TOTVS - 2º ITR 2021 Inglês

TOTVS S.A.Interim Financial StatementsJune 30, 2021and Independent auditor´s report on review of interim financial information

(A free translation of the original in Portuguese)

ContentsConsolidated Result per Business Dimension 3

Report on review of the interim financial information 16

Statement of financial position as of June 30, 2021 and December 31, 2020 18

Statements of profit or loss 19

Statements of comprehensive income 20

Statements of changes in shareholders’ equity 21

See the accompanying notes to the individual and consolidated financial statements. 22

Statements of Value Added 23

Notes to the interim financial statements 24

The Company and its operations 24

Basis of preparation and presentation of the interim financial information 25

Corporate restructuring 28

Financial instruments and sensitivity analysis of financial assets and liabilities 30

Cash and cash equivalents 37

Financial investments 37

Trade receivable 38

Recoverable taxes 40

Income taxes 40

Related-party balances and transactions 41

Other assets 43

Investments 43

Property, plant and equipment 45

Intangible assets 46

Labor liabilities 49

Taxes and contributions payable 49

Loans, financing and lease liabilities 50

Debêntures 51

Business partners´ payables 52

Accounts payable from acquisition of subsidiaries 53

Provision for contingencies 54

Senior shares and mezzanine obligations - Consolidated 55

Shareholders' equity 56

Dividends and Interest on shareholders’ equity 57

Share-based compensation plan 57

Segment information 58

Earnings per share 59

Gross sales revenue 60

Costs and expenses by nature 60

Finance income and costs 61

Private pension plan – defined contribution 61

Insurance coverage 62

Subsequent events 62

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3-DIMENSIONAL ECOSYSTEMNEW DISCLOSURE STANDARD

The acquisition of RD Station consolidated the birth of the Business Performance dimension and was a definitive

step in the construction of a B2B technologies ecosystem, which goes beyond ERP. This strategy aims to expand the

addressable market, take rate and, finally, increase customer loyalty, through the advancement of value chains,

leading a journey of digitization aimed at exponentializing TOTVS' operations.

As of this quarter, with the consolidation of RD Station's June results, we have a new disclosure standard, in which

we will present TOTVS' financial and operating results segregated by the different dimensions. Below, we have a

brief description of each Business Dimension.

DESCRIPTION AND COMPOSITION OF BUSINESS DIMENSIONS

Management:is the dimension where data and integrations are generated. Therefore, it is the basis that makes the other dimensions of theecosystem viable. It includes: (i) ERP solutions; (ii) HR solutions for the human capital management and development and payroll processing; (iii)specialized solutions for 12 economic segments; and (iv) and solutions aimed at micro and small businesses.

Business Performance: dimension that aims to leverage the results, performance and relationship of the different business areas of our clients.Consolidates the digital marketing platform, consisting of RD Station and Tail Target; and sales support solutions, comprising the E-commercesuite (including the JV with VTex) and OMS (Omnichannel).

Techfin: dimension that seeks to simplify, expand and make access to B2B financial services cheaper, through the intensive use of digitizationand big data. Currently, it is composed of credit solutions, including: Supplier and new products (“Antecipa”, “Consignado”, “Mais Negócios”,“Mais Prazo”, “Painel Financeiro” and “EduConnect Pay”).

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FINANCIAL AND OPERATIONAL RESULTSThe results presented in this section consolidate RD Station's June 2021 results.

CONSOLIDATED RESULTS BY BUSINESS

Consolidated Result (in R$ thousand) 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Consolidated Net Revenue 763,375 627,399 21.7% 720,256 6.0% 1,483,631 1,228,817 20.7%

Management Revenue 678,854 600,254 13.1% 660,265 2.8% 1,339,119 1,201,615 11.4%

Business Performance Revenue 23,577 176 >999% 4,377 438.7% 27,954 226 >999%

Techfin Revenue 60,944 26,969 126.0% 55,614 9.6% 116,558 26,976 332.1%

Consolidated Contribution Margin 400,213 313,702 27.6% 391,226 2.3% 791,439 622,250 27.2%

Management Contribution Margin 360,853 301,982 19.5% 359,463 0.4% 720,316 610,729 17.9%

Biz Performance Contribution Margin 12,021 173 >999% 1,499 701.9% 13,520 223 >999%

Techfin Contribution Margin 27,339 11,547 136.8% 30,264 (9.7%) 57,603 11,298 409.9%

% Consolidated Contribution Margin 52.4% 50.0% 240 bp 54.3% -190 bp 53.3% 50.6% 270 bp

% Management Contribution Margin 53.2% 50.3% 290 bp 54.4% -120 bp 53.8% 50.8% 300 bp

% Biz Performance Contribution Margin 51.0% 98.3% -4730 bp 34.2% 1680 bp 48.4% 98.7% -5030 bp

% Techfin Contribution Margin 44.9% 42.8% 210 bp 54.4% -950 bp 49.4% 41.9% 750 bp

Management Dimension Results

The Management Dimension is mainly composed by the view previously known as “Technology Result” until 1Q21,

excluding solutions that became part of the Business Performance dimension and Techfin’s new products.

Management Result (in R$ thousand) 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Net Revenue 678,854 600,254 13.1% 660,265 2.8% 1,339,119 1,201,615 11.4%

Recurring 559,861 484,537 15.5% 534,431 4.8% 1,094,292 955,022 14.6%

Non Recurring 118,993 115,717 2.8% 125,834 (5.4%) 244,827 246,593 (0.7%)

License 46,419 47,069 (1.4%) 59,122 (21.5%) 105,541 105,349 0.2%

Services 72,574 68,648 5.7% 66,712 8.8% 139,286 141,244 (1.4%)

Costs (193,869) (173,577) 11.7% (182,882) 6.0% (376,751) (354,999) 6.1%

Gross Profit 484,985 426,677 13.7% 477,383 1.6% 962,368 846,616 13.7%

Gross Margin 71.4% 71.1% 30 bp 72.3% -90 bp 71.9% 70.5% 140 bp

Research and Development (119,466) (105,162) 13.6% (113,064) 5.7% (232,530) (210,804) 10.3%

Provision for Expected Credit Losses (4,666) (19,533) (76.1%) (4,856) (3.9%) (9,522) (25,083) (62.0%)


% Management Contribution Margin 53.2% 50.3% 290 bp 54.4% -120 bp 53.8% 50.8% 300 bp

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Net Revenue

Management Net Revenue has accelerated it´s year-over-year growth,

reaching a level of 13% compared to 10% in 1Q21, even without the

seasonal revenue from the corporate model, present in the previous

quarter. This acceleration was mainly driven by the 16% growth in

Recurring Revenue, which surpassed the record of 81% of Management

Net Revenue reached in 1Q21. The Manufacturing, Distribution,

Construction and Agribusiness industry sectors were the ones that most

contributed to this progress, with growths above 20%.

Compared to 1Q21, the 2.8% increase in Management Net Revenue was

possible by the 4.8% growth in Recurring Revenue, more than offsetting

the 5.4% reduction in Non-Recurring Revenue, especially License Revenue

that reached R$17.8 million in the previous quarter, seasonally driven by

the corporate model.

Recurring Revenue

Recurring Revenue has demonstrated new acceleration

year-over-year, reaching 16% growth, driven by SaaS, which has

increased 26% over 2Q20. Cloud, once again, was highlighted in

SaaS, showing a growth of 35% in the same period, while SaaS

new signings (sales production) continue to increase, with a 1.4%

growth over 1Q21 and 68% over 2Q20, with the Agribusiness,

Distribution and Retail segments as the highlights.

The year-over-year organic growth of Recurring Revenue

showed new

evolution, from

12% in 1Q21 to

15% in 2Q21. This

reflects: (i) the continuous acceleration of ARR, driven by signings for

new clients and cross/up sell to existing clients, mainly of SaaS offers; (ii)

the contractual inflation rates adjustments in the period; and (iii) client

renew rate increase as demonstrated in the chart on the right.

ARR had a 17% growth when compared to 2Q20, generating a new

organic Net Addition historical record of R$119.0 million, which

surpasses by 194% the same metric of 2Q20 and 32% in 1Q21.

Non-Recurring Revenue

Non-Recurring Revenues presented an increase of 2.8% in 2Q21, when compared to 2Q20, especially due to the 5.7%

growth in Services Revenue, impacted by the beginning of the pandemic in the same period of last year.

In the quarter-on-quarter comparison, the 5.4% reduction is explained by the 21% drop in the License line, which had

a seasonal effect of R$17.8 million in incremental license from the corporate model in the previous quarter, 1Q21. The

8.8% growth in Services Revenue is explained by the increase of 2 business days in the period and the resumption of

demand in some sectors most impacted by the pandemic in previous quarters.

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Gross Margin

The Gross Margin from Management reached 71% in the quarter, 30 basis points better than the 2Q20 margin,

despite the 5.7% growth in non-recurring services Revenue. This improvement in the margin is a reflection of: (i) the

scalability of the TOTVS recurrence model; (ii) continuous advances in product quality, with continuous increases in

NPS and consequently lower demand for support; and (iii) maintenance of remote deployment levels, which were

above 95% in the quarter. Compared to the previous quarter, the 90 basis points reduction in Gross Margin is mainly

explained by the reduction in License Revenue, as explained in the previous section.

Research and Development

Research and Development (R&D) expenses reduced their share in Recurring Revenue by 40 basis points against

2Q20, reaching 21%, the same level as in 1Q21. It is worth reminding that TOTVS continues to invest in portfolio

modernization, and in the increase in quality, aiming to leverage new growth avenues and increase efficiency in

resource allocation. An example of this is the generation of Recurring Revenue per R&D headcount, which grew 9.3%

when compared to 2Q20 and 3.4% against 1Q21.

Provision for Expected Credit Losses

The Provision for Expected Credit Losses (former allowance for doubtful accounts) represented 0.7% of Management

Revenue in the quarter, below the last quarter's ratio and proving that a business model based on Recurring Revenue,

combined with a fragmented and diversified clients base, and more resilient than the market average of market

companies, allows lower delinquency levels.

Management Contribution Margin

In 2Q21, the Management Contribution Margin grew 290 basis points when

compared to the same period of the previous year, as a result of the 30 basis

points increase in Gross Margin and the 76% reduction in the Provision for

Expected Credit Loss in the period. When compared to 1Q21, the 130 basis

points drop is mainly explained by the Gross Margin reduction, due to the

seasonality of License Revenue from the corporate model as mentioned

above.

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Business Performance Dimension Results

As explained at the beginning of the Consolidated Results by Business section, the Business Performance view

represents the business solutions focused on helping clients to sell more, through sales, marketing and client

experience processes. Reminding that we are consolidating the RD Station results from June 2021 only.

It is worth noting that 100% of the Recurring Revenue of this business is in the SaaS model.

Biz Performance Result (in R$ thousand) 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Net Revenue 23,577 176 >999% 4,377 438.7% 27,954 226 >999%

Recurring 22,945 134 >999% 4,512 408.5% 27,457 184 >999%

Non Recurring 632 42 >999% (135) (568.1%) 497 42 >999%

Costs (7,484) - - (2,684) 178.8% (10,168) - -

Gross Profit 16,093 176 >999% 1,693 850.6% 17,786 226 >999%

Gross Margin 68.3% 100.0% -3170 bp 38.7% 2960 bp 63.6% 100.0% -3640 bp

Research and Development (3,930) - - - - (3,930) - -

Provision for Expected Credit Losses (142) (3) >999% (194) (26.8%) (336) (3) >999%


% Biz Performance Contribution Margin 51.0% 98.3% -4730 bp 34.2% 1680 bp 48.4% 98.7% -5030 bp

Receita Líquida

The Business Performance Net Revenue in the quarter (which

considers the consolidation of only the month of June) grew 59%. As

we can see in the chart below, RD Station's Annual Recurring Revenue

(ARR) represents more than 90% of the total dimension. As of the next

quarter, it will be possible to observe the ARR organic addition of all

operations together, but it is worth noting that the ARR organic

addition of RD Station alone in the quarter was R$16.9 million. The

main elements for this performance were the addition of new clients,

up-sell, driven by the PLG (Product Led Growth) strategy, and

cross-sell.

Also noteworthy is the strong evolution of the Digital Commerce

business. In the chart above, we see a 251% growth in the number

of clients year on year. The number of customers in production

(which are already generating GMV - Gross Merchandise Volume)

was multiplied by 7. The annualized GMV has already reached

R$189 million, an increase of 1.426% versus 2Q20. Here we see a

wide avenue of growth.

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The Business Performance Research and Development (R&D) expense comprises the innovation and maintenance

structure of RD Station, which represents 16.7% of Biz Performance's Net Revenue in the quarter.


The reason for the reduction in the Provision for Expected Credit Losses to 0.6% of the Net Revenue is a higher

provision for this line in 2Q20, impacted by the beginning of the pandemic.

Business Performance Contribution Margin

The Business Performance Contribution Margin ended 2Q21 at 51%.

Techfin Dimension ResultsAs explained at the beginning of the Consolidated Results by Business section, the Techfin dimension aims to simplify,

expand and cheapen access to B2B financial services and includes the businesses of Supplier and new products

(“Antecipa”, “Consignado”, “Painel Financeiro”, “EduConnect PAY”, “TOTVS Pagamento Instantâneo”, “Mais Negócios” e

“Mais Prazo”)and we continue to work on increasing that portfolio. In this way, we started to consolidate all Techfin's

efforts in this section. This means that we have 2 operations at different times of development: Supplier, with almost 2

decades of life, solid growth and profitability; and New Techfin Products, with a little more than 1 year of life, total

focus on investment in building a portfolio and a customer base, for subsequent search for revenue and profitability.

Techfin Results (in R$ thousand) 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Techfin Revenue 60,944 26,969 126.0% 55,614 9.6% 116,558 26,976 332.1%

Funding Cost (18,305) (7,469) 145.1% (14,164) 29.2% (32,469) (7,469) 334.7%

Net Funding Revenue 42,639 19,500 118.7% 41,450 2.9% 84,089 19,507 331.1%

Operational Costs (5,385) (2,088) 157.9% (4,869) 10.6% (10,254) (2,088) 391.1%

Gross Profit 37,254 17,412 114.0% 36,581 1.8% 73,835 17,419 323.9%

Research and Development (5,823) (970) 500.3% (4,499) 29.4% (10,322) (1,217) 748.2%

Provision for Expected Credit Losses (4,092) (4,895) (16.4%) (1,818) 125.1% (5,910) (4,904) 20.5%


% Techfin Contribution Margin 44.9% 42.8% 210 bp 54.4% -950 bp 49.4% 41.9% 750 bp

% Net Funding Revenue Contrib. Margin 64.1% 59.2% 490 bp 73.0% -890 bp 68.5% 57.9% 1060 bp

We also present below the results of Credit Products - Supplier in line with the result pattern released since 2Q20. As

of this quarter, we will also present the concept of Net Funding Revenue, as well as the Contributions and EBITDA

Margins on this revenue. This is a format commonly used in the financial market that allows a more accurate credit

business monitoring and, therefore, is the main profitability metric that the managers use in their management.

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Cred. Products - Supplier (in R$ thousand) 2Q21 may-jun/20 ∆ 1Q21 ∆ 1H21 may-jun/20 ∆

Credit Products Revenue 60,225 26,664 125.9% 54,939 9.6% 115,164 26,664 331.9%

Funding Cost (18,305) (7,469) 145.1% (14,164) 29.2% (32,469) (7,469) 334.7%

Net Funding Cost Revenue 41,920 19,195 118.4% 40,775 2.8% 82,695 19,195 330.8%

Operational Costs (4,151) (2,088) 98.8% (4,113) 0.9% (8,264) (2,088) 295.8%

Gross Profit 37,769 17,107 120.8% 36,662 3.0% 74,431 17,107 335.1%

Research and Development (2,789) (703) 296.7% (2,333) 19.5% (5,122) (703) 628.6%

Provision for Expected Credit Losses (4,093) (4,903) (16.5%) (1,828) 123.9% (5,921) (4,903) 20.8%

Supplier Contribution Margin 30,887 11,501 168.6% 32,501 (5.0%) 63,388 11,501 451.2%

Commercial and Marketing Expenses (4,949) (2,298) 115.4% (5,597) (11.6%) (10,546) (2,298) 358.9%

General and Administrative Expenses (13,892) (8,890) 56.3% (11,936) 16.4% (25,828) (8,890) 190.5%

Other Net Revenues (Expenses) 503 (1) <(999%) 691 (27.2%) 1,194 (1) <(999%)

EBITDA 12,549 312 >999% 15,659 (19.9%) 28,208 312 >999%

EBITDA Margin 20.8% 1.2% 1960 bp 28.5% -770 bp 24.5% 1.2% 2330 bp

Net Funding Revenue EBITDA Margin 29.9% 1.6% 2830 bp 38.4% -850 bp 34.1% 1.6% 3250 bp

Techfin Revenue

Credit Products Revenue maintained its growth acceleration trend, with

an increase of 126% over 2Q20 and 9.6% over 1Q21. This performance

was positively influenced by Credit Production, which reached a new

record of R$2.4 billion in the quarter, 93% higher than in 2Q20, boosted

by the Steel Industry, Civil Construction and IT Equipment sectors, as

well as the high Selic rate. On the other hand, this performance was

negatively influenced by

the seasonal effect of the

Agribusiness off-season,

since the Agribusiness

credit portfolio typically

has a longer average term, resulting in revenue for a longer period of

time.

