By Brazil Stock Guide – Totvs (B3: TOTS3) posted adjusted net income of R$257.9 million (about $52 million) in 4Q25, up 14.3% year over year, as recurring software contracts lifted margins and cash generation. The fourth quarter marked a solid finish to 2025, reinforcing the company’s transition to a subscription-driven model.
Net revenue reached R$1.51 billion ($301 million), up 16.3% from a year earlier. Recurring revenue — income from subscription contracts and long-term software services — rose 18.2% to R$1.37 billion and accounted for 91% of total sales. This mix reduces volatility and improves visibility for future quarters.
Adjusted EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation and Amortization, totaled R$408.7 million ($82 million), up 19.2% year over year. The EBITDA margin expanded to 27.1%, reflecting operating leverage as revenue grew faster than costs.
Free cash flow reached R$317.1 million ($63 million), an 18.9% increase from 4Q24. Free cash flow represents the cash left after operating expenses and capital expenditures. Strong generation helped Totvs close the quarter with net cash of R$195.6 million, compared with net debt of R$273.8 million a year earlier. Net cash means the company holds more cash than financial debt.
Recurring engine strengthens
Annual Recurring Revenue (ARR) — the annualized value of subscription contracts — ended December at R$6.1 billion ($1.2 billion), up 17.7% year over year. Net ARR additions reached R$200.2 million in the quarter. The metric highlights the predictable revenue base entering 2026.
The fourth quarter showed consistent growth across software and business performance segments, reinforcing Totvs’ exposure to Brazil’s mid-sized and large corporate clients. The company’s client base remains diversified across industries, which reduces concentration risk.
AI investment and 2026 outlook
Management outlined additional investments in artificial intelligence, including its AI platform “LYNN.” The company plans roughly R$75 million per year in incremental software development spending over the next four years. The goal is to increase average contract value and expand automation features within its enterprise resource planning (ERP) systems.
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