansion is a rare combination in the global technology sector. Now Avelar will present RD numbers.

Good morning, everyone. RD station close to 2025 with very strong sequential acceleration. SaaS revenue grew 6.3% compared to the third quarter of '25, which on an annualized basis translates into a very strong and positive growth base for '26. significant recovery was observed in net ARR addition, which nearly doubled year-over-year, proving the effectiveness of our multiproduct strategy and the success of combining RD's inbound distribution model with management's outbound approach. Even with the investments made in RD Summit, we maintained a stable EBITDA margin of 13.7% for the quarter. Normalizing EBITDA for the one-off event cost, RD's margin would have exceeded 20%. And I now return the presentation to Maia for comments on Techfin.

In Techfin, net funding revenue totaled BRL 96 million in the quarter, remaining stable year-over-year as a result of expanded production in agribusiness, offset by higher funding costs during the period due to the increase in the Selic rate. The reduction in 5% versus the third quarter is related to the absence of receivable payments carried out by affiliates in the third quarter of '24. Adjusted EBITDA reached BRL 47 million in 2025, representing solid growth of 43% versus '24. The annual EBITDA margin improved significantly, rising from 10.6% to 13.4%, an increase of 280 basis points, consolidating the segment at a sustainable level of growing profitability. We are confident that our portfolio and model developments are on high path to increasingly materialize ERP finance experience for TOTVS clients. I now turn over to Dennis, who will continue from Slide 7.

Thank you, Maia. Good morning, everyone. As you could see from the quarterly results comments, we closed '25 at the same pace we started it, strong top and bottom line growth. Net revenue grew 17%, surpassing BRL 5.7 billion with SaaS revenue advancing 25%. EBITDA accelerated year-over-year growth from 20% in '24 to 22% in '25, with the margin expanding 110 basis points for the year, totaling 26.2%. We achieved a 20% ROIC and 26% net income growth. These figures for '25 add to a sequence of years of strong performance, reaffirming TOTVS' fundamentals very clearly. And now moving on to Slide 8. I would like to address the Gen AI Will Kill Software discussion that has intensified in recent weeks. It reminded me, frankly, of the first quarter '25 message, which wasn't written because of this, but it reminded me of it when we talked about the death hoax, the deliberate report of someone's death that later proves false. We believe Mark Twain's humorous quote, "the report of my death was an exaggeration" applies perfectly here. First, not all software is the same. An ERP is much more than a SaaS application. Customer profiles also differ. There are large enterprises, SMBs and small businesses. In general, we have observed the following: Number one, the more critical and/or complex the software, the slower the pace of adoption of any new technology, including AI. And then number two, adoption within SMBs is also slower. Management software is among the most critical and complex and TOTVS is focused on the Brazilian SMB segment. And even more importantly, the level of accuracy required, the risks involved in case of errors and countless other factors make the idea of replacing management systems with apps created by users at SMB clients highly questionable. At TOTVS, pragmatism focuses on our attention on turning AI into the greatest opportunity in our history. We have no doubt that generative AI is changing the world, and it is certainly already changing TOTVS. We are clear about our key assets and strengths. Number one, massive client base diversified across industries, geographies and company sizes. Number two, back and front office expertise built across each sector's value chain, combined with data generated over more than 40 years during which 20% of Brazil's GDP flowed through our systems, reflecting the internal processes of hundreds of thousands of companies. Number three, a distribution platform that combines the market's largest and best field sales force with a powerful digital inbound engine. And then finally, all of this within a culture of innovation and pioneering spirit. Based on these trends, we defined our role in AI as providing agents that perform tasks to improve our clients' outcomes. We're also convinced that the path for clients and prospects to adopt AI at scale is ANI, the so-called artificial narrow intelligence and not AGI, artificial general intelligence because it is specialized ANI master specific context, making it far superior in accuracy and performance with significantly lower cost as well as stronger governance and security. TOTVS is the company best prepared in the world, and I repeat, in the world to lead ANI applied to SMBs. We dominate B2B technology in Brazil and are expanding the leadership into AI. The message marks the official launch of LYNN, the first AI foundation in the Brazilian market. This is a very special announcement, but not unprecedented for us. Throughout our history, we have been told on several occasions, for example, by creating our own development language, the first franchise system in our own cloud. In fact, LYNN follows a concept similar to our cloud success, creating AI with a specific purpose. The slide illustrates where LYNN fits and its main components. LYNN is already a reality. The foundations shown here are operational and the work of evolution and expansion is ongoing and will remain so. LYNN ensures the greatest capacity in the market to create, use and manage AI agents with the best performance, accuracy, cost, security and agnosticism. This approach is among the most advanced in the world, especially in a landscape with multiple AI model options. Investment in these developments will be intensified, particularly CapEx. It is time to accelerate. We estimate an additional increase about BRL 75 million per year over the next 4 years for total software development CapEx of approximately BRL 600 million during this period. By focusing on ANI and leveraging its assets and strengths, TOTVS has the unique ability to do much more in AI with significantly less investment, a mindset similar to the most efficient innovators in the market, millions rather than billions. The primary monetization comes from TaaS, task as a service, which requires parallel and complementary actions, universalizing T-Cloud to ensure environmental control, governance and security, supporting clients in organizing and updating their databases and system versions. And finally, the evolution to operate new businesses model and billing models. In management, for example, items 1, 2 and 3 so-called TaaS enablers are already generating significant recurring revenues with accelerating growth rates. These revenues represented more than 17% of the total in '25, expanding 35% versus '24. Excluding cloud universalization, items 2 and 3 grew 72% during the period with strong sequential acceleration of 7.3% in January '26 versus December '25. And additionally, artificial intelligence already impacts our daily operations directly contributing to the bottom line through internal productivity gains. The best metric to measure this is net revenue per FTE, full-time equivalent. We're not here talking only about our direct employees, where we recorded growth of more than 11% in the fiscal year of '25 versus '24. AI's impact is, therefore, concrete, growing and cross-functional across all areas of TOTVS. This is the greatest opportunity in our history. With the universalization of T-Cloud and the creation of TaaS, the expansion of the addressable market is enormous. We believe this journal will extend for many years, significantly increasing our relevance within our clients, reinforcing our role as trusted advisers. And with that, I will open the floor for questions.

