LINX Linx SA

NET FINANCIAL RESULT

NET INCOME (LOSS)

Observation: The adjustments presented here do not consider the impacts of income tax and social contribution on Net income (loss), they are presented in accordance with the amounts presented in this document for the purpose of comparability. Notes: (1) Legal and financial advisory expenses arising from STNE´s proposal for Linx. (2) Expenses related to the due diligence process of acquired companies. (3) Of the total purchase price we pay for the acquired companies, a portion is paid through earn-outs, subject to the achievement of financial and operational goals. When these goals are not achieved by the acquired companies, there is a reversal of earn-out in the period. (4) Unusual operating losses of Linx Pay Meios de Pagamento Ltda, as a consequence of the cancellation of atypical transactions by third parties in the use of machines sold by a Linx Pay commercial partner. Losses were fully accounted for in 1Q21. (5) Expenses related to Linx's IPO on the NYSE and consultancy to adapt to SOX rules. (6) Organizational restructuring carried out at the beginning of the year and in June 2020.

The adjusted net loss was BRL 3.7 million in 1Q21, +BRL 3.2 million vs 1Q20 and +BRL 4.4 million vs 4Q20. These positive variations are mainly explained by: (i) cash preservation measures adopted from the second half of March 2020 onwards under the COVID-19 scenario; (ii) expansion of net operating revenue reflecting the continuous acceleration of the digital transformation process and the annual readjustment of Linx's contracts with its clients; and (iii) better financial result due to the application of IAS 29 and revenues from the prepayment of receivables from Linx Pay.

Notes: (1) Impact of the anticipation and assignment of receivables offered by Linx Pay Hub, considering that this revenue is allocated to the Financial Result, below EBITDA. (2) Legal and financial advisory expenses arising from STNE´s proposal for Linx. (3) Expenses related to the due diligence process of acquired companies. (4) Of the total purchase price we pay for the acquired companies, a portion is paid through earn-outs, subject to the achievement of financial and operational goals. When these goals are not achieved by the acquired companies, there is a reversal of earn-out in the period. (5) Unusual operating losses of Linx Pay Meios de Pagamento Ltda, as a consequence of the cancellation of atypical transactions by third parties in the use of machines sold by a Linx Pay commercial partner. Losses were fully accounted for in 1Q21. (6) Expenses related to Linx's IPO on the NYSE and consultancy to adapt to SOX rules. (7) Organizational restructuring carried out at the beginning of the year and in June 2020.

In this quarter, we had non-recurring expenses totaling BRL 5.3 million, mainly involving: (i) the Company's stock option plan; (ii) impact of revenue from anticipation and assignment of receivables offered by the Linx Pay Hub, amount allocated to the financial result; (iii) legal and financial advisory expenses arising from STNE´s proposal for Linx; and (iv) net earn-out reversal corresponding to four acquired companies. Accordingly, adjusted EBITDA reached BRL 51.6 million in the quarter, +26.4% and +22.9% in relation to adjusted EBITDA in 1Q20 and 4Q20, respectively.

The adjusted EBITDA margin was 22.4% in the quarter, 290 bps higher vs 1Q20. This evolution is mainly explained by: (i) expansion of net operating revenue reflecting the continuous acceleration of the digital transformation process and the annual readjustment of Linx's contracts with its clients; and (ii) cash preservation measures adopted as of the second half of March 2020, in view of the COVID-19 scenario. In relation to 4Q20, the adjusted EBITDA margin was 440 bps higher due to: (i) cash preservation measures adopted, as already mentioned; (ii) renegotiation of third party contracts in the period; and (iii) lower costs considering the greater concentration of implementation of Linx's solutions in the previous quarter. It is worth noting that the positive evolution of the comparatives was partially offset by the continuous investment in the teams to reinforce the cross-sell of offers connected mainly to Linx Digital and Linx Pay Hub.

CASH GENERATION AND NET CASH

In 1Q21, the Company´s cash balance and financial investments reached BRL 587.7 million, BRL 154.4 million below 1Q20 mainly due to the disbursement resulting from the four acquisitions of companies and the execution of the shares buyback program of the shares issued by the Company. In relation to 4Q20, the balance of cash balance and financial investments decreased by BRL 45.3 million mailiny due to earn-out payment to acquired companies.