In this context, the overall average term of the Credit Portfolio

decreased by 9% compared to the first quarter, which explains why the

quarter-on-quarter growth of the portfolio was lower than the growth

in Credit Production.

The integration between TOTVS and Supplier, through clients in production,

coming from the TOTVS client base with the products: “TOTVS Antecipa”,

“TOTVS Mais Prazo” and “TOTVS Mais Negócios”, continues to advance,

generating R$2.2 million in Credit Products Revenue in the quarter against

R$1.1 million in the previous quarter, an increase of 100% in the period.

TOTVS Mais Negócios product, in particular, added 2 more affiliates in the

quarter, totaling 5 affiliates in production and represented 32% of

prospecting affiliates and 29% of those under implementation.

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Techfin's other revenues, excluding Supplier’s Credit Products, represented 1.2% of the total of this business

dimension and grew 136% when compared to 2Q20. We remind that the “Painel Financeiro” (Financial Cockpit)

product continues to be freely granted part of cross-selling Techfin strategy. We understand that, especially in this

start-up, the main metric is the growth in the number of customers who started using our new Techfin solutions

(“Consignado”, “EduConnect PAY”, “Mais Prazo”, “Antecipa”, “Pagamento Instantâneo” and “Painel Financeiro”). As

shown in the chart on the left, this number was multiplied by 9 in the year-over-year comparison.

Net Funding Revenue

As of this quarter, we will highlight the Funding Cost from other

costs that constitute the Operating Cost. The Funding Cost is made

up by the remuneration of FIDC (Securitization Fund) senior and

mezzanine quotas.

In this quarter, the FIDC obtained a greater volume of funding, with

the purpose of supplying the increase in production, which led to an

increase in the FIDC cash position, as shown in the chart. The

increase in the funding volume, combined with the 0.75 p.p. increase

in the Selic rate in each of the last three Copom (brazilian monetary

policy committee) meetings (march, may and june), led to a 29%

increase in Funding Cost.

In addition to this Funding Cost increase, the average term of the

portfolio creates a temporal mismatch in the pass-through of Selic rate increase into the Credit Production, since the

revenue recognized reflects a portfolio originated in previous months, impacting revenue and, as a consequence, the

Contribution Margin, as discussed below in the section "Techfin's Contribution Margin". When the Selic adjustment

effect is excluded, Net Funding Revenue increases 10% compared to 1Q21.

Operating Costs

Techfin’s Operating Costs, which include expenses related to the credit insurance premium and the support structure

of Techfin's technology products, were raised by 11% when compared to 1Q21, especially due to the structuring of

the support team for the new “TOTVS Antecipa” and “Painel Financeiro” solutions, among others.


Techfin's Research and Development expenses represent expenses related to the innovation and maintenance

structure. This line now represents 9.6% of Techfin's Revenue in 2Q21 against 8.1% in 1Q21, reflecting the increase in

investments to implement the strategy of developing solutions in this business dimension, such as “TOTVS Mais

Negócios” and “TOTVS Mais Prazo” products.

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The Provision for Expected Credit Losses ended the quarter

representing 0.17% of the Credit Production, 22 basis points lower

compared to 2Q20 and 8 basis points higher than 1Q21. This behavior

reflects a return to levels closer to the historical 0.2% of the

pre-pandemic period, since, as mentioned in the previous quarters

release, this line was positively impacted by the reversal of provisions

made especially at the beginning of the pandemic, when default levels

reached their peak, as shown in the chart on the left.

In the same chart, we can see that, even with a new advance in credit

production, the Default Percentage maintained the trend shown as of

3Q20, remaining below the levels observed before the pandemic. The

same behavior is observed in delinquency levels above 90 days, which remained below pre-pandemic levels, even

upon the increase in the average delinquency in Brazil, reinforcing the flexibility and resilience of the business model,

and its efficient management in credit granting.

Techfin Contribution Margin

Techfin Contribution Margin calculated on Net Funding Revenue

ended the quarter at 64%, 890 basis points below compared to

1Q21, mainly explained due to the effect of the Selic increase in the

Funding Cost and the return of the Provision for Expected Credit

Losses to levels close to those before the pandemic. Normalizing the

1Q21 Credit Losses Provision to the same level of 0.17% of the

Credit Production in 2Q21 and adjusting the temporary impact of the

Selic increase on the Funding Cost, matching it to the revenue

average term, the Techfin Contribution Margin would grow 6.4% in

the quarter, instead of dropping 9.7%, as shown in the chart on the

right.

It is also important to highlight that Supplier continues to increase

the ROE (“return on equity”), accumulated in the last 12 months, increasing from 43% in 1Q21 to 56% in 2Q21.

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OTHER OPERATING EXPENSESIn R$ thousand 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Sales and Marketing Expenses (138,345) (101,474) 36.3% (129,167) 7.1% (267,512) (221,297) 20.9%

% of Net Total Revenue -18.1% -16.2% -190 bp -17.9% -20 bp -18.0% -18.0% 0 bp

Adjusted Adm. and Other Expenses (78,130) (74,891) 4.3% (72,870) 7.2% (150,999) (136,753) 10.4%

% of Net Total Revenue -10.2% -11.9% 170 bp -10.1% -10 bp -10.2% -11.1% 90 bp

Administrative and Other Expenses (74,392) (74,891) (0.7%) (74,842) (0.6%) (149,234) (137,157) 8.8%

General and Administrative Expenses (82,108) (58,351) 40.7% (67,765) 21.2% (149,873) (108,270) 38.4%

Provision for Contingencies (4,793) (16,814) (71.5%) (9,128) (47.5%) (13,921) (29,676) (53.1%)

Other Net Revenues (Expenses) 12,509 274 >999% 2,051 509.9% 14,560 789 >999%

Extraordinary Items (3,738) - (0.7%) 1,972 (289.5%) (1,765) 404 (537.3%)

Earn-out Adjustment at Fair Value (834) - - - - (834) - -

Expenses with M&A Transactions 5,814 - - 1,972 194.8% 7,786 404 >999%

Tax Credit (8,718) - - - - (8,718) - -

Sales and Marketing Expenses

Sales and Marketing expenses represented 18% of Net Revenue in the quarter, 20 basis points higher compared to the

previous quarter. This growth is explained by: (i) increase of R$3.5 million in marketing expenses compared to 1Q21

due to the seasonality of investment in the last quarter and additional investments in digital media, TOTVS’ new

communication campaign and the Tech Meeting event; and (ii) the consolidation of RD Station in June 2021, where

Sales and Marketing expenses represented 29% of revenue. These increases were partially offset by the reduction in

the commissions line, due to the reduction in License Revenue in the period.

In the annual comparison, the growth of 190 basis points in the representativeness of this line is explained by the

impact that the pandemic generated on variable compensation, commissions and marketing investments in 2Q20, in

addition to the consolidation of Wealth Systems, Supplier, Tail and RD Station results.

General and Administrative Expenses and Provision for Contingencies

The General and Administrative (G&A) expenses, excluding the extraordinary impacts of expenses with M&A

transactions, represented 10% of Net Revenue, 90 basis points above the previous quarter, especially due the

consolidation of the RD Station results, where this line represents 15% of Net Revenue.

The Provision for Contingencies line continues with a lower number of new claims, and recorded in the quarter an

expense 47% lower than the previous quarter and below the historical average.

Other Net Operating Revenues (Expenses)

The Other Net Revenues (Expenses) line suffered in this quarter the extraordinary impact of: (i) R$8.7 million in

revenue from tax credits; (ii) R$0.8 million related to the review and update of earn-out amounts for M&A

transactions; and (iii) R$0.5 million from the sale of fixed assets.

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CONSOLIDATED RESULTS

EBITDA

In R$ thousand 2Q21 2Q20 ∆ 1Q21 ∆ 1H21 1H20 ∆

Net Revenue 763,375 627,399 21.7% 720,256 6.0% 1,483,631 1,228,817 20.7%

Consolidated Contribution Margin 400,213 313,702 27.6% 391,226 2.3% 791,439 622,250 27.2%




Sales and Marketing Expenses (138,345) (101,474) 36.3% (129,167) 7.1% (267,512) (221,297) 20.9%

Adjusted Adm. and Other Expenses (78,130) (74,891) 4.3% (72,870) 7.2% (150,999) (136,753) 10.4%

Adjusted EBITDA 183,738 137,337 33.8% 189,189 (2.9%) 372,928 264,200 41.2%

Adjusted EBITDA Margin 24.1% 21.9% 220 bp 26.3% -220 bp 25.1% 21.5% 360 bp

The Adjusted EBITDA Margin ended the quarter at 24.1%, 220 basis points above 2Q20, mainly driven by the

increase in Management Contribution Margin, witch was boosted by the increase in Recurring Revenue; and the

growth in Techfin Contribution Margin, coming from the growth in Revenue and Credit Production.

When compared to 1Q21, the 220 basis points reduction is explained by the reduction in Management Licenses

Revenue (explained by the corporate model seasonality) and the reduction in Techfin Contribution Margin due to the

increase in the Selic Rate and the Provision for Expected Credit Losses in the quarter, explained above.

Depreciation and Amortization Expenses


Depreciation (26,744) (24,952) 7.2% (26,103) 2.5% (52,847) (48,856) 8.2%

Amortization (33,026) (27,706) 19.2% (33,200) (0.5%) (66,226) (42,590) 55.5%

Depreciation and Amortization (59,770) (52,658) 13.5% (59,303) 0.8% (119,073) (91,446) 30.2%

The increase in Depreciation expenses, compared to 1Q21, is mainly associated with the consolidation of RD Stationresults. The year-over-year growth in Depreciation and Amortization expenses is essentially due to the beginning ofthe Amortization of intangible assets arising from the acquisitions of Wealth Systems, Supplier and Tail, as mentionedin previous quarters. It is worth noting that the Amortization of intangible assets arising from the acquisition of RDStation will start in 3Q21.

Financial Result


Financial Revenues 13,103 15,193 (13.8%) 8,424 55.5% 21,527 32,157 (33.1%)

Financial Expenses (25,672) (15,553) 65.1% (16,253) 58.0% (41,925) (26,315) 59.3%

Financial Result (12,569) (360) >999% (7,829) 60.5% (20,398) 5,842 (449.2%)

Financial Revenues grew 56% in 2Q21 compared to 1Q21, due to the increase in the average Interbank Deposit

Certificate (CDI) for the period. When compared to 2Q20, the reduction in this line is mainly linked to the reduction in

the average volume of cash invested, as a result of acquisitions made throughout 2020.

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The 58% increase in Financial Expenses in 2Q21 compared to 1Q21 is mainly associated with interests on the recent

issue of debentures, which occurred in May, and on the funding raised by Supplier in 2Q21. In the year-over-year

comparison, the adjustment to present value of earn-outs from the 2020 acquisitions is the main factor associated

with the growth of this line.

Income Tax and Social Contribution


EBT 114,573 84,319 35.9% 120,085 (4.6%) 234,658 178,192 31.7%

Taxes at combined rate (34%) (38,955) (28,668) 35.9% (40,829) (4.6%) (79,784) (60,585) 31.7%

Law 11,196/05 - R&D Incentive 5,421 5,119 5.9% 4,442 22.0% 9,863 7,442 32.5%

Interest on Equity 30 - - - - 30 - -

Effect of Different Taxation in Subsidiaries (2,841) (1,830) 55.2% (3,559) (20.2%) (6,400) (3,418) 87.2%

Management Bonus (439) (333) 31.8% (466) (5.8%) (905) (434) 108.5%

Government Subsidies 445 518 (14.1%) 781 (43.0%) 1,226 633 93.7%

Other 409 (795) (151.4%) 191 114.1% 600 (893) (167.2%)

Income Tax and Social Contribution (35,930) (25,989) 38.3% (39,440) (8.9%) (75,370) (57,255) 31.6%

Current Income Tax and Social Contribution (32,183) (29,913) 7.6% (52,748) (39.0%) (84,931) (38,210) 122.3%

Deferred Income Tax and Social Contribution (3,747) 3,924 (195.5%) 13,308 (128.2%) 9,561 (19,045) (150.2%)

% Current Effective Tax Rate 28.1% 35.5% -740 bp 43.9% -1580 bp 36.2% 21.4% 1480 bp

% Total Effective Tax Rate 31.4% 30.8% 60 bp 32.8% -140 bp 32.1% 32.1% 0 bp

The Effective Tax Rate was 31.4% in the quarter, 140 basis points below 1Q21, which is explained by the evolution of

R&D projects according to the tax incentive rules and by the reduction in the Effect of Subsidiaries with

Differentiated Taxes in the period. When compared to 2Q20, the increase of 60 basis points in the Total Effective Tax

Rate is explained by the increase in the Effect of Subsidiaries with Differentiated Taxes.

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EBITDA and Net Income Reconciliation


Net Income 78,643 57,993 35.6% 80,645 (2.5%) 159,288 119,501 33.3%

Net Margin 10.3% 9.2% 110 bp 11.2% -90 bp 10.7% 9.7% 100 bp

Depreciation and Amortization 59,770 52,658 13.5% 59,303 0.8% 119,073 91,446 30.2%

Financial Results + Equity Pickup 12,569 360 >999% 7,829 60.5% 20,398 (5,842) (449.2%)

Equity Pickup 564 - - - - 564 - -

Income Tax and Social Contribution 35,930 25,989 38.3% 39,440 (8.9%) 75,370 57,255 31.6%

Net Income (Loss) from Discontinued Op. - 337 (100.0%) - - - 1,436 (100.0%)

EBITDA 187,476 137,337 36.5% 187,217 0.1% 374,693 263,796 42.0%

EBITDA Margin 24.6% 21.9% 270 bp 26.0% -140 bp 25.3% 21.5% 380 bp

Extraordinary Items (3,738) - - 1,972 (289.5%) (1,765) 404 (537.3%)

Earn-out Adjustment at Fair Value (834) - - - - (834) - -

Expenses with M&A Transactions 5,814 - - 1,972 194.8% 7,786 404 >999%

Tax Credit (8,718) - - - - (8,718) - -

Adjusted EBITDA 183,738 137,337 33.8% 189,189 (2.9%) 372,928 264,200 41.2%

Adjusted EBITDA Margin 24.1% 21.9% 220 bp 26.3% -220 bp 25.1% 21.5% 360 bp

(*) EBITDA and Adjusted EBITDA are non-accounting measures (unaudited) prepared by the Company and consist of netincome for the year, plus income taxes, financial expenses net of financial income, discontinued operations and depreciationand amortization.

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A free translation of the original report in Portuguese, as filed with the Brazilian Securities Commission(CVM), prepared in accordance with the Technical Pronouncement CPC 21 (R1) - Interim Financial Reporting andthe international standard IAS 34 - Interim Financial Reporting, as issued by international Accounting StandardsBoard - IASB.

Report on review of the interim financial information

To the Board Members and Shareholders ofTOTVS S.A.São Paulo – SP

IntroductionWe have reviewed the accompanying individual and consolidated interim financial information of TOTVS S.A.("Company”), contained in the Quarterly Information – ITR Form for the quarter ended June 30, 2021,comprising the balance sheet as of June 30, 2021 and related statements of income, of comprehensiveincome for the three and six-month periods then ended, of changes in shareholders' equity and of cash flowsfor the six-month period then ended, including the explanatory notes.

The Company´s management is responsible for the preparation and fair presentation of these individual andconsolidated interim financial information in accordance with Technical Pronouncement CPC 21 (R1) - InterimStatement and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board -IASB, as well as for the presentation of this information in a manner consistent with the standards issued bythe Securities Commission, applicable to the preparation of the Quarterly Information - ITR. Our responsibilityis to express a conclusion on this interim financial information based on our review.