[Operator Instructions] Congratulations for the results. I have 2 questions here. The first one is about the management margin, which reached 25.8%. And I remember that in the previous quarter, you talked about 29%. So my question is, how can we consider this margin looking ahead, especially taking into account the new AI and cloud initiatives whose results are even better than this management margin? And the second question is about LYNN. Now that CADE has approved the operation. Could you update your expectation for top line revenue and expectations versus reality here and the opportunities you foresee?

Well, good morning, and thank you again. Without Dimensa, you talked about 28.5% with the Dimensa. With Dimensa, it was 25 -- 28.5%. But when we round up, it's 29%, which means really that the cap is even higher. We continue gaining efficiency, productivity. We are growing in an accelerated rate, and we do not see any changes in this scenario. We made it clear in our message that the upcoming year is always based on the previous year. And because '25 was wonderful, this is a very good sign. This is not a guidance, but it's a very good sign that '26 is also going to be a very good year. And whenever we combine growth, relevant growth in recurring revenue. And then on the other hand, we have the discipline, which we've already been shown in terms of cost. This means that the cap for this margin will grow up and if it was 29%, it no longer is, and we are almost there. And I would say -- that some people say that when we reach our target, we double it. So we're following track. CADE has okayed the event. And so we are doing what we had imagined. We believe that this will happen in the first half of the year. And the plan remains the same. Linx will be integrated totally within our management structure. We see very important potential for synergies. They complement what we do. The way they operate is also very similar because it enables us to have a pace and intensity of integration, which is higher than the one we usually have. The expectation is the best possible. Linx product, which are not available in TOTVS portfolio today and the distribution platforms that are available, and then at the same time, naturally, we can offer a portfolio of horizontal products, which we have in TOTVS and Linx does not have for its clients as, of course, try to have all of the cost synergies that we know are already out there. And therefore, the expectations have been maintained, and we understand that there is a lot of value to be extracted from this operation.