The Company's gross debt ended 1Q21 at BRL 438.2 million, -12.9% vs 4Q20, comprising loans with BNDES in the amount of BRL 271.8 million, accounts payable for acquisitions of assets and subsidiaries totaling BRL 76.4 million, leasing in the BRL 90.0 million, since it is necessary to measure and recognize the Company's leases at present value.

The Company's net cash in 1Q21 was BRL 149.5 million. Excluding the gross debt related to the lease, resulting from IFRS16, and the net earn-out of accounts payable for acquisitions, Linx's adjusted net cash would be BRL 270.7 million. For an overview of the chnages in total cash flow (cash and equivalents + short-term investments), the statement of total cash flow can be found in Attachment III.

Notes: (1) Comprises the sum of the balances of Cash and Financial Investments. (2) Includes acquisition of companies less net cash and payment for the acquisition of subsidiaries. (3) It involves the acquisition of property, plant and equipment, the acquisition of intangible assets and the sale of property, plant and equipment. (4) Income and payments for loans and financing, lease payments, advances for future capital increase, financial charges, capital reserve and exchange variation on cash and cash equivalents and dividends and interest on capital paid. (5) For the calculation of the adjusted net cash, we highlight from the gross debt the leasing, resulting from IFRS16, and the net earn-out of accounts payable for acquisitions, excluding the portion retained for possible contingencies.

1- Social integration program – PIS, Social security financing contribution – COFINS, Service tax – ISS, INSS and others.

Notes: (1) The total cash flow consolidates the cash balance and financial investments for managerial purposes, Therefore, it is not an accounting view of the statement, (2) The difference between the "Recoverable taxes" and "Exchange variation on cash and cash equivalents" lines between the "Total Cash Flow" and "Cash Flow and Equivalents" is due to the fact that we consider 100% of the balance of Financial Investments as “Cash and cash equivalents”, resulting in the effect on the movement of the lines mentioned above..

1. The current business model of Linx's OMS is not indexed to GMV. However, this shows the relevance of the transaction volume of Linx's end-to-end platform.

2. Subscription Revenue without Neemo.

Notes:

a) In many cases, a billed customer is represented by a chain of stores; b) It is worth noting that, with the exception of OMS, the comparison between 1Q21 and 1Q20 is positively impacted by the effect of the pandemic since the second half of March 2020; c) The disclosure of the indicators is a facilitator to characterize the customer base from Linx.

GLOSSARY

Delivery app: Personalized delivery through the integration of the establishment's delivery application and its e-commerce platform, offering the consumer an omnichannel experience.

EBITDA: We calculate EBITDA as net income plus: (1) net financial revenue (expense); (2) income tax and social contribution and (3) depreciation and amortization. Therefore, EBITDA serves as an indicator of our overall financial performance, which is not affected by changes in interest rates, income or social contribution, tax rates or levels of depreciation and amortization. Consequently, we believe that EBITDA, when considered in conjunction with other available accounting and financial information, serves as a comparative tool to measure our operating performance, as well as to guide certain administrative decisions. We believe that EBITDA provides the reader with a better understanding not only of our financial performance, but also of our ability to pay interest and principal on our debt and incur additional debt to finance our investments and working capital. We calculate EBITDA and EBITDA margin in accordance with CVM rules. For the sake of comparability, in Adjusted EBITDA, we highlight EBITDA non-recurring expenses in the period.

Gateway: online gateway for payments in e-commerce.

Payment Link: Enables retailers to offer customers a secure link to pay for their purchases via messaging applications. The tool is fully integrated with the retailer's POS, eliminating the need for a website to make non-face-to-face sale.

Linx Digital or Digital: convergence of all channels used by the company with its customer, integrating the customer experience between online and offline world. In the case of Linx, it concentrates Linx Omni (OMS), Linx Commerce (the e-commerce platform) and Linx Impulse (search, recommendation, reengagement and retargeting tools).