Scope of the reviewWe conducted our review in accordance with the Brazilian and international review standards for interiminformation (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor ofthe Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor ofthe Entity, respectively). A review is substantially less in scope than an audit conducted in accordance with theauditing standards and, consequently, does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on individual and consolidated interim financial informationBased on our review, nothing has come to our attention that causes us to believe that the individual andconsolidated interim financial information included in the quarterly information referred to above was notprepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, applicable to the preparationof the Quarterly Information - ITR, and presented in accordance with the standards issued by the BrazilianSecurities and Exchange Commission (CVM).

Other matters

Statements of added valueThe interim financial information referred to above includes the individual and consolidated of added value(DVA) for the six-month period ended June 30, 2021, prepared under responsibility of Company'smanagement, and presented as supplementary information for IAS 34 purposes. These statements weresubmitted to review procedures carried out jointly with the audit of Company’s quarterly information to form aconclusion whether these statements are reconciled with interim financial information and book records, asapplicable, and whether their forms and contents are in accordance with criteria defined in TechnicalPronouncement CPC 09 – Statement of Added Value. Based on our review, we are not aware of any otherevent that make us believe that these statements of added value were not prepared, in all material respects,in accordance with individual and consolidated interim financial information taken as a whole.

KPMG Auditores Independentes, uma sociedade simples brasileira efirma-membro da rede KPMG de firmas-membro independentes e afiliadas àKPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Auditores Independentes, a Brazilian entity and a memberfirm of the KPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity.

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Comparative informationThe consolidated financial statements of the Company for the year ended December 31, 2020, were auditedby another auditor who expressed an unmodified opinion on those consolidated financial statements onFebruary 08, 2021 and the consolidated statements of income, of comprehensive income for the three andsix-month period and of changes in shareholders' equity and of cash flows for the six-month period endedJune 30, 2020, were audited by another auditor who expressed an unmodified opinion on those consolidatedfinancial statements on August 03, 2020. The interim financial information referred to above includes theindividual and consolidated of added value (DVA) for the six-month period ended June 30, 2020, weresubmitted to review procedures by those auditors who were are not aware of any other event that make usbelieve that these statements of added value were not prepared, in all material respects, in accordance withindividual and consolidated interim financial information taken as a whole.

São Paulo, July 30, 2021

KPMG Auditores IndependentesCRC 2SP014428/O-6Original report in Portuguese signed byWagner PetelinAccountant CRC 1SP142133/O-7

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KPMG Auditores Independentes, uma sociedade simples brasileira efirma-membro da rede KPMG de firmas-membro independentes e afiliadas àKPMG International Cooperative (“KPMG International”), uma entidade suíça.

KPMG Auditores Independentes, a Brazilian entity and a memberfirm of the KPMG network of independent member firms affiliated with KPMGInternational Cooperative (“KPMG International”), a Swiss entity.


TOTVS S.A.Statement of financial position as of June 30, 2021 and December 31, 2020(In thousands of reais)

Individual Consolidated Individual ConsolidatedAssets Note 6/30/2021 12/31/2020 6/30/2021 12/31/2020 Liabilities and equity Note 6/30/2021 12/31/2020 6/30/2021 12/31/2020Current assets 737,060 883,338 3,175,682 2,831,973 Current liabilities 416,596 410,979 2,723,952 2,040,031Cash and cash equivalents 5 346,396 527,955 802,260 1,027,733 Labor liabilities 15 180,682 136,350 329,679 211,603Financial Investments 6 - - 288,095 179,308 Trade and other payables 79,071 79,205 107,722 99,305Escrow account 20 8,365 8,301 9,067 10,012 Taxes and contributions payable 16 42,998 40,023 78,420 74,558Trade receivables 7 280,829 267,801 1,922,045 1,497,229 Commissions payable 49,885 44,467 61,816 53,795Recoverable taxes 8 30,707 23,592 54,389 38,092 Dividends payable 1,040 57,687 1,040 57,687Other assets 11 70,763 55,689 99,826 79,599 Loans, financing and lease liabilities 17 41,081 37,651 155,331 146,806

Debentures 18 2,993 - 2,993 -

Noncurrent assets 4,194,597 2,433,974 4,427,517 2,314,433Accounts payable from acquisition ofsubsidiaries 20 8,454 8,389 160,230 44,781

208,635 188,240 422,768 360,333 Business partners payable 19 - - 432,463 328,817Escrow account 20 - - 34,388 1,116 Senior shares and mezzanine obligations 22 - - 1,322,987 1,011,087Trade receivables 7 50,322 57,327 60,881 64,012 Other liabilities 10,392 7,207 71,271 11,592Receivables from related parties 10 1,192 - - - Noncurrent liabilities 1,791,848 302,167 2,156,034 502,209Investments at fair value 4 - - 89,297 92,770 Loans, financing and lease liabilities 165,531 166,897 192,649 178,244Deferred tax assets 9 49,219 44,244 111,701 100,535 Debentures 1,494,684 - 1,494,684 -Judicial deposits 21 39,570 38,721 44,032 43,972 Provision for contingencies 10 110,087 108,106 125,914 125,818

Other assets 11 68,332 47,948 82,469 57,928Accounts payable from acquisition ofsubsidiaries 21 - - 269,699 163,419Deferred tax liabilities 20 - - 2,349 289

3,985,962 2,245,734 4,004,749 1,954,100 Taxes and contributions payable - - 3,385 3,977Investments 12 3,259,495 1,533,262 2,797 3,476 Other liabilities 21,546 27,164 67,354 30,462Property, plant and equipment 13 329,767 333,002 390,855 364,447 Shareholders' equity 23 2,723,213 2,604,166 2,723,213 2,604,166Intangible assets 14 396,700 379,470 3,611,097 1,586,177 Capital 1,519,412 1,382,509 1,519,412 1,382,509

Capital reserves and Treasury shares 761,455 746,287 761,455 746,287Profit Reserve 244,966 432,829 244,966 432,829Retained earnings 159,288 - 159,288 -Other comprehensive income 38,092 42,541 38,092 42,541

Total assets 4,931,657 3,317,312 7,603,199 5,146,406 Total shareholders’ equity and liabilities 4,931,657 3,317,312 7,603,199 5,146,406

See the accompanying notes to the individual and consolidated financial statements.

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(A free translation of the original in Portuguese)TOTVS S.A.Statements of profit or lossSix-month periods ended June 30, 2021 and 2020(In thousands of reais, except for earnings per share)

Individual ConsolidatedNote 2Q21 6/30/2021 2Q20 6/30/2020 2Q21 6/30/2021 2Q20 6/30/2020

Software revenue 466,869 926,694 424,960 859,620 703,150 1,368,468 600,735 1,202,153Credit products - - - - 60,225 115,163 26,664 26,664Net revenue from services andsales 28 466,869 926,694 424,960 859,620 763,375 1,483,631 627,399 1,228,817

Cost of software (140,765) (273,816) (129,543) (265,920) (202,587) (388,909) (173,577) (354,999)Cost of credit products - - - (22,456) (40,733) (9,557) (9,557)Gross profit 326,104 652,878 295,417 593,700 538,332 1,053,989 444,265 864,261

Operating income (expenses)Research and developmentexpenses (81,772) (159,822) (68,194) (139,424) (129,219) (246,782) (106,132) (212,021)Selling and marketing expenses (98,229) (195,622) (73,308) (166,098) (138,345) (267,512) (101,474) (221,297)General and administrative expenses (64,606) (122,389) (53,970) (106,961) (86,901) (163,794) (75,165) (137,946)Depreciation and amortization 13 and 14 (33,315) (66,951) (31,257) (61,825) (59,770) (119,073) (52,658) (91,446)Provision for expected credit losses (3,588) (6,436) (12,872) (16,476) (8,900) (15,768) (24,431) (29,990)Other operating income (expenses) 8,010 10,151 (71) 419 12,509 14,560 274 789Operating profit 52,604 111,809 55,745 103,335 127,706 255,620 84,679 172,350

Finance income 30 7,876 12,361 10,387 20,462 13,103 21,527 15,193 32,157Finance expenses 30 (16,822) (24,692) (12,152) (19,895) (25,672) (41,925) (15,553) (26,315)Equity pick-up 12 46,753 87,408 20,117 47,706 (564) (564) - -Profit before tax from continuingoperations 90,411 186,886 74,097 151,608 114,573 234,658 84,319 178,192

Income tax and social contribution -current (5,004) (32,573) (19,274) (19,274) (32,183) (84,931) (29,913) (38,210)Income tax and social contribution -deferred (6,764) 4,975 3,507 (11,397) (3,747) 9,561 3,924 (19,045)Total of Income tax and socialcontribution 9 (11,768) (27,598) (15,767) (30,671) (35,930) (75,370) (25,989) (57,255)

Profit for the year from continuingoperations 78,643 159,288 58,330 120,937 78,643 159,288 58,330 120,937Loss after tax for the year fromdiscontinued operations - - (337) (1,436) - - (337) (1,436)

Profit for the year 78,643 159,288 57,993 119,501 78,643 159,288 57,993 119,501

Attributable to:Equity holders of the parent 78,643 159,288 57,993 119,501 78,643 159,288 57,993 119,501Non-controlling interests - - - - - -

Earnings per shareBasic earnings per thousand shares(in Reais) 0.13846 0.28045 0.10193 0.21003 0.13846 0.28045 0.10193 0.21003Diluted earnings per thousand shares(in Reais) 0.13672 0.27694 0.10082 0.20776 0.13672 0.27694 0.10082 0.20776


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(A free translation of the original in Portuguese)TOTVS S.A.Statements of comprehensive incomeSix-month periods ended June 30, 2021 and 2020(In thousands of Reais )

Individual Consolidated2Q21 6/30/2021 2Q20 6/30/2020 2Q21 6/30/2021 2Q20 6/30/2020

Profit for the year 78,643 159,288 57,993 119,501 78,643 159,288 57,993 119,501Exchange differences on translation of foreign operations (15,211) (4,449) 5,377 28,422 (15,211) (4,449) 5,377 28,422Other comprehensive income (15,211) (4,449) 5,377 28,422 (15,211) (4,449) 5,377 28,422Total comprehensive income for the period, net of tax 63,432 154,839 63,370 147,923 63,432 154,839 63,370 147,923

Equity holders of the parent 63,432 154,839 63,370 147,923 63,432 154,839 63,370 147,923

See the accompanying notes to the individual and consolidated financial statements

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TOTVS S.A.Statements of changes in shareholders’ equityPeriods ended June 30, 2021 and June 30, 2020(In thousands of reais)

CapitalCapital reserves,

share optionsand treasury shares

ProfitReserve

Retainedearnings

Othercomprehensive

income

TotalEquity

Noncontrollinginterests

Totalshareholders’

equityAs at December 31, 2019 1,382,509 813,448 259,206 - 22,051 2,477,214 1,195 2,478,409Capital transactions with shareholders - (82,909) (24,817) - - (107,726) (1,195) (108,921)Share-based compensation plan - 8,902 - - - 8,902 - 8,902Disposal of shares on a share-based payment - 1,729 - - - 1,729 - 1,729Purchases of treasury shares - (94,735) - - - (94,735) - (94,735)Prior-year dividends - - (24,817) - - (24,817) - (24,817)Acquisitions of non-controlling interests - 1,195 - - - 1,195 (1,195) -Total comprehensive income - - - 119,501 28,422 147,923 - 147,923Profit for the year - - - 119,501 - 119,501 - 119,501Cumulative adjustment for currency exchange - - - - 28,422 28,422 - 28,422As at June 30, 2020 1,382,509 730,539 234,389 119,501 50,473 2,517,411 - 2,517,411

CapitalCapital reserves,

share optionsand treasury shares

ProfitReserve

Retainedearnings

Othercomprehensive

income

TotalEquity

Noncontrollinginterests

Totalshareholders’

equityAs at December 31, 2020 1,382,509 746,287 432,829 - 42,541 2,604,166 - 2,604,166Capital transactions with shareholders 136,903 15,168 (187,863) - - (35,792) - (35,792)Capital increase 136,903 - (136,903) - - - - -Share-based compensation plan - 15,168 - - - 15,168 - 15,168Prior-year dividends - - (50,960) - - (50,960) - (50,960)Total comprehensive income - - - 159,288 (4,449) 154,839 - 154,839Profit for the year - - - 159,288 - 159,288 - 159,288Cumulative adjustment for currency exchange - - - (4,449) (4,449) - (4,449)As at June 30, 2021 1,519,412 761,455 244,966 159,288 38,092 2,723,213 - 2,723,213


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(A free translation of the original in Portuguese)TOTVS S.A.Statements of cash flowsSix-month periods ended June 30, 2021 and 2020(In thousands of Reais)

Individual ConsolidatedNote 6/30/2021 6/30/2020 6/30/2021 6/30/2020

Cash flow from operating activitiesProfit before tax from continuing operations 186,886 151,608 234,658 178,192Adjustments to reconcile profit before tax to net cash flows:Depreciation and amortization 13 and 14 66,951 61,825 119,073 91,446Share-based payments expense 25 15,168 8,902 15,168 8,902Losses on disposal of fixed assets and investments 512 (1,298) 16 (1,431)Allowance for expected credit losses 7 6,436 16,476 15,768 29,990Equity pickup 12 (87,408) (47,706) 564 -Provision for contingencies, net of reversals 21 13,686 22,225 13,921 29,676Reversal of provision net of additional provisions on other obligations andothers - (786) (834) (720)Senior shares and mezzanine remuneration (FIDC) - - 27,273 12,823Interest and monetary variations and exchange variations differences, net 18,597 13,066 30,843 14,348Changes in operating assets and liabilitiesTrade receivables (9,005) (50,595) (409,840) (24,161)Recoverable taxes (7,062) 13,411 (8,329) 15,731Judicial deposits 36 5,006 825 15,710Other assets (36,838) (25,990) (19,284) (36,967)Labor liabilities 44,179 10,536 48,694 23,270Trade and other payables (223) 3,395 (31,965) 5,942Commissions payable 5,418 272 5,369 246Taxes and contributions payable (4,580) 15,506 (16,973) 23,998Business partners payable - - 103,646 (16,358)Other liabilities (20,501) (19,535) (19,318) (32,264)Cash flow provided by operations 192,252 176,318 109,275 338,373Interest paid (5,211) (7,710) (6,811) (9,469)Income tax and social contributions paid (26,055) (3,695) (68,565) (20,996)Net cash from operating activities 160,986 164,913 33,889 307,908Cash flow from investing activitiesCapital increase in subsidiaries (1,698,812) (407,795) - -Dividends received 53,902 - - -Purchases of property, plant and equipment 13 (20,875) (15,798) (23,971) (16,844)Purchases of intangible assets 14 (23,088) (17,752) (23,706) (18,717)Merged companies 730 - - -Franchises loan (21,162) - (21,162) -Acquisitions of subsidiaries, net of cash obtained in the acquisitions - - (1,705,031) (321,895)Payments from acquisitions of subsidiaries - (7,121) (25,453) (7,121)Proceeds from sale of subsidiaries, net of cash 5,387 5,000 5,387 11,137Proceeds from sale of property, plant and equipment 1,210 1,509 1,385 1,697Financial investments - - (106,089) (74,343)Net cash used in investing activities (1,702,708) (441,957) (1,898,640) (426,086)Cash flow from financing activitiesPayment of principal portion of loans and financing - - (828) (163,937)Payment of principal portion of lease liabilities (20,407) (24,031) (23,593) (27,506)Proceeds from debentures, loans and financing 1,489,369 196,924 1,489,369 196,924Application (redemption) of senior and mezzanine shares - - 281,927 -Receivables from related companies (1,192) (250) - -Dividends and interest on equity paid (107,607) (68,526) (107,607) (68,526)Treasury shares, net - (93,006) - (93,006)Net cash used in financing activities 1,360,163 11,111 1,639,268 (156,051)

Increase (decrease) in cash and cash equivalents (181,559) (265,933) (225,473) (274,229)Cash and cash equivalents at beginning of year 527,955 1,106,888 1,027,733 1,538,156Cash and cash equivalents at the end of the year 346,396 840,955 802,260 1,263,927


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TOTVS S.A.Statements of Value AddedSix-month periods ended June 30, 2021 and 2020(In thousands of Reais)

Individual Consolidated6/30/2021 6/30/2020 6/30/2021 6/30/2020

1 – REVENUES 1,051,371 951,703 1,656,575 1,346,4661.1 Sales of goods. products and services 1,045,682 967,965 1,657,788 1,375,9701.2 Other revenue 12,125 214 14,555 4861.3 Provision for expected credit losses – recording (6,436) (16,476) (15,768) (29,990)

2 - RAW MATERIALS ACQUIRED FROM THIRD-PARTIES (includes ICMS andIPI taxes) (311,805) (308,682) (438,864) (390,594)

2.1 Cost of goods and services sold (56,096) (49,822) (105,120) (65,323)2.2 Materials. energy. outsourced services and other (255,709) (257,424) (333,744) (323,835)2.3 Results from discontinued operations - (1,436) - (1,436)

3 - GROSS VALUE ADDED (1-2) 739,566 643,021 1,217,711 955,872

4 - DEPRECIATION AND AMORTIZATION (66,951) (61,825) (119,073) (91,446)

5 - NET VALUE ADDED PRODUCED BY THE ENTITY (3+4) 672,615 581,196 1,098,638 864,426

6 - VALUE ADDED RECEIVED THROUGH TRANSFERS 99,769 68,168 20,963 32,1576.1 Equity pick-up 87,408 47,706 (564) -6.2 Finance income 12,361 20,462 21,527 32,157

7 - TOTAL VALUE ADDED TO DISTRIBUTE (5+6) 772,384 649,364 1,119,601 896,583

8 - VALUE ADDED DISTRIBUTION 772,384 649,364 1,119,601 896,5838.1 Personnel 422,135 355,385 631,903 519,1028.1.1 Direct Compensation 355,004 291,029 531,926 426,2198.1.2 Benefits 42,445 41,830 63,740 61,3308.1.3 FGTS (Unemployment fund) 24,686 22,526 36,237 31,5538.2 Taxes and contributions 165,493 154,128 285,284 230,5748.2.1 Federal 137,315 128,329 243,022 194,0318.2.2 State (2) 2 1,033 8028.2.3 Local 28,180 25,797 41,229 35,7418.3 Interest and rent 25,468 20,350 43,126 27,4068.3.1 Interest 24,692 19,895 41,925 26,3158.3.2 Rents 776 455 1,201 1,0918.4 Equity remuneration 159,288 119,501 159,288 119,5018.4.3 Retained profit / loss for the year 159,288 119,501 159,288 119,501


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TOTVS S.A.Notes to the interim financial statements(In thousands of Reais, unless otherwise stated)

1. The Company and its operations

A. General Information

TOTVS S.A. (“TOTVS”, “Company” or “Individual”) is a publicly held corporation headquartered atAv. Braz Leme, 1000, in the city and state of São Paulo, whose shares are traded on the NovoMercado of B3 S.A. – Brasil, Bolsa, Balcão (“B3”).