Next question, Gabriel, Morgan Stanley.

I have 2 questions here as well. Recently, you announced a new Vice President to focus on efficiency, and I wanted to better understand what the meaning is and what we can expect. Question number two, R&D, the performance has been very strong, and I would like to know what we can expect for '26 and how we have been following this business?

Well, I will start with the second question. And then I will quickly comment about Gustavo Mendes, and he can also comment a little bit about what he is going to do. So regarding the ARR addition and as you mentioned, Gabriel, I'm sorry, I correct myself, RD. So what we see in RD, and I had already indicated that for the third quarter is that all of the actions that were taken since '24, first of all, in the sense of going from single product, single go-to-market, single ideal customer profile going into a multi-approach, this was concluded in '25 with 3 additional things. Number one, with an integration with the structure of field sales, which provided amazing results. The representativeness of our field sales in RD is growing, and this does not cannibalize the digital inbound because the client profile is different. And actually, we're talking about different profiles and that is combined to what was already existing. And the second element is that once you have created multiproduct, you have the challenge of creating a totally integrated journey. And you know well that a very important part of this multiproduct was constructed based on M&As. And so the integration was not native from start. So Avelar coordinated this throughout last year and continues doing so this year so that this journey is native with a total integration in the journey, and that is, of course, making a huge difference in the cross and upsell of the solutions. Finally, we have the AI adoption in our day-to-day. Among us, when we mentioned that the more critical and complex, naturally, in [ RP ], which is more critical and complex than the application offered by RD, this space is slower because AI is already in the day-to-day of our activities. And of course, this provides very good final results for our customers. And that has shown to be accelerating already. So the results for the fourth quarter is a sort of a turn around the corner. And I remember that in the first quarter of -- actually the first half of the year in '24, we prepared a beautiful graph of the mismatch between IGPM and IPCA. And back then, we announced that these margins had ended, but actually, they have increased amazingly. And I can assure you that what happened now in the fourth quarter with sales is similar, of course, keeping the right proportions. But when we highlighted the sequential growth quarter-over-quarter, 6% annualized results in 25%. And when we look at the addition of [ RR ] and even if we receive the one-off results, which should not be removed actually because this is something that is here to stay. This already indicates mathematically that we are going to have one acceleration in the growth of revenue for RD. But now turning over to Gustavo Mendes, and we joked about this, but he passed his very important first test. His name is Gustavo. So as you can see, out of 7 Vice Presidents, he's Gustavo #3, which is a dramatic challenge for us defining how we're going to call him. So we have Gustavo sitting at the end, and he's Gustavo because he's been here longer. And then after that, we have Avelar. And now finally, we have our Mendes here at TOTVS. Basically, what Mendes is here to do is actually pursue within a company that has grown and continues growing and that adds more and more things and takes over more responsibilities in face of its clients to have this pursuit of somebody who's coming from outside and is still not familiar with the company to define where we can do better and where we can do more with less for the whole company. So just as when Avelar arrived here, he went through the same period, and I said so to everyone in the company that there was a company where they would have some time to get to know the company and then after that, determine where they would act with a more focused approach. We are doing the same thing to Mendes. But Mendes, please introduce yourself.

Well, thank you very much for the question, Gabriel. And yes, I am the third Gustavo, and this is my first challenge. But I would like to say also how happy I am to be working for TOTVS. It's obvious what TOTVS has been building over the years. It is a reference not only in Brazil, but at a regional level. And so coming in now and working with the team with all of the changes that we can see, technology, new company arriving at the group, I'm sure that we'll have a lot more opportunity to provide more value. As Dennis said, I have a lot to learn about the company, but I'm very enthusiastic. And I think that our future is going to be brilliant, as mentioned before.