Linx Pay Hub, Pay Hub or financial services: it involves initiatives such as TEF, Linx Pay (sub-acquiring), Linx Antecipa (anticipation and assignment of receivables), QR Linx, and new products aligned to the strategic positioning of Linx in this area.

EBITDA margin: we calculate the EBITDA margin by dividing EBITDA for the period by net operating revenue for the same period.

OMS: by using Linx Omni OMS technology, retailers can meet orders originating from any channel, regardless of where the product is located. Our OMS product offers multi-channel purchasing processes that integrate stores, franchises and distribution centers, thereby providing a single channel for our customers that decreases inventory shortage, generates more consumer traffic and increased sales. Our OMS product is divided into two modules:

• Omni OMS: A smart cloud-based suite of communication channels facilitates the interaction between business operations and applicable tax and accounting regulations. The Omni OMS module is responsible for integrating all systems associated with the OMS, such as the retailer's ERP, customer service, logistics, ecommerce platform and mobile solutions, among others.

• Omni in-store: This module is connected to a brick and mortar store's POS software, helping transform the store into a distribution center. The instore module allows the store operator to confirm that a customer has placed an order and monitor the necessary steps to ship or reserve the product, including choice of packaging, labeling, separation for pickup and interaction with the carrier for delivery, among others.

Through our OMS product, retailers can manage the following functionalities: ship from store, ship to home, ship to store, pick-up in store, click & collect, return in store, showrooming.

Consulting service revenue: revenue from implementation services of our solutions, including installation, customization, training and other services related to our products. These revenue components are characterized by their one-time or non-recurring nature. Consulting service revenue are recognized on our statement of income when delivered, in the case of installation, customization and training. If the amount billed exceeds the services performed for any given period, the difference is presented as deferred revenues on the statement of financial position.

Total recurring revenue: comprises revenue from monthly subscription fees that we charge our customers (1) for using our software; and (2) the fees we charge for ongoing technical support, helpdesk services, software hosting services, support teams and connectivity services. The fees in (1) and (2), above, are charged together in a single contract, with an average duration of twelve months, subject to automatic renewal, Subscription-related revenues are non-refundable and are paid monthly. Subscription revenues are reported as they are performed, beginning on the date the service is made available to customers and all other income recognition criteria have been identified. Subscription revenues for services made available to customers in 2017 and 2016 have been recognized since the beginning of the service. Since the adoption of IFRS 15, the fee is recognized over the average time the service is offered to the customer. Most of the revenue derives from customers' monthly use of services.

SaaS (Software as a Service): cloud-based solutions that have a recurring subscription revenue model. Examples of SaaS solutions include ERP software in the cloud, Electronic Funds Transfer (TEF), Electronic Fiscal Receipt (NFC-e), OMS, advertising and re-engagement.

Customer retention rate: the rate at which billings from existing subscribed customers at the beginning of the period continue as billings during the end of such applicable period not adjusted for (x) any increases or decreases in billings for pricing changes or (y) additional products or services provided to these existing subscribed customers.

TEF: electronic funds transfer is a middleware between POS (point of sale) software and the retail acquirer that allows our customers to direct credit and debit card transactions to their merchant acquirer of choice (credit and debit card processor), among other functionalities. This electronic payment solution is also fully integrated with our ERP (Enterprise resource planning) software. Through TEF, we have a unique opportunity to capture a significant volume of debit and credit card transactions pass through the cloud gateways managed by Linx. We actively seek to expand our electronic payment mechanisms. With the increase in debit and credit card transactions, as well as the adoption of cloud-based software, the importance of and demand for these solutions has increased. We offer TEF services as a complementary solution to our software solutions and our primary strategy is on cross-selling to our existing customer base. Customers using our TEF solutions may experience improved performance, stability and availability of our other software solutions.

Forward-looking statements

This earnings release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “going to,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, priorities, plans or intentions. Forward-looking statements in this release include, but are not limited to, statements regarding our future profitability and timing for profitability, our future financial and operating performance, including our outlook for the full year of 2020, demand for our products and services and the markets in which we operate and the future of our industry. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including risks regarding our ability to forecast our business, our competition, fluctuations in the markets in which we operate, our ability to attract and retain customers and our partner relationships. The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements in this release are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law.

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