B. Operations

The Company’s business purpose is to provide business solutions for companies of all sizes,through the development and sale of management software, productivity and collaborationplatforms, digital marketing as well as the provision of implementation, consulting, advisory,maintenance services, e-commerce and mobility. The solutions developed by the Company and itssubsidiaries are segmented by the diverse economy industry, resulting in greater importance ofthese solutions for our clients’ business.

The Company, through its subsidiary Supplier Participações S.A. (“Supplier”), provides financialservices, issuance and credit card management business, including credit analysis andintermediation of financing requests in its businesses. Supplier holds subordinated quotas of asecuritization fund known as Fundo de Investimento em Direitos Creditórios (“Supplier FIDC”),which purchases, sales and securitizes own or third-party credit rights. The investment in FIDC hasbeen included in Company interim consolidated financial information.

C. Impacts of the Covid-19 pandemic

The Company keeps monitoring the impacts of the COVID-19 pandemic and has been taking thesame preventive and mitigating measures adopted in 2020, as mentioned in the note 1.(c) of thefinancial statements for the year ended December 31, 2020, in line with the guidelines set forth byhealth authorities regarding the safety of its employees (TOTVERS) and the continuity of itsoperations.

It is important to mention that the Company did not reduce wages and the working hours of itsemployees during the period, or promote headcount reductions outside the normal course of itsoperations.

Impact analyses on interim financial information – individual and consolidated

In view of the current uncertain economic scenario, caused by the Covid-19 pandemic and incompliance with Official Letters CVM/SNC/SEP/No.02/2020 and No.03/2020, the Companyreviewed the main accounting estimates used in the explanatory notes, as follows:

(i) Assessment of the allowance for expected credit losses: The Company assesses thevariables that make up the methodology for measuring estimated losses, through theprojected rolling of each portfolio range, capturing the estimated reflexes in default and creditrecovery for the following months. The Company did not observe any significant changes inrelation to the Financial Statements for the year ended December 31, 2020. It´s important tomention that Management continues monitoring the economic scenario and assessing anypossible impacts on the measurement of estimated losses.

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(ii) Impairment testing of intangible assets with an indefinite useful live: The Companyassessed the indicators and assumptions regarding recoverability of its assets and didn´tidentify any relevant change of impairment testing of financial statements for the year endedDecember 31, 2020.

(iii) Recoverability of deferred taxes: Recoverability of deferred tax assets is reviewed annuallyor when the availability of future taxable profits for the recovery of the asset, in total or in part,is not probable. There were no relevant indications that would alter Management'sassessment of financial statements for the year ended December 31, 2020.

In addition to the items highlighted above, the Company has been closely monitoring liquidity andcredit risks as mentioned in note 4.6.

2. Basis of preparation and presentation of the interim financial information

2.1. Statement of compliance

The individual and consolidated interim financial information was prepared and is presented inaccordance with the accounting practices adopted in Brazil, which comprise the rules issued by theBrazilian Securities and Exchange Commission (CVM), and Brazil´s Financial AccountingStandards Board (CPC) pronouncements, guidance and interpretations, which are in conformity withthe standards and procedures of the International Financial Reporting Standards (IFRS), issued bythe International Accounting Standards Board (IASB). All significant information in the individual andconsolidated interim financial information, and solely such information, is disclosed and correspondsto that used by Company management.

2.2. Basis of presentation

All amounts presented in this interim financial information are expressed in thousands of reais,unless otherwise indicated.

TOTVS’s individual and consolidated Interim Financial Information was approved at the Board ofDirectors’ Meeting held on July 30, 2021, after a recommendation by the Audit Committee at ameeting held on July 27, 2021.

Significant accounting policies adopted in preparing this interim financial information have beenconsistently applied to the years presented.

Accounting judgments, estimates and assumptions are continually evaluated and are based onhistorical experience and other factors, including expectations of future events, consideredreasonable under the circumstances, and are consistent with the information disclosed in note 3 ofthe financial statements of December 31, 2020.

This interim financial information does not include all the requirements for annual or completefinancial statements, and therefore should be read together with the Company’s complete financialstatements for the year ended December 31, 2020.

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2.3. Basis of preparation

The individual and consolidated Interim financial information was prepared using historical cost asbase value, except for the valuation of certain assets and liabilities, such as business combinationsand financial instruments, which were measured at fair value.

I. Individual and consolidated interim financial information

The individual and consolidated interim financial information was prepared in accordance with CPC21 ( R1) and IAS 34, which are applicable to the preparation of interim financial information, and in amanner consistent with accounting practices adopted in Brazil, including the standards issued bythe CVM and pronouncements of the Accounting Pronouncements Committee (CPC) and inaccordance with the IFRS issued by the IASB.

II. Changes in accounting policies and disclosures

There are no new standards, amendments and interpretations of standards issued as of January1,2021 that, in Management’s opinion, may have a significant impact on P&L or equity disclosed bythe Company.

2.4. Consolidation basis

The consolidated interim financial information includes the operations of the Company and thefollowing subsidiaries and associates. The percentages of the interests held by the Company at thestatement of financial position date are summarized below:

% Interest

Corporate Names Head office Interest Main activity 6/30/2021 12/31/2020

Soluções em Software e Serviços TTS Ltda. ("TTS") BRA Direct Software operation 100% 100%TOTVS Tecnologia em Software de Gestão Ltda.("TOTVS Tecnologia") BRA Direct Software operation 100% 100%

TOTVS Hospitality Ltda. ("TOTVS Hospitality") BRA Direct Software operation 74% 74%

VT Comércio Digital S.A. ("VT Digital") BRA Direct Software operation 50% 50%

TOTVS Argentina S.A. ("TOTVS Argentina") ARG Direct Software operation 100% 100%

TOTVS México S.A. ("TOTVS México") MEX Direct Software operation 100% 100%

TOTVS Incorporation ("TOTVS Inc.") EUA Direct Software operation 100% 100%TOTVS Large Enterprise Tecnologia S.A. ("TOTVSLarge") BRA Direct Software operation 100% 100%

TFS Soluções em software Ltda. ("Dimensa") BRA Direct Software operation 100% 100%

CM Soluciones – Argentina ("CMNet Argentina") ARG Direct Software operation 100% 100%TOTVS Serviços de Desenvolvimento e Consultoriaem Tecnologia da Informação Ltda. ("Eleve") BRA Direct Software operation 100% 100%

Katrina Participações S.A. ("Katrina") BRA Direct Software operation 100% 100%

Neolog Consultoria e Sistemas S.A. ("Neolog") (i) BRA Direct Software operation - 100%

Datasul S.A. de CV. ("Datasul México") (ii) MEX Direct Software operation 100% 100%

TOTVS Corporation ("TOTVS Corporation") (ii) BVI Direct Software operation 100% 100%

Datasul Argentina S.A. ("Datasul Argentina") (ii) ARG Direct Software operation 100% 100%

RD Gestão e Sistemas S.A. (“RD Station”) (iii) BRA Indirect Software operation 92% -

TOTVS Reservas Ltda. ("TOTVS Reservas") BRA Indirect Software operation 100% 100%

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CMNet Participações S.A. ("CMNet Participações") BRA Indirect Holding - Participation inother companies 100% 100%

TOTVS Hospitality Techonology Portugal Lda.("CMNet Portugal") PRT Indirect Software operation 100% 100%

CM Soluciones – Chile ("CMNet Chile") CHL Indirect Software operation 100% 100%

RJ Participações S.A. ("RJ Participações") BRA Indirect Holding - Participation inother companies 100% 100%

R.J. Consultores en Sistemas de Información S.C.("RJ México") MEX Indirect Software operation 100% 100%

R.J. Consultores e Informática Ltda. ("RJConsultores") BRA Indirect Software operation 100% 100%

Consinco S.A. ("Consinco") BRA Indirect Software operation 100% 100%

Wealth Systems Informática Ltda. ("WS") BRA Indirect Software operation 100% 100%

Supplier Participações S.A. ("Supplier") BRA Indirect Holding - Participation inother companies 89% 89%

Supplier Administradora de Cartão de Cartão deCrédito S.A. ("Supplier Administradora") BRA Indirect Financial Services and

Credit Operations 89% 89%

Tail Target Tecnologia de Informação Ltda. ("Tail") BRA Indirect Software operation 100% 100%

National Computer Corporation ("NCC") RUS Indirect(Associate) Software operation 19% 19%

TOTVS Hospitality Ltda. ("TOTVS Hospitality") BRA Indirect Software operation 26% 26%Supplier Investimentos Ltda. ("SupplierInvestimentos") (i) BRA Indirect Financial Services and

Credit Operations - 100%

DTS Consulting Partner, SA de CV ("Partner") (ii) MEX Indirect Software operation 100% 100%

Bematech Ásia Co.Ltd. ("Bematech Ásia") (ii) TWN Indirect Software operation 100% 100%

Bematech Argentina S.A. ("Bematech Argentina") (ii) ARG Indirect Software operation 100% 100%

CMNet España ("CMNet Espanha") (iv) ESP Indirect Software operation - 100%Cartão de compra Supplier Fundo de Investimentoem Direitos Creditórios ("Supplier FIDC") (v) BRA Indirect Financial Services and

Credit Operations - -

(i) Incorporated companies as mentioned in note 3.2.(ii) Dormant companies that will be closed.(iii) Company acquired in 2021 as mentioned in note 3.1.(iv) Company discontinued in 2021.(v) The consolidated Interim financial information includes the Supplier FIDC, since the Company acquired subordinated

quotas, which maintain most of the Fund’s risk and rewards.

All balances and transactions between subsidiaries were eliminated in the consolidated financialstatement.

Comparing the consolidated profit or loss between 2021 and 2020, the acquisition dates of eachsubsidiary must be considered. Thus, the interim financial information as of June 30, 2020 does notinclude the profit or loss of subsidiaries Consinco, Wealth Systems, Supplier, Tail and RD, whichwere included in the consolidated financial statements as from the date of their acquisition.

Investments in associates are accounted for under the equity method and are initially recognized atcost.

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3. Corporate restructuring

The Company's acquisitions reinforce the software strategy to develop an ecosystem representedby three dimensions: (i) Management - ERP, HR and vertical solutions; (ii) Techfin - B2B credit,services and payments; and (iii) Business Performance - sales lead and marketing.

3.1 Business combinations

A. RD Station acquisition

On March 9, 2021, the Company entered into a share and purchase agreement for the acquisition ofshares corresponding to 92% of the capital stock of RD Gestão e Sistemas S.A. (“RD”), through itssubsidiary TOTVS Large, for the amount of R$1,861 million, subject to adjustments, to be paid atthe closing of the transaction. RD Station is a leader in the digital marketing automation softwaremarket and is part of the Company's Business Performance strategy.

The closing of this transaction depended on the approval of the Brazilian competition authorities(CADE), which took place on April 14, 2021 and on the verification of other usual conditions for thistype of business. The transaction was completed on May 31, 2021.

Additionally, the transaction also provides for put and call options of the remaining shares of thecapital of RD that can be exercised between April and June of 2024. The exercise price of theoptions will be measured based on multiples applied by RD's performance on December 31, 2023.Considering that the put and call options of additional interests issued in favor of non-controllinginterest was agreed upon in conjunction with the business combination, the fair value of the put andcall option was recognized and recorded under “Accounts payable from acquisition of subsidiaries”.

Below is a summary of the fair value at the acquisition date of the transferred consideration.

In thousands of reais NoteCash payment 1,829,713Amount withheld 20 34,228Contingent consideration 20 205,554Total of consideration 2,069,495

Acquisition Cash Flow AnalysisCash payment 1,829,713Amount withheld 34,228Net cash acquired from the subsidiary 158,910Acquisition net cash flow 1,705,031

B. Tail Target acquisition

On December 19, 2020, the Company through its subsidiary TOTVS Large, acquired 100% of thecapital stock of Tail Target Tecnologia de Informação Ltda, which provide of a data intelligenceplatform that supply insights to customers through real time monitoring of the behavior of a wideaudience on the internet in order to optimize its customers ‘sales.

The Tail purchase price was R$32,000, of which payments being distributed as follows: (i) R$ 7,800was paid in cash; (ii) R$3,506 referring to installments retained to comply with conditions

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established in the contract after the price adjustment; and (iii) R$ 20,000 to be paid upon reachingthe targets established for Tail related to the years 2021 and 2022, whose fair value on theacquisition date was R$ 11,600.

C. Identifiable intangible assets acquired and Goodwill

The following is the information related to identified assets acquired and preliminary liabilitiesassumed at fair value, goodwill and cost of the interest held that affected the consolidated financialstatements position as at June 30, 2021:

Preliminary fair value Tail RD TOTALAt acquisitions date 12/19/2020 05/31/2021

Current assets 2,735 202,809 205,544Cash and cash equivalents 679 158,910 159,589Trade receivable 1,836 27,613 29,449Other current assets 220 16,286 16,506

Noncurrent assets 11,458 319,771 331,229Deferred tax 259 - 259Property, plant and equipment 1,384 33,396 34,780Software 5,917 188,522 194,439Client portfolio 1,395 38,920 40,315Brand - 44,417 44,417Non-compete 2,503 14,516 17,019

Current liabilities 2,970 123,925 126,895Labor liabilities 586 19,888 20,474Other liabilities 2,384 104,037 106,421

Noncurrent liabilities 1,433 110,745 112,178Net assets and liabilities 9,790 287,910 297,700

Cash payment 7,800 1,829,713 1,837,513Long-term portion (i) 15,106 239,782 254,888

Goodwill 13,116 1,781,585 1,794,701

(i) Long-term portions were recorded at present value at acquisition date.

The assets acquired and liabilities assumed at fair value presented above are preliminary. So, if newinformation obtained within a period of one year from the acquisition date about facts andcircumstances that existed on the acquisition date and indicate adjustments to these amounts, orany provision that existed at the acquisition date, the acquisition accounting will be revised.

The goodwill of R$1,794,701 comprises the value of future economic benefits of synergies arisingfrom the acquisition and are allocated to the Business Performance segment.

Contingent considerations were recorded at fair value on the acquisition date and are presented innote 20.