Very nice. Next question from Livea, JPMorgan.

My first question has to do with growth. '25 was indeed a very strong year and now in '26, one of the main things we've been discussing for some time now is the tax reform. So from what you've seen in the beginning of the year, what is your expectation? Do you expect to accelerate your revenues even more after this first 1.5 months? And if you have any perspectives of course and how you're going to adjust? And I also wanted to ask you about capital allocation because we've seen a lot of M&A and you're talking about CapEx and organic growth. So has anything changed in the management of the company? And what is the priority for the upcoming 4 years and also in the very long time according to the model of the analysts here?

Well, thank you for your question, Livea. I will try to address the first question related to the tax reform. The tax reform is always a significant challenge. And at the same time, it is an opportunity. It is a situation where this very close and strong relationship we have with our clients proved to be very true. In practice, our clients already experienced in '26 what the government calls a testing period and the main change was the layout of the invoices where we have some unification and that involves all 27 states and municipalities, which regulate this. So the first challenge has to do with the products with Marcelo and Gustavo. And keeping track of all of these changes was the first thing, and this was done with the different municipalities. And what made it more complex to all of the companies is that this happened at the end of the year. And then in the beginning of the year, we had some flexibilization, and it will go until the end of the quarter. The different municipalities have regulated that. But it is -- the year has been very useful. Other controversies have arrived. We have some taxes, which will not be collected this year, but there are things that we have to indicate in the invoices. It's going to be a tense and useful year. Clients will help clarify all of these aspects. Interaction with our teams has been very high. This is what we used to call tickets. So we have different products and the activities have also been very intense since the last quarter and therefore, the new year was very challenging. Gustavo Bastos, the original Gustavo, and Dennis mentioned, can talk a little bit about this, too. And this is a process that will last at least until '33 when the whole reform will have been concluded. And during this journey, we will have to help clients navigate this scenario, dealing with the old system, learning how to use the new one and the impact this is all going to have in our lives. TITI, for example, the TOTVS tax intelligence launched last year is aimed at supporting our clients to do that, accelerate things, try to identify the impact on the business and that will probably help clients to define strategic actions, financial actions, among others. So this is another example on how TOTVS is, in fact, a trusted partner for clients with new products, update of products, services, revisiting things even. So this is an interesting opportunity. Right now, this is very interesting for us and for the market.

I would add -- this is Marcelo. And I would add that we can improve our products with the reform. We will change the way we did sales and how we import things. To do that, we have to either reset our system or to have more to provide to the different companies. Capillarity is very important because we work with entrepreneurs and they change their business model according to what is happening in the country. And in the past, we were always able to be very close to our clients, generating new opportunities.

Well, thank you very much, Marcelo. And moving on to your second question on capital allocation. No, nothing has changed. And actually, if I am not mistaken, 1 or 2 quarters ago this question was asked on capital allocation and how we saw that. And the response was that with TOTVS profitability, cash generation and the growth that it has delivered for seven consecutive years with 2-digit growth. And once again, it has to do with math. It's not a guidance. So we will generate billions in cash. In practice, today, we have an opportunity to do a lot of the things we want to do all at the same time. So we can have relatively large M&As as we have done with Linx, and we can also invest in AI or in the T-Cloud, which we are doing. And we can repurchase -- we can do all of it. TOTVS balance and cash generation, the increasing cash generation, fortunately, provides all of this capacity and this multiplicity of possibilities with our capital allocation, and this is not different from what we had indicated before.

Well, next question, Lucca.