The acquired companies were included in the Business Performance segment in line with theTOTVS group's strategy and contributed with a net consolidated revenue of R$26,054 and net profitof R$2,901 for the six month ended June 30, 2021, after each acquisition date mentioned above. Ifthe combination had taken place at the beginning of the year, consolidated net revenue would havebeen R$108,432 and net losses would have been R$76,419.

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The transaction cost involving the acquisitions of these companies in 2021 was R$7,593,recognized in P&L as general and administrative expenses.

3.2 Merged companies

For the six months period ended June 30, 2021, the Company and its subsidiaries incorporated thenet assets at book value as follows:

Financial Position SupplierInvestimentos Neolog

Date base 10/31/2020 01/31/2021

Current assets 757 5,237Cash and cash equivalents 17 1,462Trade receivable - 3,643Other current assets 740 132

Noncurrent assets 24,230 587Other non-current assets 24,230 60Property, plant and equipment - 496Intangible assets - 31

Total assets 24,987 5,824

Current and noncurrent liabilities - 3,325Merged net assets 24,987 2,499

On January 1,2021, subsidiary Supplier Investimentos Ltda. was merged with TOTVS Tecnologiaem Software Ltda with net assets amounting to R$24,987. The net assets were valued by expertswho issued a valuation report on October 31, 2020 and any changes in the net assets after the basedate of the valuation report until the effective merger date were absorbed by TOTVS Tecnologia.

On May 1, 2021, subsidiary Neolog was merged with TOTVS with net assets amounting to R$2,499.The net assets were valued by experts who issued a valuation report on January 31, 2021 and anychanges in the net assets after the base date of the valuation report until the effective merger datewere absorbed by TOTVS.

4 Financial instruments and sensitivity analysis of financial assets andliabilities

The Company and its subsidiaries evaluated their financial assets and liabilities based on marketvalues using the information available and the appropriate valuation methodologies.

4.1 Financial instruments by category

The table below compares the financial instruments of the Company and its subsidiaries by class,as presented in the financial statements:

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Fair Value throughprofit or loss Amortized cost

6/30/2021 12/31/2020 6/30/2021 12/31/2020Cash and cash equivalents (Note 5) 626,496 1,009,169 175,764 18,564Financial investments (Note 6) 288,095 179,308 - -Escrow account (Note 20) - - 43,455 11,128Trade receivables (Note 7) - - 1,982,926 1,561,241Franchises loan (Note 11) - - 37,943 16,610Receivables for investments sold (Note 11) - - 13,669 19,348Investments at fair value (Note 4.3) 89,297 92,770 - -Financial Instruments receivable 1,003,888 1,281,247 2,253,757 1,626,891Loans, financing and lease liabilities (Note 17) - - 347,980 325,050Debêntures (Note 18) - - 1,497,677 -Trade and other payables (i) - - 252,383 285,345Business partners payable (Note 19) - - 432,463 328,817Accounts payable from acquisition of subsidiaries (Note 20) 375,153 182,740 54,776 25,460Senior shares and mezzanine obligations (Note 22) - - 1,322,987 1,011,087Other liabilities - - 138,625 44,026Financial liabilities 375,153 182,740 4,046,891 2,019,785

(i) Includes “Trade and other payables”, “Taxes and contributions payable”, “Commissions payable” and “ dividendspayable”.

The fair value of financial assets and liabilities is included in the amount for which the instrumentcould be exchanged in a transaction between willing parties rather than in a forced sale orsettlement. The methods and assumptions below were used to estimate fair value:

● Escrow accounts, trade receivables, other accounts receivable, trade accounts payable andother short-term liabilities approximate their respective carrying amounts mainly due to theshort-term maturities of these instruments.

● Financial assets at fair value not traded in an active market are estimated using a valuationtechnique, such as discounted cash flow or multiple revenues, considering thereasonableness of the range of values indicated thereby.

● Loans, financing and lease liabilities and debentures are initially recognized at fair value, netof costs incurred in the transaction and are subsequently stated at amortized cost.

● Accounts payable from acquisition of subsidiaries, includes contingent payments relating tobusiness combinations and their fair value is estimated based on the performance ofoperations applied to the multiples defined in the contract.

● Liabilities for obligations with senior and mezzanine shares refer to other Supplier FIDCshareholders and are stated at amortized cost.

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4.2 Measurement of fair value

The table below presents the carrying amount of the consolidated assets and liabilities as at June30, 2021 and December 31, 2020:

6/30/2021 12/31/2020Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Financial AssetsFinancial investments (Note 5) - 626,496 - - 1,009,169 -Financial investments - not redeemable in90 days (Note 6) - 288,095 - - 179,308 -

Investments at fair value (Note 4.3) - - 89,297 - - 92,770Financial LiabilitiesLoans, financing and lease liabilities (Note17) - 347,980 - - 325,050 -

Debêntures (Note 18) - 1,497,677 - - - -Accounts payable from acquisition ofsubsidiaries (Note 20) - 54,776 375,153 - 25,460 182,740

Senior shares and mezzanine obligations(Note 22) - 1,322,987 - - 1,011,087 -

The amounts recognized in the statement of financial position regarding trade receivables, escrowaccount, labor liabilities, trade and other accounts payable, dividends payable at amortized cost, donot significantly differ from their fair values, thus, they are not presented in the table above.

There were no transfers between levels 1, 2 and 3 in the six-month period ended in June 30, 2021.

4.3 Financial assets

TOTVS´ investments in startups are made within a medium-term strategy, with output planned forwhen the expected financial returns are achieved, and are recognized as financial instruments.

These investments are private companies which do not have a quoted market price in an activemarket. The fair value of these investments is measured by commonly used market valuationtechniques, such as discounted cash flows or multiples, considering the reasonableness of theestimated range of values. The fair value measurement is the mid-point within the range that bestrepresents the respective fair value. Additionally, these investments include an investment inGoodData in preferred shares, subject to preemptive right of subscription.

These investments as of June 30, 2021 was R$89,297 (R$92,770 as of December 31, 2020).

4.4 Sensitivity analysis of financial assets and liabilities

The financial instruments of Company and its subsidiaries are represented by cash and cashequivalents, accounts receivable, accounts payable, loans and financing and debentures, which arerecorded at cost plus income or charges incurred or at fair value, where applicable, as at June 30,2021 and December 31, 2020.

The main risks related to the Company’s operations are linked to the variation of Brazilian InterbankDeposit Floating Rate (CDI).

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a) Financial assets

In order to check the sensitivity of the index in the short-term investments to which the Companywas exposed as of June 30, 2021, three different scenarios were defined. Based on projectionsdisclosed by financial institutions, the average rate for CDI is 4.15% for 2021, which was defined asa probable scenario (scenario I). Based thereon, variations of 25% (scenario II) and 50% (scenarioIII) were calculated.

For each of these scenarios the “gross finance income” was estimated, with taxes on investmentreturns not included. The reference date for the portfolio was June 30, 2021, with a one-yearprojection to check the sensitivity of CDI to each scenario.

Operation Balances at6/30/2021 Risk Probable

Scenario Scenario (II) Scenario (III)

Reduction

Loans and financing 914,591 CDI 4.15% 3.11% 2.08%

Estimated finance cost 37,956 28,444 19,023

b) Financial liabilities

To check the sensitivity of the indexes to which the Company is exposed when estimating the debtsas at June 30, 2021, three different scenarios were created. Based on CDI rates in force at June 30,2021, the most probable scenario (scenario I) was determined for 2021 and, from this, variations of25% (scenario II) and 50% (scenario III) were calculated.

For each scenario, the gross financial expense was calculated, without the related tax impacts andthe maturity flow of each contract scheduled for 2021. The reference date used for the debts wasJune 30, 2021, projecting the rates for one year and checking their sensitivity in each scenario.

Operation Balances at6/30/2021 Risk Probable

Scenario Scenario (II) Scenario (III)

IncreaseCDI 4.15% 5.19% 6.23%

Loans and financing (Note 17) (i) 102,988 4,274 5,345 6,416Debêntures (Note 18) 1,497,677 62,154 77,729 93,305Estimated finance cost 66,428 83,074 99,721

(i) Leases are not include

4.5 Changes in liabilities from financing activities

Liabilities arising from financing activities are liabilities for which cash flows were or will be classifiedin the statement of cash flows as cash flows from financing activities.

The following is a breakdown of liabilities arising from financing activities for the Six-month periodended in June 30, 2021:

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Cash flow fromfinancing activities Non-cash items

12/31/2020 Principal Interestpaid

Addition/(Write off)

Interestincurred Others (i) 6/30/2021

Loans and financing (Note 17) (ii) 101,525 (828) (10) - 2,301 - 102,988Leases (Note 17) 223,525 (23,593) (6,801) 46,792 5,069 - 244,992Debêntures (Note 18) - 1,489,369 - - 7,560 748 1,497,677Dividends payable 57,687 (107,607) - - - 50,960 1,040Senior shares and mezzanineobligations (Note 22) 1,011,087 281,927 - - 27,273 2,700 1,322,987

Total 1,393,824 1,639,268 (6,811) 46,792 42,203 54,408 3,169,684

(i) Refers to advance withholding income tax on senior shares and mezzanine remuneration of Supplier FIDC andproposed dividends for 2020.

(ii) Corresponds to the sum of "Working capital" and "Guaranteed accounts and others", detailed in note 17.

4.6 Financial risk management

The main financial risks to which the Company and its subsidiaries are exposed when conductingtheir activities are:

a. Liquidity Risk

The Company’s and its subsidiaries’ liquidity and cash flow are monitored daily by Companymanagement areas to ensure the generation of cash from operating activities and early fundraising,whenever necessary. The Group does not expect to have a significant impact on liquidity and cashflow resulting from the Covid-19 pandemic and reinforces its commitment to resource managementin order to maintain its schedule of commitments, not giving rise to liquidity risks for the Companyand its subsidiaries.

Typically, the Company ensures that it has sufficient cash at sight to cover expected operatingexpenses, including the compliance with financial obligations; which excludes the potential impact ofextreme situations that cannot be reasonably foreseen, such as naturaldisasters. The Company has access to a sufficient variety of funding sources.

b. Credit risk

Credit risk is the risk that the counterparty in a deal will not fulfill an obligation set forth in afinance instrument or contract with a customer, which would cause a financial loss.

Regarding the credit risk associated with financial institutions, the Company and itssubsidiaries distribute this exposure among financial institutions, Financial investments must bemade in institutions whose risk rating is equal to or greater than the Sovereign Risk (Brazil Risk)assigned by the rating agencies Standard & Poor’s, Moody’s or Fitch. The amount allocated to eachinstitution, except federal government bonds, cannot exceed 30% of the total balances in currentaccounts plus financial investments, and also not correspond more than 5% of the equity of thefinancial institution.

The exposure of the Company to credit risk is also influenced also by the individualcharacteristics of each customer. The Company established a credit policy whereby every newcustomer has its credit capacity individually analyzed prior to the standard payment terms andconditions.

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For the trade receivables from software operation, the Company has a very diversifiedcustomer portfolio with low concentration level. The Company establishes an estimate of theprovision for losses that represents its estimate of losses incurred in relation to trade receivable.The main component of this allowance is specific and related to significant individual risks.

The risk assessment structure of the Supplier's credit product portfolio is based on statisticalmethodologies of Application and Behavior Scoring, in addition to the use of risk mitigatinginstruments, such as credit insurance and intervention. In addition, the Supplier subsidiary seeks toprevent possible risks from the credit portfolio through the provision of monitoring reports, riskcommittee, actions to readjust credit limits, portfolio monitoring and improvements in the registrationsystem. Potential credit losses are mitigated, when necessary, through the following guarantees:insurance, issuer's guarantees, as long as approved by the credit card committee. The assessmentof the efficiency of these instruments is considered sufficient to cover any significant losses. Itshould be noted that portfolio turnover is fast with an average term of 52 days (80 days as ofDecember 31, 2020), or when they are sold in the short term.

In addition, due to the Covid-19 pandemic, the Company closely monitors the behavior andactive management of the default in its customer portfolio through policies related to the sale ofservices and software licenses. No significant impacts are expected, in addition the provision forlosses presented in note 7.

c. Market risk

Interest rate and inflation risk: interest rate risk arises from the portion of the debt and financialinvestments related to CDI, which can adversely affect the finance income or expenses in the eventof unfavorable changes in the interest rate and inflation.

The credit rights generated by the Credit Products - Supplier segment are short-term and, therefore,are not subject to interest rate variations.

Exchange rate risk: this risk arises from the possibility of losses due to currency rate fluctuationsthat could increase the liabilities resulting from loans and foreign currency purchase commitments orthat could reduce the assets resulting from trade accounts receivable in foreign currency.

Certain subsidiaries have international operations and are exposed to exchange risk arising fromexposures in some currencies, such as the U.S, dollar (USD), Argentinean peso (ARS), Mexicanpeso (MXN) , Chilean peso (CLP) and Colombian peso (COP).

The Company ensures that its net exposure is maintained at an acceptable level in accordance withthe policies and limits defined by Management and is monitoring the possible impacts of theCovid-19 pandemic in each of these companies. In the period ended in June 30, 2021, the balanceof assets exceeds the negative balances exposed, as follows:

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June 30, 2021

Company Accountspayable

Cash and cashequivalents

Accountsreceivable Other assets (i) Net exposure Currency

RJ Consultores México (24) 628 1,010 - 1,614 Peso (MXN)CMNet Participações (114) 432 122 - 440 Peso (CLP e EUR)CMNet Argentina (26) 766 285 - 1,025 ARSTOTVS S.A. (4,179) - - - (4,179) USDTOTVS Large - - - 5,988 5,988 USDTOTVS México (1,466) 2,925 5,771 - 7,230 Peso (MXN)TOTVS Argentina (1,804) 6,647 10,685 - 15,528 Peso (ARS)TOTVS Incorporation (177) 1,539 - 89,297 90,659 USDRD Colômbia (88) 1,578 - - 1,490 Peso (COP)Total (7,878) 14,515 17,873 95,285 119,795

(i) The amount of R$5,988 refers to receivable for the hardware operation sold in 2019, as mentioned in note 11.The amount of R$89,297 refers to financial investments as described in note 4.3.

d. Derivatives

The Company and its subsidiaries did not maintain financial derivative transactions in the reportedperiods.

4.7 Capital management

The Company’s capital management is intended to ensure a strong credit rating with institutions andan optimal capital ratio in order to drive the Company’s businesses and maximize value forshareholders.

TOTVS controls its capital structure by adjusting and adapting to current economic conditions. Tomaintain this structure, the Company may pay dividends, repurchase shares, take out new loans,issue debentures and promissory notes.

The Company’s net debt structure includes loans, financing and lease, debentures, accountspayable from acquisitions of subsidiaries, and senior shares and mezzanine obligations, lessfinancial investments of Supplier FIDC, escrow account and cash and cash equivalents.


Loans, financing and lease liabilities (Note 17) 206,612 204,548 347,980 325,050Debentures (Note 18) 1,497,677 - 1,497,677 -Senior shares and Mezzanine obligations (Note 22) - - 1,322,987 1,011,087(-) Cash and cash equivalents (Note 5) (346,396) (527,955) (802,260) (1,027,733)(-) Financial investments (Note 6) (i) - - (288,095) (179,308)Net (cash) debt 1,357,893 (323,407) 2,078,289 129,096Shareholders’ equity 2,723,213 2,604,166 2,723,213 2,604,166Shareholders’ equity and net debt 4,081,106 2,280,759 4,801,502 2,733,262

(i) Represent financial investments in investment funds and national treasury bills for restricted use of SupplierFIDC and are not available to the Company.

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5 Cash and cash equivalents

Cash and cash equivalents are maintained for meeting short-term cash requirements and forstrategic investment or other purposes, and are redeemable within 90 days from the date of therespective transaction and subject to a minimal risk of change of value.


Cash and banks (i) 1,098 326 175,764 18,564Cash equivalents 345,298 527,629 626,496 1,009,169Investment fund 240,715 302,674 385,517 454,145CDB 104,290 224,955 240,686 555,024Others 293 - 293 -

346,396 527,955 802,260 1,027,733

(i) Includes cash and banks of R$16,921 from Supplier FIDC that are not available to the Company.

The Company has financial investment policies, which establish that the investments focus on lowrisk securities and investments in top-tier financial institutions.

The Company concentrates its investments in an investment fund for TOTVS and its subsidiaries.The fund is composed of investment fund shares whose portfolio is made up of highly-liquidfixed-income assets. The eligible assets in the portfolio structure are mainly government debtsecurities, which present low credit risk and volatility. The Company's investments are substantiallyremunerated by reference to the CDI variation, which averaged 117.5%% of the CDI for the periodended in June 30, 2021 (94.9% as of December 31, 2020).

6 Financial investments

The following amounts refer to investment funds and financial government bonds redeemable fromSupplier FIDC that are not available to the Company.

Individual Consolidated

6/30/2021 12/31/2020 6/30/2021 12/31/2020

Government bonds - - 9,213 9,671

Investment funds (i) - - 278,882 169,637

Total - - 288,095 179,308

(ii) Investment funds shares pegged to DI.

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7 Trade receivable

Consolidated accounts receivable are as follows:


Domestic market 386,049 381,459 551,749 526,083Foreign market 1,425 766 11,265 5,801Gross trade receivables 387,474 382,225 563,014 531,884Credit rights (i) - - 1,565,467 1,165,602Total trade receivables and credit rights 387,474 382,225 2,128,481 1,697,486(-)Allowance for expected credit losses (56,323) (57,097) (145,555) (136,245)Net trade accounts receivable 331,151 325,128 1,982,926 1,561,241Current assets 280,829 267,801 1,922,045 1,497,229Noncurrent assets (ii) 50,322 57,327 60,881 64,012

(i) The credit rights belong to Supplier FIDC and refer to securities assigned arising from Supplier's creditpurchases at partner establishments.

(ii) Long-term accounts receivables refer basically to the sale of software license, softwareimplementation and customization services, and are presented net of adjustment to present value.

Changes in the allowance for expected credit losses are as follows:


Opening Balance at December 31, 2020 57,097 79,712 136,245 102,123Additional allowance in the period 6,436 26,115 15,768 43,856Credit recovery and/or (write-off) off due to use (7,210) (48,730) (8,654) (66,921)Acquisition of subsidiaries - - 2,196 57,187Balance at June 30, 2021 56,323 57,097 145,555 136,245

7.1 Aging list of trade receivable

Aging list of amounts receivable at June 30, 2021 and December 31, 2020, is as follows:


Falling due 281,573 266,158 397,121 368,815Unbilled 29,989 30,481 54,247 47,467Overdue1 to 30 days 8,858 11,081 16,420 18,66231 to 60 days 3,009 5,015 6,223 8,33061 to 90 days 2,947 5,009 6,043 7,14291 to 180 days 6,959 8,556 12,886 15,868181 to 360 days 8,655 12,425 17,213 16,098More than 360 days 45,484 43,500 52,861 49,502Gross trade receivables 387,474 382,225 563,014 531,884(-) Allowance for expected credit losses (i) (56,323) (57,097) (79,615) (76,228)Net trade receivables 331,151 325,128 483,399 455,656

(i) The allowance for expected credit losses is net of the write-off due to loss recorded against accounts receivable

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for R$7,210 for the Individual and R$8,654 for consolidated.

Management believes that the risk related to technology trade accounts receivable in general ismitigated by the fact that the Company’s customer portfolio is diluted and also throughout variousoperating segments. In general, the Company does not require any guarantee on installment sales.

7.2 Composition of credit rights by maturity

The following are the credit rights balance from credit product:


6/30/2021 12/31/2020 6/30/2021 12/31/2020

Credit rights receivable - - 1,565,467 1,165,602

(-) Allowance for expected credit losses - - (65,940) (60,017)

Net credit rights - - 1,499,527 1,105,585

The aging list from credit rights from credit product as June 30, 2021:


Falling due - - 1,488,821 1,099,155Overdue1 to 30 days - - 12,353 5,43231 to 60 days - - 1,929 1,48261 to 90 days - - 1,459 85591 to 180 days - - 2,682 2,116181 to 360 days - - 3,542 11,611More than 360 days - - 54,681 44,951Gross accounts receivable - - 1,565,467 1,165,602(-)Provision for expected credit losses - - (65,940) (60,017)Total - - 1,499,527 1,105,585

As at June 30, 2021, approximately 47% (46% in December 31, 2020) of the portfolio's contractsare insured by policies that cover an average of 90% (90% in December 31, 2020) of theoutstanding balance of operations.

The provision amount was calculated based on the analysis of losses due to credit harvests thatfollow the assumptions of Supplier FIDC Regulation. Delay in operations was used as the mainindicator of impairment.

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8 Recoverable taxes

The amounts of recoverable taxes are as follows:


Income tax to offset (a) 16,795 14,511 32,898 25,249Social contribution tax to offset (a) 11,436 9,081 17,030 11,555Other 2,476 - 4,461 1,288

30,707 23,592 54,389 38,092Current assets 30,707 23,592 54,389 38,092

(a) Refers to withholding income and social contribution tax credits in the current year and income andsocial contribution tax credits to offset from previous years, as well as payments of estimated taxes inthe current year.

9 Income taxes

Current and deferred income and social contribution taxes were recorded pursuant to the currentrates in force. Deferred income and social contribution taxes are calculated on income and socialcontribution tax losses carryforwards, respectively, as well as temporary differences.

9.1 Reconciliation of income and social contribution tax expenses

The reconciliation of expenses calculated by applying the Income and Social Contribution Tax ratesis as follows:


Income before taxes 186,886 151,608 234,658 178,192Income and social contribution taxes at combined nominal rate of34% (63,541) (51,547) (79,784) (60,585)

Adjustments for the statement of effective rateEquity pick-up 29,719 17,872 - -Law No. 11196/05 (Incentive for research and development) 5,467 3,647 9,863 7,442Interest on equity - - 30 -Effect of subsidiaries subject to special rates - - (6,400) (3,418)Participation of administrators (821) (417) (905) (434)Workers' Meal Program (PAT) 585 346 1,226 633Other 993 (572) 600 (893)Income and social contribution tax expense (27,598) (30,671) (75,370) (57,255)Current income and social contribution taxes (32,573) (19,274) (84,931) (38,210)Deferred income and social contribution taxes 4,975 (11,397) 9,561 (19,045)Effective rate 14.8% 20.2% 32.1% 32.1%

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9.2 Breakdown of deferred income and social contribution taxes


Income and social contribution tax losses - - 42,410 50,689Deriving from temporary differences:Difference between tax and accounting bases of goodwill 6,086 7,988 19,637 23,442Tax benefit from goodwill amortization (102,533) (100,709) (163,436) (157,518)Intangible asset allocation (3,240) (4,042) (9,985) (11,277)Intangible asset allocation – after Law No. 12973 21,626 20,385 52,407 38,139Provision for commissions 18,775 17,365 21,957 19,371Deferred income or revenues 6,728 6,748 11,756 12,686Allowance for expected credit losses 19,150 19,413 25,498 24,167Provision for contingencies and other obligations 37,430 36,756 42,849 42,470Provision for trade accounts payable 13,632 15,202 16,165 18,139Provision for share-based payments 17,307 15,532 18,995 16,590Present value adjustment 482 567 7,664 4,501Other 13,776 9,039 23,435 18,847Net deferred income and social contribution taxes 49,219 44,244 109,352 100,246Deferred tax assets 49,219 44,244 111,701 100,535Deferred tax liabilities - - 2,349 289

Net deferred income and social contribution taxes of the Company and its subsidiaries arepresented under noncurrent assets or noncurrent liabilities by legal entities.

Changes in deferred income and social contribution taxes are as follows:

Individual ConsolidatedOpening Balance at December 31, 2020 44,244 100,246Expense in statement of profit or loss 4,975 9,561Other - (455)Balance at June 30, 2021 49,219 109,352

10 Related-party balances and transactions

Related-party transactions are carried out under market conditions and prices established by theparties, and balances between the Individual and its subsidiaries are eliminated for purposes ofconsolidation.

10.1 Accounts receivable from and payable to subsidiaries and associates companies

As of June 30, 2021, main assets, liabilities, revenues and costs are as follows:

Company Trade accountsreceivable

Other Assets(iii) Liabilities Revenues Costs

TOTVS Large 28 4 - 28 -Wealth Systems (i) 16 - 34 16 91Supplier (ii) 32 66 197 75 563Consinco - 49 - - -Dimensa - 1,073 - - -Total 76 1,192 231 119 654

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(i) Refers to partnership contract between Wealth Systems and TOTVS for the sale of CRM (“CustomerRelationship Management") solutions.

(ii) Refers to partnership contract between Supplier and TOTVS for the sale of Techfin solutions and softwarelicense.

(iii) Refers to share-based compensation plans.

10.2 Transactions or relationships with shareholders and key management personnel

The Company maintains property lease agreements with companies, in which some of theshareholders are key management members and also hold TOTVS shares, directly or indirectly.

The amount paid as lease and condominium fees to related parties recognized for the six-monthperiod ended June 30, 2021 was R$635 (R$603 as of June 30, 2020). All lease agreements withrelated parties are subject to restatement by reference to the IGP-M inflation rate, every 12 months.

The Company has software license agreements and commercial partnerships with GoodData,which on June 30, 2021 represented the amount of R$3,756 (R$4,295 as of June 30, 2020).Through its subsidiary TOTVS Inc., the Company holds a minority interest in the GoodData capital,as well as a representative on the board. This investment was classified at fair value through profitor loss according to note 4.3.

The Company focuses its strategic social investment on the Instituto da Oportunidade Social (IOS),being the main sponsor of the Institute. Also, the Institute has the support of other partnercompanies and government partnerships. The amount of sponsorship in the six-month periodended June 30, 2021 was R$7,087 (R$1,532 as of June 30, 2020), all of which with monetaryresources.

Some of the Company’s shareholders and key management personnel directly or indirectly hold15.15% of the Company’s shares as of June 30,2021 (15.15% as of December 31, 2020). Theindirect interest is held through LC-EH Empreendimentos e Participações S.A.

The Company also incurred small expenses and income during the semester with related parties,where the total amount of expenses was R$53 and income of R$49.

10.3 Management fees

Expenses related to the Company's managing and statutory officers ‘compensation are summarizedbelow:

Individual and Consolidated6/30/2021 12/31/2020

Management compensationSalaries, fees and payroll charges 6,153 6,119Direct and Indirect benefits (i) 1,181 845Variable bonus 2,414 1,228Share-based payments 15,999 9,019Total 25,747 17,211

(i) Includes depreciation expense for vehicles on loan by some management members.

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11 Other assets

Breakdown of other assets at June 30, 2021 and December 31, 2020 is follows:


Prepaid expenses (i) 64,850 44,798 74,741 47,509Franchises loan (ii) 37,843 16,510 37,943 16,610Advances to employees (iii) 28,556 11,852 40,748 15,321Advances to suppliers 192 232 8,615 838Negotiation and intermediation – Supplier FIDC - - 3,199 33,694Dividends receivable - 17,510 - -Receivables from investments disposed of (iv) 6,166 11,553 13,669 19,348Other assets 1,488 1,182 3,380 4,207Total 139,095 103,637 182,295 137,527

Current assets 70,763 55,689 99,826 79,599Noncurrent assets 68,332 47,948 82,469 57,928

(i) Includes the amounts of taxes paid and renewals of contracts with suppliers referring to expenses thatwill be incurred during the year.

(ii) Most franchise loans are adjusted monthly by CDI or IPCA.(iii) Includes the 13th salary advance paid in June 2021(iv) Includes amounts receivable for the sale of Ciashop and hardware operation in 2019.

12 Investments

Breakdown of investments in subsidiaries and associated companies is shown below:

12.1 Investments in subsidiaries


Investments in subsidiaries and affiliates 3,214,358 1,468,156 2,797 3,476Goodwill 45,137 65,106 - -

3,259,495 1,533,262 2,797 3,476

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12.2 Direct subsidiaries information

Summarized financial statements of associated companies andsubsidiaries as at June 30, 2021

Assets Liabilities Equity Gross revenue Profit or lossTOTVS Large (i) 2,706,435 516,703 2,189,732 175,609 40,705TOTVS Tecnologia 2,599,526 2,039,676 559,850 205,708 31,147TTS 330,672 54,078 276,594 67,443 10,645TOTVS Inc. 94,973 4,491 90,482 429 (8,229)Neolog - - - 3,414 1,350TOTVS Hospitality 44,126 10,950 33,176 26,181 4,288VT Digital 1,933 380 1,553 2,015 1,257TOTVS México 14,407 11,786 2,621 12,949 (4,880)TOTVS Argentina 21,299 8,545 12,754 25,664 929TFS 67,464 26,766 40,698 76,015 15,648CMNet Argentina 2,013 1,568 445 3,250 (143)Eleve 1,693 737 956 1,324 (881)NCC - - 65 - -

(i) Goodwill from acquire TOTVS Large is recorded under Investments in the Individual. The difference between theprofit and loss of the acquire and equity pick-up balance refers to the amortization of intangible assets allocatedin determining the fair value of assets.

12.3 Investments changes

Changes in investment for the six-month period ended June 30, 2021 were as follows:

Equity pick-up

12/31/2020

Additions /(reductions) Dividends Equity

pick-upAmortization

of PPA TotalForeign

exchange/Inflation (i)

Merger6/30/2021

TOTVS Large (ii) 529,693 1,680,648 (11,323) 40,705 (4,428) 36,277 (426) - 2,234,869TOTVS Tecnologia 543,645 156 (15,098) 31,147 - 31,147 - - 559,850TTS 269,254 18 (3,323) 10,645 - 10,645 - - 276,594TOTVS Inc. 92,246 10,054 - (8,229) - (8,229) (3,589) - 90,482Neolog 17,885 - (89) 1,350 - 1,350 - (19,146) -TOTVS Hospitality 28,888 - - 4,288 - 4,288 - - 33,176VT Digital 704 - (408) 1,257 - 1,257 - - 1,553TOTVS México 6,323 6,497 - (4,880) - (4,880) (479) - 7,461TOTVS Argentina 12,006 530 - 929 - 929 (119) - 13,346Dimensa 31,064 44 (6,058) 15,648 - 15,648 - - 40,698Eleve 373 308 (93) (143) - (143) - - 445CMNet Argentina 1,116 557 - (881) - (881) 164 - 956NCC 65 - - - - - - - 65Total 1,533,262 1,698,812 (36,392) 91,836 (4,428) 87,408 (4,449) (19,146) 3,259,495

(i) Includes the inflation adjustments of Argentine subsidiaries.(ii) Capital contribution for the acquisition of RD Station as mentioned in note 3.1

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13 Property, plant and equipment

The Company’s property, plant and equipment is broken down as follow:Individual

Computersand electronic

equipmentVehicles Furniture

and fixtures

Facilitiesmachinery and

equipment

Leaseholdimprovements

Rights ofuse (i) Other Total

CostAs at December 31, 2020 196,190 11,557 26,611 26,831 94,392 264,419 7,739 627,739Additions 16,868 2,763 4 78 81 22,492 1,081 43,367Merged company 823 35 127 11 224 787 5 2,012Write-offs (3,089) (1,951) (5) (12) - (991) (67) (6,115)As at June 30, 2021 210,792 12,404 26,737 26,908 94,697 286,707 8,758 667,003

DepreciationAs at December 31, 2020 (135,250) (5,918) (16,635) (17,691) (43,663) (69,343) (6,237) (294,737)Depreciation for the period (13,241) (2,025) (1,559) (1,428) (5,447) (21,197) (464) (45,361)Merged company (678) (35) (59) (5) (224) (599) (3) (1,603)Write-offs 2,643 1,397 5 11 - 349 60 4,465As at June 30, 2021 (146,526) (6,581) (18,248) (19,113) (49,334) (90,790) (6,644) (337,236)

Residual valueAs at June 30, 2021 64,266 5,823 8,489 7,795 45,363 195,917 2,114 329,767As at December 31, 2020 60,940 5,639 9,976 9,140 50,729 195,076 1,502 333,002Average annual depreciationrate 20% a 25% 33% 10% a 25% 6.7% a 25% 10% a 33% 10% a

33% 20%

ConsolidatedComputers

and electronicequipment

Vehicles Furnitureand fixtures

Facilitiesmachinery and

equipment

Leaseholdimprovements

Rights ofuse (i) Other Total

CostAs at December 31, 2020 220,522 13,086 32,649 30,270 105,794 291,765 8,841 702,927Additions 18,307 3,638 8 147 550 23,246 1,321 47,217Business combination 5,515 - 2,420 2,097 9,633 32,907 (1) 52,571Transfers (384) (190) - (4) - (543) 5 (1,116)Exchange variation (ii) 1 (26) (11) (15) (6) (424) (2) (483)Write-offs (3,067) (2,069) (235) (20) - (448) (90) (5,929)As at June 30, 2021 240,894 14,439 34,831 32,475 115,971 346,503 10,074 795,187

DepreciationAs at December 31, 2020 (152,833) (6,553) (20,555) (19,703) (52,973) (78,804) (7,059) (338,480)Depreciation for the period (15,051) (2,238) (1,815) (1,632) (5,972) (25,580) (558) (52,846)Business combination (3,412) - (977) (556) (3,771) (10,460) 1 (19,175)Transfers 726 190 - - - 200 - 1,116Exchange variation (ii) 206 106 30 (134) 50 285 (90) 453Write-offs 2,868 1,265 218 18 - 150 81 4,600As at June 30, 2021 (167,496) (7,230) (23,099) (22,007) (62,666) (114,209) (7,625) (404,332)

Residual valueAs at June 30, 2021 73,398 7,209 11,732 10,468 53,305 232,294 2,449 390,855As at December 31, 2020 67,689 6,533 12,094 10,567 52,821 212,961 1,782 364,447Average annualdepreciation rate 20% a 25% 33% 10% a 25% 6.7% a 25% 10% a 33% 10% a 33% 20%

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(i) The Company applied exceptions to the standard for short-term and low value contracts, recorded in leaseexpenses in the amount of R$776 and R$1,201 in the Individual and Consolidated, respectively as of June30,2021.