My first question is that in the initial comments, you talked about the potential impact of AI for TOTVS and software as a whole. And one of the things we've been discussing is the city-based approach and some users must be able to interact with the software. We know that AI can be used in other fronts as well, but the [indiscernible] based monetization, is it a risk in the short and midterm? And do you have any strategy in place to deal with that? And number two, could you tell a little bit more about Linx's pipeline if you were to trace a plan for the future? And how much have you concluded already? And what would be the landmarks for this in the future?

Well, good question. Thank you. Regarding the discussion on charging per user, which is the main way to obtain monetization for most software companies, but it's not the only one we have here at TOTVS, and I would like to make that clear. We are not and have never been a pure SaaS company. And so this is one format, one criteria, but it has never been and never will be the only one. And having said that, I had already commented in another opportunity that I actually see new models arriving, and they are combined to the existing ones. When we look at the transition between license and maintenance for subscription, this is exactly what happened. You can see what we've been doing. And this discussion is a very interesting one. Sometimes I talk to Maia about this and actually, not only Maia, for 27 years, I've been in the technology market. So I've seen a lot. I've seen different cycles, new technologies arriving and so on and so forth. And this is standardized. Whenever we have a new technology, and please don't take me wrong, I'm not saying that it is eventually more impactful than others that AI is more impactful than others. In my message, I said that it has changed the world and is already changing TOTVS. But what we've seen to this day, and I believe that this can be applied to AI takes place like this. This new technology lowers the software development costs. It's not as concrete as people believe in today, but it is already something that you can see. AI will reduce software development costs and codes. But those who benefit the most are, of course, the companies that focus on this as a business opportunity. So for us, when these costs go down, it means that the TCO for the client will also decrease. And every time the TCO goes down, for a client in technology or any other activity. What happens is that, that activity will be intensified. It will gain participation and addressable market. And this is what we believe in. But now if in 5 years, 2 years, it's going to be exactly the same thing or if we are going to have another important task component and what the mix is going to be between one and the other, it's basically impossible to answer that question today. But once again, we believe and we work based on that. We have announced the largest repurchase program we've ever said, proving that we do believe in this vision that AI increases our addressable market. And what we've seen and what has been described give us better capacity than any other company, not only in Brazil, but all over the world to capture this increase in the addressable market. And this is what I can tell you here. Regarding the pipeline or the road map, you said pipeline, but it's more of a road map of LYNN. LYNN is already operational. The agents you saw in '25 or some months ago, they have been developed already in parts of what LYNN was at the time. And so it's operational, but it's operational for our internal use right now. External agents are not using LYNN yet. But, we already have developments and conversations so that this will become a reality in the near future. And I will insist on this. It is clear to us that TOTVS is not going to be the only stakeholder here. We know there will be third parties developing it, but they will have to do it all inside LYNN. So the road map right now will focus on guaranteeing that this scalability of the model will be increasingly higher because we understand that the number of agents to be developed is very large. From a practical point of view, each task executed in a management software can, at some point in time, be transformed into an agent with different levels of autonomy. Some of them have total autonomy and others will have human supervision, which is very important.

Okay. Next question, Cesar, Santander.

First of all, congratulations for the results. My first question has to do with ARR addition, and we've seen inflation deaccelerate and also given the magnitude of your base, it makes a lot of difference, and you delivered a good level of additions. So I first wanted to understand what opportunities you see and where the bulk of this is coming from? Second question, investment in R&D. You commented that -- well, first of all, you talked about new initiatives and opportunities to operate AI. And then when we look at the CapEx for LYNN, it represents 1% of your revenue, which is very low. I wanted to know what the results will be more specifically in this area?

Well, thank you very much. Regarding the addition of ARR, it's what you mentioned. First of all, the fourth quarter is a little bit more challenging in terms of ARR because we have Christmas at the end of the year and in different areas of the company, try not to start anything new. And so it's a little bit more challenging. And as you well mentioned, inflation has also contributed with a little bit less. And so we were very happy with the addition we were able to deliver, especially because the pace of sales in what we call and we made it sure in the release, the calculation of the net addition of ARR has 3 elements: the price element, which is basically related to inflation. But in terms of volume, you have gross addition that is not shown and the retention rate. The retention rate always fluctuates a little bit between the different quarters. And this time, it fluctuated downwards. And before that, it had increased. And that's why we say that it's best to look at the last 12 months. But the quarter was a record in terms of gross production. And once again, in a quarter which is more challenging. So we're very happy. And we do not see right now any changes in this scenario. Our indicators in the business area remain, as we mentioned and as we say internally, we continue strongly. And then regarding the R&D question, we commented a little bit before the event we held. We commented that the focus on AI, on specialized AI, which is ANI, actually, it enables us to do more with less. And this concept is exactly the same we have been applying for over 1 decade in T-Cloud. These are 2 of the main investments in R&D that we are carrying out in the company. And so what we internally call specific purpose, T-Cloud is a specific area and LYNN is a foundation with a specific purpose, it enables us to do exactly that, having amazing results from the point of view of revenue and growth, but especially regarding the value generated for our clients. And that is all translated into a proportionately lower level of investment, and therefore, there is no need for TOTVS to make investments in the order of billions of dollars because our role in AI, just as in the cloud is not the role of a hyperscaler, and it is not the role of AWS or Google Cloud or OpenAI. We're talking about something different, and that's something different, a different type of investment and of course, of return as well, the return that we can deliver.

Well, next question, Farias, UBS.

I have 2 questions here. First of all, you commented in the release about the new model RD Summit and also that a normalized RD margin would be above 20%. So what can we expect for '26 with these margins? And then number two, regarding LYNN, what is the acceleration road map be like in terms of business strategy?

Well, I will answer this, and Avelar, please complement it for me. Regarding the R&D margin, what we see is a very positive dynamics as we are resuming first the net ARR addition. And mechanically speaking, that will be reflected in the revenue as well. And as unit economics of R&D is very positive, this dynamics will be translated into continued margin improvement. And so these expectations are very good for R&D. Of course, we always have a series of innovations and investments that are made. Regarding RD Summit, would you like to comment about it?

Well, we have announced in the last RD Summit that we're going to skip the one for '26. There are reasons for that. One of them is that we want to have some synergies with the TOTVS universe and improve the economics of this event. And also because this year, we have the World Cup, the calendar is already complicated, and we have a short period of time to organize everything given the World Cup calendar. But we are going to have a smaller R&D event focusing on our clients in Florianopolis. This will be made public. The dates are already confirmed. And then next year, we will return with our event, and we are already planning that as well. Regarding your second question and regarding LYNN. LYNN does not necessarily have a direct revenue generation, but it enables a series of new businesses and new products. One of the main components is actually developing agents. And of course, these agents generate the so-called TaaS, task as a service. And so this is an important road map for generation and monetization of resources just as the consumption of APIs and the applications. So that LYNN enables it in a very important manner. And this is the road map from a business point of view and monetization point of view.

Okay. So we are moving towards the end of our call.

I have a question from following up the Santander question. What is the contribution of the franchise model and the sales you had last quarter? Also regarding services, somehow will LYNN accelerate the relevance of the service revenue?

Apendino, if you want to complement afterwards, but franchises are a very important strategic part of our field sales model. It is a very important differential. And I actually wanted to mention it in the release when we mentioned that LYNN's launch is very important, but it's not something new for us. And one of the things we mentioned as significant innovations at TOTVS was exactly the TOTVS franchise system. And therefore, this relevance remains the same. And that means that their contribution for ARR addition was high. Franchises not only do they contribute from the point of view of ARR addition, but their essence is to provide some regional understanding, which for our model and for our client profile, this is priceless. And of course, at the end of the day, everything is translated into sales and indicators, but there is also a qualitative aspect of regional presence, which is once again very, very valuable. And I do not believe that we would have been able to develop and sustain ourselves without the franchises. Would you like to comment or add Apendino?