(ii) Includes the inflation adjustments of Argentine subsidiaries.

Breakdown of right of use and lease liabilities for the period ended June 30, 2021 is as follows:

Consolidated

Right to usereal estate

Right of usecomputers and

equipmentsTotal assets Lease liabilities

As at December 31, 2020 201,311 11,650 212,961 223,525Contract Remeasurement (i) 22,819 427 23,246 23,247Write-offs (297) (1) (298) -Business combination 22,447 - 22,447 23,545Transfers (543) 200 (343) -Amortization (22,932) (2,648) (25,580) -Interest incurred and exchange variation (110) (29) (139) 5,069Interest paid - - - (6,801)Principal paid - - - (23,593)As at June 30, 2021 222,695 9,599 232,294 244,992

(i) Represents the annual update of the leases applied to the right of use real estate according to the indexesestablished in contracts.

14 Intangible assets

Individual

Software Trademarks &patents

Customerportfolio R&D (i) Other (ii) Goodwill Total Intangible

assetsCostAs at December 31, 2020 386,823 63,149 220,417 16,735 18,750 280,308 986,182Additions 13,332 - 231 9,525 - - 23,088Merged company 8,103 1 4,226 259 1,036 12,565 26,190Write-offs - - - (72) - - (72)As at June 30, 2021 408,258 63,150 224,874 26,447 19,786 292,873 1,035,388

AmortizationAs at December 31, 2020 (321,210) (52,226) (214,416) (110) (18,750) - (606,712)Amortization for the period (16,182) (2,101) (1,565) (1,742) - - (21,590)Merged company (8,098) (1) (1,251) - (1,036) - (10,386)As at June 30, 2021 (345,490) (54,328) (217,232) (1,852) (19,786) - (638,688)

Residual valueAs at June 30, 2021 62,768 8,822 7,642 24,595 - 292,873 396,700As at December 31, 2020 65,613 10,923 6,001 16,625 - 280,308 379,470Average annual amortizationrates 10% a 20% 6.7% a 8% 10% a 12.5% 20% a 50% 10% a 50%

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Consolidated

Software Trademarks& patents

Customerportfolio R&D (i) Other (ii) Goodwill Total Intangible

assetsCostAs at December 31, 2020 579,858 127,807 484,244 33,384 81,627 1,145,831 2,452,751Additions 13,354 - 134 10,211 7 - 23,706Acquisitions of subsidiaries 189,955 44,417 39,038 60 14,516 1,781,585 2,069,571Write-offs - - - (72) - - (72)Transfers 576 - - 162 - (43,611) (42,873)Exchange variation (iii) (6) - - - 5 - (1)Others (iv) - - - - - (446) (446)As at June 30, 2021 783,737 172,224 523,416 43,745 96,155 2,883,359 4,502,636

AmortizationAs at December 31, 2020 (383,054) (78,339) (294,191) (10,491) (56,888) (43,611) (866,574)Amortization for the period (32,957) (12,792) (12,202) (2,733) (5,543) - (66,227)Acquisitions of subsidiaries (1,521) - (30) (60) - - (1,611)Transfers (735) - (1) 2 (4) 43,611 42,873As at June 30, 2021 (418,267) (91,131) (306,424) (13,282) (62,435) - (891,539)

Residual valueAs at June 30, 2021 365,470 81,093 216,992 30,463 33,720 2,883,359 3,611,097As at December 31, 2020 196,804 49,468 190,053 22,893 24,739 1,102,220 1,586,177Average annual amortizationrates 10% a 20% 6.7% a 8%10% a 12.5% 20% a 50% 10% a 50%

(i) The development capitalization totaled R$10,211 as of June 30, 2021, that majority are related to theCompany’s strategic plan. R&D amortization starts when development is completed and the asset isavailable for use or sale.

(ii) Includes primarily non-compete rights arising from the purchase price allocation from business combinations.(iii) Includes the inflation adjustments of Argentine subsidiaries.(iv) Purchase price adjustment, as defined in the contract, with impact on goodwill during the measurement

period.

Amortization of intangible assets is based on their estimated useful lives. Intangible assetsidentified, the amounts recognized, and useful lives of assets resulting from a business combinationare premised on a technical study by an independent specialist firm.

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14.1 Changes in goodwill

The breakdown of goodwill as of June 30, 2021 and December 31, 2020 is as follows:

12/31/2020Combination of

business /adjustment

6/30/2021

RD Station (i) - 1,781,585 1,781,585TOTVS Large (ii) 220,298 - 220,298Consinco 160,436 - 160,436Supplier 288,558 - 288,558RM 90,992 - 90,992W&D 64,070 - 64,070Virtual Age 46,497 - 46,497RMS 35,740 - 35,740SRC 33,688 - 33,688Datasul 30,084 - 30,084WS 17,334 - 17,334Gens FDES 16,340 - 16,340Seventeen 15,463 - 15,463TOTVS Agroindústria 13,128 - 13,128Neolog 12,565 - 12,565Tail (iii) 13,561 (446) 13,115BCS 11,821 - 11,821Outros 31,645 - 31,645Total 1,102,220 1,781,139 2,883,359

(i) Acquisition of RD as mentioned in note 3.1(ii) Goodwill arising from the acquisition of the software operation of TOTVS Large (formerly Bematech S.A.)(iii) Purchase price adjustment, as defined in the contract, with impact on goodwill during the measurement

period.

14.2 Impairment of assets

The Company annually tests goodwill for impairment using the “value in use” methodology, throughthe discounted cash flow model of cash generating units, which represent the tangible andintangible assets used in the development and sale of different solutions for its clients.

In the six-month period ended June 30, 2021, the Company evaluated assumptions used onDecember 31, 2020 for the recoverability of its assets considering the possible impacts caused bythe Covid-19 pandemic and did not identify the need for a provision for loss in the interim financialstatements.

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15 Labor liabilities

Balances of salaries and charges payable are broken down as follows:


Labor liabilities:Salaries payable 28,328 22,556 79,828 35,787Vacation payable 69,676 61,770 111,570 93,20113th monthly salary payable 22,051 - 37,729 53Profit sharing and bonus 23,968 22,263 33,080 38,202Withholding Income Tax (IRRF)payable 21,257 14,284 39,898 20,591Actuarial liabilities due to health care planand retirement benefits (i) 2,942 2,786 2,942 2,786

Other 1,836 1,821 3,164 3,913170,058 125,480 308,211 194,533

Payroll liabilitiesFGTS (Unemployment CompensationFund) payable 4,715 5,082 9,202 7,305

INSS (Social Security Tax) payable 5,909 5,788 12,266 9,76510,624 10,870 21,468 17,070

Total 180,682 136,350 329,679 211,603

(i) Refers to the actuarial provision for the health care plan of the participants who contributed or still contributewith fixed installments to the plan costing and who will be entitled to remain in the plan after retirement.

16 Taxes and contributions payable

Taxes and contributions payable are broken down as follows:


Federal Social Security Tax on Gross Revenue (CPRB) 15,224 14,857 21,287 19,948Service Tax (ISS) payable 5,136 5,187 7,825 7,722PIS and COFINS payable 20,396 18,197 27,103 23,875IRPJ and CSLL payable - - 17,578 19,355Withholding IR and CSLL 1,031 932 3,839 3,272Other taxes 1,211 850 4,173 4,363Total 42,998 40,023 81,805 78,535

Current liabilities 42,998 40,023 78,420 74,558Noncurrent liabilities (i) - - 3,385 3,977

(i) Noncurrent liabilities corresponds to installment payment of federal taxes of the acquired.

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17 Loans, financing and lease liabilities

Loans are initially recognized at fair value, net of transaction costs incurred, and are shown atamortized cost. Any difference between the borrowed amounts (net of transaction costs) and thetotal amount payable is recognized in the statement of profit or loss during the period when theloans are due, using the effective interest rate method.

The loan and financing transactions are as follows:

Individual ConsolidatedAnnual financial charges 6/30/2021 12/31/2020 6/30/2021 12/31/2020

Leases (a) 2.00% a 10.89% a.a (i) 206,612 204,548 244,992 223,525Working capital (ii) CDI + 1.9% a.a. - - 102,988 100,740Secured accounts and other - - - 785

206,612 204,548 347,980 325,050

Current liabilities 41,081 37,651 155,331 146,806Noncurrent liabilities 165,531 166,897 192,649 178,244

(i) Rates for the lease of real property right of use range from 2.00% to 10.89% (nominal interest rate) and7.82% to 9.24% for the lease of the right to use electronic equipment.

(ii) As of June 30, 2021, only the working capital loan of the Supplier Administradora subsidiary had an earlymaturity clause in the event of default, bankruptcy or protest of a security with a value above R$10,000,besides other conditions under the agreement.

Amounts recorded in noncurrent liabilities as at June 30, 2021 and December 31, 2020 have thefollowing maturity schedule:


2022 20,992 36,810 26,329 41,7612023 39,179 33,440 47,901 37,8952024 37,117 32,512 45,480 33,7512025 34,542 31,734 38,922 32,0672026 onwards 33,701 32,401 34,017 32,770Noncurrent liabilities 165,531 166,897 192,649 178,244

Below is the breakdown of loans and financing as of June 30, 2021:

6/30/2021Individual Consolidated

Opening balance 204,548 325,050Additions to right of use leases 22,576 23,247Acquisitions of subsidiaries - 23,545Additions of incorporation 195 -Interest incurred 4,911 7,370Interest amortization (5,211) (6,811)Principal amortization (20,407) (24,421)Closing balance 206,612 347,980

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a) Leases

Lease obligations are guaranteed by chattel mortgage of leased assets. The table below showsgross liabilities of finance leases as of June 30, 2021 and December 31, 2020:


Gross lease liabilities – minimum leasepaymentsLess than one year 50,403 46,824 63,592 55,014More than one year and less than five years 179,807 154,671 208,907 166,413More than five years 5,042 33,409 5,152 33,783

235,252 234,904 277,651 255,210Future financing charges on finance leases (28,640) (30,356) (32,659) (31,685)Present value of lease liabilities 206,612 204,548 244,992 223,525

Current liabilities 41,081 37,651 52,343 45,281Noncurrent liabilities 165,531 166,897 192,649 178,244

18 Debêntures

18.1 Composition

At June 30, 2021, the balance was broken down as follows:

Individual andConsolidated

Description Debentures Unit Price Annual financialcharges Maturity 6/30/2021

3rd Issue of Debentures - Single Series (i) 1,500,000 1 100% do CDI +Spread 1.90% 05/21/2024 1,497,677

1,497,677Current liabilities 2,993Noncurrent liabilities 1,494,684

3rd Issue of debentures: on May 21, 2021, the Company approved the 3rd issue of Simple,non-convertible, unsecured debentures, in a single series for public distribution with restricted placementefforts in the total amount of R$1,500,000, at face value of R$1. The Unit Face Value or the Unit FaceValue leftover, as the case may be, will bear interest corresponding to 100.0% of the accumulatedvariation of the average daily rates of the DI Interbank Deposits – DI, plus an exponential spreadequivalent to 1.90% per year on a two hundred and fifty-two (252) Business Day basis. Interest will beamortized always on the 21st of May and November of each year, with the first payment due onNovember 21, 2021 and the last payment due on the due date.

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18.2 Changes

The changes in the years are shown below:


6/30/2021Balance at beginning of year -Issue of debentures 1,500,000(-) Funding costs (10,631)Interest incurred 7,560Costs and amortized expenses 748Balance at end of period 1,497,677

The maturities of redemption in non-current liabilities are presented below:


6/30/2021Maturity2022 371,5462023 373,5012024 749,637Noncurrent liabilities 1,494,684

18.3 Covenants

The debentures have redeemed in advance clauses normally applicable to these types ofoperations related to compliance with economic-financial ratios. The financial index applied to thisdeed derives from the coefficient of dividing the net debt by the Adjusted EBITDA, which must beequal to or less than 4 times.

These restrictive clauses have been complied with and do not limit the ability to conduct the normalcourse of operations.

19 Business partners´ payables

Basically, refers to the amount of outstanding receivables acquired from the establishments affiliatedwith Supplier Administradora de Cartões de Crédito S.A. in the amount of R$432,463 (R$328,817as at December 31, 2020), with maturities within 30 days.

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20 Accounts payable from acquisition of subsidiaries

Accounts payable from the acquisitions of subsidiaries refer to amounts due to the previousshareholders of the acquired companies, with payment in installments or guarantees given. Theseamounts are recorded in current and noncurrent liabilities, as follows:

Individual

6/30/2021 12/31/2020Contingentpayments Other Total Contingent

payments Other Total

Datasul MG - 4,894 4,894 - 4,824 4,824Seventeen - 3,160 3,160 - 3,114 3,114Virtual Age - - - - 56 56Other - 400 400 - 395 395Total - 8,454 8,454 - 8,389 8,389Current liabilities 8,454 8,389

Consolidated6/30/2021 12/31/2020

Contingentpayments Other Total Contingent

payments Other Total

Datasul MG - 4,894 4,894 - 4,824 4,824Seventeen - 3,159 3,159 - 3,114 3,114Virtual Age - - - - 56 56Supplier 124,166 - 124,166 117,133 - 117,133Consinco 26,313 9,195 35,508 40,945 10,171 51,116Wealth System 703 - 703 5,837 - 5,837RD Station 205,554 34,388 239,942 - - -Tail 11,857 2,038 13,895 11,600 4,073 15,673RMS - 573 573 - 1,584 1,584RJ Participações 6,560 - 6,560 7,225 - 7,225Other - 529 529 - 1,638 1,638Total 375,153 54,776 429,929 182,740 25,460 208,200Current liabilities 160,230 44,781NonCurrent liabilities 269,699 163,419

The maturity of non-current liabilities is shown below:

Consolidated

Year 2021 2020

2022 - 93,778

2023 - 6,034

2024 52,119 53,319

2025 205,554 -

2026 12,026 10,288

Noncurrent liabilities 269,699 163,419

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As of June 30, 2021 and December 31, 2020, the liabilities for the acquisition of investments hadguarantees in the form of marketable securities, which consisted of CDB operations in the followingamounts:

Individual Consolidado

6/30/2021 12/31/2020 30/06/2021 31/12/2020

Investment guarantees - current 8,365 8,301 9,067 10,012

Investment guarantees - noncurrent - - 34,388 1,116

Total 8,365 8,301 43,455 11,128

21 Provision for contingencies

In the ordinary course of their operations, the Company and its subsidiaries are parties to variouslegal proceedings relating to tax, social security, labor and civil matters. Provision for contingenciesis set up by management, supported by its legal counsel and an analysis of judicial proceedingspending judgment, at an amount considered sufficient to cover probable losses, as shown below:


6/30/2021 12/31/2020 6/30/2021 12/31/2020

Tax 5,926 5,890 7,496 7,440

Labor 63,488 70,095 74,173 82,496

Civil 40,673 32,121 44,245 35,882

110,087 108,106 125,914 125,818

Changes in provisions for the six-month period ended June 30, 2021 are as follows:

IndividualTax Labor Civil Total

Balances at December 31, 2020 5,890 70,095 32,121 108,106(+) Additional provision - 8,817 9,111 17,928(+) Monetary restatement 36 2,999 3,328 6,363(-) Reversal of unused provision - (3,657) (585) (4,242)(-) Write-off due to payment - (14,766) (3,302) (18,068)Balances at June 30, 2021 5,926 63,488 40,673 110,087

ConsolidatedTax Labor Civil Total

Balances at December 31, 2020 7,440 82,496 35,882 125,818(+) Additional provision 20 9,133 9,370 18,523(+) Monetary restatement 56 3,558 3,615 7,229(-) Reversal of unused provision - (3,840) (762) (4,602)(-) Write-off due to payment (20) (17,174) (3,862) (21,056)(+) Exchange rate - - 2 2Balances at June 30, 2021 7,496 74,173 44,245 125,914

The provisions reflect management’s best current estimate, which is based on information, externalcounsel has updated analyses and outcomes of previous legal proceedings in which the Companywas defendant. TOTVS’s risk monitoring and control constantly review this estimate.