Well, I would like to thank you because this is a very strong network we have. We are present in different cities of the country, thanks to this network. It does allow the company to grow and their capacity to invest and their regional knowledge of the area is very important. It's an important lever for TOTVS. It's valuable to us. They are always present in our call. So this message is also for them. Well, regarding services, you're totally right. For a long time, we've been saying that what we really want is to reduce our TCO, the property cost for our clients, especially when we have new sales, be it for a client at the basis, but especially for a new client with a new logo as we call it, the cost for services and the cost for implementation is sometimes prohibitive. And so we've been working for a long time to try to reduce that and to render this process into something simpler. We always need less time. We have had an amazing evolution. We used to spend 1,000 hours in a standard product. Today, we spend a little over 500 hours. And of course, it is one of the areas that we have been working the most. We have tested. We have implemented AI. And naturally, it works in the service area. So once again, we will always have part of services in my opinion, but it doesn't mean that it won't be less. We've been working in that direction.

Well, this is going to be the last question in the Q&A session, Luis with Citi.

I have 2 questions. I would like to talk a little bit about the gross addition and also understand if this is something internally in the company with product changes or commercial changes or if the clients are responsible for that? I also wanted to focus on LYNN because we've been talking about T-Cloud, but we have 2 other very important enablers. And I wanted to know what the company's strategy is, So that we can keep traction in T-Cloud and also the API enablers?

Well, wonderful. Thank you for your question. From the point of view of gross addition, our dynamics is relatively similar to what we already had in the past, something like 60% to 75% with a cross and upsell for clients at the base and then between 25% and 30% of new logos or net new names as we call in TOTVS. And therefore, this dynamics has not changed in any sense. And what has caused that is exactly the combination of an increasingly large portfolio of products. The whole time, we always have something else to offer our clients so that we can improve the value chain, increment the results that we generate for them. And then on the other hand, this reduction that we just commented about TCO and the cost of property, which make our solutions more profitable. And then the coverage of the field sales which is being complemented with the digital inbound and more and more, these 2 things go hand-in-hand and complement one another. And so it's a combination of all of this. And of course, that add to a level of client satisfaction, which for a long time has run at levels that for our industry represent absolute efficiency levels. And now back to LYNN, this is what we tried to bring in with the new figures. We mentioned how much those 3 AI enablers, and that's the main form of enablers we have today. And we exactly excluded the universalization of T-Cloud because this is something that has been going on for a while now. And we only focus on the other 2 enablers, the APIs and the agent consumption as this other thing where we can help clients organize their database and lead them to the latest versions of the software. And these 2 in combination, even though numerically speaking, represent a low volume, they are growing in an accelerated manner. So between '24 and '25, we had a 25% growth year-over-year and month-to-month between December and January, we already had a growth greater than 7%. And therefore, this is amazing acceleration. And we have no doubt that with the official launching of LYNN and other activities, we are already carrying out, and we have mentioned many of them in our message such as a larger control of the application and also the APIs and our database work, all of this will certainly lead the capture of these 2 other enablers to be increasingly higher from now on. And we are very enthusiastic with that. So this is what I wanted to say.

Well, very good. Before returning to you, Dennis, for your final message, I would like to thank the analysts who are here with us today for their presence. I would also like to thank those who were with us remotely and special thanks goes to PH and the MZ team, which accepted the challenge and organized this very nice event at the arena. It's a very nice area. So I thank you for having supported us. Well, now I turn it over to Dennis.

Well, thank you, Sergio. Congratulations to the whole team. This was an innovation we had here. I know, at least I do not recall any other conference call with analysts present on time and seeing how things really work on site. Over more than 4 decades of life, we have been reinventing our sites. And this means that being the same, always being different motto indicates that this is true more than ever. I would like to thank our partners, our clients, our whole ecosystem for another year and of course, for another quarter of amazing results. Thank you very much, and I see you next time.