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Further information regarding other significant ongoing lawsuits is provided in Note 23 to thefinancial statements as of December 31, 2020.

Judicial deposits linked or not to the provision for contingencies, are stated below and are recordedunder noncurrent assets:

Individual ConsolidatedJudicial deposits 6/30/2021 12/31/2020 6/30/2021 12/31/2020Tax 12,194 12,091 12,828 12,697Labor 11,133 10,835 14,137 14,669Civil 16,243 15,795 17,067 16,606

39,570 38,721 44,032 43,972

21.1 Contingent liabilities

The Company and its subsidiaries are parties to other lawsuits which, based on the opinion ofCompany management and its legal advisors, are classified as possible losses and for which noprovision has been recognized, as follows:

Individual ConsolidatedNature 6/30/2021 12/31/2020 6/30/2021 12/31/2020Tax 102,203 102,600 146,746 143,725Labor 91,987 103,098 107,540 119,637Civil 188,563 162,929 209,379 181,097

382,753 368,627 463,665 444,459

In the second quarter of 2021, we received a civil action filed by a customer alleging problemsrelated to the implemented product, which would have caused material damages, moral damagesand loss of profits. The process is in its initial phase. The claimed update was R$13,733 on June 30,2021 classified as possible losses.

The breakdown of the other significant ongoing lawsuits at June 30, 2021 is in Note 23.2 to thefinancial statements for the year ended December 31, 2020.

22 Senior shares and mezzanine obligations - Consolidated

Financial liabilities amount to R$1,322,987 (R$1,011,087 as of December 31, 2020) and fullycomprise Supplier FIDC's senior shares and mezzanine obligations. The index used for theprofitability of senior shares is CDI + 2.5%, for mezzanine I shares, it is CDI + 3%, and formezzanine II shares, CDI + 4%.

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23 Shareholders' equity

a) Capital

As at June 30, 2021 the Company’s capital was composed of 577,913,181 registered commonshares issued and fully paid, with no par value (577,913,181 as of December 31, 2020), as follows:

6/30/2021 12/31/2020Shareholder Shares % Shares %LC EH Participações e Empreendimentos S/A 80,282,970 13.89% 80,282,970 13.89%BlackRock 35,950,839 6.22% 35,950,839 6.22%Constellation Investimentos e Participações 30,090,381 5.21% 30,090,381 5.21%Itaú Unibanco S.A. 28,929,046 5.01% 28,929,046 5.01%GIC Private Limited 30,107,693 5.21% 28,442,062 4.92%Laércio José de Lucena Cosentino 6,631,704 1.15% 6,376,005 1.10%CSHG Senta Pua Fia 144,800 0.03% 144,000 0.02%Other 356,663,514 61.70% 357,544,292 61.87%Outstanding shares 568,800,947 98.42% 567,759,595 98.24%

Treasury shares 9,112,234 1.58% 10,153,586 1.76%

Total in units 577,913,181 100.00% 577,913,181 100.00%

On April 20, 2021, the Company 's Extraordinary Shareholders Meeting approved the capitalincrease of R$136,903 through capitalization of retained earnings, without issuing new shares. Thecapital increased from R$1,382,509 to R$1,519,412, divided into 577,913,181 common shares, allregistered, book-entry and without par value. On the same date, the change in the authorizedcapital limit from R$2,500,000 to R$4,000,000 in the Company's bylaws was also approved.

b) Capital reserves

The balance of capital reserves at June 30, 2021 and December 31, 2020 was broken down asfollows

6/30/2021 12/31/2020Goodwill reserve 795,538 795,538Goodwill reserve due to merger 14,330 14,330Premium on acquisition of non-controlling interests (24,323) (24,323)Debentures converted into shares 44,629 44,629Stock option plan 64,584 64,650

894,758 894,824

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c) Treasury shares

As at June 30, 2021, changes in "Treasury Shares" were as follows:

Number ofshares (units)

Value(in thousand)

Average priceper share (in

reais)As at December 31, 2020 10,153,586 R$ 148,537 R$ 14.63Used (1,041,352) R$ (15,234) R$ 14.63

As at June 30,2021 9,112,234 R$ 133,303 R$ 14.63

In the six-month period ended June 30, 2021, 1,041,352 treasury shares were used by the stockoptions and restricted share plans, which consumed R$15,234 from the capital reserve.

24 Dividends and Interest on shareholders’ equity

The Company’s bylaws provide for mandatory minimum dividend of 25% of net income for the year,adjusted by the amount of the legal reserve set up, pursuant to Brazilian Corporation Law.

On April 20, 2021, the General Shareholders' Meeting approved the distribution of dividends in theamount of R$50,960 relating to net income for 2020 with payment made as from May 20, 2021.

The balance of dividends and interest on equity payable in the statement of financial positionamounted to R$1,040 as at June 30, 2021 (R$57,687 as of December 31, 2020).

25 Share-based compensation plan

The main events associated with the stock option plan are described in Note 27 to the FinancialStatements for the year ended December 31, 2020.

There are two new grants of the current share-based compensation plan for the six-month periodsended June 30, 2021, which had the following assumptions:

Fair Value Assumptions

Plans Date MarketValue

Expectation ofdividends

TermMaturity Fair value

Regular 05/7/2021 R$ 30.58 1.31% 3 years R$ 29.39Partners 05/7/2021 R$ 30.58 1.31% 3 years R$ 29.39

Changes in restricted shares for the period are shown below:

Restricted sharesAmount (units)

Opening balance 6,981,409Transactions:Exercised (1,436,247)Granted 3,257,580Cancelled (270,207)Added (i) 27,999Closing balance 8,560,534

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(i) Addition generated by the performance appraisal result referring to grants already granted in previous years

The cumulative effect in the six-month period ended June 30, 2021 was R$15,168 (R$8,902 as ofJune 30, 2020), recorded as share-based payment expenses.

26 Segment information

The presentation of information by operating segment is consistent with the internal report providedto the Company´s main operational decision-makers. After RD Station acquisition (note 3.1), theCompany consolidates its strategic position focused on the business performance dimension andstarted to present its results in three reportable segments:

Management segment: represents TOTVS software operation.This segment comprises thedimensions of management software, with ERP, HR and Vertical.

Business Performance segment: includes solutions focused on generating opportunities andconverting customer sales, such as sales, digital marketing and customer experience.

Techfin segment: includes the business of providing financial services, such as technologyproducts aimed at financial services (example “Painel Financeiro”), partnerships (example “créditoconsignado”), products with assumption of some degree of credit risk and/or the definition and/orapplication of credit policies (examples as “Supplier Card”, “Antecipa” and “Mais Prazo”). Thissegment also consolidates the results of the subordinated shares of the Supplier FIDC, to whichSupplier currently assigns the originated credits.

The statement of profit or loss for the period ended June 30, 2021 for these three reportablesegments is as follows:

GestãoBusiness

Performance Techfin ConsolidatedStatement of profit or loss 6/30/2021 6/30/2020 6/30/2021 6/30/2020 6/30/2021 6/30/2020 6/30/2021 6/30/2020Net revenue 1,339,119 1,201,615 27,954 226 116,558 26,976 1,483,631 1,228,817(-) Cost (376,751) (354,999) (10,168) - (42,723) (9,557) (429,642) (364,556)Gross profit 962,368 846,616 17,786 226 73,835 17,419 1,053,989 864,261(+) Research and development expenses (232,530) (210,804) (3,930) - (10,322) (1,217) (246,782) (212,021)(+) Provision for expected credit losses (9,522) (25,083) (336) (3) (5,910) (4,904) (15,768) (29,990)Margem de Contribuição 720,316 610,729 13,520 223 57,603 11,298 791,439 622,250(-) Operating expenses - - - - - - (416,746) (358,454)(-) Depreciation and amortization - - - - - - (119,073) (91,446)(-) Finance income (costs) and equity - - - - - - (20,962) 5,842(-) Income and social contribution taxes - - - - - - (75,370) (57,255)Profit for the year from continuingoperations - - - - - - 159,288 120,937

The Company has disclosed information above for each reportable segment, as this information isregularly reviewed by the chief operating decision maker.

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27 Earnings per share

The tables below show earnings and share data used to calculate basic and diluted earnings pershare:

Earnings per share 2T21 6/30/2021 2T20 6/30/2020

Profit or loss for the periodContinuing operations 78,643 159,288 58,330 120,937Discontinued operations - - (337) (1,436)Net income attributable to the controlling common Company’sshareholders 78,643 159,288 57,993 119,501

Denominator (in thousands of shares)Weighted average number of common shares outstanding 567,979 567,979 568,969 568,969

Basic earnings per share 0.13846 0.28045 0.10193 0.21003Basic earnings per share continuing operations 0.13846 0.28045 0.10252 0.21255

Earnings per share 2T21 6/30/2021 2T20 6/30/2020

Profit or loss for the periodContinuing operations 78,643 159,288 58,330 120,937Discontinued operations - - (337) (1,436)Net income attributable to the Company’s controlling commonshareholders 78,643 159,288 57,993 119,501

Denominator (in thousands of shares)Weighted average number of common shares outstanding 567,979 567,979 568,969 568,969Weighted average number of stock options/restricted shares 7,188 7,188 6,222 6,222Weighted average number of common shares adjusted according to dilutioneffect 575,167 575,167 575,191 575,191

Diluted earnings per share 0.13673 0.27694 0.10082 0.20776Diluted earnings per share continuing operations 0.13673 0.27694 0.10141 0.21026

There were no other transactions involving common shares or potential common shares betweenthe date of the statement of financial position and the date when these interim financial statementswere concluded.

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28 Gross sales revenue

Gross revenue and deductions used for the calculation of net revenue presented in the Company'sstatement of profit and loss for the three and six-months ended June 30, 2021 and 2020 were asfollows:

Individual Consolidated2T21 6/30/2021 2T20 6/30/2020 2T21 6/30/2021 2T20 6/30/2020

Recurring software 444,851 872,947 393,966 782,591 657,553 1,266,871 549,039 1,082,831Nonrecurring softwarenonrecurring 85,278 184,991 89,002 196,103 137,508 287,107 131,989 281,825

License fees 38,296 94,904 39,606 94,157 53,244 125,544 53,390 119,364Nonrecurring services 46,982 90,087 49,396 101,946 84,264 161,563 78,599 162,461Credit product - Supplier - - - - 63,444 121,147 27,991 27,991Gross revenue 530,129 1,057,938 482,968 978,694 858,505 1,675,125 709,019 1,392,647

Sales canceled (3,311) (12,256) (3,703) (9,309) (5,920) (17,337) (6,494) (13,968)Sales taxes (59,949) (118,988) (54,305) (109,765) (89,210) (174,157) (75,126) (149,862)Deductions (63,260) (131,244) (58,008) (119,074) (95,130) (191,494) (81,620) (163,830)

Net revenues 466,869 926,694 424,960 859,620 763,375 1,483,631 627,399 1,228,817

29 Costs and expenses by nature

The Company presents below the information on operating expenses and costs by nature for thethree and six-months periods ended June 30, 2021 and 2020.

Individual ConsolidatedNature 2T21 6/30/2021 2T20 6/30/2020 2T21 30/06/2021 2T20 30/06/2020Salaries, benefits and payrollcharges 215,654 422,135 177,864 355,385 330,391 631,903 264,295 519,102

Outsourced services and other inputs 106,229 194,637 91,484 201,270 165,806 304,955 131,472 266,761Commissions 50,491 103,477 36,076 83,751 59,872 120,142 40,526 92,721Depreciation and amortization 33,315 66,951 31,257 61,825 59,770 119,073 52,658 91,446Provision for contingencies 4,323 13,336 13,091 22,225 4,793 13,921 16,871 29,676Allowance for expected credit loss 3,588 6,436 12,872 16,476 8,900 15,768 24,431 29,990Other 665 7,913 6,571 15,353 6,137 22,249 12,467 26,771Total 414,265 814,885 369,215 756,285 635,669 1,228,011 542,720 1,056,467

Individual ConsolidatedOccupation 2T21 6/30/2021 2T20 6/30/2020 2T21 6/30/2021 2T20 6/30/2020Cost of software 140,765 273,816 129,543 265,920 202,587 388,909 173,577 354,999Cost of credit products - - - - 22,456 40,733 9,557 9,557Research and Development 81,772 159,822 68,194 139,424 129,219 246,782 106,132 212,021Commercial and Marketing Expenses 98,229 195,622 73,308 166,098 138,345 267,512 101,474 221,297General and Administrative Expenses 64,606 122,389 53,970 106,961 86,901 163,794 75,165 137,946Expenses / Operating Revenues 28,893 63,236 44,200 77,882 56,161 120,281 76,815 120,647Total 414,265 814,885 369,215 756,285 635,669 1,228,011 542,720 1,056,467

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30 Finance income and costs

Finance income and costs incurred for the three and six-months periods ended June 30, 2021 and2020 were as follows:

Individual Consolidated2T21 6/30/2021 2T20 6/30/2020 2T21 6/30/2021 2T20 6/30/2020

Finance incomeShort-term investment yield 4,787 7,369 9,110 17,600 9,469 14,750 11,949 23,766Interest received 832 1,750 874 2,033 1,127 2,165 1,135 2,475Inflation adjustment gains 1,879 2,600 530 1,098 2,129 3,029 611 1,403Adjustment to present value 450 899 343 647 499 1,001 376 740Foreign exchange gains 277 287 12 49 659 2,056 1,650 4,935Other finance income (i) (349) (544) (482) (965) (780) (1,474) (528) (1,162)

7,876 12,361 10,387 20,462 13,103 21,527 15,193 32,157Finance costsInterest incurred (10,931) (13,667) (9,622) (14,795) (11,573) (14,716) (9,904) (15,440)Inflation adjustment losses (3,057) (6,644) (1,207) (2,490) (3,809) (8,185) (2,197) (4,614)Bank expenses (1,478) (2,654) (1,168) (2,157) (1,635) (3,023) (1,382) (2,621)Adjustment to present value of liabilities (151) (310) (117) (224) (4,837) (9,873) (123) (240)Foreign exchange losses (1,152) (1,309) (6) (7) (2,805) (3,453) (1,525) (2,462)Other finance costs (ii) (53) (108) (32) (222) (1,013) (2,675) (422) (938)

(16,822) (24,692) (12,152) (19,895) (25,672) (41,925) (15,553) (26,315)Net finance income (costs) (8,946) (12,331) (1,765) 567 (12,569) (20,398) (360) 5,842

(i) Includes the amounts of PIS e COFINS on finance income.(ii) Includes inflation adjustments of Argentine subsidiaries

31 Private pension plan – defined contribution

The Company offers the TOTVS Private Pension Plan, currently managed by BradescoSeguros, which receives contributions from the employees and the Company, as described in theProgram Membership Agreement. The three types of contribution are:

● Basic Contribution – corresponds to 2% of the employee’s salary; in case of executiveofficers, the contribution ranges from 2% to 5%.

● Voluntary Contribution – made exclusively by employees, with no matching contributionby the Company.

● Company Contribution – corresponds to 100% of the basic contribution. The Company isallowed to make extraordinary contributions, at the amounts and frequency it chooses.

The private pension expenses for the six-month period ended June 30, 2021 was R$3,263(R$3,009 as of June 30, 2020).

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32 Insurance coverage

Based on the opinions of their advisors, the Company and its subsidiaries, maintain insurancecoverage at amounts deemed sufficient to cover risks on their own and leased assets, and civilliability risks. Insured assets include owned and leased vehicles, and the buildings where theCompany and its subsidiaries operate.

33 Subsequent events

On July 12, 2021 the Company entered into an agreement for the subscription, by B3 S.A. - Brasil,Bolsa, Balcão, of a minority stake representing, postmoney, 37.5% of the total shares of TFS for theamount of R$600,000, subject to adjustments, and with the new company's post-money equityvalued at R$1.6 billion. The closing of this transaction depends on regulatory approvals and theverification of other conditions usual for this type of business.

On July 30, 2021, the Board of Directors approved the distribution and payment of interest on equity(JCP) regarding the first semester of 2021, in the total amount of R$51,193. The interest on equitywill be paid on October 22, 2021.

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TOTVS - 2º ITR 2021 Inglês

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